President Drew Faust this afternoon delivered what was billed as an "opening-of-year" address in Sanders Theatre, in lieu of the e-mail messages sent in prior years: her first such general, community-wide speech, apart from her installation address in 2007 and her afternoon addresses at the 2008 and 2009 Commencement exercises. It was "a good idea to talk in person," she told the audience, after an "unusually challenging year" dominated by news of financial and economic challenges--which perhaps overshadowed gains in the University's academic programs, teaching, and faculty ranks. (Hear a recording of Faust's remarks, watch the archived video, or read the speech text.)
Before focusing on "our changed financial landscape" and the "difficult challenges" that still face the University, Faust recalled the "resilience" and "creativity" of prior Harvard generations in sustaining and building the institution, and asked that the community "meet this moment with equal devotion." She underscored the need for the University's scholarship and teaching in a world beset by global economic problems, climate change, infectious diseases and healthcare disparities, inequality, and religious and cultural strife. In conducting research, devising policy solutions, and education, she said, universities are uniquely placed to "take the long view" of immediate problems, placing them in historical context and maintaining a perspective on the horizon beyond. People within the University, she said, have the obligation "not just to serve but to doubt," particularly at a time when "our work has never mattered more."
Harvard's Financial Situation
Faust noted that, as reported, the endowment's value had declined by $11 billion during the past fiscal year. As endowment distributions--typically about 5 percent of the assets' value--provide more than one-third of University income, she noted that the decline would imply a loss of $500 million in such income. Instead, the University aims to spend about 6 percent this year, and then a progressively lessening percentage in future years, to keep the decline in operating revenues from being too abrupt or jarring. Nonetheless, that means that after a period of rapid growth, the University now faces a structural revenue gap, Faust said--because it tied income too closely to volatile markets and learned "costly lessons about risk" as a result.
Looking ahead, and outlining some of the information to be disclosed in Harvard's annual financial report (to be released in a few weeks), Faust said that net income from tuition (after financial aid) declined in fiscal year 2009; that current-use giving had risen, but that gift income overall, as reported, had declined by nearly 10 percent; and that sponsored-research funding had risen by a relatively robust 7 percent. (The potential risk in research support, she said, comes in not relying too heavily on the temporary surge of funding associated with the federal government's stimulus program, which has just a two-year duration.)
How would Harvard adapt? Faust reiterated the financial plan now in place: distributions from the endowment will decline 8 percent in the current fiscal year, and "at least" that much next year. She said that the schools' responses to new budgetary realities varied with their circumstances, but did not provide any detailed examples. Spending reductions did achieve "meaningful savings" last year, compared to the budget adopted before the financial crisis took hold. Many of those reductions reflect the multiple steps taken to restrain personnel costs, from reductions in hiring and in filling vacancies, to the voluntary retirement incentive, to the layoffs implemented late last spring, and to the freeze on faculty and nonunion staff members' salaries.
The University has also "slowed our ambitious capital plans," she said, especially with regard to the long-term ambitions in Allston. Compared to last year's original capital plan, spending has been cut in half for the next several years, she said. And efforts continue to secure efficiencies in procurement.
Operating Principles
For the future, Faust said, the University must identify and protect its core priorities--"what we are here for," namely "education and research of the very highest caliber." It would not be possible to pursue every interesting idea, nor to do everything that has been done heretofore. The community, she said, would have to move promptly to a "new normal" state of affairs, because it was unlikely that rebounding financial markets would restore the lost value of the endowment anytime soon. Accordingly, Harvard would have to "embrace the opportunity and the necessity" of working more efficiently and cooperatively, doing better work by "harnessing the power of a more unified Harvard." In that vein, she invoked President Charles William Eliot, who in 1908 (his fortieth and last year in office) called for a better integrated University. Faust said there were three reasons for promoting such interaction today: the nature of the challenges the world faces; the opportunities to create and share knowledge; and the practical, economic constraints on how Harvard can now operate. In that spirit, she said, "even as we find ways to adjust, we will find ways to advance."
To that end, Faust underscored Harvard's commitment to attracting and supporting the best faculty members and students from around the world, a basic principle of both meritocracy and of access. She listed areas of intellectual connection across schools, in fields ranging from the global economy and stem-cell science to work on human rights; students and faculty members, she hoped, would increasingly feel themselves part not only of a single school, but of Harvard University. She reiterated the commitment to liberal arts as a fundamental purpose of a Harvard education. And she encouraged members of the community to recognize their obligation to "live by the ethical standards we preach" and to "repay the privilege of being in a rare place like this" through lives of service.
Toward the "New Normal"
Faust then sketched some examples of the kinds of collaborations she is encouraging, both administrative and academic. Among the former, she cited the task force now examining the "curious practices" of Harvard's 70-plus libraries, whose separate operations may impede access to collections and produce duplication, unaffordable expense, and sub-optimal teaching and research. Similarly, she said, separate information-technology systems around the University impede compatibility and collaboration, and drive up costs.
Turning to academic examples, she cited the new undergraduate General Education curriculum, just launched, pointing to instances of novel courses. The initiative, she said, "invites our faculty to join intellectual forces and our students to trespass" across intellectual boundaries, not only within the Faculty of Arts and Sciences but across most of the professional schools. Similarly, she said, 200-plus faculty members had joined forces to plan initiatives in global health, resulting in new research clusters (examining, for example, chronic diseases, children's health, and new technologies), and yielding new interfaculty courses. Beyond its own merits, she said, the initiative was "modeling a culture of collaboration."
Whatever the value of the endowment, Faust concluded, "There is a wealth of intellectual opportunity within this University." Some of the opportunities reside within disciplines; others exist across such boundaries. "We need one another," she emphasized, to do the best work possible. If the community proceeds in that spirit, she said, Harvard will emerge from its current constraints a stronger, more vital institution.
