April 21, 2020

Dear Members of the Yale Community,

I hope that you are healthy and safe, and that you and your loved ones are managing these difficult times as well as possible. Although our year has been disrupted, and we are forced to be apart, I feel immense gratitude for the strong bonds within our community, exemplified by our efforts to reduce transmission of the novel coronavirus and to look after one another. In this turbulent period, it is important for us to come together in the ways we can. So, on May 1, Provost Scott Strobel and I will participate with others in a virtual town hall for faculty, staff, and students. Invitations, including a way to submit comments and questions, will go out soon.

In the meantime, I write to update you on current work to prepare for the months ahead and the next academic year. In the face of the pandemic’s severity and the uncertainty that surrounds its duration, Yale must in the coming months make important decisions on two related fronts: how and when we will return our campus to relative normalcy, and how we will respond to the financial disruption we are experiencing.

Planning for next year

As we consider how and when to reactivate various aspects of campus life, the well-being of the members of this community remains our overriding priority. We therefore will continue to rely on the medical, epidemiological, and public-health expertise of our faculty, and on federal and state guidance, in determining: whether, when, and how we might allow students to come back to campus in the fall; when and how we can resume our scholarship and research fully; and when and how staff can return to their workplaces.

To ensure that we plan carefully for what lies ahead, Provost Strobel and I have charged six COVID-19 contingency planning committees with generating recommendations that will allow us to operate safely in the coming months, the fall, and beyond.

Faculty on the Academic Continuity and Research Continuity committees will prepare plans for various possible scenarios, helping us keep both our academic enterprise and our mission of research and scholarship functioning whether students are back to campus on schedule, or are delayed, or are unable to return in the fall and must continue online.

In the course of their work, the members of these, as well as the four other planning committees, will consult with colleagues around the university and with student representatives. As they plan, the determinations of our federal, state, and city governments will certainly be important and could be prescriptive. And of course, the overall picture will change for the better upon any significant advances in COVID-19 testing, therapeutics, and contact-tracing. We are actively engaged in preparing for these events on all fronts daily.

I am as eager as all of you to have clarity on the most difficult of the questions we face: whether or when students will return to campus in the fall. I understand that we all need time to make plans. We will announce decisions about the fall no later than early July. If we can do so sooner, we will. And on an ongoing basis, we will provide guidance bearing on spring and summer. We are aware that many of you are eager to know when greater access to office, lab, library, and other spaces will be possible.

Responding to the financial disruption

COVID-19 has brought economic devastation on a scale not seen for decades. In the four weeks following the March 13 declaration of a national state of emergency, 22 million Americans filed for unemployment relief. Since late February, financial markets have seen significant declines and high volatility. The value of Yale’s endowment has been reduced, and there is no doubt that the university must recognize and adjust to new budget realities.

Although the financial situation remains volatile, we will analyze and refine our projections even as we begin to act. The 2008 economic crisis taught us many lessons, and the university has plans in place to help us contend with financial stresses and recession. Last year, every school and unit in the university was asked to create a strategy to implement in case of significant losses in endowment or other revenue. It is reassuring that this “stress testing” and planning have already been done, enabling us to act more decisively and with greater confidence.

As we navigate the pandemic and its consequences, there are certain principles we will follow. It is essential we preserve the excellence and diversity of the student body to fulfill our mission of educating leaders for the future regardless of their economic circumstances and backgrounds. Yale will remain a great research university, and scholarship and research must be sustained and advanced when possible. The sacrifices that will be required must be shared.

For the 2020-2021 academic year, we have planned a budget reduction in centrally supported schools and units that totals five percent of expenses. We have called for a similar reduction to programs that rely on restricted endowment funds. Much of this can be achieved through the measures announced on April 7 by Provost Strobel and Senior Vice President for Operations Jack Callahan: a pause on hiring; a freeze on salaries; a pause on spending for capital projects; the avoidance of non-essential spending, including travel; and careful management of financial resources.

Last week, deans and unit heads submitted revised budget proposals. All budget proposals will be reviewed by the Budget Advisory Group, which includes tenured faculty members in addition to the provost (who chairs it), the senior vice president for operations, the vice president for finance, and others. This group meets throughout the year with schools and units to understand their proposals and to make recommendations. The provost will submit the revised 2020-2021 budget to me in the coming weeks. I will then, as always, request approval by the board of trustees in June.

The expense reduction in 2020-2021 is a prudent and immediate step, but we are likely to need to take additional actions. We will be guided by the facts as they unfold, and we will evaluate and reevaluate the facts about the economy at large and Yale’s financial situation continuously. Every decision will be a strategic action in support of Yale’s mission and priorities. We will work collaboratively with colleagues across Yale’s schools, departments, and bargaining units.

The endowment

We are fortunate to have a large, well-managed endowment, which mostly is restricted to support various aspects of the university’s core mission—from financial aid, to faculty salaries, to research and scholarship, to student activities. This year, the endowment supplies more than $1.4 billion of the university’s $4.3 billion budget. Because the endowment’s value will likely decrease, the amount available from the endowment to spend on the activities of the university will be lower than originally anticipated. This gap will affect nearly every school and program.

In recent days, and as in the previous financial crisis, I have been asked why Yale cannot simply spend more from its endowment. After all, isn’t this a time of true emergency? The simple answer is that the endowment is neither a savings account nor a “rainy-day fund,” but rather a collection of gifts made to the university over its lifetime, usually with restrictions on how the earnings from those invested gifts can be spent and with requirements that they support programs both today and in perpetuity.

Yale’s policy for spending from the endowment does mitigate the immediate effects of a financial disruption. When the value of the endowment drops, we spend a greater percentage of the endowment’s value than when the endowment’s value is rising. This “smoothing” component of the policy has proven over time to be a very effective way to blunt the immediate shock of a drop in the endowment on our budget. Nonetheless, when endowment investment returns are smaller than originally anticipated, our spending over time must decrease.

Our spending policy seeks to balance two objectives: to provide a steady flow of funding for current operations, and to preserve purchasing power for future generations. Over the course of every five years, we spend about one-quarter of the value of the endowment. This is as much as we can responsibly spend without unfairly taking from those who will come after us. The strength we enjoy today derives from the generosity and care of those who came before us, and we have similar obligations to the future students, faculty, and staff of this university.

On our extraordinary community

Yale doctors, nurses, and other clinicians are saving lives every day. Investigators are collaborating across fields to address the pandemic and its consequences. And critical staff on campus have shown great fortitude, imagination, and resolve in keeping us operational through thick and thin. The university will not forget the dedication of all who are serving Yale and this community so ably.

Yale is playing an important role in the city’s and state’s response to the pandemic. Earlier this month, we made 550 residential college and Old Campus beds available for health care workers, first responders, and funeral-home employees; created a field hospital in the Lanman Center at Payne Whitney Gymnasium and partnered with the Yale New Haven Health system to open it to the broader community; and announced the organization of three funds to support, respectively, COVID-19 research on campus, student emergencies, and the New Haven community.

To say I am proud of all of you is as true as it is inadequate. This crisis has brought out your finest instincts and best work, to the enduring benefit of our university, city, state, country, and world.

In the coming days, I will stay in close touch about plans for the 2020-2021 academic year. I look forward to our next opportunity to connect and to discuss the path ahead.

Stay safe and be well!

Sincerely,

Peter Salovey
President
Chris Argyris Professor of Psychology