6/8: Update from the Provost and Chief Financial Officer

Dear Colleagues,

We hope this finds you safe and well. Thank you for your continued perseverance in maintaining the important work of the University. USC has been severely impacted by the COVID-19 pandemic, but we are committed to supporting our people, protecting the excellence of our programs, and ensuring a strong future for USC while also undertaking the financial steps necessary to stem our losses.

We write today to inform you of another step to help us close a potential budget gap of $300 to $500 million in FY 2021. The gap arises from lost revenues and increased costs associated with COVID-19. We are preparing for a prolonged economic recovery that could impact our finances for several years. We remain confident that we can close this gap for FY 2021, and over the next year, develop plans to emerge stronger from the pandemic.

In our letter of April 3, we outlined several measures to help offset this shortfall. These included pauses in hiring and merit increases, reductions in travel, and salary reductions by President Folt (20 percent), the Provost, Deans, and Senior Vice Presidents (10 percent) during the upcoming fiscal year. In addition, the Vice Presidents will now be taking a 5 percent salary reduction.

From the start, we have sought feedback from a diverse group of stakeholders, including the Executive Board and the Committee on Finances and Enrollment of the Academic Senate, elected student leaders, the elected Staff Assembly, school council chairs, and many other groups and individuals, including through a webinar attended by more than 1,000 faculty. Many questions were raised in these conversations, including the use of endowment and borrowing, which are addressed in these FAQs.

These discussions with the community have provided valuable guidance to our decisions. We have made every effort to protect the excellence of our academic programs, our research, student aid, and most of all, jobs. However, personnel costs – salaries, wages, and benefits – account for almost 60 percent of our operating costs, and unfortunately, we must curtail some of these costs to address a budget deficit of this magnitude.

Beginning in January 2021, we will be suspending employer contributions for one year to the University’s retirement plan for faculty and staff to help fill the FY 2021 gap. This move will generate a cost savings of approximately $130 million. This action does not affect any employee’s ability to make pre-tax contributions. It is only the university’s employer contributions to these plans that will be suspended.

A separate clinical financial plan is being developed for those who work in our health system, as they have different sources of income, work in different sites, and have different ways to generate revenue. Keck Medicine of USC employees and faculty paid from clinical revenue generated through the CHLA medical group, the LA County contract, and USC Care medical group who spend the majority of their time in patient care activities will fall under that clinical plan, and will be exempt from the suspension of employer contributions to retirement benefits.

This step alone will not close the financial gap. We are currently identifying additional non-compensation opportunities in procurement, information technology, professional services, and other areas that will be needed to close the remainder. We have asked our Deans and university leaders to strategically assess all functions, activities, and programs to identify innovative ways to make us more efficient. Of course, should our financial situation deteriorate significantly, we may need to take additional compensation-related actions. We anticipate that our long-term strategy will result in expansion of some operations and shrinkage of others. Both revenue growth and restructuring of administrative and academic operations will be explored as we build for the future.

Although the challenges ahead are daunting, we remain confident in our collective capacity to emerge from this period in a strong, highly competitive position.


Charles F. Zukoski, Provost
James M. Staten, Senior Vice President, Finance