FAS To See Deficit In Tens of Millions

The Faculty of Arts and Sciences is bracing for annual budget deficits in the tens of millions brought on by expensive construction projects and other high-cost initiatives, according to several department chairs who were briefed on the projections.

The report of the projections came at a chairs’ retreat in September, when Dean of the Faculty William C. Kirby also confirmed his intention to sharply slow faculty hiring as a reaction to unexpectedly high pressure on the budget. That decision took professors by surprise when word of it trickled out of University Hall in late summer.

But in an e-mail yesterday, Kirby cast higher expenditures as part of a plan to expand the Faculty’s physical and human resources for which it has long been preparing financially. Indeed, Kirby’s first annual letter to the Faculty, in 2003, warned of budget deficits by fiscal year 2005.

Kirby did not address the projected size of the deficits discussed at the September retreat. But Andrew Gordon, the chair of the history department, recalled that report’s projection of annual deficits as between $40 and $80 million, and several other chairs also put the number in the tens of millions. Deficits were projected to start in fiscal year 2006, Gordon wrote in an e-mail, and to “continue for some time if no steps were taken.”

With the looming budget deficit, FAS is going to dip into its reserve funds, which it has accrued through gifts and at least four consecutive years of budget surpluses.

“These reserves were accumulated for a purpose, with the idea that they would be spent, and they are one means of financing new construction and renovation,” Kirby wrote in his e-mail.

High construction costs are primarily to blame for the projected deficits, department chairs said. Specifically, they said that expenses for projects including the Center for Government and International Studies (CGIS) and the North Yard science complex were said to be significantly higher than initial estimates.

But the chairs also noted that they can only speculate as to the real reasons for the projected deficit— which would be down from a $22.2 million surplus in fiscal year 2004. They also said they were uncertain about what the FAS’s financial future holds.

“If you ask me where we will be one year from now, I honestly don’t know,” said a department chair who asked not to be named.

That throws departments’ long-term plans into limbo.

“I think when one is in a deficit the question is really what the long-term prospects are,” said Robert J. Sampson, the chair of the sociology department. “What’s important is to place it in the long-term plan.”

University Hall spokesman Robert Mitchell would not comment on construction costs, citing FAS policy, and the amount by which various projects exceeded initial estimates remains unclear.

Linda Snyder, the associate dean of physical resources and planning, acknowledged that the costs are in the hundreds of millions. The Laboratory for Integrated Science and Engineering—a part of the broader North Yard science complex—is currently expected to cost $150 million, according to the capital projects manager, Steve Smith. The CGIS complex that opened recently cost about $140 million, said Government Department Chair Nancy L. Rosenblum, who noted she could not confirm that figure.

But Snyder wrote in her e-mail that the cost of buildings is largely in keeping with estimates.

“While we are in a very challenging construction marketplace, I don’t believe that our current construction costs have changed significantly enough from projections to affect future annual costs of the buildings,” she said.

In his e-mail, Kirby acknowledged that FAS would be dipping into its reserves to fund its expansion. That expansion includes the construction, as well as a plan to grow the Faculty to 750 by 2010 from 700 this January.

“Looking ahead, as we invest in new faculty and buildings, we will continue to use our existing reserves,” Kirby wrote. “In some sense that is as it should be, for as we seek additional funds, we need to show that we are using our reserves and other resources.”

Kirby added that the FAS would continue the cost-cutting measures he set out in his annual letter this February. Those measures include a “soft freeze” in staff hiring and “continued, careful monitoring of costs that are not related to our highest priorities.”

—Staff writer Anton S. Troianovski can be reached at atroian@fas.harvard.edu.