Furloughs Loom as YU Struggles with Deficit
In a letter sent today to alumni of Yeshiva University, President Richard Joel revealed the alarming extent of YU’s financial troubles. “We intended to achieve a balanced budget this year,” Joel said, “we have not succeeded.”
Since the economic crash of 2008, YU has attempted to balance its budget through pay freezes and other cost-cutting measures. This year, the Board of Trustees authorized salary raises for YU faculty, a move Joel called “insane,” given YU’s continued “massive financial issues.” In addition to faculty raises and losses in its endowment, Yeshiva has suffered philanthropic walkouts and heavy legal fees in the wake of the exposure of sexual abuse at its MTA High School. These burdens, among others, have prevented the administration from maintaining a balanced budget this year.
President Joel’s letter disclosed that the spending required to keep the university afloat could not be sustained in the face of “substantial deficits.” He noted that while many faculty members suffered from downsizing, salary freezes, shrinking departmental budgets, and decreased retirement contributions during the Recession, these cost-cutting measures must nevertheless persist for the near future.
Worse still, sources within the administration divulged that the Board will announce even more painful cuts in upcoming weeks. Information released to The Commentator revealed that, pending an emergency Board Meeting next week, President Joel may announce mandatory furloughs to YU employees. Details of the emergency Board meeting and follow-up plan are still unknown, but Joel alluded to further cuts in the letter, saying “We must spend in accordance with our financial resources…In the coming weeks, we will begin to act to achieve these goals, and we will of course communicate them with you.”
Furloughs, or temporary layoffs, were common across public universities during the height of the recession in 2009. For instance, Clemson, Utah State, Arizona State, and the California University system mandated five days of unpaid leave for faculty and staff and 15 days for presidents and deans during state budget cuts. However, furloughs within private universities are exceedingly rare.
Joel’s letter comes only weeks after Moody’s Investor Service, a major credit rating agency, downgraded YU to a Baa2, the agency’s second lowest grade. In its report, Moody’s noted YU’s full draw on its operating lines of credit, a breach of a $75 million credit line, and only $123 million on hand. The agency estimates that, given YU’s financial and public relations troubles, an upgrade to a higher credit score is unlikely in the next five to ten years.
Moody’s expressed the possibility of a further downgrade if YU could not “grow internal liquidity.” The revelation of YU’s deep operating deficits and negative cash flow, along with possible employee furloughs, will almost certainly result in a highly unfavorable Baa3 rating.
In 2009, YU cut course offerings and student services. If the past is any indication, students may see similar cuts in the coming weeks. The Presidential Fellowship and summer programs may also be in jeopardy.
In his letter, President Joel wrote that the current fiscal crisis will force YU to “reframe the way we educate.” Joel noted, “conventional models crumble beneath the weight of fiscal hardship,” and discussed the need for a “new strategic vision” to increase revenue and efficiency in new graduate programs and online education.
The Commentator will publish its third issue on Monday.