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COVID-19: Update on Budget and Planning

 

Dear Colleagues,

 

As promised during this morning's town hall meeting, I wanted to provide a brief written report on the this year's budget and planning for next year:

  • Prior to counting any COVID-19-related relief or loan funds, we are projecting a loss of $1.6 million this year, with the bulk of that loss stemming from the refund of spring room and board and the loss of summer camp revenue.

  • Between CARES Act relief funds and our forgivable PPP loan, we believe we will net approximately $2.9 million in revenue, which will leave us with a roughly $1.3 million cash surplus on the year that we can carry into next year.

  • Planning for the fall continues to be difficult. There remain many unknowns, both in terms of student behaviors (will they choose to come or not?) and expectations or requirements pertaining to public health (will size of gatherings be restricted? by how much? must we/should we test? how much isolation space do we need? etc.).

  • We anticipate that enrollment will be down next year. Deposits are currently at 202, which is 13% behind last year at this time.

  • We are evaluating multiple enrollment/budget scenarios for next year, but as an example ... if we go into the fall with 220 new students (12% behind last year's move-in day number of 250), and if retention is off by 5% due to COVID-19-related financial pressures on returning students, we would have a revenue miss of over $1.9 million. 

  • The cash carried forward from this year would help with that deficit, but we will still need to make budget adjustments, both for the sake of next year and the years following (since the impact of a small incoming class stays with us for four years). 

  • We are rebuilding our budget in light of the assumption of lower enrollment.

  • We have compiled a very long list of potential budget adjustments. We want to look at everything, and we have included in our long list things that we certainly would not choose to do at this time.

  • Our priority is to achieve cost savings without eliminating positions. We believe the people who serve at Covenant are our most valuable asset. We believe we have the right people in place for a season of growth and vitality at the college. We believe that letting those people go at this point actually undermines our efforts to put Covenant in a healthier position.

  • VPs will be meeting with their directors to assess the impact--both financial and missional--of potential budget adjustments. Our goal is to make adjustments where we can do so without negatively impacting the quality of the educational experience we provide to our students.

We are grateful that we are, by God's provision, in a place where we are not under immediate pressure to take drastic measures in order to cut our budget. In fact, we are blessed in many respects:

  • Approval for a forgivable PPP loan means an estimated $2.5 million injection of cash (the bulk of the $2.9 million mentioned above).

  • Because we carry no long-term debt, we are not under pressure from financial creditors to make decisions we might not want to make.

  • Giving to our annual fund has remained strong. We are just ahead of the pace set last year, which was one of our best years ever. We've received 137 gifts for a total of over $75,000 to our COVID-19 relief funds and we've had families give $50,000 worth of room and board refunds back to the college as gifts.

  • The over 200 deposits we've received to date is better than we would have projected a few weeks ago. We have many more admitted-but-uncommitted prospects this year than we did last year (which is not surprising given the uncertainties that high school seniors are facing). The admissions office has identified almost 40 of those who are likely to come to Covenant and another almost 60 who are fifty-fifty. If we do a great job of recruiting these students, we could do better than projected.

  • Our numbers of high school sophomore and junior leads are much higher than they have been in recent years, which means we are building a deeper pool of prospective Scots.

  • Virtual commencement--while not equivalent to the real thing--was a tremendous success. The outpouring of enthusiasm for that event speaks volumes about the passion our students, alumni, families, etc. have for Covenant College.

  • Our cabinet, who have been meeting multiple times a week, have been functioning well and approaching their work with dedication, creativity, intelligence, and good humor.

  • There were many good things happening at the college--in classrooms, residence halls, locker rooms, the admissions office, the marketing and communications office, etc.--prior to the COVID-19 outbreak that gave us reason to be optimistic about the future. We liked the direction in which we were heading prior to this semester's disruption. We still like the direction in which we are heading.

  • We are making good progress on our plans to reopen campus in the fall. 

For all of the challenges COVID-19 has presented us with, God has been good to provide both the people and the resources we need to address those. There are, no doubt, still more challenges in front of us. We will have to be frugal and creative as we prepare for the likelihood of lower enrollment in the coming year(s). We may yet have to make difficult decisions. But, thanks be to God, we are in a position where we do not have to approach those challenges under immediate, existential threat. We are not being forced to make long-term decisions for the sake of addressing short-term problems. For that, we should give thanks to our merciful Father.

I hope this update proves helpful to you in giving a sense for where the college stands right now. If you have questions, please don’t hesitate to reach out to me. There are certainly many questions I can’t answer at this time--because we don’t know what fall enrollment will look like, or what strictures the Georgia Department of Public Health might place on us, etc.--but I am happy to answer those questions I can. 

Thank you for the remarkable manner in which you have responded to this difficult season. Your tenacity and creativity in the face of challenges is a large part of what gives me confidence that there are great days ahead for Covenant College.

In Christ,

JDH