ITHACA, N.Y. — As the COVID-19 crisis continues to rage, the economic unrest is continuing to build with it, Cornell is ordering severe measures in an effort to tighten its budget, including a freeze on new hires and a cancellation of salary increases.

The news came Monday afternoon in a letter posted to the university’s COVID-19 response website. In the letter, signed by Provost Michael Kotlikoff and Executive Vice President and Chief Financial Officer Joanne DeStefano, several immediate efforts to reduce operating costs are put forth.

Most significant are the freeze on all new staff and temporary staff hires, and the cancellation of salary increases originally set to go in effect on July 1st. The hiring freeze does not apply to academic hires like professors, though the letter states all proposed faculty hires will be “carefully reviewed” by deans. An exception also exists to the salary increase declaration for raises required as part of previously agreed collective bargaining agreements with unions.

Other steps taken to rein in expenditures include a travel ban for university-related business (faculty and their research groups may still travel on their own research grants), and all summer classes and programs are being canceled or moved online. Discretionary spending for food and events has been suspended, and all capital projects involving the renovation or construction of Cornell facilities are being re-evaluated; unless deemed essential, the projects will be put on hold, and no new construction projects will be initiated until financial conditions improve.

“We fully appreciate that these steps are significant. But until we can better understand the full impact of COVID-19 on the economy, financial markets and the university, these steps are essential to our being able to sustain our commitment to our employees and our students and to ensuring that Cornell has the funds necessary to continue to be a world-class university,” says Kotlikoff and DeStefano’s letter.

“The most frequent concerns that we have heard regard pay continuation for staff and whether we will be able to support students whose financial circumstances may have changed as a result of COVID-19….(O)ur goal is to preserve the vast majority of staff positions within our Cornell community until we can return to full campus operations, recognizing that no institution, including Cornell, can predict today the impact of this crisis on its future budget. We have also provided staff an additional ten health and personal days to support them during this time.”

The letter states that members of Cornell’s leadership, including President Martha Pollack, Provost Kotlikoff, vice presidents, deans, vice provosts and other members of Cornell’s executive management have agreed to “voluntarily assumed salary reductions” for the next six months. However, the letter does not explicitly state how much of a reduction in salary will occur.

Staffing costs – salaries, benefits packages and pensions –  make up about 65% of Cornell’s expenses, as reported by the Cornell Daily Sun last fall.

According to the Cornell University Factbook, the institution employs about 7,500 non-academic staff, the vast majority at the Ithaca campus. The last economic crisis in the late 2000s resulted in the reduction of about 700 positions, mostly among those in maintenance, service, and back-office roles.

While the simple answer might seem to be to simply tap into the school’s multi-dollar endowment, the truth is more complicated. For one, there’s typically a pre-negotiated spending limit on how much can be taken from an endowment to put towards the budget.

Second, that pre-negotiated limit is typically a small percentage of the total, and the endowment relies in large part on stock market performance — and when the stock market plunged over the past month, so did the endowment and the spending limit allowed. Due to the restrictions, the endowment is only 8% of Cornell’s total revenue. For comparison, tuition revenue covers 17% of total income, and revenue from Weill Cornell medical hospital in New York City makes up 26% of revenue. Even then, the university typically operates at a budget deficit.

Given that non-academic staff turnover typically numbers in the hundreds each calendar year, and the loss of salary increases for the upcoming year, the picture painted by Cornell’s economic outlook is increasingly grim. It is also likely to reflect back onto Ithaca and Tompkins County, as it means less money and fewer jobs in the community in the months ahead.

Even worse, those concerns only grow when trying to figure out what will happen in the months ahead. As with many concerns involving the impacts of COVID-19, it’s not clear if this will this be a short-term hit or the trigger of a longer and graver economic contraction.

Brian Crandall

Brian Crandall reports on housing and development for the Ithaca Voice. He can be reached at bcrandall@ithacavoice.com.