Harvard freezes top salaries

Harvard University will slow major capital expansion projects, freeze top administrators’ salaries and raise the cost of tuition in response to massive losses in the university’s endowment, Harvard President Drew Faust announced in a letter to all students and faculty members on Wednesday.

“We are living through much more than a bump in the road,” Faust wrote, adding that radical changes in the economic landscape will force the Harvard community to commit to significant adjustments. “Our challenge is to confront the new economic realities and intelligently adapt ourselves to them.”

The Cambridge, Mass., university will stall its plans to grow into neighboring Allston until financial conditions improve, Faust wrote. The move puts a temporary stop to the university’s most ambitious expansion plan in a generation.

Since a science complex in the Allston development has already broken ground, Faust wrote, the university will complete its foundation. But after that, Faust said, the university will determine whether funds are available to continue work on the project.

The letter went on to detail the financial challenges her university faces in the near future, and noted that the university will launch a voluntary early retirement program this week. Roughly 1,600 of the university’s staff will be eligible.

Faust also announced that she and the university’s deans and provost will hold their salaries flat for the coming fiscal year, although the cost of tuition will rise 3.5 percent.

The freezes will apply to “the deans, the provost” and faculty, Faust wrote.

In a December letter, Faust revealed that Harvard’s endowment had fallen 22 percent, or $8 billion, between July and October. Faust repeated forecasts in Wednesday’s letter that Harvard’s endowment, which now stands at $28.7 billion, will lose approximately 30 percent of its value by the end of fiscal year 2009. And that calculation, Faust wrote, does not even take into account the $1.4 billion Harvard will draw from its endowment to fund operating expenses during the 2009-’10 academic year.

With other sources of revenue such as tuition payments and research grants on the decline, Faust warned that the university’s dependence on endowment funding would place the university in a difficult position. Withdrawals from the endowment comprised of more than a third of the university’s annual operating budget this year, Faust wrote.

“The current yearly endowment distribution — the dollars we take out of the endowment to support activities across the University — is approximately 50 percent higher than it was when the endowment was last at the value we expect as of next June 30,” she wrote. “Tinkering around the edges will not be enough.”

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