Institutions will use furloughs and salary cuts to reduce costs. This is after suffering significant revenue losses due to lockdowns caused by the spread of the coronavirus.
Economic uncertainty caused by the spread of coronavirus in the US is causing institutions to consider drastic changes to reduce operational costs. Weeks after states started implementing stay at home orders, there is no indication things will return to normal soon.
Institutions counting losses
Institutions are now projecting they will have shortfalls in revenue and will be forced to cut costs. The University of Arizona is projecting a loss of more than $250 million due to the pandemic. The losses include $66 million projected for this fiscal year ending June 30th.
In response to these projections, the university has started outlining policies that will cut the cost to reduce the financial impact of these losses. Implementation of furloughs and salary cuts for staff is already being implemented.
Reducing costs through furloughs and salary cuts
Robert C. Robbins, Arizona’s president indicated salary cuts and furloughs were necessary to mitigate losses and prevent the institution from firing people in order to reduce costs. The furlough program will also give closure to workers in the university who are uncertain if they will still keep their jobs.
Robbins continued by saying the cuts were based on the assumption everything will be returning to normal by summer and the university will be reopening. However, if the lockdown and stay at home order will be extended beyond summer, staff should expect more cuts and cost-cutting measures will go further.
The long-term impact of furloughs on workers
The university indicated that starting from May 11th, 2020 to June 30th, 2021, staff earning up to $150,000 will see their paid working hours reduced. For instance, the directive indicated that staff that earned up to $44,499 will see their paid workdays reduced by 13 days, an equivalent of five percent pay cut. Workers earning more than $150,000 would see their salaries reduced by 17 percent, which would rise to 20 percent for workers earning more than $200,000.
Another taking such measures is the University of Wisconsin which announced that it would implement furloughs to more than 600 staff for one day a month until June 2021.
Vermont’s chancellor of the state college system has also announced the closure of three campuses due to financial struggle. The lockdowns have had detrimental results in Vermont which has struggled with declining enrollments. The closure of the universities will also see over 500 workers losing their jobs.
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