October Update on Financial Implications + Planning

Oct. 15, 2020

Conclusion of FY2020

(July 1, 2019 – June 30, 2020)

Like our peers, Johns Hopkins experienced sudden and profound revenue shortfalls and new expenses as a result of the COVID pandemic, and our response required painful and urgent sacrifices—first, across-the-board measures including a hiring and salary freeze and one-year suspension of retirement contributions, and second, division-by-division strategic planning and budget control efforts to align expenses with anticipated revenues over the years ahead while continuing to make strategic investments in critical priorities. Regrettably, this process included the difficult but necessary reductions in force and furloughs experienced by some of our divisions and within university administration.

The first phase of our control efforts started with the onset of the pandemic and went into full effect at the beginning of the current fiscal year; the second phase concluded this month. In that second phase, we focused mainly on non-personnel savings, but in order to align our expenses with our revenues, some divisions and departments had to make the difficult decision to eliminate staff positions. In total, out of the university’s approximately 17,000 full-time employees (exclusive of the Applied Physics Laboratory), we eliminated 204 filled positions (approximately 1.2% of our workforce), and closed 229 vacant positions. Those suffering job losses received enhanced severance arrangements to reflect the challenges of this moment, including cash payments, extended health benefits and job placement services.  And we know that without the early and across-the-board austerity measures we put in place last spring, our job losses would have been dramatically higher. 

Taken together, the initial phases of the austerity measures adopted in the spring, significant financial relief to the university from the CARES Act, mission support from the Johns Hopkins Health System, and less severe impacts to clinical revenue and philanthropy enabled us to end FY20 in a stronger position than we anticipated.

As an institution, we operate on a tight margin. We typically have a financial surplus of approximately 2% of our total budget, and we invest those modest margins in our strategic priorities.  In FY20 we ultimately achieved a 1.2% margin, which was encouraging but due in large measure to the very strong first three quarters as well as extraordinary one-time contributors that we cannot count on going forward.  This margin would be considered slim under any circumstances, but is particularly so given continued disruptions and unexpected expenses related to caring for our community during the pandemic.

Forecast for FY2021

(July 1, 2020 – June 30, 2021)

The university has weathered an intense and unprecedented fiscal storm and there are still many unknowns about the path ahead. Nevertheless, we are moving forward with cautious optimism to get back to more normal operations by next year.

Over the course of the spring, we reduced our projected losses for FY21 (which runs from July 1, 2020, to June 30, 2021) from an estimate of $375 million in April to $156 million as of June, in large part due to the impact of the across-the-board austerity measures. Now, based on the most recent data, JHU divisions have improved our budgeted operating result for the current fiscal year so that our loss is now expected to be $73 million. This revised loss is expected even after incorporating a $100 million savings due to the one-year suspension of retirement contributions and significant additional savings due to salary and hiring freezes for FY21. Had these sacrifices not been made, we would be projecting a deficit closer to $200 million.

While this revised budget is significantly better than we forecasted in the spring, much uncertainty remains, particularly related to the potential for additional COVID surge through the fall and winter. In addition to our one-time undergraduate fall tuition reduction of 10% and enhanced assistance to graduate students in many of our divisions, auxiliary revenues—which include residential housing and dining—are budgeted to reflect a drop of $46 million compared to our spring budget projection.  At the present time, and reflected in the university’s revised forecast, we still expect FY21 reductions in clinical revenue, net tuition and fees, and philanthropy as compared to our pre-COVID baselines.   

We also know there are significant additional COVID-related costs that we will have to bear.  Specifically, we will have to invest further in public health protocols, testing, tracing, and additional housing for quarantine and isolation if, as we are hoping, we are able to bring students, faculty and staff back in greater numbers to our campuses this spring, should public health conditions allow.

COVID Supports for our Community

Even as we have made every effort to address the fiscal challenges presented by COVID to our budget, we took steps to mitigate the impact of the pandemic on our community, both across our campuses and in the city of Baltimore, with particular attention paid to the least advantaged members of the communities of which we are a part.

These critical COVID-related supports have included:

• Emergency aid to students: $12 million in emergency funding and additional financial aid to help students whose family situations have changed as a result of the pandemic;
• Workforce relief funds: More than $1 million to launch two COVID-19 workforce relief funds—the COVID-19 Employee Relief Fund and the COVID-19 Contract Worker Relief Fund—to provide grants for our employees and displaced contract workers who need financial assistance as a result of the pandemic;
• Caregiver support: The creation of a fund to cover new, unanticipated caregiving expenses for our faculty, staff, and students that is anticipated to cost $18 million;
• Instructional technologies: The construction of 127 state-of-the art studios and enhanced instructional spaces for faculty to conduct remote instruction in a way that promotes interaction with students; and
• City and community programs: More than $2 million in direct funding to assistance programs in Baltimore, including an effort through which we partnered with a dozen community organizations to deliver more than 2 million meals to city residents in need.

Next Steps

Given the challenges we foresee and the likely risk that additional challenges will emerge later in the fiscal year, we plan to continue on our present, fairly cautious path. More specifically, we will pursue the following steps, which were endorsed by the board of trustees earlier this month.  

• Lifting the salary freeze, hiring freeze and pause on retirement contributions is our priority for Fiscal Year 2022, however, these measures will remain in effect for Fiscal Year 2021, as will salary reductions for university leadership. 

• We will continue to limit capital projects, moving forward only with those that are mission critical and impact health, safety and deferred maintenance or for which dedicated external funding has been secured, such as the donor-supported 555 Pennsylvania Ave., SNF Agora Institute, and Homewood Student Center projects.

• We will continue to invest in our communities and support our neighbors and take necessary steps to address urgent concerns in Baltimore, through programs such as HopkinsLocal and the recently announced Innovation Fund for Community Safety.

We will continue to be vigilant both in our planning and our monitoring of the pandemic’s trajectory, and are grateful to our faculty, staff and students for all you have done to bring us to this point.

As conditions develop, we will provide further updates on the university’s finances, and we encourage you to offer your thoughts and input via our feedback form.