Duke President Vincent Price announced Wednesday several new cost-cutting measures designed to secure the university’s financial future in the aftermath of the COVID-19 pandemic that has affected all of the university’s sources of revenue.
The new measures are effective July 1 and include temporarily suspending the university’s contribution to the Duke Faculty and Staff Retirement 403(b) plan for a one-year period; temporary reduction of salary for employees earning more than $285,000; and additional voluntary salary reductions by senior leaders.
Price’s announcement applies to all university employees, and can be read in full here.
Duke University Health System employees will receive separate communications.
These steps are in addition to previously announced actions including requiring the approval for all ongoing, non-salary expenditures greater than $2,500; a hiring freeze; suspension of salary increases; and placing new university construction projects on hold.
Including the measures announced Wednesday, the university’s actions to date are projected to reduce expenditures by between $150 million and $200 million in the next fiscal year, Price said. That savings will be essential to “sustain the university’s academic programs for the near-term.”
“We take this step only after very careful study and deliberation,” Price said. “While painful, it appears our best way forward for two reasons. First, it affects only deferred income and only for one year, meaning that regular salaries will continue to be paid throughout this temporary period. Second, this will ensure that Duke can continue to support our employees, their families, and the Durham economy.”
Price noted the action will not affect either the employee contribution to the 403(b) retirement plan and or the separate Employees’ Retirement Plan for biweekly paid employees.
Approximately 300 university employees who earn more than the federal 403(b) contribution threshold of $285,000 will have their salaries reduced by 10 percent of the amount above the threshold. Meanwhile Price’s salary will be reduced by 20 percent - and the provost, executive vice president and chancellor’s salaries by 15 percent - of the amount over the threshold. Deans and vice presidents will also make additional contributions.
Price called these actions the “best and most equitable path for us at this difficult moment.” He added that university officials are continuing to monitor the financial situation and that the Team 2030 task force is engaged in long-term planning. This team may recommend further actions in the future.
“Some may wonder why we don’t simply draw additional funds from Duke’s endowment to address these deficits,” Price said. “You are probably aware that the endowment, which in times of growth is a source of funding for priorities such as student financial aid and faculty chairs, is not a ‘rainy day’ savings account. Rather, it is a permanent fund intended to provide ongoing support over the life of the university, and most of it is legally restricted for specific purposes.
“The steps we are taking to secure Duke’s financial future are already predicated on spending as much as we responsibly can from our endowment. Indeed, even with the actions outlined here, we expect in the coming year to spend from our endowment—which has suffered considerably by recent declines in the market—at rates that will not be made up for by investment growth, thus further reducing this vital source of long-term income.”
He added that the strength shown by the Duke community throughout this semester reinforced his belief that the university will get through daunting times. “We are a strong and resourceful community guided, especially in challenging times, by our shared values of mutual respect, trust, inclusion, discovery and excellence in all we do. Our work is great and good, and it continues in the face of the pandemic.”