Speaking on the “State of the School,” Nye said the school is “doing well” with plans for cutting a fiscal year 2002 loss of $5.9 million to $2.9 million for this fiscal year.
But because only first quarter financial results are in, Nye acknowledged that he could not be sure the school would meet the goals.
In a similar address at the ARCO Forum last November, Nye told KSG students and faculty that the school would run a $3 million deficit for fiscal 2002, but that number ballooned to $5.6 million in April and $5.9 million when the fiscal year closed in June.
Plans last spring had called for a $2.5 million deficit this year, but the figure was increased after the final 2002 deficit was higher than expected, Executive Dean J. Bonnie Newman said after the speech.
The school still plans to be in the black by next fiscal year, Nye said.
The deficits—the highest of any school at Harvard—resulted from years of expansions of KSG faculty and programs made possible by a strong economy in the 1990s and large increases in payouts from Harvard’s endowment.
Following the recession and economic downturn from Sept. 11—which cost the school millions in cancellations for its executive education programs—the school could no longer finance large overhead costs of several of its centers and research projects. It cut 47 staff and adjunct faculty positions, and Nye now meets quarterly with the Harvard Corporation to review financial plans.
Despite his optimism, Nye said he worried that a war in Iraq could diminish executive program enrollment. Newman said she was working on contingency plans to make substitutions for executive programs—like those for foreign officials—that might be particularly impacted by a war.
She said tightened visa requirements have already slightly impacted executive enrollment.
Initial revenue from both degree programs and alumni donations—generally limited because KSG graduates often go into public service—has been higher than expected during the first quarter of this fiscal year.
But the school has still been unable to sublet some Cambridge offices vacated as a cost-cutting measure last year, while subletting Washington offices took longer than Newman expected. If the school cannot dispose of those properties, it could lose $1.9 million per year.
In response to a question from a student worried about cuts in financial aid, Nye said he had asked the University for help to ensure the school could maintain current levels of aid but was unsure whether it would come through.
“If you’re running a non-profit, you can’t run it into the ground,” he said. “What we’re going to have to do is hold the line on financial aid.”
He said the school spends 10 percent of its budget on aid and subsidizes tuition for half the student body by 50 percent and for the entire student body by at least 20 percent.
The aid budget was flat this year, and Nye said he could not rule out cuts for next year but thought they were unlikely.