HMS Is Facing a Deficit. Under Trump, Some Fear It May Get Worse.

Despite its $5 billion endowment from about 1,400 school-specific gifts, Harvard Medical School will run a deficit this year.

Only slightly more than a quarter of HMS’ operating revenue comes from “endowment income made available for operations,” per the Medical School’s official news publication.

Of the remaining sources, 38 percent comes from “sponsored support,” 11 percent from “education revenue,” 8 percent from “gifts for current use,” and 15 percent from “other.”

According to an HMS Office of Finance document obtained by The Crimson, “despite the optics of the Medical School’s endowment, HMS’s budget is perpetually underfunded.”

“Deficit spending is an increasing problem at HMS,” reads the document, which details the school’s deficit spending policy.

At the school’s 2024 State of the School address, HMS Dean George Q. Daley ’82 announced that the school was facing a $37 million shortfall due to “a perfect storm of negative financial headwinds.”

According to HMS officials, the deficit is the result of National Institute of Health funding not keeping pace with compounding cost inflation, increased labor and construction costs, and poor endowment returns — and with former U.S. President Donald Trump’s reelection, money issues may only worsen.

Declining NIH Funding

The NIH has long been a critical source of funding for Harvard and HMS researchers.

In 2018, the NIH was responsible for 71 percent of Harvard’s federal funding and half of all Harvard research funding.

In fiscal year 2024, NIH funding decreased for the first time in 11 years. Since fiscal year 2003, funding for HMS from the NIH has declined by 2.7 percent, adjusted for inflation.

In an emailed statement to The Crimson, Daley wrote that “the NIH is a tremendous engine for both human health and economic vitality,” and the U.S.’ standing as a global leader in biomedical research “has been built on sustained funding by the federal government to support basic and translational science.”

According to some professors, labs at HMS are feeling the pressures caused by a strained budget paired with the high inflation of the past few years.

“The buying power of the dollar going down — especially in an inflationary climate — leads to very significant reductions in the ability of scientists to perform their work,” HMS professor Reza Dana said.

According to the HMS deficit spending policy document, the HMS Office of Finance has placed limits on gift usage and departmental spending.

The document also stipulates that the Office of Finance produce a plan to resolve the deficit by the end of the fiscal year and work with various departments to meet mutually agreed upon targets.

Harvard Medical School Dean George Q. Daley '82 said earlier this year that the school faced a $37 million budget shortfall. By Marina Qu

Timothy T. Hla, a professor of surgery at HMS, said “it’s not getting any easier” to receive research funding, an issue he attributed to more than just inflationary pressures.

“Cost of trainees like postdocs and students have gone up a lot. Cost of supplies have gone up a lot,” Hla said.

Hla also noted that receiving an NIH grant has become increasingly difficult nationwide, with the rate of successful grant applications declining from roughly 20 percent to less than 10 percent for some institutions.

“Researchers have been squeezed from many, many different directions for so many years,” Hla said.

A ‘Devastating’ Lab Impact

As a result of the constrained budgets, HMS scientists are pursuing a number of avenues to maintain their ability to perform high-quality research.

Hla summarized many labs’ approach to the issue as to “just work harder,” pursuing more “entrepreneur routes” — such as receiving therapeutic development funding from pharmaceutical and biotech companies or venture capital firms — rather than only relying on government grants.

HMS Microbiology professor Lee Gehrke wrote in an emailed statement to The Crimson that the decline in research budgets from the U.S. government to research universities “raises questions about the sustainability of research at private institutions, which are being asked to make up the difference through philanthropy and foundation grants.”

But the shift to privatized research funding has not come without pushback.

Earlier this year, HMS affiliates had mixed reactions to the rise of private sources of funding for HMS research, weighing the benefits of large streams of funding against potential strings attached to the sums.

Hla — whose lab is based at Boston Children’s Hospital — said HMS is a “soft money institution” — one that does not directly fund researchers, but instead requires researchers to pursue outside sources of funding, such as through the NIH.

Though labs at HMS-affiliated institutions like Boston Children’s Hospital are not directly funded by HMS, the school offers several internal funds that faculty may apply for. In addition, approximately one-third of the gifts HMS receives contain terms that require the money be used in a clinical setting or for hospital-based research.

According to Hla, state universities typically provide more hard money to its researchers, allowing them to spend less money on operational costs such as personnel and supplies.

To solve this problem, Hla said that HMS “should support the talent that they have” and invest more in its own faculty.

“If you lose the human capital, and if you stop training the next generation of biomedical investigators, that will have a devastating impact,” Hla added.

An ‘Uncertain’ Future

With Trump poised to take a second term in the White House, many at HMS are concerned that the school’s financial issues will only worsen.

The changing political landscape “just adds uncertainty to this already uncertain environment,” Dana said.

Such uncertainty “breeds a lot of anxiety,” especially in junior researchers, according to Hla.

“My fear is that the Trump administration will take unilateral action to cut NIH budgets,” Jeffrey Holt wrote in an emailed statement to The Crimson, on top of already declining funding.

Professors said they worried about the impact of Trump's presidency on funding for scientific research. By Courtesy of Gage Skidmore / CC BY-SA 2.0

For Philip A. Cole, an HMS professor of medicine, the last Trump administration’s proposed cuts for the NIH suggest a somber outlook.

While Congress did not pass the cuts, the current federal deficit could mean “more motivation on the part of folks to cut wherever they can,” Cole said.

NIH grants typically have two components: direct costs that go to a lab’s principal investigator and indirect costs that go to an institution. Cole envisions that indirect costs in particular — which fund infrastructure, utilities, and lab renovations — could see reductions.

“They’re critical dollars for all institutions,” Cole said.

Potential consequences of such cuts could include a reduction in workforce and a change in the scale of biomedical research activity at HMS, Cole said, resulting in the school pivoting further into industrial partnerships to make up the difference.

“The pressure will be on us even more because we cannot rely on the government to the extent that we have been historically,” Dana said.

But others are hopeful that the bipartisan support for the NIH will shield the organization from the most zealous members of the new administration.

“My experience is that we always come back to the bipartisan support,” former NIH Director Elias Zerhouni said in an interview with The Crimson.

“The people, the patients, and those who talk to their legislators are saying, ‘Look, you can touch XYZ, but don’t touch my hope for a cure for my disease,” Zerhouni added.

“Scientists think they are influential. They’re not as influential as you think,” he said. “It’s the patients that really protect the NIH.”

HMS professor Jonathan C. Kagan also points to the naturally sinusoidal nature of scientific funding.

“Funding rates will go up and they’ll go down,” Kagan said, but overall, the work being done at the Medical School and affiliated hospitals “is going to continue.”

“History usually teaches us that during elections, a lot more extreme optimism or negativity is magnified,” Kagan said. “Change in America occurs at a glacial pace.”

—Staff writer Veronica H. Paulus can be reached at veronica.paulus@thecrimson.com. Follow her on X @VeronicaHPaulus.

—Staff writer Akshaya Ravi can be reached at akshaya.ravi@thecrimson.com. Follow her on X @akshayaravi22.