$52M Shortfall For Funding Fringe Benefits

In what administrators are calling one of the largest financial crises in recent University history, Harvard has amassed a $52.2 million shortfall in its funding for the fringe benefits of faculty.

Over the past four years, finance officials failed to count $66.4 million of actual benefit expenses in the University's $384.1 million budget for faculty benefits, according to Secretary to the Faculty Council John B. Fox Jr. '59.

In a meeting with the Faculty Council yesterday, Dean of the Faculty Jeremy R. Knowles offered no explanation for the oversight, Fox said.

Figures on the shortfall were distributed to members of the Faculty Council yesterday, prompting reactions which ranged from concern to amazement.

"$52 million is a huge amount of money," said Kahn Associate Professor of the History of Science Anne Harrington. "It was amazing to see the payroll benefits broken down like that."

"I was alarmed to see the amounts of money we put into things that are invisible to most of us," Harrington added.

Professor of Chinese History Peter K. Bol said his response to the data was one of "profound concern."

A reserve of $14.2 million from 1989 limited the actual shortfall to $52.2 million, according to a table produced by Director of Finance and Accounting Judith B. Warren.

After 1989, the benefits fund dove from a surplus into a shortfall. The shortfall was $1.8 million in 1990, $22.5 million in 1991 and $45.9 million in 1992, according to Warren's table.

The Corporation has indefinitely loaned money to the University in order to cover the shortfall.

The shortfall is costly because Corporation money could be used to slow tuitionincreases or raise faculty salaries, Fox said.

"My understanding is that the more we spend onbenefits, the less money we have to spend oneducational programs, and on faculty andstudents," said Professor of Sociology ThedaSkocpol.

A standing University Benefits Committee and atask force chaired by Provost Jerry R. Green willinvestigate the causes of the Shortfall andpropose possible remedies to alleviate thesituation, Fox said.

Faculty Council members said they will await areport from the Green task force beforeconsidering potential solutions to the deficitproblem.

"My sense was that this was presented to theFaculty Council more with the idea of preparing usto review solutions when they are presented," saidAssistant Professor of the Classics Cynthia Damon.

Despite her willingness to wait for a reportfrom the Task Force, Damon said the "the problemis in urgent need of solution."

[Yesterday's] meeting did bring that home to memore than ever before," Damon said.

Fox said the costs of benefit packages willcontinue to rise for reasons beyond Harvard'scontrol--particularly the national rise in theprice of health care.

Fox said that a larger number of participantsin benefit programs, increasingly generous benefitpackage and rising social security costs have alsocontributed to the rising costs.

Independent of the $66 million oversight,Harvard's projections show that the Universitycould face a similar shortfall within five or sixyears simply because of rising costs, Fox said.

Faculty Council members said they understoodthe structural reasons for the deficit, but onedid suggest a solution.

"I understand that some of the reasons for ourdebt are Harvard controlled, but some are societalproblems," Skocpol said. "And the societal problemof the health care crisis would, in my opinion, beeffectively addressed by a national comprehensivehealth care program. But that's just my opinion.

"My understanding is that the more we spend onbenefits, the less money we have to spend oneducational programs, and on faculty andstudents," said Professor of Sociology ThedaSkocpol.

A standing University Benefits Committee and atask force chaired by Provost Jerry R. Green willinvestigate the causes of the Shortfall andpropose possible remedies to alleviate thesituation, Fox said.

Faculty Council members said they will await areport from the Green task force beforeconsidering potential solutions to the deficitproblem.

"My sense was that this was presented to theFaculty Council more with the idea of preparing usto review solutions when they are presented," saidAssistant Professor of the Classics Cynthia Damon.

Despite her willingness to wait for a reportfrom the Task Force, Damon said the "the problemis in urgent need of solution."

[Yesterday's] meeting did bring that home to memore than ever before," Damon said.

Fox said the costs of benefit packages willcontinue to rise for reasons beyond Harvard'scontrol--particularly the national rise in theprice of health care.

Fox said that a larger number of participantsin benefit programs, increasingly generous benefitpackage and rising social security costs have alsocontributed to the rising costs.

Independent of the $66 million oversight,Harvard's projections show that the Universitycould face a similar shortfall within five or sixyears simply because of rising costs, Fox said.

Faculty Council members said they understoodthe structural reasons for the deficit, but onedid suggest a solution.

"I understand that some of the reasons for ourdebt are Harvard controlled, but some are societalproblems," Skocpol said. "And the societal problemof the health care crisis would, in my opinion, beeffectively addressed by a national comprehensivehealth care program. But that's just my opinion.