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WORLD> America
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Harvard seeking spending cuts amid economic crisis
(Agencies)
Updated: 2008-11-11 10:51 BOSTON – Harvard University is considering spending cuts because the economic slowdown may reduce federal grants and the school's substantial endowment, President Drew Faust said Monday.
Harvard's endowment posted an 8.6 percent return and grew to $36.9 billion in the fiscal year that ended June 30. The school, however, lost 12.7 percent on its US stock portfolio and 12.1 percent on its foreign equity portfolio during that time. Faust's spokesman on Monday declined to say much the endowment has lost during the current economic turmoil. Still, Faust warned in an e-mail to faculty, staff and students that "we must recognize that Harvard is not invulnerable to the seismic financial shocks in the larger world. Our own economic landscape has been significantly altered." "We need to be prepared to absorb unprecedented endowment losses and plan for a period of greater financial restraint," she said. Harvard's is the nation's largest university endowment and provides about a third of the annual operating budget. Faust said the school is looking at ways to cut spending and will review compensation costs, which account for nearly half of the budget. Harvard also is reviewing its ambitious expansion program, including plans announced early last year to expand across the Charles River from its Cambridge campus into Allson, she said. "We will need to plan and act in ways that reflect that reality, to assure that we continue to advance our priorities for teaching, research and service," she said. The school intends to implement initiatives to make education affordable to students from low- and middle-income families, and will ensure that those with income below $60,000 will pay nothing to send children to Harvard College. Those earning up to $180,000 can expect to pay no more than about 10 percent of their income, she said. Graduate and professional schools will keep financial aid budgets at current levels. Harvard's efforts to address the economic downturn mirror what is happening elsewhere in the country, including other Ivy League schools. While wealthy schools can fare better in a downturn, they are also seen as vulnerable to prolonged market slumps because they tend to fund a greater portion of their budget from their endowment. Dartmouth College has announced that it will cut spending after its endowment, which also makes up about a third of its budget, lost $220 million. That school's trustees blamed the loss on poor returns on stocks and bonds because of the Wall Street meltdown. Last week, Brown University announced a hiring freeze through January, and said it would review its capital budget to determine which projects could be delayed. Cornell University also recently announced a 90-day halt of construction projects and a pause on hiring staff members from outside the university through the end of March. "Virtually every college and university, their budgets are under strain, stress, for a variety of reasons," said Matthew Hamill, a vice president of the National Association of College and Business University Officers. |
