Stanford University forecasts staggering financial losses, workforce reductions

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SAN JOSE, Calif. — Stanford president Marc Tessier-Lavigne wrote a letter to the university community Wednesday outlining current financial challenges and staggering projected losses in the months ahead.

Tessier-Lavigne wrote that Stanford is forecasting a “$267 million negative financial impact from COVID-19” between March 1 and Aug. 31, 2020, which marks the end of the fiscal year 2020. Tessier-Lavigne also said the university expects “our financial challenges to be as great or even greater,” in fiscal year 2021.

“Housing revenue will be reduced due to fewer students living on campus; income-producing events and programs will continue to be limited; and clinical, research and philanthropic income streams will be challenged,” Tessier-Lavigne wrote.

Tessier-Lavigne also said the “magnitude of the budget challenge,” will lead to workforce reductions in the new fiscal year, but Stanford does not yet know how many jobs will be lost. The reductions are expected to include a combination of furloughs and permanent layoffs.

The university reported the value of its endowment was $27.7 billion on August 31, 2019, but Tessier-Lavigne wrote that market volatility, which has affected the endowment during the coronavirus pandemic, can be expected to continue.

Stanford paid out $1.3 billion from its endowment (an estimated five percent) in 2019 to cover operating costs, but the university does not appear to have plans to use as much money from its endowment to cover losses next year.

In Tessier-Lavigne’s letter, he wrote that university units have been asked to prepare budget plans based on a scenario with a 15% reduction in funding from an endowment payout and a 10% reduction in support from Stanford’s general funds.

Tessier-Lavigne said it is possible the reductions in payouts will be smaller than the targets university units must prepare for and assured units that final allocations of general funds and endowment payout will be set by the end of June.

Tessier-Lavigne and Provost Persis Dell are planning to hold a “Conversation with the President and Provost” on June 1 at 1 p.m. over a livestream, to address questions from the Stanford community.

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©2020 The Mercury News (San Jose, Calif.)