Amid “mounting evidence” or a “prolonged recession,” Yale President Rick Levin announced Monday that the university is planning deeper cuts.
Levin wrote in a mass email message that the administration will pursue an additional $37 million in cuts beyond those announced in December.
About 12,000 people work at Yale outside of construction jobs. That’s by far the largest workforce in town. It has an approximately $17 billion endowment.
The administration will delay some more construction projects and cut non-faculty salaries and benefits by 7.5 percent in the coming fiscal year, rather than 5 percent previously announced in December, Levin announced. Departments will also be asked to cut non-salary spending by 7.5 percent over the next two years. Deans and other employees earning above $75,000 will forgo merit raises. (The increases remain in place for people earning under $75,000.)
Following is the text of Levin’s message. Click here for a previous interview with him about Yale’s strategy for coping with the recession. (Click on the play arrow at the top of the story for highlights from the December interview.)
February 24, 2009
To: The Faculty and Staff of Yale University
From: Richard C. Levin
Since I wrote to you on December 16 about Yale’s response to the economic downturn, the prospects for an early recovery have diminished. Unemployment has grown faster than expected. Mortgage and consumer credit delinquencies and defaults are increasing. And the recession has spread to Europe and Asia. We are all hopeful that the stimulus plans developed in Washington will inspire confidence and an eventual recovery, but this will take time.
The mounting evidence suggesting a prolonged recession has caused us to recognize that we need to take a more aggressive approach to budget reductions for the coming fiscal year. Although our endowment has declined only slightly since mid-December, and we are still projecting a 25% loss for this fiscal year, it will likely be some time before the endowment resumes its normal growth.
After much deliberation, the officers recommended to the Corporation this past weekend further adjustments in the plan we outlined in December. Details will be conveyed to unit heads later this week, but I wanted you to hear of these developments directly from me.
Before deciding to take further action to reduce the operating budget, we scrutinized our capital investment plans. As we announced in December all new buildings and renovation projects currently under construction will continue until completion. Essential utilities projects will remain on schedule, as will the renovation of Morse and Ezra Stiles Colleges, completing our decade-long plan to refurbish all undergraduate residences. But we will postpone construction on all other approved projects until conditions in credit markets improve or until gift funding is received. Unless gift funding is available, we will also delay design work on these projects. In total, we will be deferring capital expenditures of up to $2 billion over the next five years.
Unfortunately, capital delays alone will not be sufficient to address the deficits created by the decline in the value of the endowment; we need to make additional reductions in the operating budget, as outlined below. I deeply regret needing to take actions that impose a burden on the loyal and dedicated members of our staff, whose work contributes so much to the life of the University.
1. We will reduce 2009 – 2010 budgets by an amount equal to 7.5% of the salaries and benefits of all non-faculty staff, rather than the 5% announced in December. We expect to achieve this reduction largely through attrition in managerial, professional, clerical, technical, service, and maintenance staff, as well as through reduction of casual and temporary employees. To the extent that layoffs are necessary, we will make sure that affected individuals are provided support and guidance.
2. We will also seek larger reductions in non-salary expenditures. Instead of a 5% reduction for each of the next two years, we will ask units to budget a 7.5% reduction for 2009 – 2010, and continue to plan for an additional 5% reduction the following year.
3. Faculty, managerial, and professional employees with salaries below $75,000 will continue to be eligible for merit increases of up to 2%. But there will be no increases for those with salaries above $75,000, including all deans, directors, and University officers. Foregoing the increases announced previously will allow us to preserve more staff positions.
The measures I am announcing today will result in $37 million of additional relief for the 2009 – 2010 operating budget and position us well for the next several years. Of course, if external conditions deteriorate significantly, we may be required to take further action next year. It is my hope that the steps we are announcing today will make the need for subsequent reductions less likely.
I wish we could avoid these additional actions, and I understand that meeting the revised budgetary targets will be challenging. But it is important to keep in perspective that after reaching these targets, we will still have more employees and a larger annual operating budget next year than we had two years ago. And we will continue to pursue our most important priorities. We will maintain our commitment to financial aid for our students, and we will aggressively seek our share of the increased Federal support for research made available by the stimulus package. We will continue to renew and refresh our extraordinary faculty, albeit at a slower pace.
I believe that with your help we can and will manage our way through this downturn, preserve the University’s great strengths, and seize the most important opportunities for the future. I thank you for your loyalty and commitment, and I know that I can count on you to help ensure that Yale continues, at the highest level of excellence, to advance the frontiers of knowledge and to educate the most talented and promising students for leadership and service.