Published by Yale Daily News
Faced with increasing financial pressure, half of the Ivy League was in the red last year.
Yale University, Harvard University, Dartmouth College and Cornell University all posted budget deficits for the fiscal year that ended Jun. 30. Yale had the highest gap between revenue and operating costs at $39.2 million, compared to Harvard’s $33.7 million deficit, Cornell’s $31 million and Dartmouth’s $1.8 million. According to financial experts interviewed, some of the world’s wealthiest universities faced budgetary gaps during fiscal 2013 because of rising operating costs, cuts to federal research funding and ambitious financial aid programs.
“I don’t think we’re about to see the clouds part — I think a lot of these issues are structural,” said David Strauss, a principal at Art and Science Group LLC, a firm that advises colleges and nonprofits. “Are there going to be some tight times? I don’t think that’s a one year phenomenon, I think it’s a multi-year phenomenon.”
Eighty percent of colleges ran deficits last year, according to Richard Hesel, another principal at Art and Science Group LLC.
Though schools are faring better than they did in the immediate aftermath of the 2008-’09 financial crisis, many are still struggling to cover costs.
Both Strauss and Hesel said the need-blind financial aid policies of many Ivy League schools are a primary cause for the gap between expenses and revenue. Strauss added that the cost of providing a college education is rising faster than the family incomes of prospective students. As applicants face financial pressures at home, they need more money for aid and universities are forced to direct a greater proportion of their budget toward student aid, Hesel said.
Like other large universities, Yale relies heavily on government grants to fund much of its research. While the University received $562 million in federal grants in the 2012 fiscal year, that figure declined to $535 million in the 2013 fiscal year, largely because of the sequester. Government cuts to research funding have impacted universities across the nation.
Going forward, Strauss said universities will have to find ways to reduce cost, dip into reserves or somehow increase their revenue streams. Schools may need to consider tuition increases or reductions in financial aid, Strauss said.