UC reeling under staggering coronavirus costs; 'the worst impacts … all at once'

The University of California was hit with $558 million in unanticipated costs in March alone due to coronavirus, a staggering sum as students canceled housing and dining contracts, medical centers paused elective surgeries and campus costs soared for online learning.

UC President Janet Napolitano detailed the grim financial picture in a letter Wednesday to Gov. Gavin Newsom and legislative leaders and asked them to provide more funding to help cover the unprecedented costs.

She noted that the public research university system was incurring added expenses and revenue losses in multiple areas, as health centers treated high-cost COVID-19 patients, researchers worked on potential cures and campuses sent most students home.

“As the world’s largest public research university system, UC is confronting many of the worst impacts of the virus all at once,” she wrote. More funding, she added, would “help UC provide students the education they were promised, treat our employees with fairness and provide our communities with compassionate care.”

The 23-campus California State University system estimates its lost monthly revenue at about $100 million, according to spokesman Michael Uhlenkamp.

State finance officials were not immediately available for comment.

Napolitano’s letter provided the first detailed look at the extraordinary financial impact of the pandemic on the 10-campus UC system, which educates 285,000 students and employs 227,000 faculty, researchers and staff. The recently enacted federal Coronavirus Aid, Relief, and Economic Security Act, known as CARES, will provide an estimated $437 million in aid to UC campuses and medical centers, Napolitano said, but that would not fully cover even a month of the extra costs — which are expected to further soar in coming weeks.

The federal bill provides nearly $14 billion overall for higher education. But the American Council on Education, an association of more than 1,700 colleges and universities, has criticized that sum as “woefully inadequate” and called for $50 billion in aid.

Colleges and universities throughout the state and nation already are beginning to take austerity measures as pandemic-related costs mount. UC Berkeley alone announced this month that the pandemic would cost the campus “$100 million and growing” with lost revenue from canceled housing and dining contracts, public performances and sports events, along with higher costs for technology.

“The longer that normal operations are disrupted, the more dire the situation becomes,” Chancellor Carol Christ and Provost Paul Alivisatos said in a message to faculty and staff.

UC San Diego Chancellor Pradeep Khosla said the campus losses for about 10,000 canceled housing and dining contracts could total nearly $40 million. The medical center had to cancel all elective surgeries and keep 40% of hospital beds open in case of a surge of COVID-19 cases, which could cost more than $40 million in lost revenue. Technology costs sharply increased as well, he said, as the campus purchased more than 500 laptops for students for the shift to remote learning.

“We are in for some really challenging times,” Khosla said in an interview.

To reduce costs, UC Berkeley and UC San Francisco have instituted a campus-wide hiring freeze, as have dozens of other campuses including USC, Stanford and Harvard. Those private institutions also have announced salary cuts for senior leaders.

As UC reels, it also will probably suffer the loss of expected new revenue from the state. Napolitano said this month that she was informed that Newsom’s proposed 5% increase for UC, amounting to $217.7 million, was off the table for now, although additional funding would be considered after July tax returns are in.

In addition, UC regents have postponed a planned vote on a five-year plan to raise tuition for incoming classes beginning this fall.

According to Napolitano, unanticipated new costs and revenue losses include:

• $310 million for UC campuses for canceled housing and dining contracts, facility cleaning costs and transitioning to remote instruction. Costs were mostly incurred in the last two weeks of March and will probably increase when the full month of April is tallied. An expected $260 million in federal relief won’t cover the costs, Napolitano said.
• $248 million for UC’s health system, which includes six academic health centers. The sum includes costs for emergency medical services and other patient services. The health centers have treated more than 1,000 patients for COVID-19, which initially cost between $1 million and $10 million per person in the early weeks to prepare facilities for the critical care. Losses from cancellation of elective procedures amounted to about $170 million, an “unprecedented” sum that will probably climb much higher in coming months, Napolitano said. The health centers expect to receive about $177 million in funding from the Department of Health and Human Services —”short of the first month’s losses,” Napolitano said.
• Additional costs for medical supplies and equipment and more skilled technicians to perform diagnostic testing.
• Greater demand for financial aid as massive job losses have upended family economic stability. But $130 million in federal emergency financial aid grants that UC expects to receive should cover the additional needs for the next several academic terms, Napolitano wrote.
• Unknown costs to buttress academic support for vulnerable students. It is not clear how many will choose to return to campus this fall.
• Unknown impact on research funding as the pandemic forced the shutdown of many labs unrelated to the virus. More funding is needed to support UC’s 300 COVID-related research programs, Napolitano said.
• Expanded paid administrative leave of up to 128 hours. UC also pledged to avoid layoffs for most of its 227,000-member workforce, the third largest in the state.
• Loss of revenue due to the cancellation of artistic performances, museum exhibits and athletic events.

“As the Governor and Legislature distribute emergency funding … I am asking you to remember the important function of the University of California in addressing this crisis as a partner with the state,” Napolitano wrote.

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