Fighting A Long-Term Squeeze

There's a message that comes through loud and clear in the 1973-74 Financial Report to the Board of Overseers. Simply put, if the financial outlook doesn't improve in the near future--either via the divine intervention of the invisible hand or the restrictive intervention of Big Brother--Harvard, yes, fair Harvard, is going to have to seriously consider basic changes and cutbacks in its programs.

By itself, a $1-million deficit is really not that much to worry about. Harvard has run larger deficits in recent history, and when you're talking about the summation of 42 separate budgets involving expenditures of $230 million, $1 million is a paltry figure.

But things are different this time around. The symptoms that caused this year's deficit threaten to be long-term rather than short-term aberrations, and with each passing year the weapons with which the University can fight back become less effective.

During the three deficit years of the late 60s and early 70s, the University was able to rise to the challenge through better organization and management, cutting back in the growth rate of expenses. All these measures paid off in multi-million dollar surpluses for 1971-72 and 1972-73.

Despite this year's deficit, these factors played an important role in all of Harvard's budgets in 1973-74. If the University had not halved its growth rate of expenses in the first years of this decade, had the management of food services and other budgets been less efficient, had the University not cut its energy consumption by more than 20 percent while energy costs were skyrocketing by 66 per cent, then 1973-74 could have produced an astronomical deficit.

It is no longer simply a matter of better management. The downward trend in governmental support places more and more pressure on the University's private sources of income, yet these sources are in the process of undergoing a dual squeeze.

Inflation has reduced the real value of any money Harvard receives. Just to keep up, the rate of private support has to increase at the same percentage basis as the rate of inflation.

On the other hand, the limp stock market and current recession (even Gerry Ford uses that word now) have placed tremendous pressures on private donors and foundations.

Harvard can continue to cut costs, to institute better and more centralized management procedures, to conserve fuel and supplies, and to closely monitor the expense accounts of its various budgetary units. But while neoclassical economists can't tell us how to deal with the current stagflation, they can tell us that Harvard's conservation efforts are subject to increasingly diminished returns. There's no two ways about it: America's economic problems are Harvard's as well.