Zoe Berg, Senior Photographer

In a year of market fluctuation and endowment stagnation, the University has maintained a strong financial position, though not without challenges.

Just before winter recess, the University released its 2022-23 budget update. In the fiscal year ending June 30, 2022, the University generated a surplus from operations of $166 million on $4.876 billion in revenue. During the same period, the endowment returned 0.8 percent, but after accounting for spending distributions, the endowment’s value dipped almost $1 billion. Because it is difficult to estimate returns on the illiquid assets which comprise the majority of Yale’s portfolio, it is possible that returns may be lower than reported.

“We are pleased to have had an operational surplus in FY22 that reflects our community’s careful stewarding of university resources,” the budget update read. “As a result of Yale’s decentralized financial structure, these surpluses are distributed across hundreds of individual school, department, program, and faculty accounts.”

While the budget report argues that a “minimal endowment return is not a cause for concern,” it also acknowledges that high interest rates and prolonged recession — which many experts are currently forecasting — may become challenges in the near future.

The report also highlights several other challenges, including the University’s overdependence on revenue from the School of Medicine, sustained operating deficits at Yale New Haven Hospital and market inflation.

“Nothing surprised me,” accounting professor Rick Antle told the News. “The University is financially strong and I expect it to continue to be so going forward. I believe the Provost rightly points out the challenges presented by the large position of the Yale Medical School in the University’s financial position and the risk of inflation.”

Antle told the News that maintaining an operating surplus is healthy financial practice.

From 2018 to 2022, the University has reported surpluses of $91, $87, $125, $276 and $167 million, respectively.

“[This year’s surplus] is about 3.4 percent of revenue, which does not strike me as excessive,” Antle wrote in an email to the News. “Yale University is a large, complex institution, and we can’t expect to hit zero every year. As a management matter, I would expect an institution like Yale to aim for a small, positive operating surplus and to try to avoid operating deficits.”

Antle added that operating deficits can be detrimental to the University’s financial future, whereas surpluses are relatively benign and roll over for future use.

78 percent of this year’s surplus falls into restricted endowments and gifts that must be spent for specific purposes. The University’s unrestricted funding source, which can be used however the president and provost see fit, also recovered from the large deficit detailed in last year’s budget update.

“The surplus largely stays within the specific unit that generated it,” senior vice president for operations Jack Callahan wrote in an email to the News. “For example, with endowment-related revenue, it remains in the fund balance for that unit to be consistent with the donor’s intention of the original gift agreement.”

Callahan says this financial structure ensures that the University fulfills its fiduciary obligation to manage these funds appropriately.

The report further discussed the financial challenges presented by Yale New Haven Hospital, which has experienced operating deficits for the past two years and, according to University leadership, will likely report a deficit again in the current fiscal year. 

Although the hospital is an independent non-profit organization, it works in “close partnership” with the School of Medicine to provide care for patients. More than one-third of YSM’s clinical revenue comes from YNHH. Because the School of Medicine accounts for half of University revenue, this is a legitimate cause for concern.

“The [School of Medicine’s] largest source of revenue is from clinical activities — patients paying for professional services to Yale doctors and funds from the YNHHS to support joint clinical investments and hospital related activities such as new clinical programs,” Callahan told the News.

Yale New Haven Hospital was founded as the General Hospital Society of Connecticut in 1826.

Evan Gorelick is Managing Editor of the Yale Daily News. He previously covered Woodbridge Hall, with a focus on the University's finances, budget and endowment. He also laid out the weekly print edition of the News as a Production and Design Editor. Originally from Woodbridge, Connecticut, he is a junior in Timothy Dwight College double-majoring in English and economics.