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From the Vice-Chancellor

An update on our 2020 financial position and Reset Program

24 September 2020

Dear colleagues,

I am writing to you to share an update on our ongoing response to the COVID-19 pandemic.

As a result of the pandemic we have been working remotely for six months now, living and working under very challenging conditions. Yet we have maintained our focus on our students, our research and research partners and the sustainability of our University. I want to thank you all for your hard work and commitment.

It has been over a month since I first announced the measures that the University must take to combat the revenue shortfall created by the COVID-19 pandemic. Waiting for clarity about this has undoubtedly made many of you feel anxious about the future, and I am very sorry about that, but I want to ensure that we explore all possible avenues thoroughly before we act.

We have taken this time to ensure that a considered approach is taken to these critical decisions, mindful of the impact on our staff, our students and the long-term future of our institution. I am conscious that the steps I am announcing today may, in some ways, prolong this anxiety due to the sequencing of the Reset Program. However, it is important to understand that this is about delivering the best possible outcome given our challenging circumstances, through an approach that has been designed to limit the overall number of involuntary redundancies.

The approach I am setting out here follows a meeting of University Executive on Wednesday at which we considered and agreed the detailed phasing of our Pandemic Reset Program that will be implemented in these final months of 2020 and into 2021. This process has been guided by a set of agreed principles addressing the kind of University we are, and how we work with our staff to achieve this goal under very demanding circumstances and high levels of uncertainty.

An update on our 2020 financial position 

Our current financial forecast for 2020 indicates a revenue shortfall of $177 million against our budget. This remains a serious problem for the University, but is, I am pleased to say, better than the expected $309 million shortfall previously forecast.

This improved position is primarily driven by the latest data from the September census, which shows higher-than-expected student enrolments and load in Semester 2. In addition, our research income is significantly higher than this time last year, which is fabulous news, although this funding is directed towards specific research projects and will not directly offset the University’s operating loss.

These outcomes are a reflection of your much-appreciated efforts to attract, retain and support students amid the pandemic, particularly through your commitment to improving our online teaching and learning, while continuing to conduct brilliant research under great pressure. In addition our COVID-19 support programs have been positively received by our students, helping to ensure confidence in their education at Melbourne. I am deeply grateful for the high level of professionalism and agility shown by everyone across all areas of work required to run this large university under such changed circumstances. This is an outstanding achievement.

To manage the overall financial impact in 2020, we have already implemented non-salary-related savings and executive pay cuts and freezes, deferred capital expenditure, utilised $120 million of available cash reserves, and increased our borrowing capacity by $300 million. I thank everyone for their contributions in getting us to this much improved financial position.

Taking into account all these factors, the University is still expecting an operating loss of around $60 million in 2020 because it is costing us more money to run the institution than we have coming in.

A detailed explanation of the updated forecast for 2020 is available on the Staff Hub and any questions you may have can be submitted to the Pandemic Reset Program team.

We remain in a time of major uncertainty, and so we have a duty to continue to take a cautious approach to planning for 2021 and beyond, acknowledging that external factors could cause a worse-than-expected future financial outcome.

Victoria is currently facing particular challenges as a result of the pandemic in terms of allowing students to return to campus, which we must work through. It is unclear how the pandemic will affect first-time and returning students in 2021. On the one hand, demand for university places has been known to rise during economic downturns, but on the other hand this is a global challenge where other factors may influence student choices in the face of travel restrictions and volatile geopolitics.  There is also the added uncertainty generated by the new “Job Ready Graduates” legislation currently going through Parliament along with any outcomes of the research review being conducted by the Federal Government.

We will continue to monitor closely all aspects of the impact of the pandemic on the University so that as the situation changes – for better or worse – we can adjust our plans accordingly while engaging openly with you.

In the meantime, we still need to make significant savings over the next two years to return to a financially stable position on an ongoing basis. This means resizing our operations and reducing our annual operating costs to match our reduced revenue.

Pandemic Reset Program – Implementation plan

Since my update in early August, all parts of the University have been working on their savings plans as part of the Pandemic Reset Program.

We remain committed to prioritising the retention of jobs wherever possible.  In this regard, and in light of the improved 2020 financials, we have adjusted the Pandemic Reset Program plan as follows.

  • Pending the outcome of a decision by the Fair Work Commission, we propose to consult on a process to invite expressions of interest in a voluntary redundancy program for academic and professional staff in 2020.
  • The University has submitted an application to the Australian Taxation Office to have the proposed Senior Academic Enhanced Retirement Scheme (SAERS) formally recognised as an eligible scheme allowing generous concessional tax rates and the same benefits as apply to those who take redundancy. We will be able to provide more detail and invite expressions of interest from staff if and when the scheme receives ATO approval - we anticipate this will occur this year.
  • We will progress some change programs which are already in development. These will proceed now because they are not solely related to our pandemic response and will deliver long-term benefits to the University. This includes continued work on the Professional Services Redesign workstream as this will improve our shared services model to ensure that it functions efficiently and effectively at this time of great uncertainty. This work will optimise our services across Finance, Data and Reporting, HR, Occupational Health and Safety, IT, Facilities, Advancement, Student Recruitment, Admissions, and Communications and Marketing. We will consult with staff about these changes prior to the end of the year and will operationalize these changes in a phased manner to enable the least disruption to research and teaching, while giving clarity to those staff affected as soon as possible.
  • We will defer a final decision on involuntary redundancies until early 2021, when Expressions of Interest in voluntary redundancy have been responded to and we will have clearer data about the student load and revenue projections for 2021 and potentially 2022.  However this will not preclude staffing changes in 2020 arising from the Professional Service Redesign program as well as a small number of other change plans.
  • We will continue with the non-salary savings identified by the Divisions in their savings plans.
  • We will continue to manage carefully the staff appointments process as we have done throughout 2020, including continuing to freeze vacant positions where Divisions have identified these as part of their savings.
  • We will continue to reset the 10-year capital plan, by seeking to defer further planned expenditure in 2020 and critically reviewing every capital project to minimise expenditure in 2021 and beyond.

Next steps

From early October, the Deans and Executives, together with their leadership teams, will engage with staff within their areas to provide an update on the program as outlined, and to discuss what this means locally.

Our ongoing operational response to COVID-19

We have been working remotely for six months now and the findings of our recent staff survey indicate that there is more we can do to support you to continue to operate in this way and to stay connected. We will draw upon the lessons of this new way of working to ensure that you are supported to the fullest extent possible.

The pandemic itself, the extended lockdown in Victoria, together with the changes that are required for our University as a result of the financial impact of COVID-19, will cause us all to respond in different ways at different times. As I have shared previously, we have a range of support services available to you and your families, and our students. I hope that you will make use of them whenever you think that they might help.

We will continue to adhere to the latest government guidelines and adapt our roadmap for a phased return to campus whenever that becomes possible. I look forward to keeping you up-to-date as restrictions change.

Finally, I want to acknowledge the considerable feedback received about how best to address the challenges ahead which we have incorporated into our thinking wherever feasible. It is really encouraging to see the deep engagement of our community, working together to be part of the solution that ensures we emerge from this difficult time as strong as ever, preserving what we care about most as a University: great teaching, high-quality research and community engagement that enriches our society.

Duncan Maskell