Many of you will have seen an article in The Age today [Race to shore up La Trobe University as cash crisis bites], that reports the University is “at risk of going broke in a matter of weeks unless it secures a financial lifeline from the banks and an agreement from staff to cut wages.” I want to assure you that this is not the case and clarify some of the information reported by The Age, as this article has been very confronting for La Trobe University students and staff.
1. The University is not at risk of going broke
The action we are taking to find cost savings and balance our books over the longer term is securing our future. Although the University faces revenue losses this year ($120-$150m) and in 2021 ($170-$200m) and 2022 ($110m-$170m), we have already made significant cost savings in 2020 and have mapped out a financially sustainable path for the future of the University.
We have already made significant cost savings of $87m in 2020 which includes deferred capital spending, non-salary cost reductions, deferred staff recruitment, discontinuing some casual staff and initiation of a voluntary redundancy program which is expected to deliver savings of $20m in 2020 and $40m in both 2021 and 2022. These actions are very similar to those being initiated by universities all over the country.
It’s worth noting that La Trobe University is ranked 566 in Australia’s top 2000 companies for revenue, putting us in the top 30% of Australia’s top 2000 companies and 164 in Victoria. Despite the challenges posed by COVID-19, we have also seen a 14 per cent increase in student applications for the University’s Apply Direct mid-year intake from 2019.
2. La Trobe’s cash reserves have not been reduced to the minimum required
The data being reported in the article simply refers to the minimum cash position the University would like to have, fortunately we are currently double that amount. As with all businesses, the University aims to have a minimum cash balance at any point within the year which is the equivalent of a month’s expenses.
Our cash balance as at the end of May is not lower than 5% below the balances at this equivalent point in prior years.
3. We have not been declined an extension to a credit facility by one of our banks
There have been no unsuccessful attempts to extend our credit and we are in productive and on-going discussions with our three banks for increased facilities and we believe we will meet our funding requirements.
The University’s response to COVID-19
The COVID-19 pandemic has resulted in the entire higher education sector facing financial shortfall and uncertainty, and La Trobe is no exception. La Trobe knew that the price of being open and transparent in dealing with the situation could mean that erroneous information was circulated or reported out of context. But we stand by our responsible approach to COVID-19: we are being completely upfront with our staff and we are being proactive and steadfast in managing COVID-19.
Had the university sector not been excluded from the government’s JobKeeper program, our need to require staff to take measures within the AUJPF such as pay cuts would not be necessary, as JobKeeper would have provided $50m, while the AUJP will provide $32m.
We will continue to implement cost saving measures in the short and longer term. Where possible, we will endeavour to minimise job losses so that La Trobe can continue to make a profound difference to the lives of our students, our partners and our communities.
Professor John Dewar AO
La Trobe University