Yale saw a $166 million operating surplus and a 0.8 percent return on its endowment last fiscal year, bringing the university’s endowment to a total of $41.4 billion.
That Ivory Tower fiscal news was delivered Friday in a “university budget update” published online by Yale Provost Scott Strobel, Senior Vice President of Operations Jack Callahan, and Vice President for Finance Stephen Murphy.
According to that update and Yale’s 2021 – 2022 Financial Report, the university saw a net operating surplus of $166.5 million after bringing in a total of $4.87 billion in revenue during the fiscal year that ended June 30.
A separate update from October stated that Yale’s endowment earned a 0.8 percent investment return last fiscal year, bringing in $266 million in “investment gains.” After $1.6 billion in spending from the endowment, the university saw its endowment value decrease last fiscal year from $42.3 billion to $41.4 billion.
“In FY21, we reported an unusually high 40% endowment return,” the top university officials wrote on Friday. “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.”
Click here to read Friday’s Yale financial update in full.
The university’s financial update comes as Yale is planning some very big builds across the city, including a new lab and classroom building that will be nearly as large as Yale’s football stadium — at least in terms of square footage — for “Science Hill” and a new hub for Yale’s performing arts downtown. It also comes roughly eight months after the Board of Alders granted final approval to a new city-Yale deal that increased the university’s voluntary payments to the city by $52 million over six years, ceded control of a downtown stretch of High Street to Yale to convert into a city-owned pedestrian plaza, dedicated $5 million of Yale money towards the creation of a new Yale School of Management-based Center for Inclusive Growth, and established a new 12-year sliding scale for local property taxes on properties newly acquired and converted to tax-exempt status by the university.
Alternative headline: Yale Reports $1.1B Loss