Berklee Consolidated Financial Statements: May 31, 2021, and 2020

Letter from the Senior Vice President of Administration and Finance, Chief Financial Officer, and Chief Investment Officer 

The COVID-19 pandemic has had an unprecedented impact on society since its onset over a year and a half ago and has presented enormous personal and professional challenges for Berklee’s students, faculty, and staff. The Berklee community has responded well to these challenges, working steadily through the pandemic to ensure the health and safety of our community, while simultaneously striving to maintain the quality of the educational experience for our students. Berklee’s COVID-19 response team has met continuously during the pandemic, proactively introducing new health and safety measures (establishing a new testing clinic, for example) while monitoring the health and safety of our entire community utilizing a variety of metrics, including those on Berklee’s publicly available COVID-19 dashboard. We are pleased to report that the COVID-19 positivity rate has consistently been quite low in our community, while the vaccination rate has been very high. Thanks to our faculty and strong academic leadership, with support from our excellent administrative teams, the educational experience on our campus has been optimized over the past year, utilizing both virtual and on-campus modalities. In addition, Berklee Online, which has offered online courses for almost two decades, continued to provide its high-quality offerings to students of all ages, growing very significantly in the process. As a result of the very hard work of all our staff and faculty, despite the enormous personal challenges they have faced, Berklee’s enrollment has rebounded to new highs this fall. While we are disappointed that COVID-19 is not yet behind us, Berklee is well positioned to handle the pandemic while it continues and to emerge as a stronger institution post-pandemic. 

Berklee entered the crisis from a position of financial strength, with a solid balance sheet and high liquidity—cash and cash equivalent reserves exceeded $140 million, which equates to approximately five or six months of expenses. Our financial objective was not just to survive the crisis, but to be able to thrive post-crisis. Accordingly, as we faced a large enrollment and revenue shortfall at the beginning of the fiscal year, it was necessary to dramatically reduce expenses, while simultaneously supporting new or existing revenue opportunities, notably Berklee Online. The expense management program was carefully orchestrated to avoid adverse impacts on our educational offerings. With over 60 percent of our expense structure dedicated to people-related costs, we found it was necessary to introduce a furlough program, which was very tough on the people that were furloughed and on the staff that worked extremely long hours to absorb demanding workloads, including the requirements of COVID-19. With the return to robust on-campus enrollment this fall, our workforce has returned to or above pre-pandemic levels; nevertheless, we are mindful that the pandemic has had lasting impacts on all of our staff, students, and faculty. 

As a result of the hard work by everyone at Berklee, we have been able to keep our community safe, maintain the quality of our education, and maintain our financial strength. Berklee ended 2021 with $237.5 million in unrestricted operating revenues ($58.4 million below 2020), but successfully mitigated most of the revenue shortfall, resulting in a $5.1 million unrestricted operating loss for the year, which has been absorbed by our healthy cash reserves. As noted, the revenue shortfall primarily reflects a temporary enrollment decline (which in turn impacted room and board and comprehensive fee revenues). However, in support of our students, Berklee also froze tuition last year and issued one-time Back to Berklee grants to all students that enrolled last fall; this added to the net tuition shortfall. Partially offsetting these factors were significant growth in Berklee Online revenues as well as support from federal programs, including the CARES Act and the American Rescue Plan, which provided relief funding to higher education institutions and their students.

The 2021 operating expenses of $242.6 million are down $37.9 million from 2020, due largely to our swift and decisive cost management efforts. Personnel savings were achieved primarily through furloughs, reductions in hours, position eliminations, a hiring freeze, and a suspension of salary increases. Part-time faculty savings were also realized due to lower enrollment. Other operating expense savings were achieved through freezing non-essential expenses, facilities-related savings from the campus closure, and through the deferral of major initiatives, including a multi-year enhancement to our information systems. These savings were somewhat offset by new COVID-19-related infrastructure costs including COVID-19 testing, medical support, additional cleaning protocols, and the procurement of personal protective equipment. As noted, Berklee ended the year with an unrestricted operating loss of $5.1 million, which compares to an unrestricted operating surplus of $15.5 million in fiscal 2020.

At the end of fiscal 2021, Berklee’s balance sheet was stronger compared to the prior year due primarily to the investment performance of our endowment and pension plan assets (which in turn reduced our net pension liability). Assets in the endowment amounted to $446.6 million at May 31, 2021, compared to $327.6 million a year earlier (in the midst of the pandemic-related correction in the markets). With a corresponding increase in pension plan assets, the net liability of the pension plan has dropped from $91.8 million at May 31, 2020, to $61.5 million at May 31, 2021. Combined, these factors supported an increase in net assets to $480.4 million this year from $347 million last year.  

While the pandemic is not yet behind us, we are confident that we are well positioned financially to manage through the rest of the pandemic and to be able to continue to thrive as an institution post-pandemic.  

The following table summarizes key operating results for the past five years.

Berklee College of Music Consolidated Financial Results (Millions)

View Berklee's consolidated financial statements.

Richard M. Hisey

Senior Vice President of Administration and Finance

Chief Financial Officer | Chief Investment Officer