Facing a projected $40-million budget deficit for the coming academic year, faculty and administrators continue to deliberate about how to close the gap.

The 2013-’14 shortfall is significantly smaller than the $350-million gap between costs and operating revenue that Yale faced following the onset of the economic recession in 2008, but Provost Benjamin Polak told the News that Yale has not yet reached a sustainable budget model and continues to draw on reserve funds. Though there will be no “across-the-board” cuts this year, the University must look for ways to reduce expenses permanently, Polak said, adding that he has begun meeting with departments and programs to discuss their budgets and hiring prospects for the coming year.

“There are no scary, across-the-board cuts,” Polak said. “In some sense, my conversations with chairs will be much easier. But they’re going to be tight-ish budgets.”

Departmental budgets will be slightly larger than they were last year to accommodate inflation, salary increases and benefits such as health care, Polak said. But the budgets will not be large enough to enable departments to pursue many desired new initiatives, he said, adding that he has already had to say “no” or at least “not now” to many good ideas since he became provost last month.

While departments will have to make choices to keep costs down, additional savings may come from beyond the Faculty of Arts and Sciences. Between 2009 and 2011, Yale’s multiple rounds of budget cuts affected both academic and non-academic units of the University.

In a series of three meetings this fall, the University Budget Committee examined Yale’s facilities as a possible source of savings, Polak said.

The committee found that the University could save significant funds if it could create more “swing spaces” on campus for use during construction projects, Polak said. He added that the University currently has to pay extra to rush projects during the summer and could reduce expenses if projects were able to progress at a slower pace.

Departments will also not be able to hire as many new professors as they may like next year, Polak said. During the recession, the number of tenured and tenure-track professors in the Faculty of Arts and Sciences was capped at 700. Though professors continued to leave and retire at normal levels, new hiring slowed to a trickle, and many departments struggled under the strain of smaller faculties.

Hiring levels have now returned to normal, but almost all of the authorized searches for new faculty underway this year are to fill existing or impending vacancies rather than new positions, Deputy Provost Lloyd Suttle told the News last fall.

“Departments really want to hire,” Polak said. “There’s kind of this pent-up demand.”

Polak said requests for hiring are currently examined on a case-by-case basis, but added that the system for allocating teaching positions between departments is flawed. He said he hopes the Academic Review Committee, a group of faculty members that started examining the distribution of teaching slots across departments in fall 2012, will recommend a new allocation system soon. The new system will ideally create a pool of teaching slots that can be methodically allocated to the departments most in need of them, he said.

Vice President for Finance and Business Operations Shauna King told the News in January that she has “no doubt Yale will balance its budget for 2014.”

The size of the budget is determined in part by the “smoothing rule,” which keeps spending from the endowment relatively consistent on an annual basis despite fluctuations in investment performance. Yale’s endowment posted a subdued 4.7 percent return on its investment for the most recent fiscal year.

“The smoothing rule is very important,” Polak said. “Without it, we’d be hiring and firing as the market changed.”

Keeping spending in line with the smoothing rule helps maintain a sustainable financial model that will keep Yale’s finances strong for future generations, King wrote in an October financial report.

Eight department chairs contacted for this story did not respond to requests for comment. Inderpal Grewal, chair of the Women’s, Gender and Sexuality Studies Department, and Holly Rushmeier, chair of the Computer Science Department, said they have not met with Polak yet to discuss their departments’ budgets.

Still, Rushmeier said she hopes the budget will enable the Computer Science Department to increase course offerings and support for “computer science-related student activities.”

University operating expenses totaled $2.8 billion in 2011-’12.