Universities and hospitals are significant anchor institutions, rooted in place, unlikely to relocate, and stable during economic uncertainty, with highly trained and compensated employees. Brookings Institutes’ research labeled this industry cluster Eds and Meds, oftentimes being the largest employer in some cities like Pittsburgh where they comprise 22% of metro jobs. In metro Atlanta economic impact reports published by hospitals and universities total over 300,000 jobs, more than all Fortune 500 headquarters combined. Hospitals are the battleground in treating patients with Covid-19 while universities partner with hospitals on cutting edge research for medical breakthroughs and train future medical workers. This symbiotic relationship in Atlanta led to successful treatments for EBOLA, HIV, autism and others, helping create start-up ventures. Eds and Meds are now partnering to find treatment for the pandemic plus ongoing research for emerging health issues including brain health, cancer immunology and chronic diabetes. This type of research requires long term financial commitment in a time of risk aversion.
Despite their intense engagement in helping solve the crisis, hospitals are now facing significant financial losses. Hospitals were forced to cancel all non-elective procedures, an area where hospital net income subsidizes other services. Millions of dollars are lost each day by treating pandemic patients. This causes hospitals to burn through their operating reserves, which range from 40 to 60 days of cash on hand. They cannot cut staff due to the incredible pandemic patient demand. Many hospitals, especially rural or small independent ones, were threatened with closure before the pandemic. Even large multiple campus hospitals are cash-constrained. Federal relief due to the pandemic is slow in coming and difficult to anticipate accurately. Hospitals will take months to recover financially requiring staff reductions, loans and canceling needed research and growth.
Universities also are suffering. Atlanta is blessed with many research universities that collaborate with each other through the Georgia Research Alliance, the Georgia Clinical and Translational Science Alliance and the recently announced Global Health Crisis Center. With classes canceled on campus, mandatory on-line learning, and acceptances down, tuition is difficult to anticipate causing reduced revenue forecasts. The American Council on Education estimates fall enrollment may be down 15%. To date, universities have not had job cuts like private-sector employers but they are dependent on the state for major funding each year.
GSU’s Center for State and Local Finance forecast a one billion dollar state income and sales income and local sales tax revenue shortfall from industries hardest hit by social distancing for the remainder of CY 2020 and FY 2020. On May 1, 2020, the Georgia legislative budget committee and the governor’s budget director preparing for changes requested all state agencies to submit cuts of 14% across the board for FY 2021 which begins July 1. It will take several years for Georgia’s economy to recover according to the Georgia Budget and Policy Institute. Thus our anchor institutions which were on the front line of virus defense and weathered downturns before may face the economic pain now being experienced by the private sector.