The University announced its plan to incentivize retirement for employees under its defined benefit retirement plan at its Primetime Employee Forum: Duke and the Economy at Griffith Film Theater Tuesday before about 150 employees.
The panel of speakers-Provost Peter Lange, Executive Vice President Tallman Trask, Vice President for Finance Hof Milam and Vice President for Human Resources Kyle Cavanaugh-outlined the steps the University is taking to meet economic challenges and explained what President Richard Brodhead calls "a smaller Duke" might look like for employees in the future.
Panelists said they hope to make necessary reductions to the workforce voluntarily through Duke's defined benefit retirement plan, the efforts of the Duke Administrative Reform Team and greater scrutiny of hiring. But administrators noted that they cannot rule out the possibility of more job cuts in the future.
"As much as I wish I could say workforce reduction is not a possibility, we are not ready to say that," Trask said. "We can say that it is one of the last possibilities."
The University faces a $125 million budget deficit this year, Milam said, which is more than 10 percent of the University's $1.2 billion operating budget. He added that 60 percent of the operating budget pays for salaries and fringe benefits, so some savings will have to come from employee expenses.
Cavanaugh said the University will begin revealing details of staff retirement incentives as early as this week and send individualized information to those eligible in early May. For employees under the defined benefit retirement plan, which is comparable to a pension plan, the University will change the criteria for retirement to include those 50 years old or older with 10 or more years of service at Duke.
The retirement incentive will make about 700 employees paid on a biweekly basis eligible for early retirement and would provide them with both health care benefits and an increased monthly pension, Cavanaugh said. He added that by offering this option to employees and using stricter hiring practices in deciding whether to backfill those vacated positions, administrators hope the workforce will shrink voluntarily.
"Our hope is that by systematically working through this over the next couple months, we could significantly mitigate or even eliminate the need for reduction in the workforce, but we won't know that until the summer or Fall," Cavanaugh said.
The University is still reviewing how to incentivize retirement for those monthly salaried employees under the contribution retirement plan, he said.
Several employees who attended the event asked the panel whether the University had considered reducing its contribution to employee retirement and specifically how employee benefits might be affected by budget cuts. Trask said that although these benefits might eventually have to change, the University does not currently plan to reduce them.
Trask said the Board of Trustees will approve next year's budget at its meeting in May, and he expects budget reduction efforts to be fully in place in the Fall.
The panel also discussed the importance of continuing Duke's progress even during times of financial constraint and said employee understanding and involvement will be key to solving problems facing the University. Trask said Duke will likely hold more forums similar to the Primetime event to keep employees informed, and he encouraged employees to continue submitting suggestions online of ways to save.
"We don't want to be caught in panic mode," he said. "What's made Duke great over the years has been not just the money we've had but the forward momentum. We don't want to lose that over the next few years."
Lange added that communication with employees will be crucial to successfully weathering the economic climate.
"I just think the most important thing to taking on this is we realize that one of the most important assets that we have is our employees and that we need to be as transparent as possible... because when people understand [the University's situation and plans] they can be supporting and help the University move forward," Lange said.
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