Jim Gash (President, Pepperdine University), Starting Off Strong:
As the school year starts, and as we are learning more about the enrollments at each of our five schools, the Steering Team has been addressing our projected COVID-induced deficit. Last week, I outlined for you a number of steps we have already implemented to backfill this deficit, and I am enormously grateful to our community for instituting the expense optimization measures we have developed. This University-wide effort has made a tremendous contribution to the FY20 budget cycle (which ended on July 31), as well as the FY21 budget.
In addition to the continuation of the general expense optimization measures, we announced last week several specific steps we have taken to help address our deficit. These included deferring certain strategic allocations made in the annual budgeting process, deferring certain capital maintenance and improvement projects, and realigning the telecom allowance. Also included was a one-year suspension of the University's retirement matching program for all employees. This decision, which was approved by the University Benefits Committee, leaves in place the four percent contribution the University makes to employee 403(b) retirement accounts, but suspends the University's match of up to an additional six percent of what employees contribute to their own retirement accounts.
Because this projected deficit is so significant, however, and because personnel costs make up more than 60 percent of our total annual budget, I informed the community at last week's President's Briefing that we would need to go through a due diligence exercise to determine whether furloughs and layoffs would be needed to fulfill our commitment to balance the University's budget.
Furloughs and Layoffs Decision
As Pepperdine's leadership deliberated on this decision, two of the values referenced above came into sharp focus for us, making this a very difficult decision. Those competing values are 1) taking care of our people, our greatest asset, and 2) being good stewards of the resources God has provided for us to fulfill our mission.
We are aware that some employees in our community are unable to perform their work remotely, in full or in part, through no fault of their own due to current COVID-induced restrictions. Shortly after we closed campus last spring, we made the commitment to our community, consistent with our principles above, that we would not furlough or lay off members of our workforce through July 31, 2020, because of these workload reductions.
After careful consideration, we have decided to extend this decision to not furlough or lay off members of our workforce due to COVID-related workload reductions through at least December 31, 2020. This decision applies to all domestic employees. With respect to our international program employees, we are working with the Office of International Programs to evaluate how the social services and labor laws in each country will allow us to provide similar protections. We will re-evaluate the status of the pandemic and our budget condition toward the end of the year to determine whether we need to change our approach in calendar year 2021. Our desire is to take care of our people. Sometimes that will be expressed through avoiding layoffs and furloughs. Other times we may be required to implement reductions in our workforce. If that day comes, our desire will be to do it in a way that takes care of our people.
Stewarding our Resources
Following our diligent review of University expenses, we discovered that if we had implemented a furlough or layoff of those who cannot, in part or in full, perform their work remotely, we would have realized some budgetary savings. In this case, however, rather than implementing the furlough, we instead decided to create those same savings through a reduction in executive compensation. This reduction is in addition to the salary freeze and the retirement matching suspension that the Steering Team also has experienced along with other Pepperdine employees. This decision allows us to fulfill our commitment to steward well the resources entrusted to us. As a result, we will not furlough through December 31, but we will still capture the savings that a furlough would have otherwise produced.
For employees who are unable to work remotely, in part or in full, we intend to first redeploy them within their department or school. If there are no compatible projects within their department or school, they will enter a pool of employees for placement around the University to assist with strategic projects that will advance Pepperdine during this challenging time. Human Resources will be communicating more details about the redeployment process in the coming days.
As you can see, the heart of Pepperdine is to confront every challenge we face with a response that will make our community stronger and bring us together. That is my great hope for the academic year 2020-21.
May God bless the work of our hands and the passion in our hearts as we stand together to make Pepperdine shine.