University Budget Update 2021-22

Friday, October 29, 2021

Dear Yale Faculty and Staff,

We write today with good news: Yale finished the fiscal year ending June 30, 2021 (FY21) with strong financial results.

The university recently announced the investment return on the Yale Endowment of 40.2% for FY21 and more recently published its annual financial statements, which report an operational surplus for FY21 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 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. This is an exciting moment.

Broader Context: COVID-19, Central Deficit, and Impact on Operational Units

While these recent financial results are excellent, the COVID-19 pandemic has had a significant negative impact on the university’s finances. It has caused over $200 million in lost revenues or increased expenses in FY21, totaling over $350 million since its onset in March 2020. 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, however, was the result of a conscious decision to cover all COVID-related expenses (including testing, contact tracing, PPE) centrally instead of assessing them to individual units.

A large portion of this central deficit also resulted from admission deferrals, lower housing and meals revenue from de-densifying our campus, and lower enrollment in Yale College last year. Fortunately, the university absorbed this large central 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.

Yale’s decentralized financial structure means that the operational surplus is distributed across individual schools, departments, programs, and faculty accounts. The balances are earmarked for those specific uses. More than half of this surplus was generated by the Medical School, thanks in part to robust clinical practice growth, which helped cover FY20 losses sustained as the hospital paused many of its operations to focus on pandemic support. The remainder was realized by the university’s other professional schools, as well as units that have restricted endowments and gifts, allowing them to increase reserves to insulate against future uncertainty or downturns.

Endowment Spending and Next Year’s Budget

Yale’s endowment is governed by the endowment spending policy approved by the board of trustees, which 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. Those unfamiliar with the endowment spending rule are encouraged to review a series of short videos that provide a clear explanation of the policy and the overall university budget. The university’s annual target spending rate is 5.25% of the endowment’s value, which means we spend about half of the endowment every ten years.

We remain committed to the fiscal discipline of the endowment spending policy. The policy’s smoothing effect cushions against sharp fluctuations—up or down—in spending. The significant endowment return in FY21 will provide an increase in operating funds beginning with next year’s budget (FY23, which begins on July 1, 2022) and will grow according to formula over the next five years. Of course, we don’t know exactly how future endowment returns will affect these recent positive results, but the recent gains will provide opportunities for significant investments in university priorities.

Ongoing and New Commitments to University Priorities

This is a moment to think even more boldly about the future of our university. As we consider new initiatives and recommit to continuing ones, our decisions will be guided by the university’s mission:

Yale is committed to improving the world today and for future generations through outstanding research and scholarship, education, preservation, and practice. Yale educates aspiring leaders worldwide who serve all sectors of society. We carry out this mission through the free exchange of ideas in an ethical, interdependent, and diverse community of faculty, staff, students, and alumni.

As we focus this mission into tangible actions reflected in next year’s (FY23) budget, we will invest in expanding and diversifying our faculty, providing greater financial support for students, and strengthening support for staff members. We will also invest in the physical infrastructure and human capital that sustain our academic mission, and we will expand support for our home city of New Haven.

Preparation of next year’s budget is currently under way and will continue through the balance of this academic year, concluding with approval by the board of 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 schools and units of the university as part of the annual budget process. Schools and units will bring forward their best ideas for how the university’s expanded financial resources will strengthen their programs and promote the overall mission of the university, while remaining consistent with the spending restrictions of the more than 8,000 gifts that make up the university’s endowment.

We are excited to share some of the commitments that have already been identified and will be included in next year’s budget. Detailed explanations of these and new commitments will be provided in future announcements.

Faculty Support and Academic Investments

We will prioritize further faculty recruitment and retention as we support a diverse and inclusive community of world-class scholars and teachers. We 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 COVID-19 pandemic has underscored the need for greater investment in public health research and teaching and in minimizing health disparities. Additional details will be finalized and shared about these investments in the academic mission of the the university in the coming months.

Financial Aid and Student Support

Every school in the university is committed to making a Yale education as accessible as possible. For example, Yale College currently provides a financial aid package to undergraduate students—part of our need-blind admissions policy—in which more than 60% of undergraduate students received aid for an average grant award of more than $58,000. This equates to 78% of tuition, housing, and meals. Additionally, families of undergraduate students making $75,000 or less, with typical assets, are not expected to contribute toward their child’s Yale education. We are one of only a handful of schools that have a need-blind admissions policy for both domestic and international students.

We are committed to further expanding financial aid to students across all of Yale’s schools. As was announced yesterday, beginning in fall 2022, we 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.

This complements other financial commitments we are providing to our students. Last spring, we 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 university will continue to invest in campus resources that support our 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, we 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

We will strengthen our culture of diversity, equity, inclusion, and belonging through the set of concrete actions we announced earlier this year as part of President Peter Salovey’s initiative to build a stronger and more inclusive Yale. We will augment these actions by further enhancing the benefits provided by the university to eligible employees. In the coming weeks, we will make the following announcements:

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

Our staff and faculty have made extraordinary contributions throughout this unprecedented public health crisis. 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.

Our Physical Campus

Investing in the success of our faculty, students, and staff also means investing in our office, laboratory, collection, and teaching spaces. This is ongoing work punctuated by moments of celebration as we bring multi-year projects to completion. 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 our quantum and materials science initiatives and co-locate our 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 added a range of new performance, student activity, and teaching spaces, such as in the Schwarzman Center and the recently completed Humanities Quadrangle that now provides an exceptional home for most of the FAS humanities departments—their faculty and their graduate students.

City of New Haven

Yale currently makes the largest annual commitment to its host city of any university. We will meaningfully increase our direct financial support to New Haven, further solidifying this leadership position. This support is one of the outcomes from 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. Already they have identified multiple collaborations that will benefit city residents, and President Salovey and the Mayor will provide additional details in the weeks to come.

In addition, consistent with our dedication to the local community, Yale remains committed to the hiring of 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.

Our Thanks

It continues to be a privilege to witness first-hand the many ways our community members 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. 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. We look forward to further updating you on these and other initiatives as plans are developed and finalized.


Scott Strobel, Provost

Jack Callahan, Senior Vice President for Operations

Stephen Murphy, Vice President for Finance