After turning down an $8.5 million federal relief package last month, Northwestern University said it will instead attack its $90 million budget shortfall this year by tapping into its endowment.
The university, which has a roughly $11.1 billion endowment, said it will temporarily increase the payout rate to deal with losses from the COVID-19 pandemic, according to a financial update the university president sent out Monday.
A payout rate is yet to be determined, a spokesperson said. But last fiscal year, the payout rate from the endowment was 5.25%, a figure that included administrative and management fees, according to the university website.
“We expect to see repercussions from the pandemic for some time,” the letter read.
Last month, a number of top universities, including Harvard, Yale, and the University of Pennsylvania, turned down federal stimulus checks after facing backlash from lawmakers, who argued that coronavirus relief should first go to smaller institutions without wealthy endowments.
The Chicago-area university is taking other measures to draw back on spending, including furloughing some 250 employees likely through the summer. Northwestern said state unemployment benefits, plus the federal stimulus, will likely replace most wages for some workers.
Other staff members are taking steep pay cuts, including the president, interim provost, and senior vice president, who said they would take 20% pay reductions. University deans will take a 10% cut. Other university leaders are expected to take similar reductions.
Starting in June, the university will cut contributions for the school’s 403(b) retirement plans for the rest of the year. The decision to cut the 5% automatic and 5% match contribution is expected to save the school “tens of millions of dollars.”
Despite these changes, which halved the budget shortfall, the university said the financial repercussions of the coronavirus are expected to last for some time.
“We are likely to see a significant shortfall in the 2021 fiscal year as well, perhaps as great as or greater than what we are experiencing this year,” according to the letter.