September 22, 2020
Christina H. Paxson, President; Richard M. Locke, Provost; Barbara Chernow, Executive Vice President for Finance and Administration
Tags Faculty and Staff

To Brown Faculty and Staff: Further actions to address COVID-19’s financial impact


Dear Brown Faculty and Staff,

We are writing today to share information about the steps Brown is taking to address the unprecedented financial challenges created by the COVID-19 pandemic. As you know, the pandemic has impacted the U.S. economy deeply, resulting in financial stress across many industries and millions of jobs lost. Institutions of higher education, including Brown, have not been spared, nor have the students, faculty, staff and families they serve.

From the outset of the pandemic, Brown has been committed to investing in our people and our community. The University has invested millions of dollars to protect the health and safety of our students and employees and sustain our education and research with the technology, infrastructure changes and public health systems necessary to safeguard the well-being of our campus. The safety of our community continues to drive our decisions.

With significant declines in University revenues and the increase in costs related to operating during a pandemic, Brown is expecting a substantial financial loss in Fiscal Year 2021 that will carry over into Fiscal Year 2022. Even with the actions already taken -- instituting a salary freeze, carefully controlling expenses and hiring, borrowing additional debt to ensure adequate cash flow, and voluntary salary reductions by senior administrators -- we anticipate that the financial losses this year may range from $100 to $165 million, representing roughly 8% to 13% of the total operating budget.

Although there is still uncertainty about the total size of this deficit, it is critical that we take steps now to ensure the financial health of the University so that Brown can effectively support students and scholars into the future. In this letter, we outline current plans to address the gap in financial resources. Measures to reduce the budget shortfall will be spread across multiple areas: increased use of debt, increased use of the endowment, continued controls for expenses and hiring, and a voluntary retirement plan for qualifying staff. In addition, we have concluded that it will be necessary to institute a temporary 12-month reduction in the University’s contribution to retirement plans for non-unionized employees, which goes into effect Nov. 1. This is an important step to avoid layoffs and preserve jobs.

Before going into greater detail on these measures, it is important to restate the values that underlie these actions. As we have stressed in our communications to the community since the beginning of the pandemic, all of our decisions during these challenging times are guided by the following values:

-- Protecting the health of our community
-- Protecting the most vulnerable students and employees from financial impacts
-- Protecting Brown’s academic mission
-- Protecting the long-term financial health of the University
-- Transparency in these efforts

The actions taken to date are all aligned with these values of protecting our Brown community. Steps taken to safeguard the health of our community include setting up two on-campus COVID testing sites and offering free testing to all members of our community; procuring and distributing personal protective equipment to all Brown students and employees working and studying on campus; upgrading building air filtration and HVAC systems and installing touchless fixtures; and de-densifying our dorms, classrooms, labs and administrative buildings. In addition, we have increased financial aid for students, including waiving summer earnings requirements, extended the tenure clock for junior faculty, extended graduate fellowships, honored all research and start-up commitments, and continued to pay all regular employees, regardless of whether or not they could continue to work remotely.

It is because of this deep commitment to our community that Brown has not laid off or furloughed any regular Brown employees due to COVID-19-related budget challenges. While the University could never promise guaranteed employment for all current employees under all circumstances, our hope is that if members of our community embrace a shared commitment to work together to weather our current challenges, we will be able to come through the pandemic with our community intact.


Many factors have adversely affected Brown’s financial performance this year. While we continue to see strong support from our donor community and have been able to re-launch most of our research programs, other areas of revenue have been significantly impacted. For example, because of travel restrictions and health concerns, many students have taken leaves, deferred enrollment or chosen to study remotely. Although Brown supports our students in these decisions, the result is tens of millions of dollars of lost revenue.

Similarly, while expenses in such areas as travel and events have declined, other expenses have increased as a result of the pandemic. The Plan for a Healthy and Safe 2020-21, designed to mitigate the impact of the pandemic, is crucial for keeping our community safe and well. However, to implement this plan, the University has already incurred, and will continue to incur, many millions of dollars in additional expenses.

To safeguard resources for the long term and protect the University against a sustained economic downturn, Brown has taken on more debt since May 2020. Taking this debt now is attractive due to historically low borrowing rates. Borrowing now allows us to have predictable liquidity for the foreseeable future, but servicing this new debt will add significantly to our operating costs.

Prior to the pandemic, Brown had been working diligently and successfully toward closing a persistent gap between expenses and revenues in its annual operating budget. While this letter focuses mainly on the projected COVID-19 loss we expect this year, the work to solve our recurring deficit will continue throughout this year and beyond.


The financial losses due to COVID-19 will be funded through a combination of the following actions described below: 1) using portions of our newly issued debt to pay for a large fraction of the deficit; 2) a one-year increased distribution from the endowment, as well as targeted fundraising; 3) additional reductions to non-personnel expenses for items such as travel, supplies and other materials and services; 4) reductions in personnel expenses created by hiring controls, reductions to senior administrative staff salaries and a voluntary retirement program for qualifying staff; and 5) a temporary reduction in Brown’s match to retirement savings plans.

Our priority is to focus on measures that will address the COVID-related deficit while having the smallest impact on Brown employees and avoiding layoffs. The funding levels provided are estimates based on current modeling and are subject to change based on circumstances impacting the University.

(1) Use of debt

The largest portion of Brown’s financial losses is expected to be funded through the use of new debt. Currently, the University expects to use between $30 million and $40 million of debt to fund operations for the current fiscal year ending June 30, 2021. Using debt will allow the University to smooth the impact of this year’s financial losses over time (versus all at once) and support University operations without drastic cuts to the operating budget. We will then repay that debt over the next several years as revenues return to normal.

(2) Increased use of the endowment and targeted fundraising

The Investment Office has done a remarkable job managing Brown’s endowment over the past several years. In Fiscal Year 2021, we plan to withdraw an additional $15 million to $20 million from the endowment to help cover the gap between expenses and revenues. In addition, the generosity of donors will help address some of the immediate costs of supporting students during the pandemic. More than $23 million has been raised in support of Brown’s President’s Response Fund, of which $15 million will be available to support the budget this year. An additional $1 million was raised for the Student Emergency Support Fund.

(3) Reductions in non-personnel expenses

We are seeing significant declines in spending for non-personnel expenses, such as travel and events, and we appreciate the efforts that have already been made by departments to reduce expenses. However, we’ll need to do more as a community. We have set a target for an additional $15 million to $20 million in reductions of non-personnel expenses for the coming year. With travel and event restrictions in place, and the ability to defer many on-site expenses while many in our community are working remotely, we believe this is an achievable target, but we will need your help. The University-funded budget for these categories currently totals roughly $200 million, meaning we need to achieve total reductions of 8% to 10% across the University. A representative from the Finance office will be reaching out to academic and administrative units to ask for help in identifying additional cost savings.

(4) Reductions in personnel expenses through hiring controls and voluntary retirements

As is the case at most institutions, Brown’s single biggest expense is compensation -- payroll and benefits -- for our exceptional employees. Investing in our faculty and staff is an important priority, but to slow the growth of these costs and preserve as many current jobs as possible, we moved quickly earlier this year to put in place a hiring freeze and develop an attractive early retirement program for qualifying staff. All new hiring requests are being closely evaluated, and only positions deemed essential or positions that are externally funded are being approved for hire. At the same time, we have created a Staff Temporary Project Assignments Program to help match departments that have emerging needs with available staff from other units who have unused capacity during the pandemic due to the nature of their positions at Brown. The combination of the hiring controls and the early retirement program is projected to result in $15 million to $20 million in savings for the University in the current 2020-21 fiscal year.

(5) Temporary reductions in the Brown match to retirement savings

Because of a deep commitment to our community, Brown has not laid off or furloughed any regular Brown employees due to COVID-19-related budget cuts. To help preserve jobs, Brown will temporarily reduce contributions to its retirement plans. As of Nov. 1, Brown will reduce its contribution to most employee plans to 2% for a planned period of 12 months. Retirement plans that are collectively bargained (i.e. subject to union contracts) will not be impacted at this time.

We understand that many members of our community and their families will experience this change in personal ways, but we firmly believe it is the right thing to do to avoid layoffs. Many universities that have already taken this action have reduced their contributions to zero, but our goal is to preserve as much of Brown’s support for retirement plans as possible. The reductions will save the University approximately $20 million over the next 12 months, and will be a meaningful shared community contribution toward addressing the financial impact of COVID-19 while preserving the jobs of our friends and colleagues.

Employees with questions about contributions to employee retirement plans should visit the Retirement Plans webpage maintained by University Human Resources, where there are answers to frequently asked questions:

If we see improvements in the financial outlook for Brown in coming months, we may be able to restore contributions to their current rates sooner than planned. Like all the actions described in this letter, the change is temporary and linked to this time of reduced resources. We are grateful for your continued dedication as we confront Brown’s financial challenges in the weeks and months ahead.

We know that more than six months into confronting this global pandemic as a campus community, this continues to be an extraordinarily challenging time. The country continues to live through multiple crises of health, economics, social justice and the environment that are deeply affecting many of you, as well as your families near and far. There’s no other way to say it -- with everything going on in our lives and in the world, it’s hard.

We are looking toward the months ahead with hope and a commitment to work together to overcome our current challenges and sustain the strength of our community through this pandemic.


Christina H. Paxson

Richard M. Locke

Barbara Chernow
Executive Vice President for Finance & Administration