University Falls Prey To Economic Malaise

The nation's richest university fell prey to a nationwide climate of economic malaise this week, as Harvard joined the swelling ranks of schools facing budget cuts in coming months.

Acting Dean Henry Rosovsky announced Thursday that the Faculty of Arts and Sciences (FAS) may incur a deficit exceeding $13 million by the end of this year. Facing its most serious financial crunch in almost 20 years, FAS must trim up to 6 percent of its 1991 departmental budgets, he said.

And even as Harvard administrators look eagerly toward a planned multi-billion dollar fundraising campaign, higher education analysts say new capital may do little to ease current operating losses.

"It's very difficult to soften a deficit with a fundraising campaign," said Stanford University President Donald Kennedy '52, whose school is now winding up a $1.1 billion capital drive.

Kennedy is well aware of deficit problems,having cut programs 13 percent across the boardlast spring to contain deep financialtroubles--despite a fund drive that raked in morethan $200 million in gifts that year.

"Even significant improvements in endowment donot improve your annual cash flow situation nearlyas much as you expect," Kennedy said.

With Stanford's lesson in mind, Rosovsky saidyesterday that the Faculty cannot afford to dependupon a future fund drive to pay for currentexpenses--as had been the policy under former Deanof the Faculty A. Michael Spence.

"I knew [the campaign] was not going to startimmediately," said Rosovsky, explaining his recentbudget cuts. "Also, the wish list of the Facultyis way in excess of what we can conceivablyraise."

Moreover, as the American economy continues toshrink and inflation rises, education experts saydonors will increasingly look to support long-termprojects. Apparent deficits, they say, may onlymove donors away from unrestricted, short-termgiving.

"People just don't want to give to coverdeficits," said Michael R. Britt, a developmentofficer at Stanford. "Would you put your money ina bank that's going out of business?"

"For the most part, we have not fundraised forany deficit," Britt said, adding that most donorsgive restricted monies which can not be used tobolster annual operations budgets.

At Harvard, where a major fundraising campaignis still in the offing, administrators arecontemplating current deficits, looking at otherschools and wondering how they, too, will weatherthe immediate impact of a bleak economic climate.

Still, Kennedy said Stanford, Harvard and otherprominent schools are cushioned by their academicreputations and history of solid money management.

"I think most large donors are very interestedin institutional quality," Kennedy said. "Whentimes are difficult, when government supportfalls, then there's an extra amount ofunderstanding."

Harvard fundraisers are hoping for thatunderstanding, as they promote a conservativefiscal schedule and seek large-scale gifts tofinance substantial growth down the road.

"It's always good for a public institution tobe honest about its financial state," said GeorgeM. Whitesides '60, Mallinckrodt professor ofchemistry and a major player in the Faculty's funddrive planning.

"I think donors are usually in it for a verylong term," Whitesides said. "They're moreinterested in the honesty of a presentation andits vision."

Indeed, Kennedy said most donors are lessinterested in past problems than in futuresolutions. "It's not the fact of a deficit, butwhat you propose to do about it," he explained.

Despite the management problems sometimesassociated with budget deficits, some highereducation analysts speculated that donors willrespond to the atmosphere of need. With a majorfund drive, a little poverty, they said, can go along way.

"What will influence the donors is that it isvery difficult to finance higher education rightnow," Whitesides said. "The case is very real andvery honest--it's not a case where one hasmismanaged something."