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By Stephen M. Marks, Crimson Staff Writer

Buoyed by the success of its international programs and cost-cutting measures, the Kennedy School of Government (KSG) balanced its budget last year—just one year after being blindsided by a massive $5.9 million deficit.

Though the KSG had initially projected a $2.9 million deficit for the fiscal year ending June 30 and had foreseen a deficit as large as $500,000 as recently as late May, the school has actually run a small surplus of $84,495, Dean Joseph S. Nye announced Monday.

The school’s surprising ability to close its budget gap last year was due to the performance of its cost-cutting measures, according to Executive Dean J. Bonnie Newman, who noted that no administrative unit of the school exceeded the tight budgets that had been set.

She also credited the school’s development team with generating substantial giving despite the tough economic climate: the school received 92 percent more in gifts than last year, exceeding its target of 88 percent.

While Newman said she had worried that the Executive Programs, which target many international students, would underperform and incur large deficits due to the war in Iraq and SARS, the school actually added some extra programs and the unit met its budget.

Newman credited the school’s staff with developing a comprehensive plan to trim the KSG’s deficit and implementing it effectively. She praised a team effort by faculty and administrators and said there had been no “silver bullet” solution.

“It’s an extraordinarily great accomplishment for these people and a real tribute to their dedication to the school,” Newman said. “Everyone really did pull together.”

Nye committed to the Harvard Corporation last September that the deficit last year would not exceed half the previous year’s deficit of $5.9 million, and the school implemented a wide range of cost-cutting measures designed to balance its budget—most notably eliminating 52 staff positions, closing the school’s Washington office and selling off real estate holdings in Cambridge. The KSG also increased its tuition and upped administrative charges on research grants and restricted gifts.

The school sold five parcels in the Cambridge area and retains title to three others, in addition to a University-owned building at 124 Mount Auburn St. And the KSG continues to explore divesting itself of those properties, hoping to consolidate in existing KSG and University space.

The school currently sublets its space at 1 Brattle St. and plans to sell off one other undisclosed Cambridge property that has a lease finishing this year, Newman said. She added that as each lease comes up, the school will review the underlying parcel critically with an eye towards selling it.

One of the central cost-cutting measures was a “rebudgeting exercise” undertaken by the school to eliminate unnecessary expenses. The results included holding operating budgets flat, keeping salary raises down at two percent rather than the usual four percent, suspending performance bonuses, implementing a “hard frost” on new hires, and keeping renovations and capital expenses to a minimum.

Newman said these measures will likely continue to ensure the school’s continued financial viability.

“We recognize this doesn’t mean it’s over,” Newman said. “We’re going to have to continue to be very prudent going forward.”

And the Harvard Corporation’s decision not to increase endowment payout for the next fiscal year will put the squeeze on the school as it is just beginning to emerge from its fiscal woes, although Newman said the school is prepared for such a decrease in revenue.

But the KSG has made it out of its deficit, and Newman said the school has learned important lessons from the last crisis and would be in better shape to handle similar trouble due to improvements it has made.

She points primarily to the school’s new accounting software, which allows department managers and the school’s administrators to keep week-by-week tabs on each area’s fiscal performance. Newman added that the school has set up a four-member administrative gifts policy committee to carefully review new gifts, and she said the school’s administration also has begun to review all contracts of over $5,000.

Alex S. Jones—who directs the Shorenstein Center on the Press, Politics and Public Policy at KSG—said he was relieved that the balancing meant further cuts were likely unnecessary.

“I think it was a terrific achievement, and a painful one, but a necessary one,” he said. “The fear was that...there might need to be a further cut. I think that what this means is that that will not be necessary, and I think that’s a great relief to everyone.”

—Staff writer Stephen M. Marks can be reached at

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