Monday, November 10, 2008

"I write today about the global economic crisis and its implications for us at Harvard."

In what I'm taking as a sign of continuing Impending Doom on the economic front, I received mail from the 3 levels in the hierarchy above me regarding the financial state of Harvard in these tough times. (First from Harvard President Drew Faust which is where the title quote comes from, then the Dean of the Faculty of Arts of Sciences, and then the Dean for the School of Engineering and Applied Sciences.)

Little was given in way of specifics, but the general theme was clear. About 1/2 of Harvard's budget comes from the endowment payout each year. (The curse of a large endowment -- this number is probably higher than most institutions.) While nobody is giving a number for Harvard, the widely quoted statement from Moody's financial research is that endowments will lose about 30% this year. Given that Harvard has been outperforming the market and most other endowments over an extended time period, you can take your guess as to whether our losses will be above or below average. No matter how you do the math, it's not good.

So that means there will be some belt-tightening, and some delays in various plans. Again, very little in the way of specifics, but I'm sure (and Faust's letter suggested) that Harvard's new progressive financial aid program would not be touched. I imagine most everyone is getting similar messages at other institutions, but feel free to share your stories in the comments.

3 comments:

Anonymous said...

Since the endowment has seen double-digit growth every year for the last decade or so, a 30% drop means you are back to where you where three maybe four years ago.

No big deal.

This is really just a great excuse for management to get rid of the under-performers. Hopefully, they will realize that the best place to cut is in management itself, but I doubt it.

Nagesh Adluru said...

Temple University put a travel freeze that is effecting several grad students like me on traveling to conferences.

Anonymous said...

1. It is important to note that most universities split their budget inflow over 5 years of endowment payments. That means that 1/5 of the money made from the endowment four years ago is used in this year's budget (and 1/5 from three, two, one year ago, and this year). That means, that if the endowment payment drops by 30% this year, it in fact only results in 50%*30%*20% = 3% drop in the incoming money for this year's budget (and 3% for each of the next four years). Of course if the market sticks around where it is now, over several years the drops will add up.

2. Here is some info on other schools. MIT announced "we are tightening our belts" without any specific freezes or cut backs in employment. They did stop the construction of a graduate dorm. University of Southern California put a 1-year freeze on hiring of all staff members (likely to extend if conditions do not improve). You can get around these freeze if you have a grant that you can put up to guarantee the salary of a specific position. So basically, postdocs can get around this restriction. Public universities are expected to be hit hardest, as taxes and public money has taken a much more substantial hit than endowments.