March 23, 2009

Skorton Quells Concerns About Workforce Reduction in Open Forum

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This story was originally published on March 16.

Addressing Cornell’s approximately $230 million deficit, President David Skorton summarized the University’s current financial situation and answered pointed questions from an audience of at least 200 this afternoon in an open forum aimed for faculty and staff in Statler Auditorium.

Most of the questions raised were centered on the subject of workforce reduction. Skorton said several times during the question-and-answer session that there would be more layoffs in the future.

“It’s not possible to reduce the budget of the institution — that is predominantly based on workforce with 65 percent of the budget — without getting some workforce reduction. It’s not possible. But it is possible to do it [in a respectful and humane way,]” Skorton said.

The University has laid-off 35 employees so far in the current fiscal year, according to Mary Opperman, vice president for human resources. This, however, is not the ultimate number as budget information is not finalized yet. Opperman also implied that not all layoffs were due to budget cuts and the number has to be put in context.

“Remember we have layoffs every year because of research activities,” she said.

Although workforce reduction is inevitable, Skorton emphasized that it is always a last-resort, and will be conducted in a respectful manner.

“[We are] trying to find a way that reduction in workforce … [will be] done respectful of the situation people are in. Both financially respectful and [in a] personal, human respectful [way,]” Skorton said.

While departments are required to reduce budgets, Skorton stressed that they are also asked to retain faculty and staff. In the case of layoffs, the recommendations would originate from a local level in individual departments and units, then channel into a single process and review at the University level.

No particular profile type, such as age group, is being targeted for layoffs, according to Opperman.

“We do not target individuals. We target work that is going to end,” Opperman said. She added that all health and retirement benefit would stay in place.

The University has also saved about $20 million from not issuing raises this year. Freezing salaries, however, is not a sustainable solution, according to Skorton.

When asked whether the construction pause would result in the firing of related staff, Skorton said that he could not provide an answer until the end of the semester. The pause would provide time for the University to re-consider all construction projects.

“We need time to think this through a little bit … We can’t tell you what will go forward until the end of this semester,” Skorton said.

The forum began with Skorton outlining Cornell’s current financial state: 11 percent of the University’s and 13 percent of the Ithaca campus’ operating budget is funded by the endowment, which saw an approximately $80 million reduction.

As a result of the deficits — $215 million in the Ithaca campus; $230 million University-wide — the University will reduce the endowment payout rate by 15 percent this year, and about 11 percent the year after. A $50 million budget reduction will also be implemented across campus this July, and another $50 million budget correction will take effect in July 2010.

“This first round of cuts has not been done strategically … in the sense that the cuts were done across all units. Everybody got a five percent cut, except the provost and I got twice the cuts in our own units. Once we decided that, planning ahead for 2010-11, we need to do that in a strategic way, not in the across-the-board way we’re doing right now,” Skorton said.

The University will also increase its liquidity, or working capital, by two methods: invest the endowment in ways that make money more quickly available, and sell $500 million worth of taxable bonds. Skorton said that the first strategy is quite successful so far; and Cornell is in the process of talking with bond-rating agencies.

Apart from the endowment, Cornell’s revenue also heavily depends on three other sources: tuition, funding for scientific research, and revenue from the Weill Medical School’s medical care services. Skorton said that those revenue sources are “all very robust” and are not directly affected by the current market conditions.

“I think [the open forum] is a very positive thing. I think the president is doing the best job he can do,” said an administrative assistant who wishes to remain anonymous. “[In this financial situation] it would be strange not to worry about your job.”

Several other University employees who attended the forum refused to comment.

The forum was held over Spring Break in hopes that more employees would have the opportunity to attend, according to Tommy Bruce, vice president for University communications.