What Counts as a Fiscal Emergency?

Arbitration over contract violations and salary freezes began several weeks ago between Rutgers University and its faculty and staff unions.

The step illustrates the tumult between the university and its unions as they try to agree on how the university should balance budgets constrained by the COVID-19 pandemic. The two sides can't even agree on what numbers to use in key areas, including how much money different proposals could save the university. It's a uniquely difficult situation in a higher education sector filled with disagreements about what cuts to make in the pandemic.

In June -- several months after Rutgers sent students home amid the COVID-19 pandemic -- the university declared a fiscal emergency, citing a predicted budget shortfall of more than $200 million, according to union leaders. Revised budgets put the gap at $97 million -- still the largest revenue shortfall in the university’s history, Michael Gower, chief financial officer for the university, said in a press release this month.

The adjusted budget takes into account some cost-saving measures, including a wage freeze, additional furloughs, a continued prohibition on business travel, suspension of new capital projects and a freeze on discretionary spending related to university operations. The university also received $54 million from the CARES Act federal stimulus package last spring, $27 million of which was federally mandated to directly help students with housing, mental health services, food and other expenses.

Already, the university has laid off more than 1,000 staff members, said Christine O’Connell, president of the Union of Rutgers Administrators, URA-AFT, which represents about 2,500 Rutgers administrative staff members. The layoffs make up 5 percent of total Rutgers union membership.

In anticipation of financial hardships, Rutgers unions put together a work-share proposal last spring, said Todd Wolfson, an associate professor of journalism and media studies and president of the Rutgers American Association of University Professors chapter, AAUP-AFT, the union that represents Rutgers faculty members.

The proposal would have furloughed or reduced hours for all 30,000 university employees, he said. But it would have "kept them whole" because of the federal unemployment benefits available in the spring and saved the university more than $100 million.

“The university didn’t ever really respond seriously," he said.

Asked about the university's response to the proposal, university spokesperson Dory Devlin did not address the proposal directly. Instead, she said that 6,400 Rutgers employees have entered or will enter work-share programs that include furloughs.

"Discussions with university unions are ongoing and we are hopeful that we will be able to reach shared-work agreements with other unions as we look to control costs and preserve jobs," Devlin wrote in an email.

Under existing labor contracts, the university must demonstrate why it declared a fiscal emergency, but union leaders say the university has not been forthcoming with its finances.

“If they had given us a full accounting and they could really show where they’d been hit, we may feel differently. But what we see is a very, vastly different story,” Wolfson said. “I just don’t think we see the same sky anymore.”

Without access to all of the university’s financial information, the unions have yet to find evidence that they say justifies the university’s emergency declaration and resulting layoffs, furloughs and salary freezes.

The university’s original budget shortfall prediction was cut in half after the state of New Jersey restored funding to fiscal 2020 levels and reversed a previously proposed cut in state operating aid to the university. Direct state operating aid totals $437 million and makes up about 10 percent of the university’s operating budget, Devlin said in an email.

Still, the university maintains its financial situation is just as dire.

“Even with the restoration of $86.6 million in previously proposed cuts in state operating aid to the university, we are still in a fiscal emergency requiring extraordinary steps to fill the largest financial hole the university has ever experienced,” Gower, the Rutgers CFO, said in the October press release.

The university's current unrestricted reserves total $513.5 million, which is lower than earlier predictions that pinned them at $765.6 million. Unrestricted reserves are not earmarked for a specific project, scholarship, activity or other purpose. Rutgers’ unrestricted net position is the total of its unrestricted endowment, operations, faculty funds and capital projects, plus student funds for federal Perkins and other institutional loans.

The university concluded two recent sales, Wolfson said. After the fiscal emergency was announced in June, the university spun out RUCDR Infinite Biologics, a Rutgers lab that created a COVID-19 saliva test, for $44.4 million. It also sold a property in Middlesex County, N.J., for $28 million.

Union leaders are uncertain whether those revenues will be accounted for in fiscal 2020 or 2021.

“That is another point around which they have been transparent as a brick wall,” David Hughes, professor of anthropology at Rutgers and treasurer of the AAUP-AFT faculty and graduate student union, wrote in an email.

Rutgers graduate and undergraduate enrollment has increased slightly from last year. Total fall 2020 enrollment is projected to be 71,616, up from 71,277 in fall 2019, Devlin said. Like many colleges, the university has few students living on campus this semester. It is projecting a $73.5 million loss in auxiliary revenue, which includes housing, dining and parking.

The university also predicts a decline in athletics revenue. In July, the faculty union sued for the university’s athletics program financial records after the university moved $76 million into the already subsidized program.

O’Connell said she understands that not every employee can be shielded from furloughs and layoffs. For example, some dining employee layoffs are difficult to avoid, she said. More than 500 dining workers have been laid off.

But at the same time, the university is laying off employees from a variety of departments, including the school of arts and sciences, libraries and the Rutgers Garden, where the university conducts horticulture research, she said.

“Their response is, ‘We’re having a budget crunch and everybody can go,’” O’Connell said about the layoffs.

Meanwhile, in September, the university's president, Jonathan Holloway, hired or promoted three administrators to senior vice presidents. Enobong (Anna) Branch, the university’s former vice chancellor for diversity, inclusion and community engagement, now serves as senior vice president for equity. Andrea Conklin Bueschel was appointed senior vice president for administration and chief of staff. Brian Ballentine is now senior vice president for strategy and senior adviser to the president after serving as chief of staff.

The base salary for all three appointees is $300,000, Devlin said.

A salary freeze remains in place for many employees. Senior administrators took voluntary pay cuts earlier in the year, Devlin said in an email. Holloway, chancellors, senior leaders and head coaches for football and men’s and women’s basketball took 10 percent pay cuts, and nearly 100 senior administrators took 5 percent pay cuts. All of those employees have also taken 10 unpaid furlough days.

The American Association of University Professors has expressed concern that some boards and administrators avoid formal financial exigency declarations, which provide some level of formal protection and process when personnel cuts have to be made. Some administrators worry about the reputational risk or lack of flexibility that exigency can bring and have instead been exploring less defined financial emergency declarations that suspend faculty handbooks.

In Rutgers' case, union leaders aren't convinced there's a true emergency.

“If there truly was a fiscal emergency, then things would look differently,” O'Connell said.

The unions are still open to working with the university to minimize furloughs and layoffs. Recently, the unions offered to delay promised raises in exchange for university management’s commitment to stop all layoffs retroactive to July 1, provide health coverage for those already laid off and extend funding for teaching assistants and graduate assistants.