Faculties Deal With Serious Budget Crunch

Administrators at each of Harvard’s 12 schools are busy preparing budget proposals due in mid-March.

In doing so, they are contending with economic conditions they haven’t seen in nearly a decade: a bearish stock-market, declines in fundraising and an 11-month recession.

The economic slowdown is forcing Harvard’s finance officers to take a hard look at existing programs and, in many cases, scale back their future plans.

University Vice President for Finance Elizabeth C. “Beppie” Huidekoper says the University is “holding off on major commitments and making trade-offs” in the midst of the recession.

While all of the schools are “scaling back,” larger schools—especially the Harvard Business School (HBS) and the Kennedy School of Government (KSG) have been hit hardest.

Fundraising Difficulties

The problem for most schools begins with the money coming in—there’s simply less of it around.

Annual gifts to HBS are down 10 percent since September, according to Chief Financial Officer Donella M. Rapier. The drop is not huge, but nevertheless it is reason for concern, Rapier says.

Indeed, many schools are facing fundraising problems.

“It’s a more challenging philanthropic environment than it was before,” says KSG Executive Dean J. Bonnie Newman. Although KSG has not yet seen a decrease in monetary donations to the school, officials are working harder to keep the money flowing.

Downtown at the Medical School, the recession has limited the school’s fundraising success, according to Associate Dean for Finance Cynthia L. Walker.

“Midway through the fiscal year, our fundraising is down substationally,” she says.

In some ways, though, the Medical School is lucky—it relies on grant funding from the National Institutes of Health, which has continued to thrive during the recession.

But for all schools, there is one constant: less money coming in means less money can go out.

Cutting Back

The KSG is among the schools hardest hit by the economic slowdown. Its financial problems—including a $3 million operating budget deficit during Fiscal Year 2001—were “multifaceted” and “compounded by the recession,” according to Newman.

The school’s response to the shortfall has taken several forms, perhaps most prominently in its closing of the prestigious but underutilized office in Washington D.C.

In addition to the D.C. closing, KSG has terminated leases at 30 JFK St., 50 Church St. and 8 Story St., and moved the programs housed in those buildings to other KSG facilities. The programs include several publications and the Hauser Center for Nonprofit Organizations.

Newman says the reshuffling, coupled with sub-letting an office at 1 Brattle St. to another tenant, will save KSG nearly $500,000 a year.

That savings will begin to balance the budget, but it will be “several years” before the school is back in the black, Newman says.

Across the river from KSG, the Business School (HBS) is also tightening its belt as a result of the recession.

Already, HBS has cancelled one six-week course in Tokyo and several three-day executive programs due to lack of enrollment, according to Rapier.

The school’s plan to begin admissions outreach projects and other technology-related projects will be put on hold if the recession continues much longer, she says.

“We’re delaying discretionary spending where we can, but we don’t feel the need to cancel anything major that is already underway,” Rapier says.

But not every school is slashing programs and seminars. Harvard Law School (HLS) is hoping it will be able to limit additional spending rather than cutting existing programs.

“We just won’t be able to add things. There may be a lot less ‘yes’es than usual,” says HLS Assistant Dean and Chief Financial Officer Paul Warren Upson. But direct program cuts are “unlikely,”

he says.

Many of Harvard’s smallest graduate schools are weathering the recession almost untouched.

“We haven’t really experienced anything I would call a major impact as a result of the recession,” says Timothy D. Cross, associate dean for finance and administration at the Harvard Divinity School (HDS).

HDS recently completed the renovation and expansion of its library, and plans to renovate other buildings are continuing on schedule, Cross says.

At the Dental School in downtown Boston, Associate Dean for Administration and Finance Mary Cassesso credits “10 years of conservative spending” with enabling the school to weather the recession without program cuts. Additionally, a change in funding from the federal government has allowed the Dental School to partner with local hospitals and consolidate costs.

“We’ve been fortunate enough to have an initiative this year that will generate more revenue and I think we’ll be okay,” Cassesso says.

Employment Changes

Rather than cutting programs, many of Harvard’s graduate schools are often limiting future hires.

“We’re probably not going to grow as much as we have in past years. We’re leaving positions unfilled for longer, and it’s easier to fill positions than it was before,” Huidekoper says.

Faculty are traditionally among the most expensive items in a school’s budget, and many schools are finding their budgets are having trouble supporting such large staffs.

For instance, KSG has seen a growth in its faculty of almost 40 percent in the last five years—an increase that the school is struggling to support now as the economy slows.

“Bringing in world-class faculty is expensive and, in a declining economy, it becomes more difficult to balance the budget,” Newman says.

Newman says the school is carefully examining any new hires and balancing against a drop in available funds.

While the school will keep its recent hires, it is reducing the staff that supports those faculty.

Senior faculty, who formerly received one-half a faculty assistant’s time, will now only receive one-third.

Finally, KSG is unique among Harvard’s schools in that it has actually been forced to lay-off five staffers—three from the Harvard Information Infrastructure Program and two from the Center for Business and Government.

“We feel terrible when this happens,” Newman says. “We don’t do it out of choice, we do it out of necessity.”

Other schools, instead of laying off employees, are opting not to fill vacant, non-essential posts.

HBS is leaving unfilled certain positions, such as program managers in its executive program and technology-related positions in its e-learning businesses.

Since jobs in general are harder to find in a recession, those jobs that are available are filling up faster.

Robert Gewecke, director of fiscal and administrative services at the Graduate School of Education (GSE), says that jobs at GSE are being filled more quickly than ever.

At the Medical School, Walker says, the recession has attracted more potential employees, although the school’s overall employment has remained the same.

It is also attracting some previously unlikely candidates.

“When the dot com companies were thriving, we couldn’t hire any Internet techology specialists. Now they are finding Harvard a much more attractive place,” Walker laughs.

Looking Ahead

Huidekoper stresses that the various financial difficulties facing Harvard’s graduate schools will not detract from the University’s core mission: teaching and education.

The University is looking to improve undergraduate education and to hire new faculty, though it will not focus on launching new initiatives or expanding existing programs.

Administrators are watching nervously to see what financial news the coming months bring.

“We’re working on how this is going to affect us in the next two to three years. The more the recession persists, this is going to get harder and harder,” Huidekoper says.

—Staff writer Elizabeth S. Theodore contributed to the reporting of this story.

—Staff writer Jenifer L. Steinhardt can be reached at steinhar@fas.harvard.edu.