Budget Relief as Endowment Increases

After two years of concentrating on everything from cutting visiting lecturers to trimming paper supplies, departments are turning their focus back on curricular and academic development.

“It’s high time for Harvard to go back to being Harvard,” History Department Chair James T. Kloppenberg said.

Departments are strengthened by this year’s increase of 4 percent in the endowment distribution, the revenue that schools of the University annually receive from Harvard. By contrast, the Faculty of Arts and Sciences faced a 12 percent reduction in the distribution for fiscal year 2010 and an 8 percent cut for FY 2011.

Although this year’s 4 percent increase is modest in the face of the steep 19 percent drop over the past two years, department administrators have finally received some respite from the weary task of budget cutting.

“Before, we were holding our breaths when trimming budgets. Now, we can finally breathe,” History of Art and Architecture Administrator Deanna Dalrymple said.

In the December 2008 Faculty Meeting, FAS Dean Michael D. Smith presented a harrowing future. Departments were forced to cut their budgets by 10 to 15 percent, over 75 staff were laid off, and faculty searches were restricted. Department administrators became fastidious accountants, penny pinching to meet the budget standards and reduce the school-wide, two-year $220 million deficit.

At the end of the 2010 fiscal year, the deficit had been cut in half. And at the close of the 2011 fiscal year in June, Smith reported that FAS was on track to balance its budget by the end of the current fiscal year, FY 2012, with only a $35 million deficit outstanding. Smith plans to dip into the FAS reserves, which stood at $138 million in 2008, to bridge the remaining gap.

With the deficit nearly closed, FAS begins this year on a more optimistic note. With the endowment distribution on the rise, department administrators said that they have begun considering bringing back programs that were cut.

“There’s a sense that we’re getting back to the business of creating and planning—it’s not all just reduction, reduction, reduction,” said Allen Aloise, director of laboratories for the department of chemistry and chemical biology.

In particular, Kloppenberg noted the history department has begun searches for five faculty this year.

“It would not have been possible in the past few years,” Kloppenberg said. “The University financial picture looks much brighter than it has in recent years.”

Though the financial markets continue to bounce like a yo-yo, the Harvard Corporation has re-established its criteria to normalize its distribution.

The Corporation—the University’s highest governing body—used to tie its distribution more closely to the Harvard Management Company’s annual return on investments. This policy fared well when HMC’s returns regularly scored in the double digits. But as the financial crisis rattled markets worldwide, the University endowment plummeted by nearly 30 percent, reducing the distribution amount. The recent effort to maintain more consistent distributions will, administrators hope, maintain a stable payout through highs and lows.

While the endowment distribution value will finally increase for this fiscal year, administrators underscore that it will take time for departments to again receive the same amounts[funding levels] that they took in before the cuts. Last spring, FAS administrators reported the school will need until 2018 to reach pre-crisis spending levels.

—Staff writer Gautam S. Kumar can be reached at gkumar@college.harvard.edu.

—Staff writer Julia L. Ryan can be reached at jryan@college.harvard.edu.