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JOB #1: Keep The $ Rolling In

By Philip P. Pan

For the past several decades, if not centuries, the University's finances have been organized to preserve the virtual independence of each of Harvard's nine schools.

This tradition operates on the principle of "every tub on its own bottom," whereby each school raises its own funds, balances its own budget and sets its own course.

Unlike the financial structure at almost every other major university, Harvard's system operates so that very little money flows into or out of the central administration. Tuition revenues and gifts are rarely assigned to a University-wide pool. Rather, gifts go to the individual schools, and each school keeps its own tuition income.

It is the Harvard way, and it has been the Harvard way for as long as anyone can remember.

The advantages of the system are clear. It eliminates a bulky central bureaucracy and gives each school the freedom to set and pursue its own priorities. But as the University navigates its resources and goals through a period of budget cuts and belt-tightening, the problems of the system are also very apparent.

Some of the University's smaller faculties, such as Harvard Divinity School, the Graduate School of Design and the Graduate School of Education, have found themselves starved for funds, while others, like Harvard Business School, flourish. Although all of these fields are considered vital to the greater good of the University, Design, Divinity and Education alumni will probably never be able to produce as much in contributions as the graduates of the Law School or the Business School.

President Neil L. Rudenstine says it is a problem with no easy solutions.

Rudenstine refuses to take money from the richer schools in order to give to the poorer schools. "Those things almost always end up as disasters that breed resentment," he says. In addition, Rudenstine says, there is no simple way to change a financial structure which has been in entrenched at the University for ages.

Each school has built a faculty, a curriculum and an entire operational budget based on Harvard's unique economic system. And much of Harvard's $4.6 billion endowment, the largest of any academic institution in the nation, consists of gifts made to particular schools that cannot be transferred anyway, he says.

Connecting Separate Tubs

Although a $2 billion-plus capital campaign--the largest in the history of Harvard or any other American university--is still in the planning stages, Rudenstine has already started thinking about ways to modify the old concept of the separate "tubs."

Last spring, he suggested "every tub on each other's bottoms." This fall, he mentioned "more links between the tubs."

At Least Four Different Steps

In interviews and speeches, Rudenstine has articulated at least four different steps that the University plans to take in an effort to direct more money toward the smaller graduate schools.

* Make the individual schools feel like active parts of the whole institution and encourage collaboration in fundraising when it looks fruitful. "Where you can find University-wide priorities and opportunities that can help several of the schools together, then fundraise that way," he says.

* Enlist the help and encouragement of some of the well-endowed schools and their alumni for the schools that aren't as well off. For example, Rudenstine says, the Business School has worked hard in the past few years to help the Ed School because the business community is becoming more concerned about the problems of public education.

"It's not enough to make [the Ed School] wealthy, it's not even enough to make them feel like they're where they should be, but that's the shift in attitude and it's a very positive one," he says.

* Do more fundraising for a central administration pool in order to distribute the money to smaller schools or to finance inter-school programs that involve a rich school working with a less-endowed school. "If you had more discretionary money in the center, then you could do a lot of things," he says.

* Spend more time and effort on raising money for the smaller schools. "But there's probably a limit there because graduates of [these schools] don't tend to make a lot of money," he says.

Rudenstine is optimistic that these changes will, over time, begin to shift the balance toward the smaller faculties--especially if the University can get more money in the center to allocate.

"Right now, there's very little money in the middle," Rudenstine says. "That's a very big difference, a fundamental difference, from virtually every other major university in America."

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