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The richest schools didn't have to chop their budgets within the pandemic – however they did

Jesse Hernandez, a senior chef at the University of California Riverside, heard rumors that layoffs for dormitory and dining staff were imminent just weeks after the Covid-19 pandemic broke out last March.

For a while everything seemed to be talking.

But in fact he and most of the university's dining staff were unemployed for the summer, joining the nationwide 650,000 university staff laid off due to collegial austerity programs in the wake of the pandemic-induced financial crisis.

"We were taken by surprise to be honest," said Hernandez.

Now, Hernandez is trying – with the help of his union, the American Federation of State, County and Municipal Employees 3299 – to ensure that mass layoffs never happen again. In his role as team leader for member actions, he organizes workers and meets with administrators on topics beyond what is happening on the construction site. But while AFSCME 3299 responded to the pandemic by taking a broader view of collective action, colleges as a whole still seem to be committed to a financial paradigm that Hernandez & # 39; Job and thousands of jobs like its at risk.

Part of this may be because the foundation system that many schools use to stay solvent has brought significant financial benefits to colleges and universities in the face of a rapid surge in stock prices. These gains followed a sharp decline in the stock market immediately after the first outbreaks of Covid-19 in the United States – and rapidly falling prices led in some cases to drastic austerity measures.

Now, just a year after laying off hundreds of thousands of people, the higher education industry appears to be recovering.

The education and health services industry hired 87,000 people in May, up from 129,000 in the previous two months, according to the US Bureau of Labor Statistics. And there are signs of further attitudes. For example, the University of Michigan has just announced that it will end a one-year hiring freeze at the beginning of fiscal year 2022 in July.

But despite these strong numbers, the number of employees has not yet reached the number who have lost their jobs. And while thousands of college workers wait to see if their jobs will return, some have begun to wonder why austerity measures were taken in the first place – especially given the strong returns many schools have seen on foundations and how much of the emergency funds the Schools now available has turned out to be unspent.

Foundations meant the wealthiest public and private schools didn't need austerity as much as they thought

It is important to remember the uncertainty surrounding the coronavirus when the first outbreaks began to emerge. Social distancing was a new concept to millions of people, the debate raged over whether to disinfect your food and many experts scoffed at the notion that a vaccine would be available before 2022. Nobody knew when or if the pandemic would be over. And the exchange responded by going into free fall.

"The stock market was down," said Seton Hall University professor and professor Robert Kelchen, and the colleges "were uncertain about their future."

Unsure how long the pandemic would affect their finances, and fears of an ongoing pandemic could mean years – if not decades – of falling enrollments, tuition fees, and damage to foundations. Austerity measures quickly became the norm for many public and private schools. Andrew Comrie, a professor at the University of Arizona, said many faculties and staff have laid off and on leave, froze hiring of temporary workers, and postponed capital projects that were not yet underway. Many also turned off the air conditioning in unused buildings and stopped paying for food deliveries and classroom maintenance because there were so few students on campus.

State school revenues are at the mercy of state budgets, and as of April 2020, states anticipated a total of $ 500 billion in budget constraints as budgets were cut on concerns about tax collection and lost tourism revenue. For example, a sharp drop in tourism in Hawaii forced Governor David Ige to request a 15 percent cut in the general account that funds campuses in the state's university system. The university systems of Alaska and Nevada also lost millions.

Elite private universities, on the other hand, often have larger budgets due to the size of their foundations, but those budgets are typically funded by income from capital, which means that they grow when markets are doing well and shrink when they are in a downturn. At schools like Johns Hopkins University, the initial market shock reduced the university's investment income and budget by millions of dollars. Such losses, along with an expected decline in student income and dormitory fees, caused some schools to press the panic button.

By and large, a foundation is a kind of nest egg investment fund that is supposed to offer stability, as a “bastion of the institution's eternity,” as Francois Fürstenberg, Professor at Johns Hopkins, told me.

At the country's largest private schools, these funds can vary in value – $ 7.94 billion at Emory University in Atlanta, $ 41.89 billion at Harvard – and are used to pay for everything from construction projects to foundation scholarships. They are now considered so central to the survival of a school that many of the country's largest private universities have boards of trustees spending millions of dollars on consulting fees to maximize their returns. Some institutions, such as Yale, Stanford, and Princeton, spend more on consulting fees than on funding an entire student body.

All of these risks paid off for private schools last year, literally when the stock market recovered unexpectedly quickly, gaining nearly 32 percent in just three months.

For example, Johns Hopkins reported a budget surplus of $ 75 million in October 2020, an increase of $ 126 million from drastic projections that had led to austerity just months earlier. Northwestern University announced a profit of $ 83.4 million for the fiscal year in January. Yale University reported an even more astounding surplus of $ 203 million in November 2020.

"You obviously prepared for the worst in the middle of last year," Comrie said. "But when the market recovered in the fall, it is much more difficult to defend that level of austerity than it was literally not there two months ago."

Elite private schools did well, as did public schools with large foundations. As Lee Gardner, a senior writer for the Chronicle of Higher Education, told me, "Any school with a billion-dollar endowment fund qualifies." In the United States and Canada, this means that more than 100 institutions have weathered the economic crisis caused by the coronavirus, in part through their foundations, from the University of Chicago to Virginia Commonwealth University.

But many of those gains have been of little immediate help to schools dealing with the other effects of the pandemic or to teachers and staff wondering about the fate of their work.

"In many cases, the foundation is earmarked," said Kelchen. “Seventy-five percent of the foundation's assets can be restricted for use for study grants or the payment of buildings or donated faculty positions. The unlimited amount can be quite small. "

Increased investment income could mean more spending on these restricted areas – scholarships, salaries, restaurants, etc. – in the years to come, but could not be postponed to protect jobs. That's because, while colleges convert foundation capital into income each year by investing tiny percentages of interest, never the capital, in working capital, they don't like to exceed their assigned percentage caps.

"It is generally considered a bad idea to do more than that," said Gardner, author of the Chronicle of Higher Education. “Because you're eating up the future of college. I understand that when people lose their jobs, you don't want to hear this. But that is the mandate that you get as a university administrator: Protect the institution, protect the next few years. "

Austerity measures have not paid off

But some unions, educators and higher education experts are now arguing that emergency budget cuts – at least for the largest public and private higher education institutions – would not have been worth it, as many emergency funds prepared for crises like a pandemic.

These huge funding pools, sometimes referred to as "rainy day funds" by college officials and activists, often come from foundations and can be found in the UC system where Hernandez was employed and in many other institutions. The University of Massachusetts network has an emergency stabilization fund of approximately $ 125 million. Member of the Board of Trustees Michael V. O'Brien once joked that the money is only ever spent in the event of a "completely unforeseen catastrophe", such as an "asteroid impact".

Rutgers University, where Professor Todd Wolfson teaches media studies, has a similar fund. Wolfson said he learned about the Rainy Day Fund from the university's chief financial officer.

"I thought this was the biggest health crisis in the history of this country," said Wolfson. "Don't you think of this as a moment to use your goddamn rainy day fund? And they said, 'We're thinking about it.' But in the end they never did. "

Wolfson said schools shied away from pulling excess dollars from rainy day funds and foundations because of general concerns that had little to do with their mission as educational institutions – including what such a move would look like for creditors.

"For them, their rating of Moody's" took into account the reluctance of schools, said Wolfson. “And their ability to take out a loan in the future and not have slightly worse terms, and the desire to grow and grow and grow [the total value of your foundation] and getting bigger and bigger, it feeds a logic in and of itself. Let a foundation grow in order to grow a foundation. "

In general, schools offered few reasons for refusing to use their emergency funds and their statements about layoffs were vague. For example, in a precursor to announcing their own wave of layoffs, the Northwestern president said Downsizing was necessary because the The pandemic put "extreme pressure on all of our main functions and the sources of income associated with them." When asked about their financial strategies during the pandemic, many of the country's wealthy private schools – including Northwestern, Johns Hopkins, and Yale – made no comment.

Liz Perlman – the executive director of AFSCME 3299, the University of California's union that represents 28,000 service workers – told me that austerity in front of such funds was "bad policy".

Perlman said AFSCME 3299 identified several austerity alternatives that UC employees could have kept in their jobs, including drawing on some of the $ 14.8 billion the system owns that is categorized as short or long-term investment finance which means they as the system sees fit. Instead, the university system, California's third largest employer, laid off nearly 3,000 AFSCME-3299 employees in 2020; the number of fired workers was closer to 200, a decrease that the union believes is due to its activism.

However, it wasn't just the existence of Rainy Day funds or the rapid turnaround in the market that made austerity measures questionable. In addition, in the largest schools in particular, advocates such as trade unions began to develop new, fairer alternatives to traditional austerity measures.

The pandemic has shown alternatives to traditional austerity policies. Schools aren't sure they'll need them.

Todd Wolfson, the Rutgers professor, is also president of the university's largest teachers union and believes there are alternatives to austerity that can save even in a crisis and that can be useful in situations of rapidly changing conditions like the pandemic.

For example, his union put forward a plan to Rutgers in which every unionized worker agreed to voluntary vacation in exchange for no layoffs; Wolfson said it saved the university more than $ 150 million.

"There's a way to do this collaboratively that really makes the university a moral beacon for dealing with a crisis," said Wolfson. “In contrast to a neoliberal-driven institution that punishes whoever it has to punish when it thinks about its bottom line. To this day it is a mystery to me why they said no. "

The university eventually pursued its own plan and laid off 1,000 workers, disproportionately women and colored people; 400 associate professors were told they would not return the following year, saving Rutgers $ 4.5 million, roughly the same as head coach Greg Schiano's annual salary.

But the school's strategy changed with the arrival of a new president, Jonathan Holloway, in July. At a virtual summit in October, Holloway said Rutgers needed to continue to find savings because, despite being well equipped, Rutgers was not among the schools that benefited during the pandemic – although its losses were reduced from an estimated $ 200 million to a much more manageable $ 54 million U.S. dollar.

"We have a very large workforce, but when we don't have jobs for them because our students are not here, we ask, 'What are we doing?" "Said Holloway at the virtual summit. “We've worked very hard to find so many other types of jobs to train them for, but at some point it all stops. And that was the real frustration of the pandemic. You can try and try and try and suddenly the math stops working and you have to make these really difficult decisions. "

In February 2021, Holloway and Wolfson's union joined forces in a smaller work-sharing agreement that is preventing the university from making further layoffs until the end of the Covid-19 crisis.

“I contacted President Holloway and said, 'Hey, this is a moment. Let's try to see if we can negotiate a deal … we won't be able to get it all back, but at least get on a better foundation and figure out what's next, ”said Wolfson.

The Rutgers union wasn't the only one to find creative ways to keep the workforce; The University of California system reached an agreement with AFSCME 2399 that would allow workers from multiple universities to voluntarily move to UC hospitals in order to keep their jobs in the university system.

Some workers made the move and secured jobs. AFSCME said it fought hard to give them that option and that the deal saved thousands more workers from being laid off.

Perlman, the executive director of AFSCME, helped negotiate the deal. But she said that while it helped, it wasn't good enough that a university system with $ 40 billion in funding shouldn't lay off the poorest members of its community.

"If you live in a bubble and you are actually counting beans and nuts, then that makes sense," Perlman said. "But if you look at the real world, these people are real low-wage black and brown service providers who were the same people and their family members who showed up in UC hospitals with Covid and then died from it."

And Perlman noted that the first person to die of Covid-19 in California was a member of the AFSCME union, a UC Santa Cruz truck driver.

While the pandemic has resulted in some changes – including more union activity – little has changed overall in the financial fundamentals of schools. For example, the Inside Higher Ed survey of 2021 university presidents found that only 17 percent would pull more than planned from their foundations to increase revenue in future economic crises.

This response could be due to so many schools in strong shape entering this stage of the pandemic. The same poll found that 80 percent of presidents are confident their institution will be financially stable over the next 10 years, up from the 57 percent who said so before the 2020 pandemic broke out.

"The sky hasn't fallen," said Gardner. “I hope this doesn't instill a false belief in the leaders of these facilities that they shouldn't be as prepared as possible or be as careful as possible if something like this comes up again. ”

Hernandez sees it the same way. Just a few weeks ago, he and the Riverside staff received the news that they would be fired again this summer. He had never seen this uncertainty before last summer. Now it's an ongoing issue.

"We're cooks, we're shopkeepers, people who feed the students in our department," said Hernandez. "And are we trying to find out why we are suffering?"

Gregory Svirnovskiy is a student at Northwestern University and a political and political intern at Vox as part of the university's journalism residency program.

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