Update on University Finances
To: Faculty, Other Academic Appointees, and Staff
From: Robert J. Zimmer, President, and Ka Yee C. Lee, Provost
Subject: Update on University Finances
Date: November 12, 2020
Since the start of the COVID-19 pandemic, colleagues across the University have worked tirelessly to mitigate the pandemic’s impact on the University. Our goals have remained consistent – to protect the health and safety of our community, to support our enduring values and commitment to education and research, and to ensure that the University remains on a financially sustainable course.
While the impact of COVID remains significant on the University community, and a great deal of uncertainty lies ahead, we are confident that the University will come through this situation in a strong position to continue building upon the progress of recent years. We are writing today with an update on the University’s current financial status, and our financial outlook for this fiscal year.
Update on the Fiscal Year Ending June 30, 2020
Faculty and staff across campus have done an exceptional job during the pandemic, not only in performing their work with excellence in an extremely challenging environment, but also in controlling expenditures at a time when this was urgent, by restricting non-personnel spending and avoiding all but the most essential new financial commitments. Thanks in large part to these expenditure controls, the University’s operating deficit through the last fiscal year that ended on June 30, 2020 was lower than originally projected, coming in at $208 million, less than the projected $220 million. The consolidated University financials (including the University, Medical Center and Marine Biological Laboratory) experienced a slightly smaller operating deficit of $185 million. Our externally audited financial statements for the 2020 fiscal year can be found here. While the reduced figure is somewhat encouraging, the remaining deficit, resulting from COVID impacts as well as pre-existing budgetary challenges, reflects the significant financial challenges that we continue to face.
The University of Chicago’s consolidated endowment ended the year at $8.6 billion as of June 30, 2020, following a 3.2 percent return during a volatile year which saw a flat return for global stocks. While a positive return for the year, the amount is less than the 6.6 compounded investment average for the University over the past 20 years. The endowment value in any given year reflects the net impact of fundraising, investment performance and endowment payout, which contributes to the University’s operating budget. The majority of the University’s endowment is legally restricted and must be used for designated purposes.
Financial Outlook for Fiscal Year 2021
We expect to see the most significant impacts of the pandemic in the current fiscal year. Previously announced and implemented cost-containment measures are projected to reduce the deficit, though they will not eliminate it based on the scale of the challenges. Our projections for the University this fiscal year anticipate COVID-related revenue shortfalls and additional expenditures of $240-$260 million (approximately 10% of our total revenue, excluding the Medical Center) and a financial deficit of approximately $150 million. We anticipate continuing the various cost-containment measures through the current fiscal year to limit the deficit.
We do not anticipate the need for additional financial measures directly affecting faculty and staff during the current fiscal year beyond those already announced. We also plan to reinstitute full University contributions to the 403(b) defined contribution retirement plans, ERIP and CRP, at the start of the next fiscal year on July 1, 2021. Further details regarding the merit compensation process will be released as we get closer to the end of this fiscal year.
Staying on this projected course this fiscal year relies on the sustained, combined efforts of our campus. Together we will work to reduce our annual operating deficits while supporting our students and faculty and ensuring continued growth in the long-term academic eminence of the University. We are deeply grateful for your support as we navigate this challenging time, and for your efforts and commitment to the education and research mission of the University.