Levin calls for deeper cuts and freezes

The darkening economic forecast has prompted Yale to deepen cuts in next year’s budget and delay almost all planned construction projects, University President Richard Levin announced today in a letter to faculty and staff.

Spending on salaries will be cut 7.5 percent in the 2009-2010 fiscal year, up from the 5 percent reduction announced in December. Levin said he hopes to achieve the cuts through turnover and reductions in the number of temporary employees, but he did not rule out layoffs.

“To the extent that layoffs are necessary, we will make sure that affected individuals are provided support and guidance,” he said.

Instead of the 5 percent reductions in non-personnel spending planned in December, the University will now cut 7.5 percent next year and an additional 5 percent in the 2010-’11 academic year.

These deeper cuts will save the operating budget an additional $37 million next year, on top of the $100 million that was announced in December.

In an effort to save $2 billion in capital spending, most planned construction projects will be delayed. Work on all new buildings and renovations currently under construction will continue, Levin said, as will essential maintenance and the renovation of Morse and Ezra Stiles Colleges. In the letter, Levin went further than he did in December, saying now that even design work on other projects will stall until credit markets open up or gift funding is secured.

Planning for the two new residential colleges has already made some progress, as the architect, School of Architecture Dean Robert A.M. Stern ARC ’65 presented designs to the Yale Corporation over the weekend. But now the delay in capital planning casts their future into doubt.

Employees with salaries below $75,000 will still receive a 2 percent raise. But now, instead of a $1,500 raise cap for those making above $75,000, those employees will have their pay frozen in order to preserve more staff positions.

The projected 25 percent loss to the endowment remains accurate, Levin said, but with no sign of improvement in the economy, he said financial recovery may take longer than the University had previously planned.

“I wish we could avoid these additional actions, and I understand that meeting the revised budgetary targets will be challenging,” Levin wrote, adding that Yale will continue to recruit faculty and protect financial aid.

In a telephone interview with the News on Sunday, Levin said that while the financial health of the University has changed little since December, the global economy has deteriorated significantly in that time.

“What’s changed is the general macroeconomic backdrop,” Levin said Sunday. “The prospects of an early recovery seem less than they did two months ago. The recession looks deeper, it’s spread more widely around the world, and it looks like a harder problem for us.”

Comments

  • Recent Alum

    Levin still maintains that no cuts in financial aid will be made. How bad do the economy and the endowment need to get before he is willing to make the necessary cuts?

  • Anonymous

    What is the point of having a huge endowment if we don't actually dip into it when times are bad???

  • alum interviewer

    The aid program won't change; but Yale may cut back the number of admits entitled to it.

  • To recent alum

    Financial aid should remain untouched.

  • Other Recent Alum

    Every article about this seems to draw a post from "Recent Alum" complaining about how there aren't any cuts in financial aid - I'm gonna go out on a limb here and guess that "Recent Alum" may not have been on financial aid as a student. But if he thinks it's so terrible that we're not rebuilding our budget on the backs of poor and middle-class kids, maybe he should explain why doing so is necessary anyway. If these are such "necessary cuts," tell us, what is Levin cutting that he shouldn't be, and should instead be cutting financial aid???

  • DBprograms

    There are plenty of staff that could be cut that dont do anything, but they are unionized

  • Recent Alum

    #5: Actually, I did receive a very generous financial aid package, which I considered to be more than enough given my family's financial circumstances. From what I understand, Yale now gives far more aid than it did back in my days (when, as I said, it was already sufficiently generous). I think that we would all be better off if the purpose of financial aid returns to what it used to be - providing assistance to ensure that students of all backgrounds can afford a Yale education -- rather than serving as a bribe to get students to choose Yale over other schools just for the money.

    #3: If you are suggesting that Yale is now more reluctant to admit low income applicants, that seems worst than cutting on financial aid. Lots of prospective students would much rather see their aid package cut by a few thousand dollars than face a greater risk of being rejected outright.

  • Terry Hughes

    "The aid program won't change; but Yale may cut back the number of admits entitled to it."

    No. That would be entirely inconsistent with Yale's decades-held policy of "need blind admission." Whatever else it does, Yale will NOT restrict or reduce the number of admits needing financial aid.

    It's interesting to note that even these new cutbacks are far short of what Harvard is putting in place. Why might Harvard have to cut back so much more? Well, Harvard has to work around a rather odd legal restriction: Mass. law requires that Harvard only spend from increases in its endowment; in theory, no "dipping" is allowed! Obviously, Harvard finds ways to "dip" - but those have limits.

    It's also interesting to compare Levin's language here to Faust’s language in her corresponding letter. Levin squarely states: "[W]e are still projecting a 25% loss for this fiscal year." Faust's letter is subtly different: "[O]ur planning for 2009-10 assumes that our endowment will have lost roughly 30 percent of its value." To "assume" is not the same as "projecting." Is this yet another example of Harvard's relative lack of transparency in connection with its endowment losses? Hard to say.

    What might really be going on in Cambridge? Well, Harvard has famously ("infamously?") announced that as of October 31 its endowment loss from marketable securities was 22%. As of that date Yale's loss from such securities was 13.4%. So the Harvard/Yale loss ratio from marketable securities is about 1.64. Yale is "still projecting" a TOTAL loss (from all sources, not just marketable securities) of 25%. If the Harvard/Yale ratio of TOTAL endowment loss is the same as that loss from marketable securities (that is, 1.65), then Harvard's total endowment loss from all sources would be 25% X 1.64 = 41%. That's a lot bigger than that 30% that Faust's planning "assumes." Could that difference help explain why things seem to hurt more in Cambridge than in New Haven these days?

    Just asking.

  • Yet a third recent alum

    I agree with @5. Why the heck should Levin cut financial aid? Program cuts are never any fun, but salary freezes for everyone earning over $75k, & 7.5% cuts mostly through attrition, seem like a far better idea than cutting back need-based aid at exactly the time that students and their parents have the hardest time paying tuition in the first place.

    Financial aid is the centerpiece of Yale's commitment to being something more than a finishing school for the rich. It is a very central part of Yale's mission. I strongly applaud Levin's decision to make cuts elsewhere first.

  • Another Recent Alum

    Over 40 years ago Yale broke ground by implementing the nation's first need-blind admissions policy. They will not reduce the number of aid-eligible admits because the admissions office knows nothing of applicants' financial need. Any change to that policy would not pass the smell test.

  • alum interviewer

    Need blind, to be sure, but it is still troubling that Yale awards need-based grants to a much smaller fraction of its student body than does Harvard or Princeton or MIT - or even Dartmouth or Columbia, apparently. If you don't go out of your way to recruit aid-eligible admits, you aren't faced with the need to award them financial aid. Yale finally is taking some steps to rectify this situation, but we still trail our peers in many respects.

    http://colleges.usnews.rankingsandreviews.com/college/national-best-values

  • alum interviewer

    Last year Yale's financial aid budget was $80 million for 5,400 undergrads

    http://www.yale.edu/admit/freshmen/financial_aid/index.html

    Harvard's financial aid budget for 6,600 undergrads was $120 million last year.

    http://www.thecrimson.com/article.aspx?ref=521265

    Both will increase their aid budgets next year by as yet indeterminate amounts.

    Princeton's aid budget will increase 13% next year to $104 million.

    http://www.philly.com/inquirer/education/20090127_Princeton_sets_lowest_tuition_raise_in_decades.html

  • Recent Alum

    Yale should dip into the endowment and buy up land in New Haven, while it is temporarily cheap.

    When things come back (in a few years… or 10), the equation is going to be very different. City centers are going to skyrocket in value, as the suburbs empty out due to unsustainable energy costs.

    If Yale doesn't expand now, it may be hemmed in forever.

  • cuts

    You know, I would be impressed if some of the top 10 earners at the university would take a cut. What if Levin took home $500k instead of $1 million? What if Swensen took home a cool $1 million instead of $3 million?

    That would be some powerful symbolism that the people making the decisions think that those who can best afford to take the hit should give the most in these (relatively) hard times. Plus $500k in savings, or $2 million in savings, is real money, not just symbolism.

  • Townie

    I've worked at Yale for over 15 years and have noticed a trend: we keep adding layers of management. It seems as though every week brings an announcement of some new hire from Proctor and Gamble or Nabisco for Human Resources, etc.

    Get rid of some of these folks and reduce the bloated management. This is a university, not General Motors.

  • '04

    Love all these "dip into" comments. Maybe the authors should take a few minutes to read about how endowments work. Here's the Cliff Notes: Most of them are restricted by the donor, and I doubt that many include provisions to "buy up land while it's cheap."

  • @Recent Alum, #7

    You're lucky you felt you were getting too much aid. Until the recent changes to the policy, my family wasn't getting enough and I was taking out big loans. You really shouldn't judge the value of a policy just based on your own experience--look at what it's doing for everyone.

    By the way, I hope you gave back whatever you didn't need. Otherwise, asking Yale not to give families what they DO need is hypocritical.

  • BFair

    It is my guess that not many people from the New Haven community were there to celebrate.The incident that sticks out in my mind relative to the use of dogs in arrests is the recent settlement with the City of West Haven and parents of a young teen who lost his life after being tracked down by a police dog and who finally ran into highway traffic to escape the dog that had bitten him 27 times. He was being hunted following a fight with another teen. A fight in which no weapon was used. The use of the dog was excessive but the fact that officers have then at their disposal will increase the chance that they will use them unneccesarily especially when the man on the top gives them "all the latitude necessary to decrease crime" It's a sad day in the history of New Haven and then again even the chief could not allow this without who's support? This whole drug war must end. It's not about reducing drug use and it never has been.The guest who in the presence of officers admitted that he smoked weed is an indicator of that. I didn't read that he was arrested.If the truth will ever be told the drug war is about keeping prison cells full with the marginalized (and "unwanted") in our community and across America the free.