UAB announces temporary expense reduction strategies due to COVID-19

The University of Alabama at Birmingham and UAB Medicine are implementing additional expense-reduction strategies due to significant financial losses resulting from the COVID-19 pandemic. The university and UAB Medicine will implement different responses to address budget shortfalls for their separate lines of business.

The university is announcing limited furloughs of staff who are unable to work effectively off-campus in the current distance learning and remote work model, and UAB Medicine is announcing salary reductions for clinical faculty and staff. Salary reductions are also being applied to leadership from both the university and UAB Medicine.

Beginning in March, UAB took quick steps in partnership with the University of Alabama System to limit travel and restrict hiring and discretionary spending, among other strategies.

University Response

COVID-19 presents an extremely difficult challenge to UAB and all universities across the country and the world. Since March 16, UAB operations have been limited, and most employees have been working remotely. State and federal public health experts forecast continued disruption through the summer.

Lower revenues and increased expenses from a rapid move to social distancing, canceled on-campus programs, research restrictions and reduced philanthropy are continuing to place pressure on the budget despite a range of expense reductions implemented in March and April.

Absent further changes to operating expenses, UAB would face a budget shortfall of more than $40 million in the remaining five months of the current FY20 fiscal year ending Sept. 30. Stimulus funds address only a portion of our losses.

As a result, today UAB announced that approximately 325 university employees would be placed on a temporary furlough status beginning May 10 through July 31, 2020.

The furlough period might be shorter or longer depending on the evolving impact of the pandemic. The furloughs are limited to those who have little or no ability to work effectively off-campus in our current distance learning and remote work model. During furlough, employees retain benefits such as health insurance and are eligible for unemployment benefits and additional assistance through the CARES Act. University Human Resources will submit unemployment insurance applications for furloughed employees.

University leadership evaluated every possible option with the goals of keeping people safe and minimizing disruption to faculty and staff. The university continued to offer full salaries and benefits to all employees over the period — even those who have been unable to work remotely — since March 16. Furloughs (as opposed to layoffs) allow employees to maintain full health insurance coverage and other benefits.

University leadership also had their salaries reduced for at least the remainder of the fiscal year as follows: President 15 percent, Senior Vice Presidents 10 percent, Deans and Vice Presidents 7 percent.

In taking these actions, UAB joins a growing number of universities and academic medical centers to announce some combination of salary reductions, furloughs or reduced hours, layoffs, and stopping employer contributions to retirement plans. Similar actions have been taken by the Universities of Arizona, Kentucky, Louisville, Ohio, Oregon and Wisconsin. Recently, The Mayo Clinic announced it would furlough or reduce hours for 30,000 employees. At Huntsville Hospital, 2,000 employees had their hours reduced or were furloughed, among other expense-reduction strategies.

UAB President Ray L. Watts says these difficult decisions were made in consultation with advisers across campus, including Faculty Senate and Staff Council leaders, the university’s Budget Advisory Committee, and others to determine what expense reduction options should be adopted.

“COVID-19 will not stop UAB from providing a world-class education to our students and working to solve the most pressing problems facing humanity,” Watts said. “In fact, our infectious diseases specialists and researchers are on the frontlines of the fight to combat this pandemic. We’re doing everything we can to maintain the financial stability of the university, minimize disruption for our people and continue delivering on our mission to serve all citizens of Alabama.”

UAB Medicine Response

The pandemic also represents a significant disruption to the operations of UAB Medicine. Absent changes, UAB Medicine could experience a $230 million budget shortfall by the end of September.

UAB Medicine must institute more aggressive expense-reduction strategies to address a larger budget shortfall. However, furloughs are not appropriate at this stage of the COVID-19 crisis for UAB Medicine employees due to the upcoming return to clinical operations as the hospital and clinics gradually re-open.

As a result, UAB Medicine today announced temporary salary reductions for faculty and staff of UAB Medicine/Health-system managed entities, effective mid-May through December.

Many UAB Medicine faculty and staff will receive temporary reduced compensation. Clinical departments in the School of Medicine will identify a payroll expense reduction affecting the clinical portion of faculty salaries by an average of 7 percent; implementation dates may vary slightly by department. Clinical staff salary reductions will be implemented on a sliding, differentiated scale. While many individuals will receive no reduction, and most will be between 0 and 7 percent, executives such as UAB Health System CEO Will Ferniany will take a 15 percent reduction in compensation.

Salary reductions will be reviewed monthly for consideration of possible reinstatement to pre-COVID-19 levels based on financial performance.

“We want to protect our people and get everyone back to their regular pay as soon as we can,” Ferniany said.

Clinical Staff Salary Reductions Sliding Scale for UAB Medicine/Health System-managed Entities

Hourly wage staff making $15 or less per hour: 0% reduction in annual compensation<
$0 – $31,200: 0% reduction in annual compensation
$31,201 – $50,000: 3% reduction in annual compensation
$50,001 – $75,000: 4% reduction in annual compensation
$75,001 – $125,000: 5% reduction in annual compensation
$125,001 – $200,000: 6% reduction in annual compensation
Greater than $200,000: 7% reduction in annual compensation
Senior Leaders (Including Department Chairs): 10% reduction in annual compensation
Health System Executive Cabinet: 15% reduction in annual compensation