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UPDATED: April 18, 2017 at 3:50 p.m.
When English professor Louis Menand accepted a post at Harvard in 2003, the Faculty of Arts and Sciences’s resources seemed unlimited.
FAS was in the midst of expanding its ranks, Harvard was pouring cash into land developments in Allston, the endowment was posting consistently high returns, and Menand said professors felt there was enough money “for every important thing that we felt that we wanted to do.”
But just six years later, the world was in the midst of the biggest financial crisis since the Great Depression, and Harvard was not sheltered from the catastrophe. By September 2009, the crisis had swept away 27.3 percent of the University’s endowment, trimmed $77 million dollars from the FAS budget, and severely damaged the Faculty’s sense of optimism.
Speaking to Faculty at a meeting in October 2008, then-newly-appointed University President Drew G. Faust warned of the effects of the economic downturn.
“This University has survived revolutions, [a] civil war, downturns, and depressions, for more than 370 years, and our endowment enables us to pursue our ambitions over the long term with great consistency,” she said. “But the world is enveloped in a serious financial crisis, and we are not an exception.”
While its financial situation has come a long way since what FAS Dean Michael D. Smith calls the “craziness” of 2008, the Faculty is once again beset with financial difficulties. Multiple years of anemic endowment returns—including a consequential $1.9 billion drop in the size of the endowment value last fiscal year—have forced administrators to make difficult choices to cope with a financial reality far from the halcyon days of the early 2000s.
Among some, there's a sense that Harvard still hasn't fully recovered from the global financial collapse of 2008. Smith said the endowment's recent performance—panned as "disappointing" by many administrators—has not helped.
“It’s just that regular drumbeat of not many years between those slips that has caused the pain,” he said. “We went through a multi-year process and I think we did what we needed to do to get out of [the crisis]. And then we just haven’t had—we hoped for a bunch of good years, but we just never had those."
‘BUCKET OF MONEY’ NO LONGER
The effect of the global financial crisis on the Faculty of Arts and Sciences became clear in December 2008.
In April 2008, administrators struggled to attract faculty to monthly FAS meetings. In December, though, news of freezes on faculty searches and salary raises drew professors to the meeting in droves, forcing many to sit on the floor and stand three-deep in the doorways to University Hall’s Faculty Room.
At the meeting, Smith asked professors to consider how they could cut 10 to 15 percent of their departmental budgets.
“Everyone look at their budgets and tell me what they can possibly do,” Smith said at the meeting.
In a recent interview, Smith said the crisis changed the entire academic planning process in FAS.
“It put us on a path of having to—I think for many good reasons—be more thoughtful about how we’re spending our resources, making sure that our resources are going to our most important academic priorities,” he said.
Vice Provost for International Affairs Mark C. Elliott, an East Asian Languages and Civilizations professor, said his department was forced to admit fewer graduate students at the time. Budget constraints also imposed severe staff cuts on the Harvard-Yenching Library, which Elliott said is a key reason many scholars of East Asia choose Harvard.
Elliott said the hiring freeze was particularly painful for the department.
“That’s something that departments rely on to stay young, to stay fresh and to make sure that the people who are teaching in the classroom represent the latest and most interesting and best scholarship,” he said.
Menand said the financial crisis changed the availability of funding in the department.
“You just couldn’t assume that there’s a bucket of money that you can dip into,” he said.
In an emailed statement, English Department Chair James Simpson wrote that the department "remains extremely well-funded" and pointed to a number of funding opportunities for graduate and undergraduate students.
"Our mantra is that if we have the money, we spend it so as to nourish the lives of our students, both undergraduate and graduate," he wrote. "2008 did not make a significant difference."
But Elliott mentioned a smaller indicator of FAS’s troubles from the recession era—the cookies and coffee were gone from Faculty meetings.
‘PROBLEMS FOR THE FORESEEABLE FUTURE’
Today, though meeting refreshments have returned, the Faculty continues to grapple with suboptimal financial circumstances.
Poor endowment returns and dwindling cash reserves have compelled FAS to decrease the number of graduate students accepted this year by 4.4 percent. Additionally, Faculty compensation and graduate student stipends are both increasing at a rate below the rate of inflation. In February, Smith said most new faculty hires would only replace departed or retired faculty members.
“I think there’s a lot of concern that the FAS budget is looking at some problems for the foreseeable future,” Menand said.
Smith said the situation has been exacerbated by nonexistent FAS reserves, uncertainty about federal funding in the Trump era, and greater investments in areas like House renewal, which will be funded partially by debt.
After the news of the modest compensation increase, several professors said they were concerned with the financial health of FAS, and of the endowment in particular. Elliott said he hopes changes in Harvard Management Company—which hired a new CEO in the fall and will lay off half its staff by the end of the calendar year—will lead FAS in a more positive financial direction.
“My personal hope is that this will produce some better results,” he said. “If the endowment doesn’t do well that’s a real problem.”
Despite the diminished financial capacity of FAS, Menand said “all of us feel very happy” with the resources that Harvard provides.
“It’s a very generous institution,” he said. “I came from an institution where we didn’t have paper clips.”
Smith offered a similarly moderate view.
“It doesn’t mean the world is ending,” he said.
–Staff writer Mia C. Karr can be reached at firstname.lastname@example.org. Follow her on Twitter @miackarr.
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