Harvard To Keep Payout Program

University officials said yesterday that they have reversed preliminary budget guidance that would have prevented new programs from tapping a recently created source of additional endowment funding in the next fiscal year.

The decision to continue allowing new initiatives to benefit from the strategic payout program—which grants high-priority projects across the University modest increases in endowment funding—came shortly after schools received notice that only programs already receiving the funding would be eligible to use strategic payout funds next year.

Former University President Lawrence H. Summers originally conceived the program to up the payout rate from the endowment while avoiding a blanket funding increase that he said could encourage programs not in need of additional money to waste resources.

“There are undoubtedly particular people with particular projects who are focused on their particular budget and want more money to be paid out,” Summers told The Crimson at the time. “But my sense is that the academic leadership of the schools shares the same view that the Corporation has—that we need to set payout in a way that maximizes what we are able to do on a sustainable basis.”

The program was launched in fiscal year 2006, while endowment returns were high and payout was falling consistently short of Harvard’s 5 percent target, leading University leaders to seek new methods to increase spending from the endowment.

But the recent decision to continue accepting new projects comes amidst a dramatic decline in the value of the endowment, which has pushed the projected payout rate for next year to over 6 percent—the highest the University has seen in over two decades. With payments already projected to overshoot the desired five-percent mark, additional strategic spending will only push spending farther from the target.

University spokesman John D. Longbrake wrote in an e-mailed statement that the decision to maintain the strategic payout program was made “in recognition of the importance of making continuing progress in directing resources to shared University priorities.”

Financial aid at the College, for example, has been a strategic priority in the past. And the amount spent on aid next year is expected to increase by 18 percent, as more families suffer the effects of a weak economy.

The strategic payout has previously helped to support faculty expansion and renovation of student space at the Law School, as well as the Medical School’s fledgling Department of Systems Biology, which received seed funding over a five-year period as part of a University-wide effort to expand interdisciplinary initiatives, according to department head Marc Kirschner.

—Staff writer Athena Y. Jiang can be reached at ajiang@fas.harvard.edu.

—Staff writer June Q. Wu can be reached at junewu@fas.harvard.edu.