SUBJECT:

Message from the Chancellor: Financial Impact of COVID-19

I am grateful for the sacrifices that everyone is making every day. I understand the challenges of learning, teaching and working from home, sometimes in isolation, sometimes with competing priorities from family and work, and without a clear end-date defined. I commend each of you for forging ahead, retooling your routines, and finding creative ways to balance your lives during this difficult time. I fully recognize that COVID-19 has greatly impacted your personal and professional lives, and I appreciate that you are doing everything you can to ensure a strong future for UC San Diego.

The coronavirus pandemic has left no industry and no system unchanged. It has presented our university and health system with unprecedented healthcare, operational, and fiscal challenges. Over the last few weeks, UC San Diego has responded in extraordinary ways.

Health-wise, we responded by looking after the health of our students, faculty and staff; by building capabilities and capacity within the health system to test and take care of patients; by partnering with San Diego County; and by mobilizing our research enterprise to develop testing solutions, produce medical equipment and search for cures.

Operationally, we addressed the need for social distancing by shifting to remote learning, decompressing on-campus student residences, adapting our extensive research enterprise, and virtualizing as much of our administration as possible. The speed and quality of these transitions has exceeded expectations.

The effects of COVID-19 are far reaching. As you have heard from leaders throughout the country and the state, the fiscal challenges we are and will be facing are compounding. For example, a decline in state tax revenue may result in decreased state funding. We continue to work to limit these effects, however, as a public institution, we will be impacted.

As of today, we estimate the financial impact of pandemic-related disruptions to UC San Diego to be in the hundreds of millions of dollars. This includes housing and dining refunds to students; potential impact on fall 2020 enrollments and on state funding (we will not know of such impacts until the fall); reduction in indirect cost recovery due to research disruption; the loss of revenue from parking, retail, child care, conferences and cultural venues; and the loss of clinical revenues in order to create surge capacity in our hospitals. At the same time, we have had to cover additional expenses to maintain a functional campus for students and employees.

We are aggressively working with federal, state and local government agencies to secure emergency funds and access programs to reimburse us for some losses and expenses, and we will continue to do so even after this crisis passes. We are tracking all COVID-19-related costs and impacts and rigorously pursuing government support (CARES Act, FEMA, research funding).

In order to maintain our fiscal health, we have also taken steps to reduce costs and expenses. The campus and the health system have already responded by acting upon multiple levers, the most significant of which is hiring. Staff and academic hiring controls are in place across campus. Unless a documented offer has already been made, all offers or new searches, at any rank, require prior written approval by the Executive Vice Chancellor (EVC) or the academic Vice Chancellor (VC). The start of our three-year faculty hiring plans will be delayed. While externally funded research hires can continue, we are ensuring that research grants do not incur deficits due to salary charges.

With regards to non-salary costs, only mission-critical travel will be approved. All discretionary expenses are being reviewed and/or reduced. At this time, capital projects that have already broken ground are proceeding. Projects currently in design are being assessed and may be revised at an appropriate time to ensure they meet post COVID-19 needs. We will continue to review and adapt these strategies over the next few months.

In our lifetime, we have never faced as much uncertainty as presented by this public health crisis. Our best decisions are usually made based on well-sourced data, carefully constructed models that predict risk and/or potential outcomes, and previous experience overcoming similar problems. Right now, available data is limited, predictive models have not caught up to expected standards, and humankind has no recent experience with a situation as complex or disruptive. The last time humanity faced a similar crisis was 100 years ago with the Spanish Flu.

So, what do we do? We continue to monitor the evolving public heath situation and its effects on our daily lives and livelihoods. We collect more data and update newly created predictive models. We look at other large societal disruptions for inspiration and ideas. And most importantly, we learn as we go and change directions when indicators point to better choices.

The key to making decisions in this current environment is knowing and accepting that there are unknowns. From this position, we must plan for potential scenarios and act decisively, while accepting that we may need to change course at a moment’s notice should a new variable present itself or better solutions become apparent. In this context, we believe it is prudent to plan for a reduction of all core operating budgets for the fiscal year 2020/21.

There is no doubt that COVID-19 will continue to have dramatic effects on our world and on higher education. As Tritons, we will continue to work together, continue to look deeper at the situation and the world around us, and continue to find equitable solutions to complex problems. Times of crises present opportunities to rethink practices and innovate. We are working hard to come out of this pandemic stronger and more resilient than ever. I thank you for contributing your talent and energy, and for continuing your support for our academic enterprise.

Pradeep K. Khosla Chancellor