Yale to trim budgets as higher endowment tax tops $387 million
Sign up now: Get ST's newsletters delivered to your inbox
Yale faces an 8 per cent tax on annual investment gains from its endowment.
PHOTO: YALE UNIVERSITY/FACEBOOK
Follow topic:
NEW HAVEN, Connecticut - Yale University is cutting costs and offering retirement incentives as it prepares for higher US taxes on its endowment income and reduced federal funding.
The New Haven school, the richest private US university after Harvard, faces an 8 per cent tax on annual investment gains from its endowment – up from 1.4 per cent – under a Republican-backed tax Bill passed in July. The higher rate will cost Yale about US$300 million (S$387 million) a year starting next year when it takes effect, with the amount rising in line with the endowment’s growth.
“This action marks a substantial increase in the money Yale must pay the federal government each year, resulting in a significant reduction in the funds we will have to support students, faculty, staff, and local partnerships,” Provost Scott Strobel and other administrators wrote in a memo on Sept 30.
The university said it is delaying major projects, requiring schools to meet new budget targets over three years and introducing a one-time retirement programme for staff. A 90-day hiring freeze will expire this week, though leaders urged departments to fill only the most urgent positions.
The Trump administration has paused billions of dollars in federal research funding and cut rates of reimbursement for science funding, causing financial stress and layoffs at a several top US schools, including Harvard, Northwestern and Duke.
The cuts began after officials accused many schools of failing to tackle anti-semitism on campus after the Hamas attack on Israel in October 2023 and the Jewish state’s subsequent invasion of Gaza. The Trump administration has since broadened its complaints, accusing universities of liberal political bias and faulting their diversity initiatives in hiring and admissions.
Analysts at S&P Global Ratings have said higher endowment taxes could put pressure on schools and require management teams to review budget options to offset the cost. But the agency has also noted that many of the institutions are well-positioned to adjust to the increased levy.
Yale’s endowment was valued at US$41.4 billion as of June 2024. Updated figures for the 2025 fiscal year will be released in the coming weeks. BLOOMBERG
