University Budget Update 2022-23

Friday, December 16, 2022

Dear Yale Faculty and Staff,

In recent years, Yale has charted an aggressive path for the future of teaching and research at the university. Our priorities are based on the unique blend of talent, purpose, and opportunity we are fortunate to have, as well as the financial resources needed to support them. 

We write today to update you on the university’s overall financial position, which remains strong. In the fiscal year (FY) ending June 30, 2022, the university generated a surplus from operations of $166 million on $4,876 million in revenue. The investment return on the Yale Endowment was 0.8%. These results came amid a difficult economic environment that included residual and ongoing financial impacts from public health challenges, as well as substantial inflationary pressures and financial market volatility. Our university community’s careful planning and fiscal discipline assisted in mitigating these impacts. With continued planning and appropriate vigilance, we will continue to move forward with the significant investments we are making in our academic enterprise and build on the university’s positive momentum.

Operational Surplus & Slowed Endowment Growth

We are pleased to have had an operational surplus in FY22 that reflects our community’s careful stewarding of university resources. As a result of Yale’s decentralized financial structure, these surpluses are distributed across hundreds of individual school, department, program, and faculty accounts. A large percentage is also earmarked for specific uses. For example, 78% of the FY22 surplus falls into 2,600 restricted endowments and gifts that have legal constraints on how the funds can be spent. Fortunately, the university’s unrestricted funding source (the funds available for general use by the president and provost) recovered from the large deficit we wrote about in FY21 to finish FY22 with a small surplus.

In FY21, we reported an unusually high 40% endowment return. This year, the return was much more modest. Although the FY22 return of 0.8% is the highest among our peer institutions thanks to our colleagues’ impressive efforts in the Yale Investments Office, it is significantly below the modeled 8.25% annual return that we use for financial planning. On an ongoing basis, we need an 8.25% return to sustain the current level of endowment spending. Effectively, the university spent $1.2 billion more from the endowment last year ($1,568 million) than the return it generated ($358 million). As a result, the endowment’s market value declined in FY22. Over the short period of one year, this is not a cause for concern. Instead, it highlights the importance of the endowment spending rule, which prevents the university from overspending in a good year or being forced to reduce spending in a year of lower endowment performance.

It is important to keep in mind that the endowment is Yale’s largest revenue source. As always, its future returns are uncertain because they are based on the unpredictability of financial markets. While a minimal endowment return (such as the one we experienced this past fiscal year) is not a cause for concern, multiple years of low returns would require the university to adjust its financial picture accordingly. There are some indications that the economy could experience a recession in coming years and a higher interest rate environment could negatively impact the endowment and other revenue sources. These are challenges we will continue to monitor.  

Other Challenges

When considering the university’s funding sources by school, Yale School of Medicine (YSM) generates one-half of the university’s overall revenue. Unfortunately, its affiliated hospital, Yale New Haven Hospital (YNHH), has experienced operating deficits for the past two years and YNHH leadership expects that to be the case for a third time in the current fiscal year. Though the hospital is a separate non-profit organization, it works in close partnership with YSM to provide care for patients. More than one-third of YSM’s clinical revenue comes from YNHH. YSM leadership and YNHH are doing outstanding work together to strengthen operations and achieve alignment. We are optimistic that this partnership will lead to greater efficiencies across the health system and that the clinical enterprise will continue to thrive. The near-term financial situation, however, represents a challenge.

Another significant consideration is inflation, which has impacted budgets of all sizes. Just as we feel it on a personal level when we go to the grocery store or pay our electric bill, the university faces inflationary pressures in utilities, food, construction, health care, and other costs. Yale has sought to offset some of these pressures for its community, including with relatively higher salary increases and enhanced benefits. While we are hopeful that inflation will subside soon, we continue to monitor it closely and will adjust course, as needed.

We are fortunate that the major financial impacts of the pandemic appear to be largely behind us. Nevertheless, recent outbreaks of flu and RSV have again filled the hospitals, which reminds us of the need to stay attentive.

Investing in the Future

Despite these challenges and uncertainties, Yale is in a solid financial position due to strong previous endowment performance, consistent fundraising support from alumni and friends, and prudent financial management. As we did through the challenges of the pandemic, the university will continue to support our community and advance our academic priorities in spite of a volatile economic climate. 

Together, we have accomplished an incredible amount over the last year. This includes fulfilling the commitments from last year’s budget update, which include:

  • Prioritizing the recruitment and retention of world-class faculty, especially in rapidly growing and emerging fields and in keeping with our academic priorities
  • Bolstering public health research and teaching
  • Expanding financial aid and student support
  • Enhancing the benefits provided by the university to eligible employees
  • Investing in improvements and additions to our physical campus
  • Strengthening Yale’s support of our home city of New Haven

Thank you for your partnership in this essential work and for being such good stewards of Yale’s financial and other resources. Thank you, as well, for all you continue to do in service of the university’s mission and its people.

If you would like to learn more about Yale’s endowment and budget, we encourage you to visit a new web site – – created as a resource to help faculty, staff, students, alumni, and the public gain insight into the university’s finances.


Scott Strobel, Provost

Jack Callahan, Senior Vice President for Operations

Stephen Murphy, Vice President for Finance