Another Way To Meet Harvard’s Financial Challenges

Last month, the University released its annual financial report and it showed remarkably good news. The University’s endowment grew by roughly $11 billion to nearly $68 billion dollars. Net assets grew even more, rising from $68.7 billion a year ago to $82.3 billion. Yet the administration still insisted that recent austerity measures were justified.

Many Harvard affiliates are wondering, however, why, in such a prosperous year, has Harvard shrunk its research activities and maintained many of its draconian cuts to doctoral admissions? And why is it now laying off hundreds of devoted workers and taking such a tough line against union demands?

The administration will argue that the endowment is not a piggy bank or a rainy day fund, but a sacred trust with the people of the future. The principle of “intergenerational equity” binds us, legally and morally, to spend endowment proceeds only at a rate that will preserve its purchasing power. “’Til the stars in the firmament die,” goes the song. What’s more, in the words of this year’s report, “markets can easily take back what they give.” This year’s 27.1 percent return may well reflect a precarious market bubble.

That may be so. But there’s another item in the financial report that deserves the attention of those who believe that intergenerational equity constrains Harvard’s use of its endowment.

At the end of fiscal year 2026, the General Operating Account stood at $13.5 billion, an

amount comparable to the endowments of peer schools such as Vanderbilt, Cornell, Emory, Duke, and Washington University. This is the sum total of operational funds and endowment distributions received but not yet expended by Harvard’s schools.

One might think of it as the University’s checking account, or more accurately as a University-wide bank in which the schools deposit both short- and long-term savings. Like other banks, the University pays its depositors a modest rate of interest and then invests the capital in more profitable ventures. In FY 2026, around $7.2 billion in operating funds were invested along with the endowment. That amount is comparable to the endowments of Brown or New York University.

The GOA grew almost as fast as the endowment in FY 2026, but unlike its big brother, it does not have to be maintained into perpetuity. GOA principal can be spent by the various schools at any time. And while endowment returns are governed by donor restrictions, a substantial portion of the return on GOA investment — after interest paid to the schools — is unrestricted income that can be spent by the central administration at any rate for its strategic priorities.

To the extent that the GOA has accumulated over many years, it might violate the ethics of intergenerational equity to spend it all at once. But it would also violate those ethics to let it accumulate indefinitely.

Since the principal could be spent down, it might be imprudent to count on a consistent level of return from invested GOA, but this quality makes current GOA income an especially suitable source of funds to buffer the temporary shocks that are disproportionately harming the current generation of Harvard students and faculty.

And although investing GOA funds looks wise on paper, it has not always worked as intended. Throughout the 2000s, then-University President Larry Summers insisted on investing almost the entirety of the GOA with the endowment, creating a liquidity crisis in 2008 when the endowment’s investments crashed. This forced the University to borrow heavily, and it took over a decade for the GOA to regain its 2008 value. For the first two of those years, the amount trapped in long-term investments exceeded the total value of the GOA.

Since 2016, however, the value of the GOA has more than doubled, and its nearly 118 percent increase has exceeded that of both the endowment and the University’s annual operating expenses. Harvard achieved this growth while prudently increasing the share of GOA that is outside the long-term investment pool to $6.3 billion, only slightly less than annual operating expenses. But this growth coincided with draconian cuts at the Faculty of Arts and Sciences and the School of Public Health.

Harvard has overcorrected for past mistakes, depriving our current community of resources comparable to those available to past and future generations. The gap can be seen in the share of invested GOA made available for current operations: just 3.5 percent, or $250 million in FY 2026. Increasing that to 5 percent, or $360 million, could have enabled the University to hold its budget for salaries and wages steady, eliminating layoffs while still downsizing staff through attrition.

A somewhat larger temporary increase would also have allowed the University to replace the loss in sponsored research income (about $230 million, adjusted for inflation, between FY 2024 and FY 2026) and hold doctoral admissions at pre-crisis levels.

It is possible that Harvard is already planning to make more use of GOA income in FY 2027. The September announcement of a $150 million research fund to offset cuts in governmental support is a good first step. Perhaps the University would have used the GOA more aggressively last year if the Trump administration had succeeded in cutting off federal funds altogether. Without a shared conversation about budget priorities, there is no way to know for sure.

To be clear, the General Operating Account is no panacea. It cannot wipe away the deep structural imbalances in the FAS budget. But it is very well positioned to soften the human impact of FAS restructuring and of federal cuts that now seem likely to be temporary.

Ultimately, people are Harvard’s most valuable resource, both now and in the future. It is surely not the right path to shortchange our people even as our financial fortunes soar.

Dan McKanan is the Ralph Waldo Emerson Unitarian Universalist Senior Lecturer at the Harvard Divinity School.