Harvard: 'Nothing Is Fucked, Dude'

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From: Drew Faust To: undisclosed-recipients
Sent: 11/10/2008 2:41 PM
Subject: Harvard and the economy
To Harvard Faculty, Students, and Staff:
I write today about the global economic crisis and its implications for
us at Harvard.

We all know of the extraordinary turbulence still roiling the world's
financial markets and the broader economy. The downturn is widely seen
as the most serious in decades, and each day's headlines remind us that
heightened volatility and persisting uncertainty have become our new
economic reality.
For all the challenges such circumstances present, we are fortunate to
be part of an institution remarkable for its resilience. Over centuries,
Harvard has weathered many storms and sustained its strength through
difficult times. We have done so by staying true to our academic values
and our long-term ambitions, by carefully stewarding our resources and
thoughtfully adapting to change. We will do so again.
But we must recognize that Harvard is not invulnerable to the seismic
financial shocks in the larger world. Our own economic landscape has
been significantly altered. We will need to plan and act in ways that
reflect that reality, to assure that we continue to advance our
priorities for teaching, research, and service.
Our principal sources of revenue are all likely to be affected by these
new economic forces. Consider, first, the endowment. As a result of
strong returns and the generosity of our alumni and friends, endowment
income has come to fund more than a third of the University's annual
operating budget. Our investments have often outperformed familiar
market indexes, thanks to skillful management and broad diversification
across asset classes. But given the breadth and the depth of the present
downturn, even well-diversified portfolios are experiencing major
losses. 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. While we can hope that
markets will improve, we need to be prepared to absorb unprecedented
endowment losses and plan for a period of greater financial constraint.
The economic downturn also puts pressure on other revenues that fuel our
annual budgets. Donors and foundations will be harder pressed to support
our activities. Federal grants and contracts for sponsored research will
be subject to the intensified stress on the federal budget. Tuition
remains an important source of revenue, but in times like these we want
to keep increases moderate, mindful that many students and families are
facing economic strain.
Over the past several weeks I have been meeting individually and
collectively with the deans of the faculties, as well as the
Corporation, to share ideas on how we can best respond to this changed
economic environment. We need to sustain our high academic ambitions at
the same time that we bring greater financial discipline to all our
activities. We 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. Tradeoffs
and hard choices that can be avoided in times of plenty cannot be
averted now. 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.
As we plan, we must also affirm our strong commitment to financial aid
for our students. In Harvard College, that will mean carrying forward
our recent years' initiatives to make a Harvard education affordable for
outstanding students from low- and middle-income families. As before,
families with incomes below $60,000 will pay nothing to send a child to
Harvard College, and families with incomes up to $180,000 and typical
assets can expect to pay no more than approximately 10 percent of
income. Across our graduate and professional schools, we will maintain
financial aid budgets at least at their current levels -- and ensure
that our students still have access to needed loans, even though many
banks are making them less readily available.
We have long been dedicated to research and the discovery of new
knowledge across a wide range of fields of scientific and humanistic
inquiry. In recent years we have made significant investments toward
breaking down intellectual barriers across disciplines and across
Schools to generate new knowledge and to develop new courses and
educational opportunities for our students. These commitments must
continue to guide us as we make decisions and choices in a significantly
more constrained fiscal environment.
Harvard values its reputation as a stable and supportive employer, and
we view our workforce as a critical part of all we do. We recognize as
well the responsibility that comes with being one of the largest
employers in the commonwealth of Massachusetts. At the same time,
changing financial realities will require us to look carefully at
compensation costs, which account for nearly half the University's
budget.
We are assessing all aspects of our ambitious capital planning program,
including the phasing and development of our campus in Allston.
We are working with administrative and financial deans from across the
University to develop new approaches for generating both savings and new
revenue sources, building on the ideas and best practices of each of the
Schools.
Harvard is a famously decentralized place, and one size will not fit
all. Each School will face its own particular challenges. But we must at
the same time join together to address these new circumstances with
creativity and a spirit of common enterprise.
Today, perhaps as never before, we need to work collectively to develop
approaches and efficiencies that will allow every part of Harvard to
thrive in the years to come. Together, we must continue to advance the
priorities that define us.
For all that has changed in recent weeks, we remain devoted to
attracting the very best students, faculty, and staff to Harvard. We
will undertake the daily work of education and scholarship with the same
intensity and imagination. 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.
Drew Faust

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