Departments dip into reserves

Yale’s departments are breaking open their piggy banks.

In addition to imposing a 7.5 percent cut to all general operating budget funds, the University is asking departments and programs with their own endowed funds to dip into those coffers in attempt to close a $100 million gap in the central budget. Departments that have saved up donations and unspent revenue over the years will have to use those funds to offset regular expenses, administrators said. But though the general operating budget will be able to shed some expenses, departments’ resources will be more strained than ever before, department chairs said.

“We’re looking all over the University to see whether balances can be used to cover regular operating expenses,” Provost Peter Salovey said in an interview Tuesday.

Though some Yale departments and programs, such as the Institute for Sacred Music, survive entirely on income from gifts and endowed funds, many others rely on a combination of the University’s central operating budget and their own special funds, Salovey said. Departments with their own funds can draw on income from invested donor gifts or from “spend-down” gifts, donor contributions that are not invested with Yale’s endowment but spent directly by individual departments, he said. The size and number of endowed funds dedicated to a particular department or program vary widely across the University, he added.

Salovey said he does not know how many departments have endowed funds or “rainy day funds,” though he said all of the professional schools have their own endowed funds. But Deputy Provost Charles Long said Yale departments’ purses might hold “millions” in unspent reserves saved up over previous years.

All departments that still draw central University funding will see that funding cut by 7.5 percent, University President Richard Levin and Salovey said in an e-mail to all faculty and staff last week. For departments that can also tap endowed funds to cover costs the Provost’s Office used to discharge, central funding will be cut even further to reflect their other income — and the Provost’s Office will cut the annual payout from individual endowed funds by 13.4 percent.

Some departments and programs — including the French Department and Judaic Studies Program — began shifting their expenses from the general budget, which is controlled by the Provost’s Office, to their own endowment funds last fall, the chairs of those units said. Judaic Studies has always used endowed funds to pay for faculty salaries, graduate student fellowships and visiting lecturers and professors, but it is now employing more of its gifts to support those activities, Judaic Studies chair Steven Fraade said.

Now, the Provost’s Office is beginning to ask the remaining departments and programs, one by one, to pay more of their own bills, rather than draining money from the operating budget. Some savings will be used for a one-time boost, while others will be spent over time to provide a cushion for future years, Salovey said.

Despite the variation among departments’ incomes and reserves, the Provost’s Office will set standard targets for these additional cuts for each major unit of the University — divisions of the Faculty of Arts & Sciences and each of the schools, Salovey said. In a series of meetings, deputy provosts, chairs and directors will determine whether individual departments and programs can meet those targets, he said, depending on the size of their incomes and reserves and whether those funds can be repurposed while still remaining true to donors’ intentions.

For units that already rely on their endowment income — which will now be reduced by 13.4 percent — for a large portion of their budgets, and now must also spend their rainy day funds, the news is especially painful.

“We are taking a double hit,” said J. Joseph Errington, chair of the Council on Southeast Asia Studies Council, which takes its entire budget from its endowed gifts and which has built up a small reserve by spending less than what it earns each year. “But by making relatively small cuts in what’s outside the core of our mission, we think we’ll be okay.”

Those small cuts, Errington said, would hit the entertainment and visiting lecturer budgets, among others, for the coming year.

Still, the loss of reserves some departments have hoarded for years has not derailed major plans, five department chairs said, explaining that spending less than their departments earn is just a matter of prudence.

In addition, they added, reserves generally consist of small portions of gifts earmarked for specific purposes, making it difficult to spend an entire rainy day fund on one ambitious project.

“We try to be fiscally responsible and make sure that we have ample reserves for precisely these kinds of unpredictable events,” said Alexander Nemerov, chair of the History of Art Department. “We’re not in dire straits.”

Though he said he had hoped to host more conferences and cultural performances on campus, Council on East Asian Studies chair Haun Saussy said he would rather use his reserves to protect existing academic activities from further budget cuts.

“As the steward of funds, you’re divided between the desire to spend it and the desire to save it for a rainy day,” Saussy said. “I guess the rainy day has come.”

Comments

  • Yalie

    It just boggles my mind that after the endowment decreases by >20% due to the economy and/or other causes, that Yale cannot cough up another 0.6% of the still $16 billion to close this central budget gap. I understand the goal is not to deplete the endowment, but honestly there has to be a line drawn somewhere!

  • Skoal Bandit

    I support as much dipping as can feasibly take place at Yale.

  • ’79

    “Departments with their own funds can draw on income from invested donor gifts or from “spend-down” gifts, donor contributions that are not invested with Yale’s endowment but spent directly by individual departments, he said.” The provost has directed that the contribution which I designated, in writing, for a special purpose be used for operating expenses instead. I don’t know whether my experience is typical, but if it is, it bodes ill for donor relations.

  • @ #1

    The Yale Endowment is highly restricted, so essentially none of the endowment money can legally be used to close the central budget gap.

  • @ #3

    This is not only typical, this is central to their plans this year. Any department that has an endowment is having it confiscated. Much worse, faculty who have any balances in accounts are having those confiscated as well.

    Results?

    – donors will be very wary of giving money to Yale. It does not honor the agreements it makes when it takes money. You may give the money for graduate students in poli sci, but find it is being used to pay for new deans for South Slavic Students.

    – faculty will not make long-term research plans that require spending money over a fixed period. (Such as hiring someone to work on a project for two years) Yale won’t allow it.

    This may be good for Shauna King’s efforts to increase her power, but it does not serve the long-term interests of the university.

  • Flay Jin

    Did anybody here at the YDN bother to fact check this story too? Or is it just as pathetic as that Eric Robinsin piece?

  • Yalie2

    When I graduate, I will not be sending money to the Yale Corporation. I think I’ll just mail a check to a random office or student on campus. I think that’s a better way of making sure the money goes where I want it to go.