While the overall size of the $1.4 billion Yale budget will grow in fiscal year 2003, an unsettled national economy and the increasing costs associated with long-term University initiatives will make planning the budget more difficult.
The Provost’s Office will have to ask many departments to reduce their requests for increased funding, Deputy Provost Charles Long said.
Administrators must submit a preliminary draft of the 2003 budget to the Yale Corporation by April.
In recent years, the University has made a record number of large and costly strategic investments like the $500 million Science Hill renovation, and Long said the expenses associated with these investments increase in the years following their announcements. At the same time, a weaker economy likely will continue to slow the growth of Yale’s endowment.
“Now when we look at planning we have to be more cautious about the growth of revenue,” Long said. “[Revenue] will not grow as fast as [it has] been growing. Just as you have an expanding expense base, you have an income stream which is growing at a smaller rate than normal.”
Although Yale continues to maintain a $10.7 billion endowment, in the absence of the once-booming economy, some conditions that produced the incredible growth of the 1990s no longer exist.
“People’s expectations are high, and the reality is that we’re not seeing the accelerated growth that we’ve seen in past years,” said Provost Alison Richard, Yale’s chief academic and financial officer.Ê
Even if the endowment has a difficult year, the University will still enjoy the fruits of endowment growth in previous years. There was a 41 percent endowment return in fiscal year 2000.
“Any impact from the market takes a few years to work its way through the model,” Budget Director Julie Grant said.
Budget officials are still studying various budget requests and will not have an idea of what the final budget will look like for at least another month. A final copy of the budget probably will not be ready until June.Ê
“We’ve received proposals, and we put the numbers together; and we present them to the provost for the decision-making process,” Grant said. “We won’t know until we get all the way through the process. Yale is a big complex place, and there are a lot of decisions being made now until the end of March that will affect if they get what they want.”
Long said some departments will likely be upset with the final budget.
“We haven’t given everyone our answers yet, and my guess is that we’ll get some unhappy responses,” Long said. “I’m sure there will be some protests and disappointed responses.”
Richard said she wants future budgets to remain flexible to allow for future investments.
“I want to make sure we are positioned to make strategic investments,” Richard said.
Yale is currently in contract negotiations with its two largest unions. Since this relationship has been tumultuous in the past, the contract renewal process may further complicate the budget planning process. This year negotiations started later and are expected to last longer.
“It introduces a level of uncertainty because we don’t know what the final outcome will be,” Richard said. “We try to make room for what could be plausible.”
But an administration source said the union negotiations were unlikely to produce any major unanticipated changes that would affect budget planning.
“I don’t think that money is the big issue,” the source said.