The Yale Alumni Magazine is owned and operated by Yale Alumni Publications, Inc., a nonprofit corporation independent of Yale University.

The content of the magazine and its website is the responsibility of the editors and does not necessarily reflect the views of Yale or its officers.

Comment on this article

Deja Deficit
January/February 2004
by Kathrin Day Lassila ’81

Y: Financially, this isn’t the best of times for universities. MIT will reduce its budget by $70 million next year. Stanford has imposed a salary freeze. And late last fall, Yale announced a $30 million hole in the 2004–2005 budget. What happened? And are you worried?

L: No, I’m not worried. First, the $30 million represents only 3 percent of our central budget, and the cost reductions come after a remarkable growth spurt. Yale’s annual budget five years ago was $1.14 billion. This year it is $1.74 billion. The current deficit is very largely a product of the overall macroeconomic slowdown of the last few years, which has slowed the growth of the endowment. The rate of giving is also down, from a high of $358 million during the Tercentennial to $220 million last year. But it’s just part of the routine of running an institution that is vulnerable to external conditions.

Y: The word is that you’re not planning to cut faculty positions—at least not tenured faculty or ladder faculty, as Yale calls its assistant, associate, and full professors.

L: Right. The faculty went through a wave of significant reductions in the early through mid-90s. We have since made only strategic investments in faculty positions—to upgrade in ecology, evolutionary biology, biomedical engineering, political science, and sociology. That’s brought the faculty to a level about 6 or 7 percent over the level of the early ’90s. We don’t see much opportunity to reduce faculty without impairing the programs. That’s not a cut we can get value from. And we are not planning a salary freeze. It is important that salaries stay competitive.

Y: But you do expect to cut many positions. Will some of those be non-ladder faculty?

L: Possibly. A lot of non-ladder faculty decisions are year-to-year decisions—how many visiting professors do you have in order to cover courses for faculty on leave, for example—and we will examine those decisions carefully. But we do think it’s time to look hard at the business side of the university—at administrative support services of all kinds.

Y: The provost has predicted a 5 to 10 percent cut in staff positions. Will these come through layoffs?

L: We think we can achieve most of the savings through retirements and regular turnover. During the two years we were negotiating with the unions, there were no increases in the pensions or salaries of the unionized labor force. Now, after the recent settlement, a lot of people are looking at large increases in their pensions. Those increases apply to many managerial employees as well. We’ll have many retirements, and we don’t expect very many layoffs.

Y: This deficit comes as a number of rebuilding plans are underway—the refurbishment of the residential colleges, the $500 million capital investments in the School of Medicine and on Science Hill. How far along are those plans?

L: We’ve renovated Berkeley, Branford, Saybrook, and Timothy Dwight, and we have about $300 million worth of renovations to do in other colleges. It’s approximately the same level of investment for the arts. In the medical school, with the opening of the Anlyan research center, we’ve now spent about half of the $500 million. The remainder will be devoted to renovations. On Science Hill, the big expenditure is just starting—the only completed new building is the Class of 1954 Environmental Science Center. Construction has begun on a new chemistry building and a new engineering building. A new biology building will follow.

Y: Will any of these plans be derailed?

L: In a worst case, we would have to slow some things down. But we’re very committed to them.

Y: You sound optimistic.

L: This deficit is in truth quite a bit smaller than the kinds of deficits we were forecasting back in the early 1990s. In 1993 there was an operating deficit of $14.8 million, and we were projecting future deficits in excess of $100 million. And ten years ago, we were contributing almost nothing from the operating budget to capital maintenance. We were not treating the replacement of our buildings as a year-to-year expense. So we started a discipline of each year providing larger and larger sums directly to capital renovations. In the current budget year we’re spending $94 million. Next year we’ll spend $101 million. The $30 million deficit comes in that context. So, yes, I do feel optimistic. This has been a great period of rebuilding Yale, and the investments will continue.  

©1992–2012, Yale Alumni Publications, Inc. All rights reserved.

Yale Alumni Magazine, P.O. Box 1905, New Haven, CT 06509-1905, USA. yam@yale.edu