The August issue of Vanity Fair is flying off of newsstand shelves due to high profile articles on Heath Ledger’s last days and Sarah Palin’s political turmoil; however, arguably the most interesting article in the magazine is a feature on Harvard’s current financial troubles.
The article (a summary of which is available here), penned by Nina Munk, describes the problems surrounding the school’s endowment and the ramifications on Harvard’s day-to-day budget and aggressive expansion plans. From the ups and downs of the Harvard Management Company to the controversial presidency of Larry Summers to current campus conditions, the profile is packed with fascinating details and is a must-read for anyone who follows higher education.
As an added bonus and happy coincidence, I was in Boston this week and had a chance to go examine Harvard for myself. My question: is Harvard really going broke?
Munk’s article tells a very detailed story about how and why Harvard finds itself in a difficult financial situation. Key elements include: the outsized ambition of Summers, the fact that talented, gun-for-hire traders were run out of the Harvard Management Company, an egregious error made when the administration failed to cancel interest-rate swaps (resulting in a loss of $1 billion), and an expansion plan that calls for new building after new building. Oh, and an $8 billion hit to the school’s famous endowment (as Munk points out, the amount lost by Harvard’s endowment in 2008 is greater than the entire endowment of Columbia University) and another $11 billion in outstanding commitments. The article also has an edge to it, calling out Harvard for double talk — the school avoids words like “cuts” and “layoffs” and instead favors “alignments” and “resizements” (which isn’t even a word).
For all that, what interested me most was how these incredible numbers and stories are impacting current students. What is a first year going to look like at Harvard Law School? What — if anything — will change for a junior at Harvard College? What about prospective students? For all the hand wringing and finger pointing, are things really that bad?
Well, for starters, future students of Harvard College can probably plan on getting their checkbooks back out and once again bookmarking the FAFSA page. One of the most celebrated of Summers’ many moves as president was to offer free tuition to any accepted Harvard student coming from a family whose income was less than $60,000 per year. New president Drew Faust added a policy that gave enormous tuition breaks to any student whose family made less than $180,000 (the policy stated that such students would pay no more 10 percent of their family’s income). Both of the policies are likely to be in serious jeopardy, given that Harvard’s annual budget of over $3 billion is funded in large part by its rapidly shrinking endowment.
Once those students get done paying their way to Harvard, they can expect to find their fair share of turmoil. Every building on campus features the same decor right now — signs of protest. “No layoffs” is the most common, but “save our faculty” is also quite popular. Harvard Law School is currently a sea of activism, even in the middle of July, as message boards call for student involvement to push back against proposed budget cuts and faculty/staff layoffs. Most of these signs direct students to a dedicated blog with information, events, and editorials. Visit the blog at this moment and the front page will highlight a rally that was held this morning (August 6) at the Holyoke Center. Furthermore, a quick chat with any Harvard student — from virtually any program — will reveal that the prevailing opinion on campus is that the university is actually using the endowment trouble as an excuse for “belt tightening” measures. Most students seem to feel that simply reallocating resources and showing some restraint at the top of the food chain is more than enough to correct the current budget problems, but that Harvard is being opportunistic (at best) and trying to squeeze more work out of fewer resources by attacking the bottom of the faculty and staff. Needless to say, it is not the most harmonious place to be at present time.
Finally, there is the issue of facilities. The biggest aim of the Summers regime was to turn Harvard into the “Florence of this century” and the primary method for making that happen was expansion and construction. New buildings are everywhere on campus, outnumbered only by uncompleted construction pits. When will these projects be completed? No one seems to know. Workers tending to the current law school expansion project seem to basically be operating in maintenance mode, trying to make sure that any progress to date is protected from the coming weather changes in late fall and winter. No one is even working on the massive, $1.2 billion Allston campus that will house new HBS facilities in addition to a massive science center. How will the campus look in the months and years to come?
Even if one were to set aside the stunted growth, the controversy, and the likely diminution of financial aid, there is still a nagging sense that Harvard is on hold. The grounds were poorly maintained on my visit, there was trash strewn about, and the focus is on budgets and jobs instead of programs and ideas.
For all that though, one has to assume that Harvard will find a way to resolve this situation and move on quickly, because that is what Harvard has always done. The endowment is down over 20% from this time last year, but it is still nearly $30 billion and larger than that of any other university. All of those recently completed buildings that put the school in this position are still there, ready to improve the learning experience for Harvard students. Not to say that Munk’s article was hyperbolic or that things are all smooth sailing for Harvard right now, but I can’t help but think that this profile features the low point and that things will improve from here.
Of course, even that scenario would have been unthinkable just a year ago. Stay tuned.