Facing a possible decline in revenues of more than a quarter-billion dollars, Duke will suspend University-paid contributions to the Duke Faculty and Staff Retirement 403(b) plan and cut salaries for highly compensated employees for the next 12 months, with President Vincent Price and other top administrators voluntarily taking larger cuts.
In a Wednesday news release, Price described the changes as necessary to alleviate a loss of revenue due to the coronavirus pandemic, which could reach up to 15% of Duke’s annual operating budget—a total loss of between $250 million and $350 million. The University will implement all of the new spending cuts July 1, according to the release
The University will stop contributions to the Faculty and Staff retirement plan—which covers employees who are paid on a monthly basis—for the next 12 months. While employees will still be able to add to their retirement funds out of their own salaries, Duke will no longer make separate contributions.
The Employees' Retirement Plan—Duke’s pension plan for employees who are paid on an hourly or biweekly rate—will not be affected by the cuts.
Price wrote that by cutting retirement spending in addition to the steps it has already taken, Duke will save between $150 million and $200 million over the next year.
Meanwhile, for the next 12 months, all Duke employees who receive more than $285,000 in compensation will see a pay cut of 10% of their excess salary above that amount. Certain administrators, including Price, Provost Sally Kornbluth, Executive Vice President Tallman Trask and Chancellor of Health Affairs A. Eugene Washington, will voluntarily take larger cuts—20% for Price and 15% for Kornbluth, Trask and Washington.
“The deans and vice presidents will also make additional contributions to support our highest priorities in addition to the mandated reductions,” Price wrote.
The 300 or so employees who will see pay cuts are above the threshold of Duke’s retirement fund contributions, according to the news release.
The move is the next step in Duke’s attempt to blunt the effects of budget difficulties that will end up “almost certainly worse than the financial crisis of 2008,” as Michael Schoenfeld, vice president for public affairs and government relations, told The Chronicle in April.
Price also addressed suggestions that Duke should cover its budget shortfall by drawing from its endowment. That’s not feasible, he wrote in the news release, because current spending plans will already deplete the endowment faster than its investments grow even with the steps Duke has taken to reduce expenses, and much of the money in the endowment is already earmarked 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,” Price wrote.
In an initial round of financial measures in early April, the University instituted a temporary hiring freeze on nonessential employees, announced that it would freeze salary raises starting in July and halted all new on-campus construction.
On April 15, Price appointed two new committees, Team 2021 and Team 2030, to guide the University’s plans for the future. Team 2030 is focused on the long-term financial challenges of the pandemic, and Team 2021 is focused on campus operations in the coming months.
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