Yale leaders provide budget update for 2021–22

Yale reported strong financial results for the fiscal year ending June 30, and outlined plans calling for fresh investments in the university and its host city.
Phelps Gate illustration.

(Illustration by Eri Griffin)

Senior Yale leaders updated faculty and staff on the university budget Friday, reporting strong financial results for the fiscal year that ended June 30, 2021 (FY21) and outlining plans that call for fresh investments in faculty, students, staff, and infrastructure, as well as increased support for the city of New Haven.

In a joint email, Provost Scott Strobel, Senior Vice President for Operations Jack Callahan, and Vice President for Finance Stephen Murphy noted the recently announced 40.2% FY21 investment return on the Yale Endowment and said the university’s latest annual financial statements show a FY21 operational surplus of $276 million within an overall $4.275 billion budget.

These results are better than our expectations, especially considering the many challenges posed by the pandemic,” they said. “They reflect the careful stewarding of university resources by all parts of the university during an uncertain economic period.

These collaborative efforts have put Yale in an excellent financial position to accelerate our investments in the academic mission of the university and its people. We will continue to be both ambitious and intentional in these investments because what we do in the next few years to support our students, faculty, staff, and the city of New Haven will define Yale for generations to come.”

Despite excellent recent financial results, the COVID-19 pandemic has significantly and negatively impacted university finances, causing over $200 million in lost revenues or increased expenses in FY21 alone and totaling over $350 million since March 2020, they said. The university’s central unrestricted funding source — the funds available for general use by the president and provost — finished the year with an unprecedented $98 million deficit.

This deficit, they said, was due to a conscious decision to cover all COVID-related expenses — including testing, contact tracing, and personal protective equipment — centrally instead of assessing them to individual units.

Admission deferrals, lower housing and meals revenue from de-densifying the campus, and lower Yale College enrollment last year also contributed to the central deficit, they said. The university absorbed the deficit using unrestricted reserve balances set aside in previous years.

Past years’ prudent financial management of central funds provided this essential cushion in a time of need,” the budget message said.

Yale’s decentralized financial structure means the operational surplus is distributed across individual schools, departments, programs, and faculty accounts. Balances are earmarked for specific uses.

Endowment spending and next year’s budget

While hewing to established spending policies, the significant FY21 endowment return will provide an increase in operating funds beginning with next year’s budget (FY23, which begins July 1, 2022) and will grow according to formula over the next five years, according to the message.

Of course, we don’t know exactly how future endowment returns will affect these recent positive results,” the senior Yale leaders said, “but the recent gains will provide opportunities for significant investments in university priorities.”

Yale’s endowment is governed by an endowment spending policy approved by the board of trustees. It aims to provide a stable flow of income to the operating budget while not over- or under-spending on the current generation of scholars and students. The university’s annual target spending rate is 5.25% of the endowment’s value, which means Yale spends about half of the endowment every 10 years. (A series of short videos shared by the Office of the Provost provides a clear explanation of the policy and the overall university budget.)

We remain committed to the fiscal discipline of the endowment spending policy,” the budget message said. “The policy’s smoothing effect cushions against sharp fluctuations — up or down — in spending.”

Still, they said, “This is a moment to think even more boldly about the future of our university.”

Looking ahead and guided by the university’s mission, Yale will invest in expanding and diversifying the faculty, providing greater financial support for students, and strengthening support for staff members, according to the message. Yale also will invest in the physical infrastructure and human capital that sustain the academic mission, and the university will expand support for the city of New Haven.

Preparation of next year’s budget is underway and will continue through the current academic year, concluding with approval by the trustees in June.

The Budget Advisory Group, a provost-led committee of faculty and administrative leaders, considers long-range plans and budgetary requests from the various Yale schools and units as part of the annual budget process. Schools and units bring forward their best ideas for how the university’s expanded financial resources will strengthen their programs and promote the overall university mission, the message said, while remaining consistent with the spending restrictions of the more than 8,000 gifts that make up the endowment.

Details about new commitments are still to come, but the message noted several that have already been identified and will be included in next year’s budget. They fall into five broad categories: faculty support and academic investments; financial aid and student support; staff and faculty benefits; the physical campus; and the City of New Haven.

Faculty support and academic investments

Yale will prioritize further faculty recruitment and retention as it supports a diverse and inclusive community of world-class scholars and teachers. The university will accelerate investment in rapidly growing and emerging fields and in the academic priorities identified by faculty-led strategic planning committees over the past few years, including in the sciences, engineering, social sciences, arts, and humanities.

The message also noted that the COVID-19 pandemic has underscored the need for greater investment in public health research and teaching and in minimizing health disparities.

Financial aid and student support

Underscoring the commitment of every school at Yale to making a Yale education as accessible as possible, the message said the university plans to further expand financial aid to students across all schools. Beginning in fall 2022, for instance, Yale will increase undergraduate financial aid packages to reduce the student share such that students will not be expected to contribute toward expenses paid to the university — tuition, housing, and meals.

The reduction in student share complements other financial commitments Yale is providing to students. Last spring, the university announced that the David Geffen School of Drama will be tuition-free for all students beginning this year thanks to a generous gift by David Geffen. The school joined the Yale School of Music, which has been tuition-free to all students since 2005 thanks to the generosity of Stephen (YC’59) and Denise Adams. Expanding financial aid is a major priority for the university’s recently launched comprehensive campaign.

We will seek additional opportunities to enhance financial aid across the university as budgets are developed and through the generous contributions of the university’s alumni and friends,” the budget message said.

Also, the university will continue to invest in campus resources that support the community’s mental health and overall wellness. For instance, a new program in Yale College and a staffing increase in the Department of Mental Health and Counseling (MHC) will continue to add full-time staff positions to support student mental health and well-being.

Alongside these investments, Yale will expand support for students in Yale College and Ph.D. students in the Graduate School of Arts and Sciences who have children.

Staff and faculty benefits

Yale will strengthen its culture of diversity, equity, inclusion, and belonging through the set of concrete actions announced earlier this year as part of President Peter Salovey’s initiative to build a stronger and more inclusive Yale. The university will augment these actions by further enhancing the benefits Yale provides to eligible staff.

In the coming weeks, Yale will announce:

  • A childcare stipend for eligible staff, postdoctoral associates, and faculty, and
  • Enhancements to both the short-term disability program and the parental leave policy for managerial and professional staff.

Our staff and faculty have made extraordinary contributions throughout this unprecedented public health crisis,” Strobel, Callahan, and Murphy wrote. “We are currently evaluating what more the university will do to acknowledge and reward these contributions in light of the university’s recent positive financial results.”

The physical campus

Yale will continue to invest in office, laboratory, collection, and teaching spaces, ongoing work punctuated by moments of celebration as multi-year projects are completed.

A non-comprehensive list of projects under way or soon to begin around campus includes: renovation of certain floors of 100 College Street, which will house the neuroscience and psychology departments and the Wu-Tsai Institute; the new Yale Film Archive in Sterling Library; a new physical science and engineering building and renovation of Kline Tower on Science Hill that will, respectively, support quantum and materials science initiatives and co-locate math, astronomy, and statistics and data science departments; construction of a new building at 87 Trumbull Street to house part of the economics department and the Tobin Center for Economic Policy; and space within the 101 College Street building, which will serve as a joint city-state-university economic development project with a start-up incubator to advance the economy of New Haven.

The university has already added a range of new performance, student activity, and teaching spaces — in the Schwarzman Center, for example, and in the recently completed Humanities Quadrangle, which now provides an exceptional home for most of the Faculty of Arts and Sciences’ humanities departments, their faculty, and their graduate students.

City of New Haven

Yale, which currently makes the largest annual commitment to its host city of any university, will meaningfully increase direct financial support to New Haven. This support is an outcome of a joint committee President Salovey and New Haven Mayor Justin Elicker established last year with three particular charges: enhancing the working relationship with the city, evaluating opportunities to benefit the New Haven community, and considering Yale’s financial support for the city. The mayor and Salovey will provide additional details in the weeks to come.

In addition, Yale remains committed to hiring New Haven residents. Since the start of the New Haven Hiring Initiative in July 2015, more than 1,500 New Haven residents have joined Yale as employees, with nearly 500 from identified neighborhoods of need.
“We look forward to extending this and many other such partnerships,” Strobel, Callahan, and Murphy wrote.

Ending on a note of gratitude, their message acknowledged that many people in the university community have “gone beyond their standard roles to keep Yale safe and to advance our mission during this pandemic.”

Our collective success through this period — financial and otherwise — is only possible through the great work and dedication of Yale faculty and staff and the cooperation and help of our students,” they wrote. “We are deeply grateful for all that you have done during these challenging last few years, and hope you share our excitement about the opportunities that lie ahead.”

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Media Contact

Karen N. Peart: karen.peart@yale.edu, 203-980-2222