Hot breakfasts are a thing of the past at most dining halls at Harvard. So are free sweat suits for varsity athletes, salary raises and the jobs of 250 Harvard staff — all casualties of the $220 million budget deficit at Harvard’s Faculty of Arts and Sciences, the university’s largest division, following the 29.5 percent drop in Harvard’s endowment.
At Yale, too, administrators have capped salaries, trimmed entertainment budgets and laid off about 100 employees in an effort to close a $150 million budget gap caused by the endowment’s 24.6 percent tumble. But some of Harvard’s schools may be suffering more than their counterparts at Yale because the rival universities structure their budgets differently.
While every school at Harvard is responsible for generating its own income and paying its own bills — a tough proposition in the current recession — six of Yale’s 14 schools, including those in Yale’s Faculty of Arts and Sciences, operate out of a common fund overseen by the Provost’s Office. Drawing on Yale’s endowment income, unrestricted donations and fees paid to the Provost’s Office by the professional schools, the University not only supports small schools that cannot independently sustain themselves, such as the School of Music, but also concentrates resources on the College, the Graduate School of Arts and Sciences and the School of Engineering and Applied Sciences.
Harvard’s model, on the other hand, encourages its schools to take initiative in balancing their budgets, but Yale’s approach is allowing the University to weather the economic storm better, four administrators said.
“I think that Yale’s model gives us more flexibility in a time like this,” University President Richard Levin said.
‘EVERY TUB ON ITS OWN BOTTOM’
The downturn has been especially hard on Harvard’s Faculty of Arts and Sciences, which includes its college, graduate school, continuing education division and School of Engineering. The FAS has a 42.6 percent share of the university’s endowment, but it is responsible for many of the university’s departments, libraries, buildings, museums, research institutes and faculty, as well as half its students.
Anticipating a budget deficit of $220 million, Harvard FAS Dean Michael Smith announced in April that his division would reduce its budget by 19 percent, while some of Harvard’s other schools, including its medical and law schools, made cuts of 10 percent. Because each of Harvard’s schools is responsible for covering its own costs and generating its own income through donations, federal research grants and tuition — operating on what is known in higher education as an “every tub on its own bottom” basis — the loss is hitting them unequally, said Patricia Harrington, Harvard College’s director of budgets and finance. Each school relies on its endowment for a different fraction of its revenue, and when the endowment drops, each faces different budget cuts. The FAS, for example, depends on its endowment more heavily than all but two of Harvard’s 10 other schools.
In better times, the Crimson’s model creates financial accountability and forces schools to take initiative to generate revenue, said Ronald Ehrenberg, an economics professor and director of the Cornell Higher Education Research Institute.
“Systems in which colleges operate as ‘tubs’ provide an incentive for entrepreneurial behavior and for each college to look out for its own well-being,” he said.
A Harvard spokesman declined to comment, and multiple calls and e-mails to Harvard administrators, including the dean of budget and finance at FAS, the dean of FAS and the provost, were not returned.
‘A CENTRALIZED MODEL’
So far, all of Yale’s schools and divisions have experienced equal across-the-board budget cuts mandated by the Provost’s Office.
Unlike his Harvard counterpart, Provost Peter Salovey can control all of the University’s budget centrally, though some of Yale’s professional schools must — at least in theory — balance their own budgets. The School of Medicine, School of Nursing, Law School, School of Management, Divinity School and School of Forestry & Environmental Studies support themselves through a mixture of gifts, federal grants, tuition and endowed funds, Salovey said, though in practice, some of these “tub” schools still need subsidies from the center in some years.
The School of Medicine, for example, has managed to avoid the challenges faced by the FAS by relying on federal research grants for the majority of its operating budget.
Because income from Yale’s still-sizeable endowment and all the unrestricted donations given to the University fall into the provost’s hands, he is free to devote substantial resources to the college, graduate school and arts schools, Salovey said. The arts schools, in particular, require subsidies because they have few students to pay tuition, he added. And class sizes must remain small to allow for intensive learning, Deputy Provost for the Arts and Humanities Emily Bakemeier said.
“In a centralized model, you can run programs that would never be expected to break even,” Salovey said, referring to Yale’s arts schools. “In a time of financial challenge, ‘every tub on its own bottom’ can be very hard to manage.”
In fact, the largest chunk of Yale’s endowment supports the central budget, Deputy Provost Charles Long said.
‘YALE HAS BREAKFAST’
Yale’s ability to subsidize schools from the center also rests in part on the centralized Development Office and on the University’s assessment system, in which the “tub” schools pay a fee to use central services.
The University can accept unrestricted gifts for Yale to use for any purpose because all donations are coordinated through one office, Vice President for Development Inge Reichenbach said.
Though at Yale, donors can either give unrestricted gifts or specify a school as the recipient, Harvard donors must contribute gifts to each school individually.
“When you are interested in Yale, you are not necessarily interested in having relationships with several silos, but interested in a seamless relationship in the University,” Reichenbach said.
The Provost’s Office uses a system in which graduate schools pay the University for access to central campus services, such as athletics facilities and undergraduate libraries, Salovey said. These fees also help cover administrative costs in Woodbridge Hall and the Provost’s Office, he added.
But Harvard does not charge such fees, although graduate and professional schools in Cambridge, like in New Haven, have use of FAS facilities. Harvard’s FAS is responsible for the upkeep of the library, among other facilities, but does not receive funds from other schools to help cover costs.
Though the assessments are not a source of revenue for Yale’s FAS, they prevent the professional schools from draining the center’s resources, Long said.
Harvard students themselves have expressed frustration about the results of budget cuts. When the end of hot breakfast was announced in May, the Crimson interviewed two members of the women’s varsity crew team who complained their athletic performance would suffer from the change.
“If Harvard doesn’t win at [the Harvard-Yale regatta] next year, we’ll know why,” junior Emily Walker said. Senior Laurel Gabard-Durnam added, “Yale has breakfast.”
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