December 16, 2008

Yale Says Budget Cuts Needed After 25-Percent Drop in Endowment

Yale University’s endowment has dropped an estimated 25 percent — a loss of about $6-billion — since June 30, creating a shortfall of $100-million in next year’s budget, President Richard C. Levin announced in a letter to the university today.

The endowment stood at $22.9-billion on June 30. By October 31 it had fallen by 25 percent, and it has continued to decline since then, Mr. Levin said. Investment income from the endowment makes up 44 percent of Yale’s annual budget.

Yale’s endowment performance closely follows those at other wealthy universities, including Harvard, but is of particular interest because many university endowments have copied the “Yale model” of investing. That model, devised by David F. Swensen, the university’s chief investment officer, has helped Yale earn annual returns as high as 28 percent.

In his letter, Mr. Levin said that Yale would continue to provide financial aid and hire new faculty members, but that it would cut some nonfaculty jobs, preferably through attrition, and would reduce the size of salary increases, among other budget items.

Still, he said, the university remained in a strong position financially. “It is important to recognize that $17-billion is still a very large endowment,” he wrote. —Kathryn Masterson

Comments

1. The Yale Endowment still remains nearly 17 times larger than that at my institution — and my institution is relatively well off when compared to literally thousands of others. This is like lamenting that during the Great Depression J. P. Morgan Jr. could only afford to purchase two Silver Ghosts per year. We should be focusing on the 1000s of institutions that do not have the blue blood heritage and thus really feel the pain associated with the downturn that the unregulated market (and unscrupulous profiteers) hath wrought. The real story is that “the little man” will bear the brunt of this in a far worse way than the faculty, staff, administration and even the students at Yale. I expect more from the Chronicle than trite sensationalism about silver spooned institutions.

   — Goethe    Dec 17, 07:40 AM    #

2. I was actually impressed with Yale’s metered response to the situation (read the link to the actual presidential letter), and their plans to move forward with all the core parts of the university – financial aid,academic programming, faculty hiring, continuing buildings underway (which helps the local economy), and planning for future buildings (but not starting actual building). Many times, the president acknowledged the strength of the size of their endowment and the uniqueness of their situation. Contrast this to Harvard’s freak-out all around which I think just served to scare smaller institutions (e.g., ‘if Harvard is freaking out, then what about us?’)

   — Anon    Dec 17, 09:09 AM    #

3. The comment from “Goethe” is typical of many that appear whenever Yale or a similar institution is in the news for any reason. It represents not a reasoned or substantive criticism of policy or institutional behavior; its just an eruption of good old-fashioned bigotry.

   — say no to bigots    Dec 17, 10:06 AM    #

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