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Facing dire economic straits brought on by the global COVID-19 pandemic, Harvard is instituting an immediate University-wide salary and hiring freeze, cancelling or deferring discretionary spending, and considering deferring all capital projects, University President Lawrence S. Bacow, Executive Vice President Katherine N. Lapp, and University Provost Alan M. Garber ’76 announced in a Monday email to Harvard affiliates.
Bacow, Lapp, and Garber will each cut their salaries by 25 percent, per the email. Senior school administrators, including the deans of Harvard’s 12 schools, their vice presidents, and their vice provosts, will also either reduce their salaries or contribute to a support fund for employees experiencing hardship.
In the email, Bacow, Lapp, and Garber also addressed the possibility of layoffs or furloughs. The wrote that Harvard is still working to “gain a more complete picture” before deciding whether to take such action.
“We will be scrutinizing the FY21 budget to determine what other steps are necessary to respond to the financial impact of the pandemic on our operations. We will communicate with you when more information is available,” they wrote.
The coronavirus pandemic has thrown the University into financial turmoil in recent months, incurring unexpected expenses while also cutting revenue sources. Bacow said in an April interview with the Harvard Gazette — a University-run news publication — that the immediate financial effects are “significant.”
Bacow, Lapp, and Garber wrote that the University will tap into the endowment to address financial concerns, but its ability to do so is limited.
“Some of you may be wondering why we can’t just dip into the endowment to support us through these difficult times. We do intend to distribute as much from the endowment as we responsibly can, but there are limitations to the endowment’s capacity,” they wrote. “Because of the recent declines in the markets, the endowment, while still large, is not as large as it was previously. As it shrinks, it has less capacity to support our existing operations, especially as other shortfalls in revenue sources loom.”
Harvard’s endowment — its largest financial asset — consists of more than 13,000 funds, according to the University’s website. The largest categories of funding are restricted to being spent on specific programs, departments, and purposes, which includes professorships, fellowships, and financial aid for undergraduates. The funds have to be used according to the terms set by the donor.
In the previous fiscal year, the endowment provided $1.9 billion of funding to University operations, consisting of more than a third of Harvard’s total operating revenue for the fiscal year. By the end of that fiscal year, the endowment’s value stood at $40.9 billion.
After his 2018 inauguration, Bacow started preparing Harvard for a possible future recession and asked administrators at schools to “scenario plan” for challenging market conditions.
Harvard is planning to issue roughly $1.1 billion in bonds for outstanding debt refinancing and other purposes after steep interest rate cuts by the Federal Reserve, Bloomberg News reported last week.
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