Yale still addressing budget gap

More than three years after the onset of the recession first forced administrators to make University-wide budget cuts, Yale’s finances still have not fully recovered.

University President Richard Levin and Provost Peter Salovey wrote in a Wednesday memo to faculty and staff that additional budget reductions are required to close the remnants of a $350 million gap caused by the 25 percent decline in the endowment three years ago. Though Yale returned 21.9 percent on its investments in the fiscal year that ended June 30, the University’s increase in spending is projected to outpace growth in revenue for the 2012-’13 academic year.

Levin and Salovey said they expect to avoid the “across-the-board” cuts in the coming year’s budget, unlike those they called for last January and in previous years. The 2012-’13 budget should also leave room for increases in faculty and staff salary and wages, they said. As University officials move toward a sustainable budget, they will meet with deans, directors, faculty and staff to evaluate programs, look for different sources of funding and consider places to trim.

Additional cuts are required in part to allow Yale to resume the capital construction projects it stalled to save $2 billion in spending when the recession hit in 2008, such as work on Science Hill facilities and the new residential colleges.

“A balanced budget is a necessary target for the near term, but it is not enough to secure a vibrant future for Yale,” Levin and Salovey said in the memo. “In order to make room for academic initiatives and to advance some of the construction projects frozen in the crash of 2008-’09, we will need to free up or find new resources.”

Spending across the University is expected to increase by 6 percent next year, driven partly by rising costs of utilities and health care benefits for employees, Salovey and Levin said. At the same time, revenue is projected to rise by just 2.6 percent because of the “smoothing rule,” which keeps spending from the endowment relatively consistent on an annual basis despite fluctuations in investment performance. The spending rule helped soften the blow of the recession on the University’s finances when the endowment plunged in fiscal year 2009.

Despite Yale’s strong endowment performance in the latest fiscal year, Levin and Salovey said they do not expect to achieve similar returns in the near future considering today’s “turbulent financial markets.” Even when the University officially announced its 21.9 percent investment returns in September, experts cautioned against reading too much into one-year numbers in light of global economic uncertainty.

Levin and Salovey said that a deficit for 2012-’13 is also expected because administrators balanced the current budget by spending from the University reserves — income set aside in rainy day funds. Yale turned to those funds repeatedly in the aftermath of the recession and had essentially depleted them as of last April, though Levin said the University was able to funnel some money into the reserves when fiscal year 2011 closed.

Salovey wrote in a Wednesday email to the News that the University will maintain its commitment to protecting the academic core and the student experience as it looks for places to cut in the coming year. Levin could not be reached for comment Wednesday evening.

Administrators will begin to address specifics of the budget planning process at a Thursday meeting, Salovey said.

Comments

  • Yokel

    Duh…of course spending is projected to outpace revenue growth. Yale insists on hiring more deans and middle level managers with no added value. The problems of the old discredited corporate model appear to have migrated to academia.

  • attila

    Part of the problem is the way they do the accounting.

    Dollars spent on more vice presidents are free.

    Same goes for special advisers on “sexual climate.”

    Dollars spent on the Singapore adventure are free (and yes, Yale is spending a lot on that, whatever the admin says in public).

    Dollars spent on faculty are incredibly costly.

    And dollars spent on the library… no, we cannot spend money on the library.

    • bt

      How do you know that Yale is spending a lot on the Singapore adventure? There seems to be a plausible story that the Singaporean government cum NUS are footing the bill. What is Yale paying for?

      • attila

        I cannot tell you exactly how much, but here is an example of stuff that is coming out of Yale’s pocket: they have a group of Yale faculty doing the hiring for Singapore. This is a lot of work, so they had to hire instructors to teach the courses those faculty would normally teach. This kind of thing easily runs into serious money.

        I am willing to think there are a lot of examples like this — this is just the one I know.

  • ldffly

    It’s stories like these that make me wish I could be a billionaire. When they come to me for some of my billions, I politely ask those x#j#!! s to go take a hike.

  • joey00

    Yale is asking for primo property in Singapore for a tax free college campus.Singapore,”singapore”? Is now planning to open a Casino in NY. The shareholders of the Casino are ..you guessed it,Yale

  • observer

    So now, in addition to Yale-Singapore and Yale-New Haven, we have Yale-Aquaduct?

  • yalieForASaneNH

    Give me a break, Yale! You can’t have it both ways. This is just another step toward corporatization of the university and the austerity politics that comes with it. It’s the rationale behind not filling vacancies in clerical and technical positions, and in the dining halls and custodial departments; and in filling new positions with casuals and temps. This negatively impacts not only the workers, but un- and under-employment in New Haven, as well as students and faculty that rely on services these workers provide. One would expect an Ivy League school of this caliber (and cost to undergrads) ought to provide the best quality of services, but this is leading to the opposite.

    http://www.yaledailynews.com/news/2011/nov/29/yale-tomorrow-boosts-annual-giving/

    http://giving.yale.edu/news/yale-tomorrow-campaign

    http://www.newhavenindependent.org/index.php/archives/entry/600m_yale_expansion_gets_final_ok/

    http://www.yaledailynews.com/news/2011/oct/28/students-staff-protest-overcrowded-dining-halls/