The Crimson is reporting that the Harvard Faculty of Arts and Sciences will plan to decrease the size of the faculty* in response to budget woes. The key point seems to be that "There are now 720 associate professors and professors in FAS, an increase of 20 percent since 2000." The reductions will occur in the standard way -- not filling some positions after retirement, and offering some sort of early retirement package for faculty. (Harvard has, comparatively, a much older faculty than most institutions. Here's a 2004 Crimson article on the subject that pointed out that 7% of the tenured faculty was over age 70.)
I admit, I'd like to see some concrete statements that there's to be a similar if not more extensive effort to decrease the size of administration, although to be fair some of that has also been occurring.
* The first comment, by one menckenlite, to the article seems so funny I have to quote it here:
"Disappointed to learn that Harvard is just reducing the number of faculty members. I thought they were going to get smaller professors so that they did not overload the sidewalks and streets with their over sized egos and girths."