The University will likely lay off administrative staff during the next three to five years, senior administrators told the News Monday.
University President Peter Salovey and Provost Benjamin Polak said these cuts will be necessary to close the budget deficit that has plagued the University since the 2008–’09 recession. Though staff reductions are unlikely to occur before the end of the 2014–’15 academic year, layoffs will become increasingly probable after that time, they said. With the hope of eventually replacing the current $39 million budget deficit with a budget surplus, administrators said they will distribute three- and five-year budget targets to units across the University that will require reductions in personnel and non-personnel costs.
“If we don’t deal with the deficit, we won’t be able to do the things we need to do to move forward,” Polak said. But, he added, “It won’t be pain-free.”
Despite a strong investment return of 12.5 percent this past fiscal year, Yale’s endowment has not returned to its pre-recession level. Meanwhile, operating costs have risen by 5.8 percent within the past year and the University spends about $1 billion of endowment funds annually. Without any action, the deficit will continue to expand, Polak said, adding that the University’s reserve funds can only cover the gap between revenue and expenses for three more years.
In an email sent to the entire faculty and staff Monday afternoon, Salovey and Polak provided a broad outline of Yale’s budget woes and their vision for the way forward. They invited faculty and staff to respond to the email with any suggestions as to how to implement savings throughout the University.
Vice President for Finance and Business Operations Shauna King told the News that it would be nearly impossible to eliminate the deficit without affecting personnel, noting that 60 percent of Yale’s expenditures come from “people costs.” Still, she pointed to ways to reduce administrative costs other than forced layoffs.
For the past several months, the University has intentionally left numerous faculty and staff positions vacant, which has allowed Yale to save significant funds on salaries and benefits, King said.
Salovey, Polak and King said funds cut from administrative functions will be reallocated toward teaching and research, which all three described as the core missions of the University.
“Every dollar you spend on administration is a dollar not put toward the mission,” King said.
Though budget restrictions will prevent the faculty from growing in the coming years, administrators did not indicate any plans to reduce the size of the faculty. Still, Polak said the University has to be careful with its spending “right across the board.”
While the consequences of cuts to the administrative sectors of the University are yet to be determined, Salovey, Polak and King said they plan to give substantial autonomy to University “units” to allow them to determine how they will cut costs.
“We will leave each unit enormous responsibility,” Salovey said. “One size doesn’t fit all.”
Salovey and Polak did not provide any concrete measures in their note to faculty and staff, though they highlighted the need to make spending more efficient. But Salovey and King said leaving positions unfilled as well as finding goods and services at lower prices are likely strategies for cutting costs in the immediate future.
In a slightly longer time frame, King said that looking at productivity and “whether work can be reorganized, done in a different way or eliminated altogether” will produce significant savings.
Bringing Yale’s expenditures in line with its revenues is important for the long-term fiscal health of the University, the three administrators said, adding that the University needs to make room in the budget to introduce new initiatives in order to remain relevant and attract students and faculty.
Despite the deficit, Polak said the University remains committed to its time line for major capital projects, including the Yale Biology Building, the new residential colleges — which will be gift-funded — and the renovation of the Hall of Graduate Studies. Though Polak said Yale took the financial situation of the University into account when deciding on target completion dates for these projects, Salovey said the new buildings will nevertheless add to the University’s operating expenses.
If the University had not made significant budgetary cuts in the wake of the 2008–’09 financial crisis, Polak said the current budget deficit would likely stand at $350 million.