FAS Reserves Dwindling, Dean Says

Cash reserves for Harvard’s flagship Faculty have dwindled to “effectively zero,” Dean of the Faculty of Arts and Sciences Michael D. Smith said at a meeting of the body Tuesday.

Presenting an early draft of a Dean’s report at the first Faculty meeting of the semester, Smith offered details on the FAS operating budget, its hiring practices, and the near and long-term effects of recent disappointing returns on the University’s endowment.

While FAS administrators have worked to reduce costs, the Faculty has relied upon its reserves and unrestricted gifts from donors to fund its research initiatives and other projects like House renewal, Smith said. According to a May 2016 strategic assessment report, FAS efforts to renovate Harvard’s Houses have contributed to a “complete depletion” of FAS unrestricted reserves, down from $112 million in fiscal year 2013.

FAS receives half of its operating budget from the endowment, which could lead to tighter budgets in the coming years, Smith said. Harvard Management Company, the University’s investment arm, announced last month that Harvard returned negative 2 percent on its endowment during fiscal year 2016. The negative returns—in addition to the $1.7 billion HMC distributed to help fund the University’s annual budget—amounted to a decline of nearly $2 billion in the endowment’s value.

Despite these financial setbacks, Smith pointed to the FAS capital campaign’s passing its $2.5 billion goal as a positive source of revenue. Over the past two and a half years, FAS has benefited from two big-ticket gifts: $150 million from Kenneth C. Griffin '89 to help fund the Financial Aid portion of the campaign and $400 million from hedge fund magnate John A. Paulson to endow his now-namesake School of Engineering and Applied Sciences.

In the short term, FAS will need to invest in its research mission, balance budgets quickly, and look to replenish reserves, Smith said. Until FAS replenishes those reserves, unrestricted donations from alumni will fuel the spending pool, he said.

At the meeting, University professor Peter L. Galison ’77 asked University President Drew G. Faust for more transparency in discussing with the Faculty the impact of the endowment’s losses on FAS’ budgets. Faculty members would benefit from hearing from members of the Harvard Corporation and Harvard Management Company, Galison wrote in a follow-up email to The Crimson.

“We need a grownup financial discussion,” Galison said at the meeting, adding, “It affects everything from financial aid to hiring and retention of faculty. It really is an underpinning of all we aim to be.”

Faust said she would “welcome the opportunity” to discuss the endowment with the Faculty.

At the meeting, Faculty also heard from the two co-chairs of a committee charged with overseeing the implementation of a historic College policy penalizing members of single-gender, unrecognized social organizations.

In addition, Government professor Harvey C. Mansfield ’53 directly addressed Faust during an open discussion period in which he questioned the University’s race-conscious admissions policies.

“Affirmative action is discrimination by race and by sex, therefore it is on its face unjust, assuming that justice means choosing according to merit regardless of race and sex,” Mansfield said.

Mansfield’s comments followed a recent Supreme Court decision, Fisher v. University of Texas, which upheld the constitutionality of race-conscious admissions for undergraduates. A group called Students for Fair Admissions is currently suing Harvard for its admissions policies, which the group claims are unfair to Asian American applicants.

Faust defended Harvard’s admissions policy, saying it promotes a diverse class of students and an enriching learning environment.

—Staff writer Jonathan G. Adler can be reached at jonathan.adler@thecrimson.com. Follow him on Twitter @JonathanGAdler.