SEAS Deficit Persists, Despite a $400 Million Gift

Despite taking in a record $400 million pledge from hedge fund magnate John A. Paulson this June, a budget deficit persists at Harvard’s School of Engineering and Applied Sciences, requiring further fundraising and perhaps alternative sources of revenue to recover from the 2008 financial crisis and successfully expand its campus.

SEAS’s endowment saw a precipitous decline when the economic shock hit seven years ago, and the school has been in the red ever since, according to Timothy Bowman, SEAS’s executive dean. The downturn coincided with an increased interest in science and engineering from the student body: Enrollment in SEAS courses grew by 149 percent over the past seven years, while the number of concentrators grew by 186 percent, according to SEAS spokesperson Paul Karoff.

By Monica C Nesselbush

This rapid growth has generated demand for new faculty members and teaching facilities, creating spending needs. Because SEAS is composed of research-heavy disciplines, the school needs to provide startup research funding and laboratories to attract new faculty, Karoff said.

Although Bowman declined to disclose the exact size of the school’s current deficit, he described it as “not insignificant” and said it has been consistent over the past several years, relative to the school’s overall budget.

The massive Paulson gift, meanwhile, will come to SEAS in the form of an endowment, meaning the school may only spend income from the principal. Paulson will pay the gift in installments over eight years, with the first coming in this December. Once the pledge is paid in full, it will make a significant impact on SEAS finances, generating $21 million to $25 million per year, depending on endowment returns, Karoff said.

Although the gift will go a long way toward alleviating the school’s current deficit, Bowman said, SEAS expenses are expected to go up in the next few years as the school prepares to transition to a new campus across the Charles River in Allston. The school will need to pay for the operation of the new facilities, plus contribute to construction costs.

Administrators are exploring alternative funding sources to address the deficit, including further donations, research grants from non-federal sources such as foundations and corporations, and new programs such as master’s degrees and continuing or executive education, according to Bowman.

Currently, SEAS predominantly confers Ph.D.s to its graduate students. This September, however, the school launched a new collaborative program, a Master’s of Design Engineering, with the Graduate School of Design. In the short term, Bowman said, the new program will not have a positive impact on the school’s finances, due to the startup cost required for its launch. But if the program grows in popularity, he added, it may help to generate revenues in the long term.

The new degree joined only two other existing terminal master’s programs at SEAS, one in Computational Science and Engineering, which focuses on data science and was introduced in 2013, and one in Electrical Engineering, which according to the school’s website offers admission only in “exceptional circumstances.”

Bowman said master’s degree and continuing education programs are common among other engineering schools—the Stanford School of Engineering and the Georgia Institute of Technology both offer education programs that target professionals. The University of Pennsylvania’s School of Engineering and Applied Sciences offers a wide range of master’s degree programs.

Although there is currently “no active conversation” on whether Harvard will start offering similar programs, Bowman said, administrators are exploring the possibilities. The Paulson gift, while giving SEAS the “luxury of time” to search for alternative financial resources, will not eliminate the need for further fundraising, he said.

“We continue to need to look for other financial resources,” he said. “We have to be prudent.”

Sean R. Eddy, a professor of Applied Mathematics, said the school’s new dean, Francis J. Doyle III, has “done a good job” at explaining the actual impact of the Paulson gift to the SEAS faculty.

“Everyone has the impression that Frank has a $400 million check in his pocket,” he said. “And of course it doesn’t work that way.”

—Staff Writer Zara Zhang can be reached at zara.zhang@thecrimson.com. Follow her on Twitter at @zarazhangrui.