Yale leaders share financial update, urge fiscal restraint amid pandemic
Yale must continue to exercise fiscal restraint amid the uncertainty of the COVID-19 pandemic, even as cost-saving actions and recent financial results allow the university to pursue select hiring, compensation, and construction plans, campus leaders said Sept. 24.
In a message to faculty and staff, Provost Scott Strobel and Senior Vice President for Operations Jack Callahan underscored the pandemic’s significant effect on Yale’s finances — an estimated $250 million in lost revenue and COVID-related expense increases already — and urged faculty and staff to remain cautious about spending while avoiding new financial commitments.
“COVID-19 has a significant impact on our university, and our financial outlook remains uncertain,” they wrote.
But specific efforts to control expenses since March, when the gravity of the pandemic in the United States became clear, combined with better-than-expected financial results for the fiscal year ended June 30, 2020, will enable Yale to take new actions to support its communities and advance academic priorities.
The university is partially lifting the hiring freeze for faculty recruitment, and will approve at least 60 new and continuing faculty searches across the professional schools and the Faculty of Arts and Sciences, helping expand faculty diversity and excellence. Yale also will adjust by 1.5% the salaries of all full-time faculty and managerial and professional staff earning less than $85,000 per year.
Yale will meanwhile continue providing robust financial aid for students, especially those facing unexpected financial hardship due to the pandemic. And the university will continue its commitment to the city of New Haven, allocating funds from the Yale Community for New Haven Fund, bolstering education programs for local students, and working closely with the city to accelerate local economic growth.
Additionally, Yale will proceed with some construction projects, including the Humanities Quadrangle, the Tobin Center, 100 College Street, the Schwarzman Center, and the Peabody Museum, as well as the renovation of Kline Tower, which are “necessary to achieve our academic mission and create much-needed teaching, research, and social spaces on campus,” Strobel and Callahan wrote.
“It is still not business as usual, and we must remain prudent,” they said. “We look forward to taking additional steps when the public health situation improves and when our finances allow us to do so. The timing and scope of such actions will depend on how the financial future unfolds.”
Investing in Yale
Amid the challenges of the pandemic, Yale has invested in faculty, staff, students, postdoctoral trainees, and in its fundamental mission, while avoiding drastic measures taken by peer institutions, which included furloughs, salary cuts, and the suspension of employee retirement savings contributions.
Yale has spent over $25 million to build the campus public health infrastructure, and is providing regular and free COVID-19 testing for all members of the university community, contact tracing support, free personal protective equipment, and isolation spaces on campus.
It has spent $13 million on increased financial aid, health care, travel, and other direct support for students across Yale’s schools, and $37 million on continued pay for staff who could not work from home but who also were unable to work on campus due to public health concerns, as well as premium pay for personnel working on campus during the early stages of the pandemic.
The university has also been a principal contributor to the Yale Community for New Haven Fund, which supports local non-profit organizations offering food, shelter, health care delivery, and other services, as well as assistance to local businesses.
These investments have come amid reduced revenue due to refunds, deferred and canceled medical procedures, cancelled theater productions, athletics events, conferences, and summer programs.
Last spring, Yale refunded more than $20 million to students for room and board charges after public health conditions led to the unexpected closure of campus residences. The impact of COVID-19 reduced clinical revenue in the medical school by more than $80 million in fiscal year 2020.
Strobel and Callahan said greater financial impacts may manifest this fiscal year, which ends June 30, 2021. Lower enrollment in Yale College and the professional schools, for instance, has cost the university more than $80 million in lost tuition, room, and board revenue.
Recent financial results
There was positive news also: Financial results for the fiscal year that ended June 30, 2020, were better than expected.
Yale’s endowment finished the year with a 6.8% investment return — slightly below the annual target rate of 8.25% and in contrast to the negative return anticipated in the spring.
“Although the FY20 endowment return does not, for the most part, impact the university’s budget until the fiscal year ending June 30, 2022, because of our endowment spending policy, this overall result is encouraging,” Strobel and Callahan wrote.
The endowment generates more than one-third of the university’s revenue and more than half of revenue outside the medical school.
Results from university operations were also better than expected. Yale is finalizing its audited financial statements for FY20, which will be made public at the end of October, as usual, but the letter shared some preliminary information.
Despite the additional COVID-related expenses and revenue shortfalls, for example, the university will report a surplus from operations for the year of approximately $125 million, providing a buffer for the year ahead, the letter said. Most of the surplus is earmarked for school- or department-specific uses, and is not available for the president and provost to direct at their discretion.
“Overall, the financial results of the past fiscal year provide us some reassurance during an otherwise uncertain time,” Strobel and Callahan said. “Even though the pandemic’s total effect on our finances is unknown, the university is entering the current fiscal year stronger than initially expected, which will help us brace for what lies ahead.”