Approaching a return to normalcy: Masters pandemic finances, Jan-June 2021
Retirement contributions to resume
After a fiscal year during which Masters suspended contributions to employees’ retirement funds, the school will resume contributions during the 2021-2022 fiscal year. The new plan falls short of pre-pandemic levels, but encourages more employee involvement, according to Chief Financial Officer Ed Biddle.
Masters employees previously received a retirement contribution worth 10% of their annual salaries that was invested annually by the school, into each faculty, administrator and staff members’ retirement fund as noted in Part 1 of this report. Beginning next fiscal year, Masters will only contribute up to 7% for each employee’s retirement fund – 5% will be based on an employees’ salary, and the other 2% will be made up of an employee-employer match, Biddle said.
He explained why the “match” aspect of the plan is advantageous.
“A match is considered a best practice in retirement plan design because when your employees are contributing money of their own, they end up with a larger amount at retirement than if it’s just the employer contribution.” Biddle added, “An additional plus of matching is that employees tend to be more aware of their retirement plan options, and their choices when they are putting their own money into the plan.”
Despite the decrease in total contributions, Biddle said he does not believe it influenced teachers’ decisions to leave Masters at the end of this year. A total of 11 Upper School teaching faculty are departing this June, according to Dean of Faculty Sam Savage, as well as four additional student-facing Upper School employees, according to Tower’s count..
“I don’t know of any instance where anyone has raised that issue to me as the reason they made a decision to leave,” Biddle said. “If there are examples of that, it’s disappointing, because I think what we offer here is a compelling opportunity to be part of a community and I would hope that would outweigh our response to a one-year economic disruption.”
Multiple teachers say school’s handling of Covid-finances was troubling
Multiple teaching faculty expressed frustration over the school’s suspension of retirement contributions for the 2020-2021 fiscal year.
One teacher, who is leaving Masters at the end of this year in part due to the school’s handling of their retirement fund, said the decision to halt benefits was “unfair” because of the fact that the expected 10% contribution was a huge chunk of money that they lost out on this year.
The timing of the announcement, which came in late May, 2020, after teachers had signed their annual letters of agreement (in March) in which the 10% contribution was ensured, upset the teacher.
The departing teacher, who agreed to speak to Tower on the condition of anonymity so as not to jeopardize future job references, said, “They [administrators] are contractually obligated to offer our retirement fund. We signed an agreement and the majority of us cannot just afford not to count on it.”
Savage acknowledged that the benefit terms of employees’ letters of agreement were changed, but explained that from an institutional perspective, the financial sustainability of the school and support of the academic program took priority amid the Covid-crisis.
“I understand the perspective of the faculty who have spoken to me about this decision, and I also understand that school’s need to grapple with real-time problems and challenges they face in order to ensure financial sustainability,” Savage said.
Biddle added, “The timing of notification on retirement was difficult, but we had two inflexible dates to work with: our letters of agreement schedule and our retirement plan year.”
Another teacher, who is new to Masters this year, said they were not even notified of the decision to suspend retirement contributions by the school, but found out second-hand through colleagues. The teacher also said they feel that new faculty should have been informed at the same time as the rest of the faculty.
“We were not part of the meeting and that was my first bit of frustration with the school,” they said. “Making decisions about our livelihoods, but not inviting us to the meeting where these decisions are explained – that’s a major problem.”
The first teacher said these issues and other school-related financial concerns ultimately created a situation that was not financially sustainable; they made it clear that their decision to leave was not at all related to the academic aspect of their job.
“As teachers, we are not in this profession to make money. We do this out of real passion for our subject and out of the love for education,” they said. “Having said that, it is very important that at the very least, I have some sort of financial sustainability in the overall compensation of my package. Despite the fact that I am really dissatisfied with the financial decisions to counter the pandemic, I have always appreciated my colleagues and my students and I will miss them deeply.”
The teacher said they met several times with administration to voice their apprehensions, but said administrators continually put off their concerns.
“Every time, it was always the same. They would say ‘We are working on things,’ but nothing would ever change,” they said.
In response to teachers’ dissatisfaction with the handling of retirement contributions during the past fiscal year, Biddle doubled down on comments from the first segment of this report, explaining that the decision affected all employees, from high-level administrators to custodians at Masters.
“It was deemed the fairest way for the school to save money because it has no current impact to program or household budget,” he said.
Savage said, “The institutional move was one of equity. While I can appreciate that different people have different relationships to compensation depending on a whole variety of factors, I would say that it [losing the 10% contribution] is something that we all faced together.”
Additionally, in late fall of 2020 the school issued $2,000 stipends to full-time teaching faculty in recognition of the additional work and stresses of transforming instruction in the conditions brought on by the pandemic, Savage told Tower.
Pandemic impacts Master Plan
The pandemic has impacted the school’s efforts to break ground on the new innovation and entrepreneurship center, the next major aspect of the school’s Master Plan.
The school is currently in the planning and permitting phase, according to Biddle, which requires approval from the Dobbs Ferry Building Department.
“The process has gone a lot slower,” Biddle said, noting that the Dobbs Ferry building team has been overwhelmed with the influx of home renovation and commercial projects during the pandemic, which have all required approval from the village as well.
Biddle also explained that beginning a project at this time would have the added challenge of dealing with supply shortages caused by the pandemic.
He said, “As of right now, there is a severe shortage of building materials, which would make proceeding with the project right this minute extremely perilous.”
The school did complete a major renovation of the library in Masters hall as well as garden level spaces that began at the end of the 2019-2020 school year and opened to students in mid-January.
The pandemic affected all components of the project including availability of construction resources, health and safety of workers, donor relations and finances, according to previous reporting by Tower.
Masters’ Director of Institutional Advancement Seth Marx compared the pandemic’s impact on both projects.
“The Masters Hall renovations saw supply chain delays as one of the major unpredictable aspects of the project, but I think what we’re seeing right now with the next project, especially with regard to lumber, is this remarkable production scarcity,” Marx said. “I also think that the impact of Covid on small towns or village offices can’t be taken lightly.”
Despite the fact that the Dobbs Ferry Building Department offices were closed for a period of time due to COVID-19, Marx and Biddle remain confident in beginning the IEC construction on schedule.
Biddle said, “We are hopeful that we can stay on the late summer/early fall time table [to begin construction] but there are also some procedural obstacles, not insurmountable, but significant, for us to get over.”
“I’m not nervous or anxious about it. We’re actually still within the timeline that we developed initially,” Marx said, adding that the anticipated opening of the building will be in 2023.”
Concluding the fiscal year and projections for a new fiscal year
After a year during which the school made a number of pandemic-related upgrades – such as new furniture in classrooms, plexiglass in the dining hall – to outfit the campus for a safe return to in-person learning, Biddle said Masters is planning for a return to near normal next year and at this time does not anticipate any additional “special capital purchases.”
Biddle also said he does not anticipate that the school will need to continue weekly pooled testing next year.
“My assumption is that we will have enough of our employee and student population vaccinated that we will not need to do the surveillance testing,” he said. “But if we do have to do it, we may need to consider conducting it in a different way where it’s not a cost that is entirely borne by the school.”
Weekly pooled testing has cost Masters anywhere from $15-20 thousand a week, as detailed in Part 2 of this report.
On Thursday June 3, Head of School Laura Danforth announced that “Before the opening of the 2021-2022 school year, The Masters School will require all members of its professional community and all students who are eligible to be fully vaccinated against COVID-19.”
This year, Covid-related expenses are projected to total between $1.85-2 million for the school; yet, Biddle said he believes the school “may be able to break even” at the end of this fiscal year (which ends on June 30). This is largely due to a $450,000 surplus from the 2019-2020 fiscal year that was utilized as a COVID-19 spending reserve as well as several areas where the school saved money, such as on dining services, transportation and special events in the past year.
According to a recent article published by the National Business Officers Association that was co-written by Biddle and two other CFOs, in October 2020, almost 60% of schools projected an operating deficit in 2020-2021 fiscal year; however, if schools combine their operating results from the 2019-2020 and 2020-2021 fiscal years, “the operating expenses have been whipsawed in opposite and offsetting directions.” This assessment is in-line with Masters’ overall “pandemic finances,” according to Biddle.