As the coronavirus places an unprecedented stress on health systems and endangers the lives of thousands across the world, it also spurs another cause for panic — a financial one — that comes as the U.S. faces its biggest economic downturn since the 2008 recession. The college, with its $2.378 billion endowment, as of June 30, 2018, is not immune to this ill, regardless of how strict its sanitizing and social distancing measures may be.
The recent shift to online learning is estimated to cost the college up to $10 million, Chief Financial and Administrative Officer Kevin Weinman wrote in a March 23 letter to faculty and staff. According to him, the total includes the cost of assisting in student travel from campus and abroad, online learning tools (including Wi-Fi hotspots for students who need them), reimbursement for the second half of the spring semester’s room and board as well as staff salaries, which includes continued payment to all college employees, including student workers and shift premiums to the essential workers who continue their on-campus jobs. In an email interview with The Student, Weinman also added that the college expects to further lose revenue from now-halted summer programs that usually offer a boon to the college’s operating budget.
These expenses are spread across the board, and a COVID-19 support fund began in order to assist with the unpredicted expenses of the college’s coronavirus response. The Association of Amherst Students (AAS) quickly mobilized funding to help subsidize student travel costs and contributed $100,000 to the support fund. Since its creation, the fund has grown with contributions from alumni, parents and others in the college community, as has the Amherst Fund, which Weinman confirmed has received numerous donations since the college’s remote-learning announcement. The college also expects to receive some support from the federal government as part of Congress’s emergency assistance package. According to a recent report in the Chronicle of Higher Education, the college is projected to receive $1,574,582 from the federal government as part of its coronavirus stimulus package, with a minimum of $787,291 awarded in emergency grants to students.
Regardless of the outpouring of financial support, this hit will result in a “deficit to the operating budget for the current fiscal year, FY20,” Weinman said. Rather than pulling from the endowment, these expenses draw from the college’s rainy-day “unrestricted and flexible reserve balances.”
It’s the college’s financial growth in recent years that has allowed for the accumulation of these funds in the first place; this strategy has also positioned the institution in a place of relative comfort entering this upheaval. “We have prepared for years, and in many different ways, for the inevitable time when our finances would come under pressure,” Weinman wrote in the letter. He added, “we are fortunate to avoid having to make immediate tradeoffs between doing what we want to do to support our community and doing what we can afford.”
Weinman has faith that the investment and budget strategy employed by the college has led to this type of financial wellbeing and that it will continue to work in the college’s favor as it weathers the tumult of a coronavirus economy. “We are not just invested in ‘the stock market,’ but rather many different investment types, some of which may perform well at the same time the performance of others is challenged. This diversified approach toward investment serves the college well in good times and bad,” Weinman said. “While we expect this year’s investment returns will be the lowest in recent memory, the diversified nature of the portfolio should result in losses that are less than the declines experienced by major U.S. equity indices such as the Dow Jones and the S&P 500.”
Globally, the pandemic has strained markets, beginning well before coronavirus hit the U.S. as a sweeping concern, with production in China stalling, airlines hemorrhaging cash due to near halts in travel and the widespread loss of in-store customers for restaurants, bars and stores alike. Stock indexes like the Dow Jones, S&P 500 and Nasdaq have spiked and plummeted widely. And amid this landscape, U.S. unemployment claims reached 16.9 million as of April 9, leaving many without the paycheck they need to cover rent and to put dinner on the table.
In addition to its investing strategies, the college will continue its dedication to “careful budgeting and cost containment … and maintaining a compelling case for philanthropic support,” which are also key components of the college’s financial health, according to Weinman.
The endowment valuation has already seen decline, though, as the Board of Trustees Chair Andrew Nussbaum ’85 wrote in his open letter to the college community, in which he makes what Weinman calls a “compelling case for philanthropic support.”
“With well over 50 percent of our expenditures funded by the endowment each year, Amherst is more vulnerable than most to steep and prolonged investment market declines,” Weinman wrote. The endowment, student fees and philanthropy are the college’s primary sources of income.
Matt McGann, dean of admission and financial aid, confirmed that even considering these financial strains, the college will continue its need-blind policy in admissions and will “remain committed to meeting the full financial need of every student.”
Student enrollment in the fall semester will affect college income, and the potential prolonged need for remote learning could bring a decrease in enrollment come September. McGann acknowledged that the admissions office may see a change in the number of students in its recently accepted class of 2024 who request a gap year.
“[We] are already working on plans for a variety of possibilities, while hoping for the best outcome, a rapid return to a full year on-campus educational experience,” Weinman confirmed regarding plans for the upcoming fall semester.
In his letter, Weinman noted the intersecting effects that these funding sources all have on each other.“In challenging times, we could experience depressed endowment valuations, escalating student need for financial aid and declining giving rates and amounts, all at once,” he said.
Consequently, the college finds itself in the position of beginning to think towards the murkier horizon of what long-term financial hardship may bring, despite the short-term stability the college currently has.
For now, the college has not yet made decisions to change future budgets to account for these financial harms, Weinman confirmed to The Student. The fate of the college’s current major projects, in the new student center and its bicentennial celebration, both loom as a central concern for community members considering potential budget cuts. “Bicentennial planning is moving forward as it would have without the pandemic, but no decisions on when or how it will be marked have been made. We are very conscious of the need to be flexible. We are also considering if and how bicentennial events could potentially be produced virtually,” he said.
The process of making these decisions will occur democratically, across existing key governance bodies, like the Committee on Priorities and Resources. In response to the 2008 recession, a new Advisory Budget Committee formed in order to adjust the college’s budget to the financial realities. “President [Biddy] Martin is committed to a similar approach when we have a better sense of the challenges we are likely to face,” Weinman wrote.
While the 2008 recession can offer some lessons for the institutional response to this crisis, the challenges posed by coronavirus are unlike any other seen before, and there is no road map for how to best recover as those on the college’s finance and advancement teams now operate entirely from home and community stakeholders have scattered across the globe.
“Every day brings new knowledge … some new challenges become more apparent, while other challenges may recede a bit. This will continue for some time, and we will not fully know the nature of the financial challenges that we will be facing until these uncertainties begin to lift,” Weinman said. “Circumstances for many in our community have changed and our first concern is the well being of the Amherst family, near and far. The campaign priorities are built on the core values of this place — students and faculty together on a residential campus — and those remain.”