Yale to make further budget cuts

Just months after weathering one round of budget cuts, the University is already gearing up for another.

By design, the cuts to the current year’s $2.7 billion operating budget, which took effect in July, did not fully offset Yale’s projected deficit; administrators thought they could smooth the loss over several years as the economy recovered and avoid drastic cost-cutting measures. But that recovery did not come, and there will have to be additional cuts made in the 2011 fiscal year budget.

University President Richard Levin said a new message to the community, expected some time in the next several weeks, will spell out what that means.

“There hasn’t been a rebound,” he said. “So there’s obviously going to be further cuts this year.”

The administration still estimates the University’s endowment has dropped in value by 25 percent, or about $6 billion, but Levin said adjustments to that estimate are being made.

The administration is waiting for an exact tabulation of the endowment’s value at the end of the fiscal year as of June 30, which should come in the next few weeks. This takes some time because so much of the portfolio is in illiquid assets that are hard to value at a given moment.

“We don’t believe it will be a surprise,” Provost Peter Salovey said, “but we want that precision.”

They need the precise value because it determines how much money the University can draw from the endowment in the 2011 fiscal year.

The administration took action in December to smooth over budget shortfalls by holding the endowment payout constant over 2010 and 2011. By withholding $118 million of the endowment’s contribution to the 2010 budget and reserving it for use in 2011, the administration was attempting to avoid a situation in which drastic cuts would have to be made in any one year.

In doing so, they also created a $100 million budget gap, and the plan was not to try and recapture all $100 million all at once.

“Our strategy last year was in part based on the idea that we didn’t want to make cuts that, if there was a quick recovery, we wouldn’t have needed to make,” Salovey said. “Doing everything at once would have been very painful.”

Which, he added, is not to say there was not still some pain. All departments had to cut 7.5 percent from personnel and non-personnel costs. About 500 positions were eliminated, including 100 layoffs.

In an effort to save $2 billion in capital spending, nearly all campus construction was put on hold, with the exception of in-progress renovations and construction, essential maintenance and the renovations of Morse and Ezra Stiles Colleges. Other projects may continue as gift funding is secured, such as for the University Art Gallery renovation and the two new residential colleges.

Deputy Provost Lloyd Suttle defended the University’s approach of staggering the budget cuts rather than cutting deeper in the first place. By doing the latter, he said, “you run the risk — it’s not just a risk, you do long-term damage to core functions.”

By core functions, administrators primarily mean the student experience, both in terms of education and support services, Salovey explained.

“We consider that core mission and have worked very carefully not to compromise it,” he said.

As cuts continue, there will be reductions in support services, such as the library and information technology. Dining Services also reorganized, in part to reduce costs. But overall, cuts were difficult for students to notice.

It is a different story at many other institutions; Harvard, for example, eliminated hot breakfast. Salovey said the administration will “try really hard” to avoid such measures here.

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