Faculty Discusses Budget Crunch

The Faculty of Arts and Sciences’ (FAS) senior financial officer warned of the school’s impending budget crunch in a Faculty meeting yesterday, but offered no concrete plans for keeping the budget balanced.

With projected expenses likely to exceed revenues by the year 2005, FAS is going to have to utilize all available resources to avoid deficit spending, Associate Dean for Finance Cheryl Hoffman-Bray said at yesterday’s meeting.

“Careful use of all available resources will be key,” she said.

The last time the Faculty faced serious budget deficits was in the early 1990s.

Hoffman-Bray said FAS will need to check the growth of its expenses given that for the next two years the Harvard Corporation has only approved a “modest” two percent growth in payout from the endowment. This payout, which has increased in past years by as much as 28 percent, comprises half of FAS’ operating budget.

Hoffman-Bray said other main sources of revenue are not likely to fill the gap. She predicted that donor gifts will not grow much despite fundraising efforts.

In the meeting and in an interview yesterday, Hoffman-Bray would not detail budget cuts under consideration.

She would not rule out either raising tuition or tapping into funds from vacant endowed chairs to ward off deficit, but she did not advocate the measures.

“We are under a lot of pressure to keep tuition down...but I don’t know what we are going to do next year,” Hoffman-Bray said.

She did say that in order to proceed with plans for expansion of facilities and faculty, FAS will likely take on more debt.

Because of low-interest rates available to Harvard and the long lifetime of capital improvements such as buildings, debt financing can be an attractive option, Hoffman-Bray said.

FAS currently holds $308 million in debt, and has spent nearly twice that amount on facility improvements over the last several years.

“We could take on more debt and still be safe,” she said.

Hoffman-Bray’s presentation came as part of Dean of the Faculty William C. Kirby’s summary of his annual letter to the Faculty, the bulk of which focussed on the ongoing curricular review.

Though Kirby did not directly comment on FAS’ financial situation, he did offer one whimsical solution.

Noting that their University Hall meeting space was once a chapel, Kirby suggested it was “a good time to take up the offertory.”

—Staff writer Jessica E. Vascellaro can be reached at vascell@fas.harvard.edu.