Faculty of Arts and Sciences Planning

A Message from Dean Smith

To FAS faculty and staff:

Today marks the end of the reductions in force in the Faculty of Arts and Sciences that began on June 23, 2009. Across the FAS, 77 positions were eliminated, and 15 were offered a reduction in hours, which is equivalent to a 2.5% reduction of our total workforce. Every job eliminated was the result of a decision-making process that was carried out unit by unit as local managers determined how best to pursue their missions with reduced resources. This difficult step was necessary to ensure that we can continue vital programs core to our mission.

Harvard is one of the largest employers in Massachusetts, and our staff members are centrally involved in everything we do in pursuit of our teaching and research mission. In the FAS, compensation costs account for nearly half of our total budget, and the downturn in the global economy has forced us to take a hard look at all of our spending.

The FAS has taken a number of steps to manage compensation costs while minimizing the impact on our staff. Freezing salaries for faculty and exempt staff, strictly limiting new hires, offering a reduction in hours, and participating in the University's voluntary early retirement program were all important parts of this strategy. However, given the size of our budget gap, additional reductions were needed.

Together with the University, we have worked to make the process as humane and supportive as possible for those staff members whose positions have been eliminated. As President Faust and Vice President Hausammann mentioned in their messages on June 23, those staff members facing layoff were offered enhanced severance benefits as well as a number of services to help ease their transition to a new position, whether within or outside of Harvard.

Those staff who will be leaving us are valued and will be missed by the faculty and staff who remain. I recognize that we will have to adjust to a workplace without some familiar faces. To help in that adjustment, FAS Human Resources and your department managers are available and prepared to answer any questions or concerns you may have. You can also call the Employee Assistance Program at 877-EAP-HARV for a confidential consultation. The FAS is committed to providing a supportive and responsive workplace, not just in times of change, but at all times. I will uphold that commitment in the weeks and months to come as we grapple with the challenges ahead.

Respectfully yours,

Michael D. Smith
Dean of the Faculty of Arts and Sciences

Important Workforce Announcement

Dear Colleagues,

As all of you know, this past year has created a set of extraordinary financial challenges for our university as it has for others. I am grateful for the continuing efforts made by people across Harvard to confront these new realities with thoughtfulness and care, and with an emphasis on sustaining the strength of our core academic programs.

With compensation accounting for so high a proportion of our budget, we will enter the 2009-10 academic year with salaries held flat for faculty and exempt staff; we have also offered a voluntary early retirement program in which more than 500 staff members across Harvard have chosen to participate.

While these actions have helped us reduce expenses, we nevertheless have more we must do. In the coming days, Harvard's Schools and units, as well as its central administration, will be carrying out a reduction in the size of our workforce--modest in comparison to the overall size of our University-wide staff, but nonetheless painful for those people directly affected, as well as for our community as a whole. Most of the Schools will carry out the process this week; the Faculty of Arts and Sciences, the Medical School, the central administration, and several of the allied institutions will follow, beginning on June 29.

Such decisions, in their human dimensions, are among the hardest that an institution like ours can make. But difficult circumstances have called for difficult decisions across the University.

As we proceed through this complicated transition, I want again to express my appreciation to all of you for your dedicated efforts on Harvard's behalf. A letter from Marilyn Hausammann, our vice president for human resources, explaining more about the planned reductions, appears below.

Sincerely,

Drew Faust

Dear Colleagues,

I am writing to let you know that most of the Schools, allied institutions, and units in the central administration at Harvard will be carrying out a reduction in our workforce over the next seven business days.

The size and scope of the reductions will vary across the Schools and units, but when taken together these changes will result in the elimination of approximately 275 staff positions. About 40 more staff members will be offered positions with reduced work hours or an academic year schedule. Deans at the affected Schools and department leaders will be communicating directly with their staff members about the changes taking place in their local communities over the coming days.

We regret the impact this will have on the lives of our valued colleagues. This decision was driven by the financial challenges facing the University after a projected 30 percent drop in our endowment, as well as pressure on other revenue sources, and it should not be allowed to diminish the many contributions made by these staff members during their time with the University.

Over the past six months, managers across the University have scrubbed their budgets for non-personnel savings, canceled or curtailed travel, and limited other discretionary spending. We have slowed development in Allston, strictly limited hiring, and reduced our reliance on outside contractors. We have held salaries flat for the coming year for our faculty and exempt staff, a move affecting more than 9,000 individuals. And the Voluntary Early Retirement Program that was offered to about 1,600 employees attracted more than 500 participants.

These steps have helped to keep the number of involuntary reductions as small as possible. Unfortunately, further cuts are needed in order for Harvard to adjust to the institution's new economic reality.

About half of the positions eliminated are administrative or professional positions, and almost all of the remaining ones are clerical or technical jobs. Service and trade workers will be largely unaffected.

The University is taking a number of steps to support staff members facing layoffs. These include:

• 60 days of pay from the time of notification,
• lump-sum severance of one to two weeks of pay for each year of service,
• enhanced severance benefits that include an additional four weeks of pay, and
• the opportunity to continue medical and dental benefits for 18 months, with a full year at subsidized rates.

Employees will have access to information about their benefits in individually prepared materials, on HARVie, and at a special walk-in Employee Support Center.

Administrative/professional and non-union employees wishing to begin a new job search are eligible for outplacement services and employment coaching. Harvard case management will be provided for HUCTW members. And, effective immediately, Harvard will institute a 30-day external hiring freeze for staff jobs to focus our efforts on matching qualified internal candidates with current job openings. I know that this is difficult news both for our colleagues whose positions are being eliminated and for those of you who will miss working alongside them. I think it is important to note that all of the steps that we have taken to reduce spending over the past six months have been taken with the aim of sustaining the academic and organizational capabilities Harvard will need for the future, while minimizing the impact on our workforce.

To those of you who are directly affected by this reduction in force, please know that we will do everything we can to make your transition as smooth as possible.

And to the entire University community, please know that we appreciate your dedication in this challenging time. With your help, Harvard will continue to be a vital and engaging place to work.

Sincerely,

Marilyn Hausammann
Vice President for Human Resources

An Extraordinary Year

Dear Members of the Harvard Community,

Earlier this month Harvard celebrated its 358th Commencement, capping what was by any measure an extraordinary year.

It began with a tropical storm and a blackout greeting our freshmen on their first night in the Yard. It ended with sunshine in Tercentenary Theatre, with festive graduation ceremonies and a singular rendition of "America the Beautiful" by Wynton Marsalis, one of our honorary degree recipients. We started the year naming Julio Frenk, the former Mexican health minister, as our new dean of public health, later announced Cherry Murray of Lawrence Livermore National Laboratory as our new dean of engineering and applied sciences, and just last week appointed Martha Minow, a longtime member of our law faculty, as the Law School's new dean.

In the fall we marked the Harvard Business School centennial, hailed "green as the new crimson," created the Wyss Institute for Biologically Inspired Engineering, and embarked on new directions in the arts. In the spring we explored the sustainability of cities, readied the launch of our new General Education curriculum, admitted students from the largest applicant pool in the history of Harvard College, and loaned more than a dozen faculty members -- in law, government, science, economics, medicine, and public health -- to the new administration in Washington. From September through June, our faculty, students, and staff navigated a year filled with unprecedented financial challenges but also with remarkable achievements.

The global economic crisis and its impact on our endowment will continue to challenge us -- as we, like other institutions, confront difficult and at times wrenching choices about how to align our spending with significantly reduced resources. But, as I said at Commencement, our focus belongs not on what we have lost, but on what we have.

Whether the subject is climate change or the battle against infectious diseases, K-12 education reform or the future of financial regulation, international conflict or health care policy, our faculty and students are more than ever bringing their knowledge to bear on the world's most daunting challenges. Just as important, they are pursuing the timeless work of humane learning -- drawing wisdom for the present from the experience of the past, situating questions of immediate practical concern in the context of enduring values, reminding us of all there is to learn from making as well as understanding art.

Even as we work to resize and reshape aspects of our enterprise, let's not for a moment forget the immense contributions that our community continues to make to the advancement of knowledge. Especially at a time of volatility, uncertainty, and change, we must be sure to make ourselves the architects of change, not its victims.

As we end a year with more than its share of challenges, I hope we can pause to remember what defines us: The undergraduate students whose diverse talents and energy continue to amaze. The professional school students who are helping redefine their fields at a moment when the call to public service is resonant and strong. The graduate students who are transforming their disciplines with their doctoral research. The faculty members who each day are shedding new light on everything from stem cells to the structure of the universe, from early-childhood development to the role of religion in public life. The staff members whose dedication enables the core academic work of the University to advance and thrive.

When I spoke to our graduating seniors at baccalaureate, I tried to convey some sense of how the learning that happens here can help us improvise through times of uncertainty and come out stronger and wiser, more resilient, more adaptable, and better prepared to lead fulfilling lives. I hope our graduates' experience here, in the classroom and beyond, will serve them well -- and inspire them to serve others well. And I hope you'll take a moment to look at the following slide show of images and sounds from the past year, which captures vividly why Harvard continues to draw us together and how it helps change the world.

Sincerely,
Drew Faust
president@harvard.edu

Our Plans for the Future

On Monday, May 11, the Faculty of Arts and Sciences outlined a wide-ranging set of changes to programs and services across all parts of FAS. It launched a website to share those changes and provide contacts for questions or more information. The website will be the portal for the reporting of further progress and the collecting of broad community input. These recently announced changes to programs and services were the result of a cost-saving effort involving all units of FAS, launched as we began the process of budgeting for fiscal year 2010.

As was publicized and explained, our efforts to trim the FAS budget focused on local planning and efficiency-increasing measures, and it asked the community for ideas. It produced an extensive set of suggestions, and the academic deans of FAS approved those that made better use of our limited resources within the context of our core mission. The approved list equates to a $77 million reduction in our annual operating budget but represents only 35 percent of the $220 million deficit that FAS will face in two short years (based on what we know today).

The remaining $143 million must be the focus of our community. We will not meet this goal by simply making further reductions in our existing programs. As we have often heard, the current reductions left no fat in our programs, and to continue to squeeze them would simply cut into bone. We must look at each major area of the FAS and decide what excellence for the future will look like, within a budget driven by our new fiscal reality. Only then can we decide where to make further reductions and where to apply incremental resources.

As you have heard us say, this approach will most likely involve the restructuring or reshaping of some of our academic programs. Change is difficult, even when the goal is clear, and to successfully overcome the challenge before us, our entire community--the faculty, staff, and students--will need to work together and trust that each has the best in mind for our community.

The global economic crisis is having powerful impacts on higher education, and neither Harvard nor its peers have been immune. Difficult trade-offs among many traditional commitments have been and will continue to be made. We can promise you that the decisions we make will always reflect our core values, priorities, and mission. While the spotlight of attention will often be pulled toward that which has been eliminated, we would also like to acknowledge those of you in the community who have indicated to us that you understand that behind every measure announced there is a trade-off. And we hope that this entire process reflects our dedication to the excellence of our programs and, to the greatest degree possible, our effort to minimize its impact on all those who make FAS the unique and vibrant place it is today.

Can we reshape the FAS to ensure the quality, integrity, and excellence of our mission? Our answer is unequivocally yes. Will this be difficult? We all know the answer is yes. Inevitably, in such a process there will be disagreements and disappointments. Some commitments will be deemed more essential than others, and some activities will be continued while others will regrettably be eliminated. With such a multiplicity of important and valuable activities, it is never simple or easy to choose among them. But drawing upon the remarkable talents, goodwill, and broadly shared commitment of our community will sustain Harvard's unique identity and unmatched excellence.

Shuttle Schedule

Dear Harvard College Students,

I am writing today as a follow-up to the town hall meetings held by the College last week addressing program and service changes that the FAS announced on Monday, May 11. I appreciated the opportunity to hear from many of you at these open forums and in subsequent emails I've received. I wanted to thank you for your candid comments and to let you know that I have taken the feedback you provided - and continue to provide - seriously.

One of the cost-cutting measures the College adopted was to change the shuttle schedule to bring service in line with demand and student use. What I heard from many of you is that the reduction in overnight service raises safety concerns among those students who use this service. I wanted to make clear that the College's decision to end late night shuttle use after 1:30am on Sunday - Wednesday was made after a thorough review of the safety implications of the change and was predicated on students' use of the other late night transportation options that are currently available. What I heard from many of you, however, is that the Escort and Van alternatives are less than optimal as viable alternatives for late night shuttle service.

Therefore, I have decided that the issue of late night transportation will undergo further review. I have asked the Harvard College Safety Committee to work with students from the College's new Student Life Working Group to forward a set of recommendations to me on the range and dependability of late night transportation options available to students. I have also asked that these two groups work together to review the practices that result in our students moving around campus in the late night hours. We will then adjust the late night transportation options based on these findings and recommendations, and on our financial constraints.

I would be remiss if I did not also point out that there is more to campus safety than shuttle service, and the College has worked diligently over the last five years to increase students' safety on campus. In 2004, the Harvard College Safety Committee was reconstituted with the charge of reviewing student safety on campus. By identifying current student practices and responding to students' requests, the Committee has made recommendations for policy changes and infrastructure modifications. These include working with the City of Cambridge to install blue-light phones on the Cambridge Commons; repairing, replacing, and installing city street lamps on pathways; conducting twice annual "safety walks" to identify areas for improvement to safety; developing the Harvard University Campus Escort Program (HUCEP); and, in establishing and publicizing a set of "designated pathways." Designated Pathways are routes across the Cambridge campus that are well lit, heavily traveled, and lined with blue light emergency phones. These designated pathways can be reviewed at http://hupd.harvard.edu/.

Safety also depends on the choices you as students make. With that in mind, the Safety Committee conducts biannual community campaigns to remind students of their personal responsibility to stay safe by locking doors, walking in groups on well-lit paths, reporting suspicious activities, and preventing "piggybacking" into our residential dorms and Houses. If you have ideas on ways to improve student safety on campus, I invite you to email or join the College's Safety Committee at hcsafety@fas.harvard.edu.

Finally, I want to reiterate my commitment to the undergraduate experience and to reassure you that my staff and I are working hard to preserve the mission of the College while reducing our expenses. As we look to the next phase of identifying changes to services or programs, I will be working with two College Working Groups that include faculty, staff, house masters, and students and will be seeking your input through a larger community engagement process. These groups met last week and our first topic was increasing communications and developing mechanisms for student, faculty, and staff to have input into our deliberations. Over the summer we will be building a website and designing other public fora that will allow students, faculty, and staff to communicate with the working groups. While I have been unable to respond to all of you, I want you to know that I appreciate your taking the time at this very busy and stressful time of the year to provide your feedback to me and my staff. I wish you all the best during your final examinations this week and next.

Sincerely yours,

Evelynn Hammonds
Dean of Harvard College

College Town Hall Forums

Dear Harvard College Students,

Earlier today you received an email from Dean Michael Smith outlining several changes to existing services in teaching, research, and various student life areas that intersect with the College. While many of these changes will go into effect for the next academic year, both Dean Smith and I wanted to make you aware of these changes before you left for the summer.

I suspect that many of you will have questions about how these changes will affect you personally or change Harvard College as a whole. While I sincerely believe that these changes will have a minimal impact on the undergraduate experience as you have come to know it, I also understand that any change to routine and familiarity can be difficult.

I have decided to visit several locations around campus this evening to answer your questions about these changes. Members of the College senior staff, housemasters, and faculty will join me to help better explain the details of these plans. Here is my schedule for this evening:

• 4-5:30p - Lamont Cafe
• 5:45pm - 6:45pm - Quincy House Junior Common Room
• 7-8pm - Cabot House Living Room (Entry E)
• 8:30-9:30pm - Mather House Senior Common Room

As Dean Smith mentioned in his letter to you today, these measures represent a first phase of resizing the activities of the College in order to better align our expenses with our financial reality. Regrettably, I was unable to involve students in these initial conversations due to the sensitive nature of financial and personnel issues we face in the College. Students will play an important role in the second reshaping phase, where we will need to look critically at our academic and programmatic priorities.

I would like to extend an invitation for you to take part in two College Working Groups, one focused on undergraduate education and the other on student life in the College. I will assemble these groups over the summer in preparation for our meetings next academic year. The goal for these working groups is to identify innovative ways for Harvard College to more effectively pursue its mission while maintaining the College's commitment to excellence in undergraduate teaching, advising, co-curricular and residential life programs.

There are two ways to become involved in these groups. The first is by indicating your willingness to participate in these working groups by entering a lottery (http://isites.harvard.edu/icb/icb.do?keyword=k59361) I have established for this purpose. The second is by applying to the Undergraduate Council, which has a process for selecting student representatives. I will choose one half of the student representatives through the lottery process and one half will be appointed by the UC with the expectation that we will have a representative group of undergraduates helping us with the important tasks which lie ahead.

A portion of Harvard College's mission statement reads, "Harvard strives to create knowledge, to open the minds of students to that knowledge, and to enable students to take best advantage of their educational opportunities." I remain committed, as Dean of the College, to these goals.

Sincerely yours,

Evelynn Hammonds
Dean of Harvard College

New Budget Planning Website

Dear Faculty, Staff and Students,

I am writing today to announce the creation of a new web resource to provide faculty, staff, and students with up-to-date information on many of the cost-saving measures being implemented in the Faculty of Arts and Sciences. At http://planning.fas.harvard.edu, you will find detailed information about specific changes in services and programs, as well as cross-cutting administrative changes. This resource will be enhanced with additional features in the coming months, and will be updated as new measures and strategies are approved and implemented.

*The Current List of Service and Program Changes*
Last fall, departments and administrative units in the Faculty of Arts and Sciences began a planning process to identify a range of possible cost-savings to bring short-term and long-term budgets in line with our new economic reality. Of the more than $90 million of possible savings identified, $77 million were chosen for implementation.

The planning website does not present all of the cost-saving measures that we will begin implementing immediately. We have focused here on changes (in hours, offerings, and services) that will be visible to our community, as well as broad administrative changes that will affect units and departments across the FAS.

Individual departments, centers, and units have made other difficult trade-offs in support of the FAS's cost-saving goals. Though the majority of those more local changes are not listed here, I want to acknowledge the critical importance of these efforts.

We anticipate that most of these measures will be staffing neutral. In implementing them, we will eliminate some positions and cease their associated activities. This will result in the reallocation or redeployment of staff where possible. However, as I have said before, the size of the financial challenge before us makes it increasingly likely that staff reductions will eventually be necessary. We are engaged in thoughtful and deliberative consideration of these actions and their potential impact.

*A Two-Phase Process: Resize and Reshape*
These measures represent the completion of the first phase of a two-phase process. In this first phase, administrators, faculty, and others expended enormous time, effort, and energy in finding innovative ways to resize their activities, i.e., to reduce costs through better use of resources and increased efficiencies. I am extremely grateful to everyone who worked so hard on this difficult but critical resizing effort.

As our plans for resizing are implemented and the $77 million in cost-savings are realized, we as a community must now move forward with the second phase. As I described in the Town Hall Meeting on April 14, $77 million represents only 35% of the total $220 million annual deficit we face in academic year 2010-2011. It is not possible for us to rely solely on further resizing of our activities to eliminate the remaining annual deficit, and we clearly cannot operate indefinitely spending $143 million more each year in expenses than we receive in income. To address the rest of the looming annual deficit, I have called for a reshaping of the FAS in support of our teaching and research mission through a careful consideration of our academic and programmatic priorities.

*The Next Phase: Targeted Working Groups*
The nature of this second phase is quite different from the first, and will result in significant and visible changes to the way we pursue our teaching and research mission. Our approach to this second phase, therefore, will also be meaningfully different and will thoroughly and thoughtfully include input from our entire community. I have formed targeted working groups in each of the three academic divisions (Arts and Humanities, Science, and Social Science), two in the College, and one in the School of Engineering and Applied Sciences. These groups will produce proposals which I will consider between now and the spring semester of 2010.

Students, both graduate and undergraduate, will play an important role in the activities of these working groups. Harvard College Dean Evelynn Hammonds, Graduate School of Arts and Sciences Dean Allan Brandt and I will develop mechanisms to engage the broader student community throughout the next year in considering the proposed visions for the future of our institution that emerge from our efforts. As always, we welcome your thoughts and suggestions at priorities@fas.harvard.edu.

*Contact and Questions*
Each of the measures posted on http://planning.fas.harvard.edu is accompanied by contact information and links to unit or program websites and resources.

*The Future*
New ideas and visions of the future have always been our strength. With all of your help, I remain convinced that we can use this financial crisis to build a stronger, healthier, and more vibrant institution. We cannot stand still, and, as dean, I refuse to let this crisis diminish our unsurpassed commitment to academic excellence, innovation, and discovery.

Sincerely yours,

Michael D. Smith

Endowment Planning Guidance

Dear Faculty and Staff Colleagues,

Today the University provided the deans of the Schools with endowment planning guidance for FY10. The guidance instructs us to plan for the funds paid out from the endowment in support of our operations to be reduced by 8% in FY10, and for a decrease of at least that same magnitude in FY11. For the Faculty of Arts and Sciences, this guidance will mean a $52 million reduction in FY10 funds vis-a-vis our FY09 budget.

Because we in the FAS have been planning for a range of aggressive scenarios, we have the ability to absorb some of this decrease in funding by adjusting our FY10 budgets to implement more of the measures proposed in our planning. I deeply appreciate all the hard work, sacrifice, and institution-mindedness that has driven our planning to date. In addition, the academic deans and I will continue to work with senior administrators and our colleagues at other Schools and in the Center to find additional cross-cutting efficiencies. Whatever gap remains after those efforts are complete will be closed using our limited reserve funds.

Please know that we are taking every possible measure to protect our core mission, to support our priorities and even to pursue some new initiatives in the midst of this crisis. We are each joined here together in the pursuit of excellence in teaching and research, and we must support, in the best ways we know how, our very special community. The additional measures we pursue now will all be guided by these core principles. With this news, I ask again for your partnership, your understanding, and your patience as we continue to navigate uncharted terrain.

Sincerely yours,

Michael D. Smith

Early Retirement Program

To FAS Faculty and Staff,

Today detailed information about the University's Voluntary Early Retirement Incentive Program announced last week is being shared with all those who are eligible to participate. I would like to take this opportunity to put the program in context for the Faculty of Arts and Sciences and to express my gratitude to all those long-serving members of the staff who will now consider whether this program is right for them.

The precipitous decline in the national economy has hit every household, business and nonprofit, and Harvard has not been immune. Our plans and emerging actions assume that the endowment will be down 30 percent this year and that we must begin to adjust to this new fiscal reality immediately. As you know from the activities in your own departments over the last few months, we are attempting to reduce overall spending while still investing in the vital academic programs that will ensure FAS's excellence in teaching and research for years to come. University leadership, working closely with the Council of Deans, has taken similar actions. The voluntary early retirement program is one such University initiative that aims to help the Schools in their efforts to cut costs while minimizing impact on the workforce.

As we consider spending cuts in the FAS, we are acutely aware of the importance of our people: the faculty, staff, and students. Through the efforts of our staff, the FAS is able to further cutting-edge research, support innovative pedagogy, and develop the unique learning environment that defines who we are and enables us to make our contribution to the world, both through scholarship today and through training of tomorrow's leaders. For staff's service, their dedication, their contributions to the many activities of the FAS, I am deeply grateful.

I am pleased that the University is in a position to offer an early retirement plan for those who are eligible and who may want to take advantage of it. In addition to the benefits normally provided under Harvard's staff retirement programs, the package will include a lump-sum retirement incentive, a monthly supplement to "bridge" early retirees to Social Security at age 62, and eligibility for retiree medical coverage. Personalized information is being delivered to eligible employees in the Faculty of Arts & Sciences beginning today. Eligible staff will have 45 days from the day of receipt of their packets to decide whether to opt in. Basic information about the program, including a schedule of informational and financial counseling sessions and a list of contacts for questions or concerns, has been posted on HARVie (http://harvie.harvard.edu). Though the University's program is for staff only, we are considering whether it might be appropriate also to offer a retirement program for faculty.

With more than half of our $1 billion annual operating budget dedicated to compensation costs, it is clear that realigning FAS for the future will depend on some changes to our current workforce. Let me assure you that we continue to explore every option available in order to limit staff changes forced solely by our budget challenges. We hope that the level of participation in the voluntary early retirement program will mitigate the need for further staff reductions. Such considerations will be made after the program has closed and results are assessed.

These are difficult times for everyone, and we understand that deciding whether to participate in this program will be a major decision for many of our employees. Harvard is committed to providing our employees with the information and retirement counseling that they need to fully consider the opportunity for early retirement provided by this program.

Sincerely yours,

Michael D. Smith

Financial Challenges Update

To FAS Faculty and Staff,

The last months have been very difficult ones for our community as we each grapple personally and professionally with the local effects of the global financial crisis. My letters to you over the fall outlined the size and the nature of the considerable financial challenge we face. I am pleased to now be able to share with you early markers of progress toward meeting that challenge - progress that I hope will encourage a reemergence of the spirit of excitement and optimism for the future that normally radiates from our campus.

As one of our perceptive faculty members commented to me recently, "The global financial crisis put us, in simple but accurate terms, out of balance. Not only out of balance in budget, but out of balance in not previously having faced such a situation." With the New Year, our institutional balance begins a welcome return. I see this in the carefully considered plans we have received from departments, centers, and other units for rebalancing our budgets. I see this even more clearly in the broad, creative, and coordinated thinking occurring across all parts of the FAS.

Although it is never easy to reconfigure or disengage from worthwhile activities, especially ones in which time and resources have been invested, circumstances force us to do so, and we are doing this thoughtfully and well. I appreciate the fortitude and dedication to the institution I have seen from the FAS community in this effort over the past months.

A great many departments and other major units have taken immediate action to reduce expenses and plan for the further savings needed to meet our FAS-wide goal of reducing our total expenses by 15% over the next couple of years. (Reaching this goal would allow us to live within the limits imposed by the expected 30% investment losses in our endowment, given that slightly more than 50% of the total annual income to the FAS comes from the value of our endowment.) Many members of our community have also proposed innovative ways to address the $100-$130M shortfall in unrestricted funds projected for fiscal year 2010. For all of this painful work, I am truly grateful.

Based on the planning documents and other information being produced by the departments, centers, and other units of the FAS, the deans are working closely with me to develop by the end of January what I expect will be an "80% FAS-wide plan" for reaching our cost-reduction goal. I refer to it as an 80% plan because we will likely not have reached our total expense-reduction goal by the end of January and because we will not have had time by then to vet all details and implications of the unit-level plans. Still, a partial FAS-wide plan at this point in time will help us to produce the FY 2010 budget. It will also help us to draft a set of recommendations that the deans and I can vet with the Priorities Committee, Caucus of Chairs, Faculty Council, and others. I expect that we will produce a finalized FAS-wide plan later in the spring semester.

Beyond the immediate actions being taken locally within departments and other FAS units, we are also moving forward on several FAS-wide initiatives, a number of which were submitted as suggestions to priorities@fas.harvard.edu. For example, the Priorities Committee reviewed and encouraged the FAS to accept a proposal to change the set points for heating and cooling of our buildings to match those recommended by the American Society of Heating, Refrigeration, and Air-Conditioning Engineers. You will soon hear about the details of this two-degree change (to 68 degrees at this time of year) from your local building managers. We expect a savings of more than $600,000 a year from this change, and it will also help us to achieve nearly 30% of the FAS Greenhouse Gas Reduction goal for next year.

Although the change in temperature set points will affect all of us equally, the final set of coherent recommendations we accept from unit-level plans being developed today will not result in equal cuts in all areas. Not all units have the same capacity to absorb cuts, nor is it wise for us to reduce everyone equally if continued excellence is our goal. Furthermore, we remain committed to certain priorities, such as the official launch of our new Program in General Education that is scheduled for the upcoming fall semester. Other timelines, such as the pace of development in Allston, are being assessed and adapted to our new financial situation.

Significant and undoubtedly equally painful work remains in front of us, but the first step is in many ways the most difficult. Through this important step, we have demonstrated and strengthened a trust in each other and in the organization. We started building this trust and a new transparency in the organization before this financial crisis, and the dividends of those early efforts are abundantly evident today. Through a continuous focus on our foremost priorities - excellence in teaching, excellence in research, and excellence in training future generations of academic and world leaders - and an ever-growing trust in each other, we will emerge from this unprecedented crisis more transparent, with clearer priorities, with more collaboration between units and departments. We will then be ready to seize opportunities that present themselves even in these difficult times.

As we rise to meet the financial challenge before us, I am encouraged to remember, as I hope you do, how very fortunate we are at Harvard to be surrounded by colleagues who shape the nation's and the world's intellectual landscape today and by the students who will shape it tomorrow. We are fortunate that the Faculty of Arts and Sciences and the larger Harvard community are rich in the intellectual capital and cross-disciplinary cooperation being described in Washington as critical to the future of our country and the world. Members of the Harvard community can and will bring enormous energy to these discussions and will no doubt offer exciting solutions to pressing problems facing our nation and our world. Our ideas are our strength and will collectively take us through this difficult time to a brighter future.

Sincerely yours,

Michael D. Smith

Letter Regarding FAS Finances

Dear FAS faculty and staff:

I write today to update you on the discussion that took place in the Faculty Meeting on Tuesday, December 9. This letter reviews the highlights of my presentation, answers some questions that have been raised following it, and offers ways that you can help.

My presentation built upon my letter to faculty and staff on November 10, in which I described the importance of the endowment to our operations and opened a discussion on the potential impact of the global economic crisis on our finances. Since that time, the global economy has continued to deteriorate, President Faust has confirmed (http://www.president.harvard.edu/speeches/faust/081202_economy.php) a University-wide planning assumption of a 30% loss in our endowment this year, and I have worked closely with the faculty and the FAS administrative team to understand the nature and size of the budget gap that we now undeniably face.

I have talked with a number of faculty and staff groups both to share what we now know and to hear their concerns. I have continued to consult with the academic deans, as well as the Caucus of Chairs, the Faculty Council, and the newly formed Priorities Committee, composed of faculty leaders who are not members of the other three groups. I have also met with department administrators, and Dean for Administration and Finance Brett Sweet has held multiple discussions with senior members of the FAS administration and leaders of the FAS "tubs". I am grateful to all for the clear expressions of care and deep concern that so many of you have expressed for the institution. What follows is in large part a response to what I've heard.

The Size and Nature of the Gap

In the most recent Faculty Meeting, I began with an explanation of how projected changes in our annual income and expenses would produce a financial gap of $100 to $130 million, depending on the endowment distribution (i.e., the amount that is paid out from the endowment) authorized by the Corporation for FY 2010 (the next academic year). I also presented several actions that the FAS has taken to curtail incremental expenditures that would, if left unaddressed, increase this already sizeable gap.

The $100 to $130 million gap between our expected revenues and our expected expenses results from more than just the change in endowment value, though that is the most significant underlying factor. As you know, our planning is based on an expected 30% decline in the value of our endowment. The University will not, however, reduce the actual endowment distribution for FY 2010 by that percentage - in fact there may not be a reduction in the total dollars we receive from the endowment at all. At best, we expect the endowment distribution to remain flat, which would give the FAS the same amount of endowment income to spend in FY 2010 as it was given in FY 2009 (this academic year). But, because of the continuing uncertainty in the global markets, I have also asked the FAS to develop a contingency plan in which the endowment distribution for FY 2010 is 5% less than we received in FY 2009.

Note that in either scenario, the FY 2010 distribution will be taken from an endowment that is substantially smaller than it was last year. This will mean that the endowment payout percentage, under either distribution scenario, would be greater than 6%. Even with this higher-than-usual payout rate, we still face the large gap in funding.

It is important to understand the components of the $100 to $130 million gap. They include:

• An estimated $20 million decrease in net revenues from tuition as a result of increasing demand for financial aid;
• An approximately $20 million increase in expenses due to higher interest rates associated with the repayment of debt for recently constructed capital projects;
• An approximately $15 million increase in expenses due to the maintenance and utility costs of new buildings coming on line;
• An approximately $10 million increase in expenses due to the arrival of new faculty and previously negotiated salary increases for non-exempt staff;
• An estimated $10 million in unavoidable growth of costs due to inflation; and
• An approximately $25 million gap carried forward from FY 2009 where our unrestricted expenses outstrip our unrestricted income.

Taken together, the result is a $100 million shortfall assuming a flat endowment distribution; the $130 million figure assumes a 5% decrease in the endowment distribution from approximately $650 million in FY 2009 to $620 million. To put the size of this gap into perspective, our FY 2009 expenses are estimated to be just under $1.2 billion. I should also emphasize that this gap does not include the costs of any new activities of any kind.

This estimate of the size of the gap does have some inherent risks. It assumes that some sources of income, such as gifts from our alumni/ae, will remain constant, although our alumni/ae have been by no means immune to the effects of the financial downturn. It assumes that we will be successful in holding many of our expenses flat. Also, it assumes that the performance of our endowment will recover in future fiscal years, so that cost of living increases, new activities, and inflation in future years will be again be covered by increases in the value of our endowment.

Immediate Measures

A financial challenge of this size has no historical precedent at Harvard. During the Great Depression, for example, there was no loss of endowment principal, although the market crash and subsequent economic downturn greatly reduced growth. In looking at the history of how Harvard has faced past, albeit lesser, financial challenges, the approach most similar to that needed today was pursued by Dean Henry Rosovsky during the financially difficult, but fundamentally different, times of the 1970s. As then, we must engage in a process of scaling back our operations to a size we can responsibly support; this will require prioritization and planning, as we have been doing this fall. As Dean Rosovsky noted, "to do more of one thing will require less of another."

The size of the budget gap depends on how well we can rein in incremental costs. If we cannot do this effectively, the gap grows larger by the incremental costs. To address this, we have decided to implement several immediate measures to limit incremental costs that, while painful, are necessary given the size of the challenge we face. These include:

• In line with University guidance, all faculty and non-union staff salaries will remain flat next year.
• All originally authorized tenure-track and tenured searches have been reviewed and most have been postponed until a point in time when our financial situation has improved. A small number of searches remain underway (selected with an eye toward minimizing costs and maintaining priorities), and all search chairs have been informed of the disposition of their searches.
• To minimize the cost of visiting faculty, new non-ladder faculty appointments, and purchases of faculty time from other Harvard schools, we will only authorize requests for these types of instructional faculty to fulfill essential curricular needs. If such a need is demonstrated, we have asked that departments first consider filling the positions using Ph.D.s recently graduated from Harvard or other local institutions.
• As was announced (http://www.fas.harvard.edu/home/dean-and-administration/deans-office/communications/staff-review-committee-12042008.shtml) earlier in December, only urgent and critical staff hires will be made at this time. (This policy does not apply to positions funded entirely by sponsored or start-up money.) Please contact the FAS Office of Human Resources if you have any questions concerning this new policy.

Although these measures will have a significant impact on our faculty and staff, they do not address the $100 to $130 million shortfall we face. They simply stop us from adding to this challenge with new costs.

Common Questions

Do we need to undertake such significant measures?
Of the many suggestions I have received, some have counseled that now is the time to recruit aggressively, to take advantage of a soft market to bring in the best faculty, staff, and graduate student talent. And I have heard the opinion that we are curtailing faculty searches, staff hires, and graduate student admissions to save money. The rhetoric of "saving" indicates a misunderstanding both of what is possible in the current environment and of the scale of the actions needed to balance the costs of our activities with our revenues.

The measures described above are not being adopted as a means to save money, as counterintuitive as that may sound, but are meant to reduce the rate at which we are spending down our savings. We are spending our savings now (and will be for the foreseeable future) to cover our current operations. Spending another dollar simply further reduces our already depleted endowment and reserves (much of which was invested with the endowment), and this has the effect that it will take that much longer for us to recover and return to normal operations. Real change must happen, and we must start now. We cannot finesse our way through this challenge.

Are we still pursuing our priorities during this time of financial crisis?
Yes, we are. Although some paths we had hoped to follow will not be taken at present, we cannot stand still, or stop the pursuit of our most important academic priorities. These priorities are central to our unique identity as a community, one whose commitment to academic excellence, innovation, and discovery remains unsurpassed.

For example, the Faculty of Arts and Sciences remains unwavering in its commitment to our students and to our financial aid program. Our students and their families have not been immune to the economic downturn, and the demand for financial aid is projected to rise. Our recent financial aid initiative has helped to create one of the most diverse freshman classes in the history of Harvard College. A community of true academic excellence is by necessity a diverse community, and our financial aid program is an important tool for advancing this vision for the FAS.

We will similarly continue to pursue diversity in the hiring of our faculty and staff, even as we hire fewer people.

Affirming our commitment to our current graduate students is equally important. They, like all of us, have been hit hard by the economic downturn. The Graduate School of Arts and Sciences is considering a range of actions to help them weather these stressful economic times. For instance, both to support our recently graduated Ph.D. students (who are entering what promises to be a very difficult job market) and to help our departments meet their teaching needs by spending less than at present, the FAS is developing a new program akin to a teaching post-doc. This is just one of what we hope will be many innovative programs to come from our efforts to address the budget gap.

Are we still committed to a tenure-track system for our junior faculty?
The FAS remains committed to a tenure-track system, and internal promotions will continue to be based on academic merit alone.

Is it still important to develop academic plans?
Absolutely. It is imperative that we continue with the academic planning process so that we understand what are the foremost priorities of the FAS now and in the future. Although we do not know when, the University will again launch a capital campaign, and when that occurs, the FAS must be prepared to participate fully.

Will we eliminate $100 to $130 million from the FAS FY 2010 budget?
No, we will not bridge this gap in one year, but even reaching our target over several years will require more than simple belt-tightening. It will require a sincere and coordinated planning process.

What You Can Do

Faced with a financial challenge of the magnitude described above, the FAS needs all members of its community to take part in working aggressively to identify opportunities to bridge the gap. I ask that each of you who control a budget funded by an endowment or an unrestricted subvention work with your administrators to devise a plan to cut 15% of your annual expenses. Please communicate this plan to the director of your unit or an appropriate academic dean, and with those with whom you work most closely. We are a very interconnected organization, and any actions we take will need to be carefully coordinated across the internal boundaries of our organization.

Even if you do not control a budget, you can still help. Speak with those who do control the budgets in your area and help to generate ideas. If you have expense-reducing ideas outside your area, please send them to priorities@fas.harvard.edu. We are considering how to acknowledge and reward the best of the ideas that we receive.

Finally, let me emphasize that this is a time for planning, and planning is not the same as implementation. In order to determine the extent and magnitude of what is possible, we first must understand what is feasible, and we need to weigh the consequences of these changes on our ability to pursue our mission. I consider this an iterative process, where, through a series of conversations, we find the balance between opportunities for meaningful reductions and the pursuit of our priorities. Only then will we be in a position to implement our plans.

Although the challenges before us are sobering and the expense reductions certainly painful, I am convinced that we can use this financial crisis to build a stronger, healthier, more vibrant institution. I am encouraged by what one faculty member sent me recently: "[We must] rethink the ways in which we organize and configure our programs and come up with structures that are less costly but just as effective in intellectual terms." With this attitude, we are guaranteed success.

Sincerely yours,

Michael D. Smith

Staffing Review Committee Letter

TO: Faculty, Center Directors, Tub Directors, Administrative Unit Directors, Department Administrators and Financial Officers, and Public Information Officers

As I mentioned in my letter of November 24, all current staff hiring is on hold, and only urgent and critical hires will be made at this time. Below I outline the process for determining if positions are urgent and critical. Managers who feel their positions to be necessary even in the new financial situation, i.e., important enough to be funded by cutting equivalent funds from other areas of their budgets, should seek approval via the new procedure for staffing requests that I outline below. Please note that positions funded entirely by sponsored or start-up money are not subject to this new policy and will go forward uninterrupted.

Please share this information with your unit, adding any appropriate local context.

PROCESS CHANGE

I have convened a Staffing Review Committee to oversee all FAS staff† hiring for the coming months. The members of the committee are:

Brett Sweet, Chair
Beverly Beatty, Social Science Division
Nancy Cline, Harvard College Library
Deena Giancotti, Finance Office
Margot Gill, Graduate School of Arts and Sciences
Georgene Herschbach, Harvard College
Sara Oseasohn, Arts and Humanities Division
Russ Porter, Sciences Division
Geoffrey Peters, Human Resources

Posting requests covered by this new policy should be brought first to your FAS HR representative, who will set a tentative grade and salary range and then refer it to the appropriate administrative dean. The administrative dean will work with you to understand the need for the position, alternatives to filling the position and a funding plan. If the request supports the department's goals within the current and pending budget constraints, the administrative dean will bring the proposal to the Committee. Approved positions will then move forward. Searches that were already underway and have been approved by the Staffing Review Committee to move forward shall recommence where they were put on hold (e.g., already posted positions do not need to be reposted).

TEMPORARY STAFF

Please limit your use of temporary staff. There is a natural tendency to look to temporary staff to take on the tasks of unfilled positions, but doing so dilutes the savings that must be achieved. The Review Committee will monitor these expenditures monthly.

SALARIES and GRADES

Until July 1 or the Committee decides otherwise, all salaries and grades are to remain at their current levels.

QUESTIONS

Please address your questions to anyone on the Committee or to your FAS HR representative.

† Staff includes postdoctoral fellows not supported by sponsored funds. For clarification, the procedure outlined above does not apply to non-ladder faculty, preceptors, lecturers, teaching fellows, or teaching assistants. These appointments are made through a separate process that is currently being reviewed by the academic deans. For questions on these appointments, please contact the Office for Faculty Affairs.

Expense Reductions and Economic Planning

Dear Colleagues,

I want to begin by thanking so many of you for attending the November Faculty Meeting and participating in the frank and important exchange about FAS finances that dominated that gathering. As we discussed, the global financial crisis has likely resulted in unprecedented losses in our endowment, and as we all saw last week, the market continues to slide downward. Given our heavy reliance on endowment income, these losses will have a major and long-lasting impact - one that will require significant reductions in our annual expenses. I am actively working with the academic deans to plan for reducing our annual expenses starting now and looking to fiscal years 2010 and beyond. Your participation in this evolving process is welcome, and your serious consideration of the draft plans when they appear will be greatly appreciated.

As you all are experiencing, the global economic situation continues to evolve quickly, and I promised to keep you abreast of developments and our efforts through regular communications. This letter presents some of the immediate measures that we are undertaking, answers some of the questions that I have received, and briefly describes how we are moving forward with planning. Our actions at this time are meant to minimize disruptions to the FAS community, preserve the high quality of our teaching and research, and give us time to plan.

Staff Hiring

Beginning immediately, all staff changes and searches are on hold. This applies to all current or proposed postings, including proposals to fill vacant positions, to create new positions, and to increase the FTE status of existing positions (e.g., from a 0.5 FTE to 0.75 FTE). Until stated otherwise, we will open postings only for critical positions.

This new policy means that the goals associated with unfilled positions either will not be pursued or will be pursued by reprioritizing the activities of our current staff. We will all need to resist turning to the use of consultants and temporary staff as substitutes for unfilled positions.

In the coming days, managers of FAS staff will receive a report showing current postings and use of temporary workers and consultants. The academic deans and the FAS Offices of Finance and of Human Resources stand ready to help you find ways to provide essential services without increasing our expenses.

Faculty Searches

Last spring, the academic deans considered requests for authorizations for new faculty searches (for the academic year 2008-2009) with an eye toward authorizing only those that were both urgent and critical to our academic program. At that time, we intended to provide a bridge year that allowed the FAS both to absorb the very large number of new appointments of the past several years and to complete our academic and long-term strategic planning.

Because of the approach we took last spring, I am not putting the few faculty searches we began this fall on hold. However, I ask that the faculty consider canceling any open search if the priority of the search changes or the quality of the applicant pool is not truly extraordinary.

Tenure-track Faculty

Although there are many unknowns as we navigate through today's challenging financial situation, I want to assure you that the FAS is firmly committed to our tenure-track system. Reviews for promotion will continue on schedule and will be based solely on merit (scholarship, teaching, and service).

Timeline

Our financial planning that will take place over the next few weeks and months will focus on developing budgeting guidelines for the various groups within the FAS. It is already clear that because of the structural differences among our various programs, centers, departments, and Schools, the size of recommended cuts will vary. We will not implement a single, one-size-fits-all, overall cut in our annual expenses. At the December Faculty Meeting, I will give you a sense of my thinking about how we can reduce our expenses for FY10 and beyond. In the January meeting, we will continue the discussion in enough detail to bear on the FAS FY10 budget, which is due in March 2009.

Your Input and Ideas

I am pleased with how many ideas for cost-saving measures I have received since the November Faculty Meeting. Please know that I have shared all the suggestions I have received with the academic deans and with my senior staff so that they may all benefit from your advice. To make the process of submitting suggestions easier, I have established a dedicated email address. You are welcome to submit your ideas to priorities@fas.harvard.edu.

To provide even greater faculty input, I will appoint in the next two weeks a Priorities Committee that will complement the work of the academic deans, the Caucus of Chairs, and the Faculty Council. As I mentioned in the November Faculty Meeting, our approach to this financial crisis must be based on a firm understanding of our core mission and highest priorities. The focus of the Priorities Committee is fundamentally different from the work of our historical Resources Committee - a committee that focused on an understanding of the financial resources of the FAS. The Priorities Committee is an ad hoc committee that will be in place through March 2009.

Although some paths we had hoped to follow will not be taken at present, we cannot stand still, or stop the pursuit of our most important academic priorities. In spite of the challenges ahead, we will remain a uniquely vibrant community whose commitment to academic excellence, innovation, and discovery remains unsurpassed.

Sincerely yours,

Michael D. Smith

Impact of the Economy on FAS

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.

Sincerely yours,

Michael D. Smith

Letter about the Global Economic Crisis

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 Gilpin Faust