June 4, 2020

UOW confronts COVID-19 financial impact

Staff offered options to save jobs amid financial crisis

University of Wollongong (UOW) Vice-Chancellor, Professor Paul Wellings, CBE, has today briefed UOW staff on the impact the COVID-19 pandemic has had on University finances, actions taken to date and options for returning the Institution to a financially sustainable position.

In a live webcast, Professor Wellings outlined how COVID-19 international border closures and social distancing requirements have triggered sudden declines in international student enrolments and campus accommodation occupancy, cut income from campus and commercial operations and incurred additional costs associated with the pivot to remote course delivery and student hardship support.

Universities Australia is now forecasting a $16 billion impact of COVID-19 to 2024 and most universities are adjusting expenditure to deal with this crisis.

Revenue down; fiscal position deteriorating

From its 2019 revenue of $691 million, UOW is projecting an unplanned 13% drop in 2020 to $601 million—returning to 2016/17 revenue levels—leaving a budget shortfall of approximately $90 million.

As a consequence of the scale of the global recession and the limitations on the movement of people across international borders, it is estimated by 2022 international student revenue will be almost half of what it was in 2019. This reality is coupled with relatively flat domestic student enrolment projections.

The University’s fiscal position is also being heavily impacted, with declining revenue and rising costs depleting UOW’s cash balance. Current forecasts indicate that these will drop to about $18 million by December 2020, nearly 80% below what was planned before COVID-19.

Actions already taken in response to COVID-19 pandemic

Professor Wellings outlined actions already taken by University management since January to address the deteriorating fiscal position, including himself and the senior executive taking a voluntary 20% reduction in pay for 12 months, increasing borrowings and curtailing travel, consultancy, capital works, equipment, staff recruitment and non-essential research expenditure.

After accounting for lost revenue from suspending parking fees and the Student Services and Amenities Fee for Autumn Session, along with the $1.9 million paid so far to students suffering financial hardship, these measures will save $33 million, leaving a further $57 million worth of savings required this year.

While optimistic the revenue decline may slow or begin to recover in 2022 as international students return, Professor Wellings emphasised the need for immediate action.

“We’ve enjoyed a decade of steady annual revenue growth that has enabled us to fund salary increases and absorb rising costs while maintaining an annual surplus of around 2% to invest in new equipment and upgrades to technology and facilities. Those days are now behind us. This pandemic has changed everything.

“COVID-19 has brought permanent, far-reaching changes to our world, our economy and to higher education globally. No university is immune and doing nothing is not an option.

“As well as returning to financial sustainability, we must also prepare for a post-COVID-19 world that is very different from the future we envisaged just months ago, and with that comes the requirement to make extremely difficult decisions,” the Vice-Chancellor said.

Professor Wellings told staff that savings already achieved needed to be maintained and more found until the end of 2022 while the University worked to recover its lost international student enrolments.

Staff offered options to save costs and jobs

Professor Wellings asked staff to consider three options to contribute to savings. Two of the three options vary enterprise agreements by reducing pay on a sliding scale according to salary levels of between 5% and 10% for 18 months, or between 7.5% and 15% for 12 months.  Staff may then opt to reduce their hours proportionate to their pay cut. The third option retains pay and conditions provided under UOW’s existing enterprise agreements.

Either enterprise agreement variation option would help minimise job losses—potentially limiting them to 150 or 200 Full Time Equivalent (FTE) positions from the University’s 2351 FTE-strong workforce—compared to the ‘status quo’ option, which would require substantial staff reductions across the University, possibly double the job losses forecast under either of the two agreement variation options.

The proposed variations also include a freeze on scheduled pay increases, a requirement to reduce accrued leave, greater flexibility regarding staff duties and a commitment to provide regular updates.

 “With employment costs accounting for 55% of our operations, there is no scenario in which UOW can return to financial sustainability without impacting on staffing levels,” Professor Wellings said.

Staff will have the opportunity consider the proposals and ask questions of their manager before indicating their preferred option in an anonymous survey conducted by independent survey provider, the Voice Project. Results will be provided to staff once available.

If staff select an enterprise agreement variation as their preferred option, UOW management will prepare a variation proposal accordingly and conduct the required consultation and formal vote before submitting it to the Fair Work Commission for approval.

If staff indicate via the survey that their preferred option is to not vary their enterprise agreements, the University will not conduct a staff vote on either of the proposed variations, but instead proceed with a process to make savings within the current enterprise agreement conditions.

The Vice-Chancellor’s presentation, frequently asked questions and related information have been provided to staff on the University’s intranet and free counselling offered under UOW’s Employee Assistance Program.

“These are challenging times and in years to come 2020 will be remembered as a threshold moment in our University’s 45-year history as an independent institution.

“Our university community has already pulled together this year to face bushfires and a public health crisis. I am confident we can similarly work together to confront this financial crisis,” Professor Wellings said.

 

Media resources

The Vice-Chancellor’s presentation is available to media via Drop Box here.