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Financial planning in response to COVID-19

April 6, 2020

From:
Cyril Clarke, Executive Vice President and Provost
Dwayne Pinkney, Senior Vice President and Chief Business Officer

The unprecedented COVID-19 pandemic continues to impact our university in ways unimaginable a few short weeks ago. Thus far, significant focus has been placed on the immediate needs of campus and students, and the herculean transition accomplished by shifting from face-to-face operations to virtual interactions. In the true spirit of Ut Prosim (That I May Serve), we are inspired daily by the resolve demonstrated by the entire university community.

As you know, the scale of this pandemic and its global reach have created an uncertain financial landscape. In response, Governor Northam issued a memorandum to state agencies on April 2 outlining a series of cost-savings measures designed to reduce spending and position state agencies in anticipation of reduced resources. Prudent and proactive financial stewardship will help us preserve jobs and continue our mission through the pandemic.

While we do not have sufficient information to provide specific targets for FY21 budget planning at this time, we do know it will be prudent to apply the brakes through the end of this fiscal year. The more you do now to limit expenditures, the better positioned your units will be in FY21. To that end, please note the following areas in which your actions can help your area prepare for reduced resources:

Hiring: Newly-funded positions and those that are open due to previous resignation, retirement, or termination of appointment contracts are to be left unfilled until further notice. Only absolutely essential teaching and research faculty, administrative and professional faculty, and staff (university and wage) positions may be filled. Approval to make essential hires must be sought from the Provost or Chief Business Officer, by submitting requests to the Vice Provost for Faculty Affairs and the Vice President for Human Resources, respectively. All such requests must be endorsed by the dean, vice provost, or vice president of the respective unit.

No position offers will be extended effective April 6 without prior approval. Virginia Tech will honor the employment contracts already signed by new employees. Similarly, units may follow through and complete the contracts for candidates who already have signed offers in hand and fully accept the current terms. All other recruitment efforts must be suspended pending possible approval due to the hires being declared essential.

Positions that are funded in full by extramural grants and contracts, including VT Foundation funded employees, are exempted and may be filled if the respective sponsoring agencies have committed to fund the full employment contract period or the foundation income is sufficient to fund the full cost.  Please note, however, that expenditures related to hiring these individuals, such as start-up packages, are subject to approval if they are to be supported by university funds.

Positions that are coming up for renewal, in which the performance of the incumbent is satisfactory, and there remains a need for the position are exempt and the reappointments may go forward as usual without additional university approval. Positions that have fixed employment termination dates, and which need to remain filled to meet unit responsibilities, are subject to review and approval.

Compensation Actions: Actions that increase personnel costs (including pay actions, promotions, in-bands, and bonuses) must be approved in advance by the Provost or Chief Business Officer, using the process stipulated above for essential hires. In addition to internal approval, compensation actions will require approval by the Secretary of Education. Only in extenuating circumstances will such actions be approved.

Purchasing: Expenses should be limited to those critical to maintaining operations of your area.

Travel: On March 11, 2020 a moratorium on all university-sponsored domestic and international travel was imposed. All members of the Virginia Tech community are discouraged from any non-critical domestic or international travel.

Discretionary Spending: Spending not critical to the operation of your area should be eliminated. This includes the hiring of outside consultants, renovations, equipment, or any other discretionary cost or activity.

Summer Session Instruction:  A separate communication limiting summer teaching, camps, and conferences to online only will be distributed soon. Summer is important for students’ continued academic progress, and many colleges rely on resources generated by summer session to support their overall college budget. Therefore, it is important for colleges to shift high demand seat-based summer courses to an online format to ensure the availability of course offerings. Estimated summer session budgets will be distributed at the beginning of the fiscal year and aligned to actual enrollment activity after summer term is complete.

Critical Needs:  Even in times of austerity, it is important for units to prioritize their resource needs.  Therefore, we are continuing with the critical needs budget request review process for the 208 E&G budgets of academic and administrative units. Given the fiscal uncertainties, you should plan for the response to requests for new funding to be measured and more limited than in prior years.

Budget Reduction Planning: While we do not yet have a complete picture of the pandemic’s impact on the university budget, every unit should prepare for a university-wide budget reduction in 2020-21. In doing so, please also consider how low-priority activities could be eliminated, new initiatives can be deferred, discretionary spending eliminated, and new commitments avoided. While these actions may be painful, this period also provides an opportunity to prioritize activities and focus on the highest strategic priorities. A budget reduction planning process will be undertaken once we have better information on state and self-generated resources. This process will also collect and consider negative fiscal impacts on units already affected by COVID-19 that may need assistance.

Year-End Carryover:  The university recognizes that carryover of fund balances will constitute an important part of strategies employed to manage expected budget cuts in FY21. We will prioritize continued use of these resources by units and these balances will be included in the overall analysis of each unit’s financial resources as budgets for FY21 are finalized. The university recognizes that fund balances vary in that some are discretionary whereas others are committed to multi-year use, such as faculty start-up funding.

Higher Education Equipment Trust Fund: Institutions are allowed to carry over funds for this fiscal year.

Each of these steps will position your area to adapt to a more resource-constrained environment. We will continue to communicate with you as we learn more, and we appreciate your commitment to Virginia Tech.