Schools Expect Payout Decline

With Corporation yet to set payout, schools brace for decrease.

In response to guidance from the University, several of Harvard’s schools are planning for a decline in endowment income for the next fiscal year, according to University administrators interviewed this weekend.

Earlier expectations had been for a flat payout—or the same dollar amount in endowment income as last year—a School of Public Health spokesperson wrote in an e-mail.

The Harvard Corporation, the University’s highest governing board, has yet to set next year’s endowment payout rate—a figure generally announced in December—leaving schools to plan their budgets without definitive numbers while decisionmakers attempt to get a better idea of market conditions.

Though the Corporation is meeting today, University administrators declined to discuss the topics on the agenda this weekend.

In the meantime, schools are taking various approaches to prepare their budgets, which are generally due in April, despite the uncertainty over payout.

The Faculty of Arts and Sciences is planning for budget scenarios ranging from a flat payout to a five percent decrease, according to FAS Dean Michael D. Smith.

A five percent reduction in endowment income would translate into an $80 million decline for the entire University from the $1.6 billion paid out last year.

Harvard officials have projected a 30 percent decrease in the endowment from its June 2008 value of $36.9 billion. Even with a five percent decline in spending, the payout rate would be nearly 5.9 percent—a number that would be the University’s highest in over 20 years.

Similarly, the School of Public Health is now expecting a two percent reduction in endowment income for the coming year, the school’s dean Julio Frenk wrote in an e-mail to faculty and staff on Friday.

In an effort to meet the challenges posed by the financial crisis, Frenk wrote that the University had also issued a directive in December to freeze all salaries for faculty and non-union staff.

In line with the University’s recommendations, the School of Public Health will form a committee to review the posting of non-research funded job posts.

“This is indeed an opportunity to look at our staffing levels and structures, in order to make sure that they are as efficient and productive as possible,” Frenk wrote.

Approximately 35 percent of the University’s operating budget is dependent on income from the endowment, though certain schools rely more heavily on this income stream than others.

The School of Public Health relies on the endowment for only 13 percent of its spending needs, but the Radcliffe Institute for Advanced Study, at the other end of the spectrum, receives 83 percent of its budget from the endowment.

The Divinity School—which receives 71 percent of its budget from the endowment—has planned more extensive belt-tightening measures than many of its peers.

The school will cut its annual budget by four to eight percent and is already “reducing sharply” the number of visiting and adjunct professors, according to a letter from Dean William A. Graham to the community late last month.

—Staff writer Athena Y. Jiang can be reached at ajiang@fas.harvard.edu.

—Staff writer June Q. Wu can be reached at junewu@fas.harvard.edu.