Can Harvard Use Its Endowment To Make Up For Federal Cuts? It’s Possible, but Not That Simple.

Harvard’s endowment is not a $53.2 billion pile of cash. But as the University sits on the precipice of historic financial losses, it has increasingly faced calls to draw from endowment funds to make up the difference.

Even as Harvard’s annual financial report emphasizes that the endowment is a long-term investment, not a slush fund, it leaves room for flexibility during crises.

“While the University has no intention of doing so, there are additional investments held by the University and the endowment that could be liquidated in the event of an unexpected disruption,” the report reads.

If anything counts as a disruption, it would be the Trump administration’s targeted attack on Harvard’s financial stability — freezing $2.2 billion in federal research funding, floating an endowment tax increase, and directing the IRS to revoke Harvard’s tax-exempt status.

Since the cuts were announced — with Harvard researchers already receiving stop-work orders and Harvard Medical School announcing imminent layoffs — some prominent voices have said Harvard’s endowment is a powerful backup plan.

Former Harvard President Lawrence H. Summers wrote in an April 4 New York Times op-ed that wealthy universities, including Harvard, “should make clear that their formidable financial endowments are not there to simply be envied or admired.”

“Part of their function is to be drawn down in the face of emergencies, and covering federal funding lapses surely counts as one,” Summers wrote.

But the endowment — a complex, highly structured pool of investments — is not a conventional rainy day fund.

The overwhelming majority of Harvard’s endowment — more than 80 percent — is made up of more than 14,000 “restricted” funds. Donated with a specific purpose in mind, restricted funds are dollars the University cannot reallocate at will.

Even so, the remaining $9.6 billion in the endowment is, in theory, Harvard’s to liquidate. Combined with Harvard’s $6.9 billion annual operating budget, that leaves Harvard with $16.5 billion in unrestricted funds.

Based on these figures, Eastern Michigan University business professor Howard Bunsis — who has audited several universities’ finances— wrote that Harvard could afford a substantial but short-term hit to its endowment.

“This is exactly what reserves are for: To deal with temporary unexpected declines in revenues or increases in expenses,” Bunsis wrote. “As long as they are not asked to take out $1 billion per year for many years, they can easily afford this on a one-time basis.”

“President Trump is unlikely to threaten these funds more than once, and he will not be President forever (no joke intended). It will not be risky if it is one or two times,” he wrote.

University spokespeople did not respond to a request for comment for this article.

But schools that rely substantially on federal funding — like HMS and the School of Public Health — can only keep dipping into their endowment funds for so long.

During a Wednesday morning town hall on impending cuts, HMS Chief Financial Officer Julie Joncas warned that the Medical School’s unrestricted funds would last only a decade if it decapitalized $300 million a year — the amount necessary to cover lost federal funding and the school’s annual deficit spending.

“It’s important for everyone, when they hear these big numbers, to realize it translates to a much smaller number,” Joncas said in a recording of the meeting obtained by the Crimson.

Typically, Harvard makes roughly $2 billion — less than 5 percent — of its endowment returns available for operations each year, plowing the rest back into the endowment itself. That lets Harvard’s pile of investments keep growing year over year.

“Harvard is obligated to preserve the endowment’s purchasing power by spending only a sustainable portion of its value each year,” the University wrote in its fiscal year 2024 financial report. “Spending significantly more than that over time would favor the present at the expense of future generations, undermining the endowment’s fundamental purpose of maintaining intergenerational equity.”

But former Vassar College president and economist Catharine Hill wrote in an email that the unprecedented financial circumstances make it appropriate for Harvard to break with the conventional wisdom that it should pull conservatively from its endowment.

“In times of crisis some of the normal rules/practices around endowment spending can/should be relaxed, and there is some flexibility in the use of endowment resources that institutions can take advantage of to protect their missions,” Hill wrote.

“There is no need to make budget cuts to the core mission,” Bunsis wrote. “If you do not use reserves for this type of situation, what are reserves for?”

The clock is ticking for Harvard to decide how to make up lost funding as terminations and stop-work orders roll out at HMS, the School for Public Health, and the Faculty of Arts and Sciences.

And some research projects could face irreversible damage and steep costs as they lose funds. Pauses to studies involving animals could lead them to be euthanized, and some sensitive laboratory materials like cell cultures require constant maintenance. Federal funding also supports many postdoctoral researchers and research assistants, who may lose their jobs as a result of cuts.

If Harvard remains unable to access large swaths of federal funds, it may not have alternatives — other than its endowment — to make up for the scale of the losses. The University could borrow money via bond sale as it has twice this year or look to private nonprofit organizations for philanthropic support.

But private funding cannot match the support the University receives from the federal government. The NIH has a budget of nearly $48 billion, making it the largest funder of biomedical research in the world.

The largest private nonprofit funders of biomedical research — including the Howard Hughes Medical Institute and the Bill & Melinda Gates Foundation — have annual budgets of less than $10 billion.

Harvard could also turn to its donor base for help — and alumni may be increasingly willing to chip in as they react to Trump’s cuts.

Thomas P. Lockerby ’87, who leads alumni engagement and fundraising at Phillips Academy Andover — a private high school in Massachusetts with an endowment of more than $1 billion—said that some Harvard donors are more willing to give as it faces attacks from the Trump administration.

“I've seen examples of people saying ‘I would increase my giving if Harvard needed to dip into, say, the unrestricted endowment to support research at this time,’” Lockerby said.

“Most Harvard alumni are very mindful of the role of basic research in almost every form of innovation,” Lockerby added. “So an appeal to support that, I think, would be strong.”

—Staff writer Avani B. Rai can be reached at avani.rai@thecrimson.com. Follow her on X @avaniiiirai.

—Staff writer Saketh Sundar can be reached at saketh.sundar@thecrimson.com. Follow him on X @saketh_sundar.