Dear FAS Faculty and Staff,
Earlier today, President Faust sent a letter to the University community addressing the impact of the global economic crisis on Harvard. I am writing to give you a sense for what her statements mean for the Faculty of Arts and Sciences. This is the first of many communications on this topic.
As her letter stated, leaders from across the University have met regularly during the last weeks to discuss the global economic crisis and how we as a university and as individual schools should react. From these meetings, two major conclusions became clear. First, the University cannot follow a one-size-fits-all plan moving forward, because each School has a different dependence on endowment income, sponsored research, student tuition, and current-use giving. Second, though the future of the global economy remains unclear, we must recognize that the severe economic downturn has fundamentally changed how we must approach our current activities as well as plan for our future.
At this time, neither I nor the rest of the FAS Academic Leadership have decided on the full range of specific actions that we should take to mitigate the negative impact of the current economic downturn on the finances of the FAS. Even so, we are today, more than ever before, carefully considering how we spend (or do not spend) each dollar that we have, and I ask that you do the same.
As President Faust wrote, "[w]e have to think not just about what more we might wish to do, but what we might do at a different pace or do without. ... And, given the ongoing volatility and uncertainty, we need to plan and budget with a range of contingencies in view, including scenarios for reducing our spending both this year and next." Fortunately, the new budgeting process we launched this year takes its direction from the academic priorities coming out of our departments, centers, and schools. We have thus begun to lay a foundation for the tradeoffs and hard choices mentioned in the president's letter. Our faculty and administrative staff have embraced this priority setting process, and through a series of fall meetings, are delivering to the deans exceedingly wise and carefully considered requests.
Yet to deliver financial results this year that are below budget and create future budget scenarios that reduce our recurring expenses will require us to take an even harder look at what we do and how we do it. The FAS is not unfamiliar with proverbial belt-tightening, but given the current crisis we will need to go significantly further.
Let me try to paint the FAS financial picture beyond the immediate crisis so that I can put what we have to accomplish in a more complete context. The last half-decade has seen the FAS undertake unprecedented expansion in its faculty, programs, and facilities. The major driver of this expansion was the exceptional growth of our endowment; in fiscal year 2008, endowment income paid for more than half of the total expenses of the FAS. Simultaneously, the growth in the FAS endowment allowed us to vastly reduce the cost to low- and middle-income students of attending Harvard.
As the president mentioned in her letter, "Moody's, a leading financial research and ratings service, recently projected a 30 percent decline in the value of college and university endowments in the current fiscal year." A reduction in the size of our endowment of this magnitude is not one that we can hide by averaging the income we pay out of the endowment over several years of returns. Given the prominence of endowment income in our finances, we must consider budgeting scenarios that significantly reduce our annual operating expenses.
The academic and administrative deans and I have already begun to think about how best to approach this unparalleled challenge. I say that this is unparalleled, because we often consider how we might slow the growth of our expenses, but we almost never discuss how we can roll back the clock to spend less. The plans emerging from this challenge will almost certainly affect the FAS unevenly, although the size of this challenge will guarantee that every one of us will be affected in some way.
We must also be careful not to allow prudent financial planning for worst-case scenarios to leak over and affect our programs. We don't know the future. We don't know how long this crisis will last or how severe it will be. We must approach it with eyes open, but be on guard to ensure that negativism does not prevail.
As we enter this difficult period, I want to assure you that I will approach this challenge in a thoughtful, communicative, and consultative manner. When it comes time to make painful decisions, I pledge that they will not be made lightly. I can only hope that this period will offer us a chance as a community to focus our vision of what is truly important in the work that we do.
With all of this said, I will repeat what I said to the faculty before the current financial crisis occurred: We cannot stand still, or stop the pursuit of our most important academic priorities. The FAS remains committed to attracting the best faculty, students, and staff. I join President Faust in asserting that, in spite of the unparalleled challenge before us, "we will set our academic sights just as high, and we will ensure that the ambitions and vibrancy of our community and the strength of its commitment to the pursuit of truth remain unsurpassed." Harvard was built by alumni/ae, faculty, students, and staff working together toward a shared purpose, and together we will overcome this challenge and create a Harvard that is even stronger than the one we enjoyed before this crisis.
Michael D. Smith
Thursday, November 13, 2008
Michael D. Smith, Dean of the Faculty of Arts and Sciences, letter to FAS staff following Faust's email, 11/10/2008
at 11:49 AM