Stanford will experience up to a $267 million negative financial impact by the end of the 2020 fiscal year on Aug. 31, and is forecasting similar or worse challenges for the next fiscal year according to a Wednesday announcement from President Marc Tessier-Lavigne. 

Given the magnitude of the impact on Stanford’s budget, the University expects that “some workforce reductions” will be “unavoidable” as Stanford enters the new fiscal year, Tessier-Lavigne wrote. 

“I know this is difficult news to hear, and it is difficult for me to share, knowing the dedication and contributions of the people across our Stanford workforce,” he added. 

Workforce reductions will be determined by program needs and the budget considerations of units within the University. Some reductions are expected to be temporary layoffs, while other reductions are expected to be permanent. More information regarding specific issues can be found on the Cardinal at Work website. 

The University is extending pay continuation for benefits-eligible employees through Aug. 31. Previously, the University assured pay continuation through June 15, the end of spring quarter.

“For employees of contract firms who normally provide services at Stanford during the summer months,” the existing policy, which comes short of pay continuation, is also extended through Aug. 31, Tessier-Lavigne wrote.

“We will be providing more information about assistance the university will provide for anyone we’re unable to retain,” Tessier-Lavigne wrote. 

Provost Persis Drell previously asked units to prepare for the possibility of a 15% reduction in funding from endowment payout, and a 10% reduction in support from general funds. Tessier-Lavigne reaffirmed this request, writing that “we sincerely hope that the reductions needed will be smaller than this, but for now we need to plan to these targets as a contingency.”

Stanford expects to finalize the allocation of endowment payout and general funds by the end of June, enabling units to finalize their budgets in July. As a result, more detailed decisions regarding layoffs will not be available until late July. 

“We must plan not just for a temporary budget blip that disappears by this fall, but rather an ongoing challenge that requires us to re-set expectations and chart a new steady state for the university’s operations,” Tessier-Lavigne wrote. 

He described diverse sources of continued financial pressure, writing that the University must navigate the immediate crisis while ensuring that it emerges “firmly positioned to continue advancing [its] mission.”

“Housing revenue will be reduced due to fewer students living on campus; income-producing events and programs will continue to be limited; and clinical, research and philanthropic income streams will be challenged,” he wrote. “At the same time, expenses in some areas, such as student financial aid, will increase. The market volatility affecting our endowment also can be expected to continue, given the seismic disruptions occurring in the national and global economies.”

Since the outbreak of COVID-19, Stanford has instituted several “one-time measures,” to stabilize its finances, including reducing expenses by freezing salaries, pausing hiring, reducing discretionary spending by departments, and holding approval on all new capital projects. 

Provost Persis Drell and Tessier-Lavigne announced in April they would be taking a 20% voluntary base pay reduction in early April, asking other members of the University’s senior  leadership  to take reductions of 5-10%. It is unclear, however, how many members of the University’s senior leadership responded to that request.

Tessier-Lavigne announced he and Drell will be holding another “Conversation” on Monday at 1 p.m. PT.

“I recognize the difficulty that will come with some of the steps we will need to take in response to this current challenge,” he concluded. “They will allow us to sustain Stanford’s mission of teaching and research for a world that desperately needs it – the mission that brought so many of us here to begin with. I deeply appreciate your partnership as we navigate this period.”

Contact Emma Talley at emmat332 ‘at’ stanford.edu.