Washington Heights—Yeshiva University stands as one of the finest universities in the United States as well as Israel. Its graduates have excelled in nearly every field of endeavor, and compared to some universities of equal standing, its tuition is significantly less according the U.S. News and World Report’s 2013-2014 ranking of colleges. Full-time equivalent (FTE) enrollment is 6,704 students as of Fall 2013), up 16% in first-time undergraduate student enrollment in the past two years, with less than 10% of freshmen leaving after one year for other than academic reasons. It has a low student to faculty ratio, an 85% graduation rate and high student rating. And 25% of its students, huge numbers of its faculty and alumni, and some service providers call Bergen County home.
Yet there’s another report on YU which has dimmed this rosy picture for the administration, instructors, students and parents.It has to do with money, and a serious lack of it.
According to Moody’s Investors Service,YU is $567 million in direct debt. This includes
a $75 million line of credit that expires in March of 2015 and a $60 million variable rate which YU extended to Sept 1. There are also operating deficits of $107.5 million from 2010, $46.7 million from 2011, $105.9 million from 2012 and $63.6 million as of the end of 2013. It would have reached$155 million if not for “an unusually large net assets release of $92 million” from the sale of three office buildings bestowed to Albert Einstein.
Other factors listed by Moody’s were weak financial management and the board’s unwillingness or inability to act, ineffective internal controls and limited transparency.
Specific mention is made of the university’s high-cost educational model with multiple New York City locations and two distinct undergraduate campuses for men and women, yet Stern College generated $33M in revenue.
Many articles have blamed the downward spiral on the losses YU experienced due to the Madoff Ponzi scandal in which YU was reported to have lost $110M, but school officials and Moody’s deny the extent of the losses and limit it to approximately $17M. Observers say YU lost $360M more from its endowment due to the credit crisis. A YU spokesman, said the numbers were inaccurate, but did not have the numbers at press time.YU also spent a considerable—undisclosed—amount of money defending the class action lawsuit for $680M. Although the case was dismissed based on the statute of limitations, many investors were prompted to liquidate the school’s bonds. Moody’s also reported that YU depends a great deal on bank loans for its cash flow.
Other fingers are pointing at operating costs at the Albert Einstein College of Medicine. YU increased expenses by upgrading their equipment and opening the Price Center/Block Pavilion, and spending to strengthen the academics and research at the Manhattan and Bronx campuses.
Enrollment declined 5% at the law school 2013 with additional decreases too early to call. This led to a reduction in net tuition revenue, a 20% decline of operating revenue during the past five years because other schools were competing for the same students.
Recently, Albert Einstein College of Medicine partnered with the Montefiore Health System in the Bronx, wherein no money changed hands. Critics expressed dismay and saw it as the loss of the crown jewel of YU. But YU has stated that the partnership benefits both the medical center, the college and the students by increasing efficiencies. Montefiore will take over the operations and financial management of the medical college and financial responsibility for Albert Einstein, relieving YU of the burden.
Separately, $250 million in real estate assets were approved for sale by the board of YU. The University entered into an agreement “to sell 10 residential properties in close proximity to the Wilf Campus in Washington Heights.” According to university president, Richard Joel, the sale delivers a tremendous return on the University’s original investment and provides an infusion of cash that will be used to strengthen the school’s financial position. They buildings were bought seven years ago to preserve the nature of the community, and are home to thousands of university students in Washington Heights. The buildings were sold last week for $72.5 million to Rubin Schron, the founder of Cammeby’s International Group, a co-owner of the Woolworth Building, who promised not to raise the rents for the students. The Schottenstein Theater on the Beren campus was also sold.
In recapping the stories of the financial predicament YU finds itself in, JLBC learned thatYU’soperating margin excluding gifts dropped from minus 9% seven years ago to minus 41% in 2013.Only 14% of the university’s $1.2 billion of cash and investments for 2013 fiscal year is free from donor restriction and could be liquidated within a month to cover operating expenses or other needs.
In 2008, YU’s credit quality with Moody’s was Aa2, which is among the highest. Just six years later, though it maintains an endowment of $1 billion, a steady enrollment and more than $500 million in contributions and grants and getsnearly $250 million in tuitions, YU was given a negative bond rating and has quickly dropped in the past three years to B3, assigned a negative outlook—well into the speculative grade category. Moody’s analysis reports that YU’s deficit looks like it is going to grow. They wrote: “Until there is a clear turnaround plan in place, the university will continue to face challenges to restore fiscal stability and further deplete already minimal liquidity levels.”
What that means is that the institution can presently meet its financial commitments though it may run out of cash before the board is able to execute a turnaround plan.The University has appointed Toby Winer from Pace University as CFO and is hiring a consultant to identify and implement a turnaround plan that will also cut expenses at the end of fiscal year 2014.
Joel and other top school officials have cut their salaries. (According to the Journal of Higher Education, Joel is among the top 20 highest earning university officials in the nation.)By the end of 2013 announcements were made that freezes on senior administrators’ salaries were implemented. Freezes were also placed on hiring, and the employee retirement plan.
Some non-academic departments that are currently split between multiple campuses may be united. Also being considered is increasing class sizes. Lowering the allocation of scholarships is also being considered. In 2011, YU paid out $97,160,843 in grants according to its 990 form, but between 2011 and 2012 it was cut by $7 million and more cuts may come to the honors program.
Despite rumors to the contrary, YU is not cutting the women’s graduate program though there will be changes. Among them is that it will no longer be funded by Stern College but by private donations, the Vice President’s office and the CJF. Stipends of $15,000 for students will be decreased but the amount is being negotiated, and the Board of the University has approved exploration of a voluntary retirement program.
YU is also getting help from supporters and government grants.Research grants and contracts represented about 31.9% of the total operating revenue in fiscal year 2013 and the revenue stream continues to be strong.
According to YU’s 990 forms, government grants and funding has been rising steadily from $165,426,724 in 2009 to $189,331,604 in 2010 and $207,969,462 in 2011.Another boost came from Muriel L. Block who bequeathed $150 million to be used for medical research to the Albert Einstein College of Medicine.
In a statement to the YU community, University president Joel wrote: “There is much more work to do and we will still encounter difficult times along the way. But let us keep our sights on the many strengths and achievements that define our University and inspire us to confront the challenges of the 21st century and emerge better than before” In the end, he said, there is just one mission: to “enhance our ability to invest in our core objective: delivering an unmatched educational experience for our students.”
By Anne Phyllis Pinzow
