Harvard to Review New Ways To Finance Operating Expenses

The Harvard Corporation has begun informal discussion of drawing upon the University's endowment to pay for the present operating costs of the University.

The discussions, which began last year are expected to lead to the formation of a committee for formal consideration of endowment policies and related financial matters.

The Corporation has not made any decision other than to investigate endowment policy further, and has not yet held any formal votes on the matter.

"If the Administration is going to try to provide enough money here during what may be a period of economic recession, we've got to carefully review all these questions." President Bok said yesterday. "But nobody now has any set answer in mind."

Bok emphasized that there is no impending crisis that would force the University to dip into its savings to finance present operations.

"It's just that any responsible university ought so carefully review the factors and considerations and data that go into deciding between the claims of the present and the claims of the future." Bok said.

The University presently uses only interest on bonds and dividends from stocks for its expenditures. The increase in the value of the University's stocks -- known as capital gains -- is not spent, but reinvested.

George F. Bennett '33, outgoing Treasurer of the University, said yesterday that this policy is designed to insure that the University's income from endowment rises every year to make up for the increase in expenditures due to inflation.

Critics of present policies maintain that the University does not need to reinvest all capital gains to keep endowment rising at a pace fast enough to stay ahead of inflation. They say that some of the increase in the value of the University's stocks should be used for current ex- penditures, especially in a time of economic recession.

According to Bennett, capital gains on Harvard's stocks have amounted to 35 cents per dollar invested for the past two years. However, in the year prior to that, he noted, the endowment had suffered a capital loss.

Income from dividends on stocks and interest on bonds during the same period amounted to approximately 5.4 per cent.

Rumors this summer that the Corporation was considering spending part of capital gains prompted strong reaction from some alumni.

Paul C. Cabot '21, Harvard's treasurer before Bennett, wrote an open letter to Bok late last June calling the proposed policy "dangerous unfair, unwise and possibly disastrous."

"If one spends capital," Cabot wrote, "obviously, there will be lens in the future to earn money on. It really amounts to robbing the future to take care of the present."

"I beg you and the other members of Harvard's governing boards not to be a party to the slow strangulation of Harvard's goose that has laid so many golden eggs," he told Bok.

If extra funds are needed, Cabot said, the University should decrease spending rather than dip into capital gains. "Let's face the facts and not go down the primrose path of capital spending but cut expenses," Cabot said.

Cabot recommended several specific measures for cutting expenditures, including lessening the number of students in the University, curtailing scholarship and loan funds, reducing the else of the faculty, ceasing new building programs and abandoning activities "that only involve a very few students but are very expensive to run.