Yale estimates that the pandemic has cost the University more than $250 million in lost revenue and COVID-19 related expenses, but it is still reporting a $125 million surplus within an overall operating budget of approximately $4.3 billion for the most recent financial year.
On Thursday, University Provost Scott Strobel and Senior Vice President for Operations Jack Callahan ’80 updated Yale faculty and staff on the state of Yale’s finances amid the COVID-19 pandemic. In the update, Strobel and Callahan acknowledged the significant impact the pandemic has had on University finances and emphasized that “it is still not business as usual, and we must remain prudent.” However, they also expressed optimism because, due to cost-saving measures implemented in the spring and the better-than-expected financial returns, Yale will be able to “move forward with caution.”
“While we need to continue to be cautious, it does give us, as a University, the opportunity to move forward on a few key priorities that are important for continuing the excellence of the University,” Strobel said in an interview with the News.
While the University is still finalizing its audited financial statements for the last fiscal year — ending on June 30, 2020 — the update provided some preliminary news regarding Yale’s endowment and administrators’ plans for the upcoming months.
According to a press release from the Yale Investments Office, the endowment finished the year with a 6.8 percent investment return, bringing the Yale endowment value to $31.2 billion compared to the $30.3 billion value from June 30, 2019. Although the return is below the annual target rate of 8.25 percent, it exceeded expectations given that a negative return seemed likely in March and April according to the update provided by Strobel and Callahan.
The reported $125 million surplus for this fiscal year comes on the heels of last year’s $87 million surplus. While the pandemic has had adverse economic consequences across multiple sectors, endowment returns also increased from 5.7 percent in 2019 to 6.8 percent this year.
The update also detailed some of the projects and measures that the University will prioritize in the short-term. Among them is a partial lift in the hiring freeze for faculty recruitment — a measure put in place in the spring. The University will approve at least 60 new and continuing faculty searches across the professional schools and the Faculty of Arts and Sciences.
Additionally, the update stated that all full-time faculty and managerial and professional staff earning less than $85,000 per year will receive a 1.5 percent salary raise effective Oct. 1. Certain long-term projects such as finishing the construction of the Schwarzman Center and the renovation of the Peabody Museum will also proceed.
The update further broke down costs associated with the pandemic. According to the report, the University spent over $25 million on public health infrastructure, including testing, contact tracing and personal protective equipment. According to Callahan, rather than considering temporary layoffs, the University spent another $25 million to continue paying faculty and staff who were not asked to come back to campus but were unable to complete their jobs at home.
The University spent $13 million in increased financial aid, health care and travel support for students in Yale College, the Graduate School of Arts and Sciences and the professional schools.
However, some of the greatest financial burden came from lost revenue relating to enrollment. Because of the number of students on deferrals and leaves, and because many students are studying off campus and remotely, the University has lost an estimated $80 million due to the reduced revenue from tuition, room and board.
“We have never seen as quick or as dramatic a decline in our revenues within a year… I don’t think ever in the University’s history,” said Callahan in an interview.
In the update, Strobel and Callahan thanked faculty and staff for an “exceptional job of restraining spending and avoiding unnecessary new financial commitments.”
While other universities took more aggressive steps to cut costs when the pandemic struck — including furloughing employees, cutting contributions to retirement plans and cutting salaries — Strobel said he was glad that Yale did not take some of those actions.
“We were cautious, and I think we found the right balance between caution and care,” said Strobel. “And I’m quite comfortable with what we did, and now we’re in a position where we can move forward to ease those actions, at least a bit.”
According to Vice President for Finance and Chief Financial Officer Stephen Murphy ’87, Yale entered the current economic downturn in a good financial position as a result of years of preparation. However, he noted that this current health and economic crisis is not yet over, and the University will continue to adjust its financial strategy as circumstances change and new information arises.
What will not change, says Murphy, is the University’s commitment to its main priorities.
“Something we spent time on very early in the crisis and that we’ve stayed true to was being clear about our priorities,” said Murphy. “There are really three areas we’ve been focused on. One is focused on the health and safety of our community — faculty, students, and staff. [The second is] sustaining and advancing the quality of faculty teaching and research. And [the third area is] the diversity and excellence of our faculty, students and staff. That stayed true throughout.”
Similarly, Callahan notes that the experience Yale has gained through the pandemic will likely leave a lasting impact on how the University operates.
From implementing remote work to providing digital resources, the University has been required to work quickly and collaboratively to adapt its operations to the current crisis.
“I think we are a more responsive, nimble organization, and we want to keep that going forward,” said Callahan in an interview. “We have been faced with an ongoing set of challenges that we have never seen before. And I think we have gotten better at working together to address them, and I don’t think that’s going away.”
The University contributed over $17 million in 2019 to the city of New Haven in property taxes and a voluntary payment.
Julia Bialek | [email protected]