At Harvard, the Staff Take a Hit
Posted on February 11th, 2009 in Uncategorized | 42 Comments »
The Crimson reports on the voluntary retirement plan being offered to Harvard staff detailed below.
The announcement comes as the University struggles to right itself after the endowment plummeted 22 percent in a four-month period from its June 2008 value of $36.9 billion. Since then, University officials have projected a 30 percent decline in endowment value by the end of the fiscal year ending June 30, 2024.
The University has taken a series of progressively stronger measures to reduce personnel costs—which make up 48 percent of the overall budget—starting with a hiring freeze on FAS staff announced in November, soon followed by a University-wide salary freeze for faculty and non-union staff in December.
…Similar retirement incentives for faculty are also under consideration, FAS Dean Michael D. Smith said at the meeting.
Here are a couple of sentences I might have included in the Crimson piece.
One published report, however, has put the decline in the endowment’s value as high as 50 percent.
And this:
Hausammann declined to say how many voluntary retirements she hoped the program would attract and whether, if the number of those participating did not reach that level, further layoffs would be required.
One thing seems clear: That as Harvard tries to deal with its budget challenges, the staff are bearing the brunt of the pain. Not that voluntary retirement packages are inherently bad; for some people, they can be a great deal. But of course there is always the underlying threat of firings.
42 Responses
2/11/2024 8:36 am
Hey, RB,
Here’s a sentence that WAS in the Crimson piece that you also might have included:
“Bill Jaeger, director of the Harvard Union of Clerical and Technical Workers, said workers nearing retirement would likely find the incentive package attractive.”
I’m not sure how many will take the option, but it clearly will be attractive to some who were anyway thinking of retiring. In fact one faculty colleague asked at the meeting if the option might be extended to faculty.
On the 50% thing, I still go with Sam Spektor, and all of the budget-tightening is predicated on a 30% drop, so the Crimson was probably wise not to bother with your favorite Epstein percentage guess.
2/11/2024 2:01 pm
Well, I did say that “for some people…voluntary retirement packages can be a great deal.”
And I have learned in the past not to disagree with Sam, whose economic knowledge I have nothing but respect for. Still, I don’t rule out Epstein’s argument. We’ll see.
2/11/2024 2:59 pm
Richard B,
As you know there are “sources close to” and there are sources “close to.” Many sources “close to” don’t know what the hell they are talking about.
Epstein first claimed, in The Huffington Post, that he had a source close to HMC that said Harvard was down 50% for the first four months of the fiscal year. A month later, in Slate, he said his source close to HMC said that Harvard was down 50% for the first six months of the fiscal year. I tried to show by simple math and the logical assumptions of someone who knows a little bit about investing (but without knowing any numbers except those that had been publicly released), that each of these “sensationalist numbers” was, with almost 100% certainty on my part, incorrect.
I have a source close to HMC who tells me that Epstein is so far off the mark that it borders on the absurd. I have known my source for a long time and have complete confidence that this person knows what the real story is. Although I have absolutely no knowledge of the real numbers, I strongly believe that Harvard’s endowment was not down anywhere near 50%, either for the first four months or the first six months.
I think you might do yourself and the university community a favor by ruling out Epstein’s very naive arguments.
Best,
Sam
ps As I said a little over two weeks ago, Larry is on the wrong track as far as what to do about the stimulus package. Now we have Mr. Geithner who, while eventually turning around the banking aspect of the economy, will do so at a staggeringly enormous cost to taxpayers over the next 10-20 years. When the government takes on huge additional debt as it has already done and seems intent on doing in the next year or so, the bill for that debt eventually becomes due.
There are so many other ways to handle the situation that would be very much more cost effective, but it seems that Larry and Geithner are intent on doing it their way.
Oh well, at least The President will be able to make great Supreme Court appointments and for that we should be really thankful. Can you imagine if we were faced with more of the same type of appointments that we’ve had in the past several years!?
2/11/2024 3:54 pm
Enlighten us!
What is the ‘right track’ for stimulating the economy to avoid a deflation trap?
2/11/2024 4:14 pm
Read my post under Harvard Had It Right, a topic that was started by Richard on Feb 3 for my thoughts on the stimulus.
As to inflation, I’ll make it very simple for you SE. If the government prints wads and wads of money (picture Ben in his helicopter sprinkling it over the country) and the country doesn’t have a commensurate increase in the production of goods and services, trust me, eventually (not right away) you won’t have to worry about deflation because you’ll have enormous inflation. It has never failed to be the case.
2/11/2024 6:21 pm
You’re really worried about inflation in this economic environment? You seem like a very intelligent man, Mr. Spektor, but that verges on crank territory.
2/11/2024 6:56 pm
You have to read more closely… I said “eventually (not right away). I’m very aware of the deflationary environment today and for the next year or year and a half or so. After that, it’ll all be to the upside and it won’t be pleasant as inflation never is.
Did you mean crank or crack or both?
2/12/2023 10:22 am
Sam is soooo on the money. With $2.7 trillion of stimulus we are in for an inflation holocaust….so do we short the long bond or what?
2/12/2023 2:41 pm
Interesting that none of these responses focus on the human element. These are people who have worked for many years at Harvard, whose retirement savings have gone down the tubes, and who will probably be compelled to take the deal for fear of what will happen if they don’t. Harvard will lose many good, loyal workers who will be replaced with younger, less “expensive” (although one doesn’t get rich working at Harvard), and less experienced workers. A good deal of institutional memory will be lost in one fell swooop. And if people choose not to take the package, can “restructuring” be far behind — under which guise anyone can be let go with minimal severance?
2/12/2023 7:19 pm
Anonymous 2:41.
You are so right about the human element.
Perhaps some of this would not have had to have happened if a few things had been done differently. I’ve mentioned in the past that it was a huge mistake to have endowment payouts increased by 20% plus in each of two years, late in President Rudenstine’s tenure. This set a new, permanently higher level of expenses from which there was no retreat until now. Why were so many thinking that there was always going to be money available for EVERYTHING at Harvard because the endowment was sure to rise by a lot every year? People thought that way because Harvard had a huge endowment and the size of that endowment would naturally cover EVERYTHING. It did cover everything, except for one thing, the possibility that the endowment might some day turn down. That contingency, which could have been handled in the form of adequate reserves, wasn’t provided for. The mantra was spend, spend, spend. I have mentioned on this blog, that it was the height of folly for some in the Harvard community to urge even higher payouts from the endowment. Why wasn’t there any sense of moderation, any sense that things could go wrong… and particularly that things could go wrong in the investment world?
Then, of course, is the fact that it is extremely difficult, if not impossible, to budget over a longer period of time (e.g. five years… a period of time that Harvard and other universities should be thinking of) if a major component of revenues, endowment payout, was based on a formula that was neither sound nor rational nor bore any resemblance to the real world of investment results.
Furthermore there is the problem of waste and also of unnecessary expenditures. With regard to waste, I’ll give just one example though there are hundreds of others. How many real estate departments are necessary to manage Harvard’s massive real estate holdings. It is truly a massive undertaking to buy, to build and most importantly to operationally manage the real estate holdings. At most every other university, however, there is one real estate department. Not at Harvard. Why? Entrenched interests! Why are there some totally independent departments in The FAS, for example, with all of the necessary overhead of a separate department, when those departments (serving few scholars) could easily be folded into others (with no loss of scholarly independence). Entrenched interests.
In the category of unnecessary expenditures, I would ask why tens of millions of dollars have been spent over the years to subsidize The ART. The ART is a worthy entity, but at what cost to the university. Shouldn’t the money be spent on the arts as it relates solely to students and faculty? Why has the university been willing to provide what many have regarded as excessive perks to ART directors (I’ve mentioned this in a past blog)? Couldn’t that money have beeen better spent?
There is only so much money to go around, even at a wealthy university. It should be used wisely with the thought of supporting a long term plan to enhance scholarship, not just for any one year, but for the next five, ten or more years. Perhaps this unfortunate period, with all of its terrible consequences for the human element at the university, will get everyone to focus on the need for a restructuring of how things are done. Harvard is too great a university to allow for less.
2/12/2023 7:48 pm
Sam,
Are you implying that President Summers mismanaged the University? Someone must have been responsible for the series of human errors (the human element) described in your eloquent commentary. Where does the buck stop and when were the errors made?
2/12/2023 7:49 pm
First time I’ve ever contributed here. The waste referred to above is on such a grand scale, but waste on a more minor level has gone on for years. And all these minor items pile up: faculty who insist on designer (or specially made) furniture, rather than accepting the basic metal/formica desk; faculty who compare the offices and technology of other members and then in a “his can’t be bigger than mine” mode, insist on getting unnecessary upgrades; departments that have parties with musicians and extravagant catering; money spent on lavish dinners at expensive restauraunts. The list is endless. Perhaps omitting these extraneous expenses will force people to focus on what is really important and to realize that education can occur without champagne galas and without some faculty having a ridiculous sense of financial entitlement..
2/12/2023 9:46 pm
2:41- this happens in government all the time and no one squawks. Perhaps because no one has a vested interest in the day-to-day goings on in government. But, your essay on the human element extends to government most especially.
The cuts there are a result of years and years of believing the Regan Revolution that government is bad and taxes are very bad - decrease revenue and increase expenses. The public wants bargain basement prices but private club type services. Not possible. That is why the most government services today are sub-par - no money to serve the public or pay the employees properly.
Sam is right on re real estate and fiefdoms. Wonder what the value of the Allston land is today versus what was paid for it during the height of the boom…anyone care to hazard a guess? I hope it is still active on the tax rolls and not fallow….?
And Sam, I had very similar comments re the Brandies Art Museum a few weeks ago and got lambasted…I am with you re spending cash on ART. If specifically donated, sure why not, but as a line item or program budget, c’mon that’s crazy when most of the kids today don’t know basic math, science, history or English.
Back to basics should be the mantra.
2/12/2023 11:38 pm
meanwhile, the new conventional wisdom says Larry Summers is usually considered a team player! (see http://foxforum.blogs.foxnews.com/2009/02/09/peek_obama_bailout/)
2/12/2023 11:40 pm
With you, Sam, on everything but this:
“Why are there some totally independent departments in The FAS, for example, with all of the necessary overhead of a separate department, when those departments (serving few scholars) could easily be folded into others (with no loss of scholarly independence). Entrenched interests.”
That was an LS position too, and it sounds sensible from the outside, but is not so in the case of an institution like Harvard, where small, intellectually rich, specialized departments, with devoted student (not just scholarly) constituencies, thrive in ways they likely wouldn’t if subsumed into larger, more amorphous groupings. Imagine, e.g. a large X Department which subsumed the current small Y Studies Department, arguably a part of X, but intellectually separate and not fully comprehensible by most members of X. The language specialist in the former Y (now X) retires, there’s a (sort of) hiring freeze, and the X Department decides whether to replace the specialist whose work they never quite got or argue for a more mainstream position that really excites THEM, and is more centrally positioned in the larger department. Multiply this process and what you end up with, e.g. is big, not very interesting, Humanities Departments.
Over time the loss is likely to be one of scholarly existence rather than independence.
The overhead in cases such as these is peanuts in the scheme of things, and this is not where the bloat has been occurring, rather precisely in some of the other areas you mention, and particularly the opulence accorded some buildings, outfittings, and targeted favorite projects.
Yes indeedy, doomwle 7:48, yes indeedy.
The humane aspect of all of this is indeed the one to keep sight of, Anonymous 2:41. If layoffs have to happen, and we all obviously hope that will be a last resort, the current move of looking for those willing and able to retire early seems to me the most humane way of minimizing those.
2/13/2009 4:35 am
And unfortunately, RT, the LS position continues to some extent even after his departure. Faculty members in department Q, who back in their graduate student days took a course in Z and were bored out of their minds by it, decide that Z isn’t at all important. The current hiring freeze welcomes this position (anything to reduce the numbers of professors in Q!), and there goes a whole branch of the discipline.
I am not making this up.
2/13/2009 8:39 am
I had to comment on the note about “minimal severance.” Anyone with more than 15 years of service gets 2 weeks of severance per year of work. And the University often kicks in other monies on top of that. So anyone who fits the criteria of institutional memory and long years of service will likely leave with close to a year’s pay whether or not they take the retirement deal.
2/13/2009 9:17 am
I know you’re not, Judith! So don’t stay too long in Paris . . .
2/13/2009 10:31 am
Richard and Judith,
My apologies for not making myself perfectly clear. I was not suggesting merging departments on a scholarly basis, but rather on an administrative basis. Departments can negotiate any type of arrangement they want from a scholarly standpoint. However, you’re right Richard, this is bupkis.
Let’s speak about the big bucks. In a previous blog, I mentioned two areas. A few anons mentioned a few others. A lot of the excesses pertaining to faculty really started to take off when the concept of fame and celebrity came into play with regard to appointments to departments. Fame and celebrity… wasn’t that what teenage girls were fixated on when looking at rock stars. Wasn’t that what was concentrated on (unfortunately) when society elevated sports stars to near mythic proportions. Somehow or other I never thought it would or should apply to academia. In my mind, the important thing was being called to Harvard, an honor reserved for few. Today it is members of “dream teams”, who before accepting, make a different type of call… a call to their agents to start negotiating. Dream teams, dream teams… is this what scholarship has come to? I thought it was reserved for basketball teams playing in The Olympics. This did not start in Larry’s administration. This is a series of events that has unfolded over a long period of time.
Larry started to reign in some of the abuses, but didn’t go far enough because of entrenched interests. In other areas unfortunately, he contributed to increased expenses against the wishes of some of his staff. Overall, however, he and his staff made very substantive changes in bringing a real world mentality to costs. In many cases, of course, they were taken to task for doing so. Little things were tackled: how many shades of Crimson did there need to be, a 128 different shades or some such outrageous number because everyone wanted their own shade (I’m not making this up!). Isn’t copy paper copy paper? Not if you wanted to buy it where it was more convenient rather than where it was cheaper. There are still areas of the university, many areas, where only 45% of the materials needed are bought through preferred vendors. Entrenched interests continue to rule and waste is the norm.
Then you had waste in the form of some faculty members double dealing with regard to non arms length transactions. Sometimes, when it was discovered, the whistleblower was let go, the incident was covered up and the guilty party went on to bigger and better remunerative rewards. Special payoffs for favorite professors. Outrageously expensive hotel rooms in foreign countries (anon 7:49 has already mentioned outrageously expensive meals in outrageously expensive restaurants, similar to The Street using taxpayer money for such things). RT, for every custom made desk and expensive picture on the wall, how many books could have been bought for Widener? How much money was spent, and how many boondoggles were associated with it, as the ill fated museum project by the river was unfolding. Millions and millions of dollars for some ill thought out whim, promoted by a spouse no less. Couldn’t the money have been better used?
This is the time to restructure Harvard from the standpoint of costs. Make a fresh start. Nothing should be sacrosanct. It wasn’t done when times were good because most believed the good times were going to roll all night long (as the lyrics to one of my favorite rock songs ,of long ago, said).
There is a second opportunity; if not now, when?
2/13/2009 10:40 am
I agree with Sam’s post above almost completely (with regard to the ART, not s’much; I think his comment there falls at the very far, less philistine end of a continuum of philistinism represented in the middle by the guy who said “why have theater when kids these days don’t know their three R’s” {hey, buddy, it’s Harvard, they know nine R’s and a U}).
But here’s the point I keep trying to make to Sam: a truly visionary reaction to this economic climate would say, We have this endowment for several reasons, and yes, extending Harvard in perpetuity is the first and most important one. But number two might be to ensure stability and minimize distraction that societal fluctuations otherwise create. So the payout should be INCREASED, not decreased, when the endowment performs poorly, so that the real dollar value is constant. (As Sam points out, this requires hawkishness at all times to keep costs down, since without local recession there’s a ratchet effect and interests get entrenched.)
The endowment should, in my book, mean COUNTERcyclicality. The university should be buffered from the economy, and the endowment is that buffer. Too often the endowment has the effect of AMPLIFYING rather than MITIGATING the impact of societal tumult on the intellectual world in which, for example, there is world-class theater around the corner all the time. (And yes, my students benefited quite a bit from the visiting professionals at the ART.)
Standing Eagle
2/13/2009 11:16 am
Hey SE:
No the H kids don’t know 9 R’s. Have had to turn a whole bunch of them down for jobs because they think they are smart when what they are is well read - no practical experience. Most don’t know a debit from a credit or how to write a proper sentence. Critical thinking skills are also lacking (Same goes for MIT undergrads…). And everybody has to know those things in order to survive.
It is wonderful to contemplate deep and heavy thoughts about serious and not so serious stuff and things. But in the real world the students need to be prepared to perform. No more so than when economies go sour.
Did preparatory lessons in high school not go far enough re classics, social sciences and the arts? Or are the sciences and maths not strong enough that the only option for most undergrads are the less rigorous subjects that one can bulls**t through? Are the kids too scared of their inabilities, lack of preparedness and perhaps insecurities to venture into the harder subjects due to ego? Who facilitates, encourages or has a stake in this situation?
No one from faculty will dare to answer these questions honestly and faithfully.
We have in front of us a very different landscape than one year ago. Students must be wondering were to put energies and attention. Similar to the 1960’s when Kennedy said that we were going to the moon in a decade, curricula turned to the maths and sciences and kids learned. What about today - we need chemists, biologists, engineers and the like to take on energy, environmental and medical opportunities.
Who will be best prepared to serve that need and who will be best prepared to take on that challenge…..I’ll leave this to all of you to bicker over.
Have a nice weekend.
2/13/2009 11:17 am
Hey SE:
No the H kids don’t know 9 R’s. Have had to turn a whole bunch of them down for jobs because they think they are smart when what they are is well read - no practical experience. Most don’t know a debit from a credit or how to write a proper sentence. Critical thinking skills are also lacking (Same goes for MIT undergrads…). And everybody has to know those things in order to survive.
It is wonderful to contemplate deep and heavy thoughts about serious and not so serious stuff and things. But in the real world the students need to be prepared to perform. No more so than when economies go sour.
Did preparatory lessons in high school not go far enough re classics, social sciences and the arts? Or are the sciences and maths not strong enough that the only option for most undergrads are the less rigorous subjects that one can bulls**t through? Are the kids too scared of their inabilities, lack of preparedness and perhaps insecurities to venture into the harder subjects due to ego? Who facilitates, encourages or has a stake in this situation?
No one from faculty will dare to answer these questions honestly and faithfully.
We have in front of us a very different landscape than one year ago. Students must be wondering were to put energies and attention. Similar to the 1960’s when Kennedy said that we were going to the moon in a decade, curricula turned to the maths and sciences and kids learned. What about today - we need chemists, biologists, engineers and the like to take on energy, environmental and medical opportunities.
Who will be best prepared to serve that need and who will be best prepared to take on that challenge…..I’ll leave this to all of you to bicker over.
2/13/2009 11:24 am
Sam,
I pretty much agree with all of of your 10:31 post, except for the view that lavish spending, special deals, and the like stopped between 2001 and 2006.
I also agree this is a time for getting it right and getting away from the “fame and celebrity model”, not peculiar to Harvard, as David Lodge or James Hynes (The Lecturer’s Tale is a classic on this topic) show.
Btw, the administrator of a very small department is generally an important part of the intellectual and general life of that community, keeping an eye on and helping advise or mentor undergrad and grad, students. But bupkis as you say, and that sort of “waste” is no waste at all unless you believe “everything can be measured”.
2/13/2009 11:28 am
SE,
I’ve made exactly that point, that the real dollar payout should be constant, many times on this site. Please go back and read some of my posts from two plus years ago. I spelled out how it could very easily be done. What you and others keep bringing up, however, is the payout percentage, as if that were some magic number ( you’d be much better off if you did not use the words “percentage” and “payout” in the same sentence). If you use any type of payout percentage, except for the starting value (and even there it is an incidental number), you cannot get a constant real dollar payout. What people have to start thinking about, as you said so well, is the actual dollars paid out. They have to forget about percentage. Real constant dollars can be paid out. It just involves three things: long term goals, plans and budgets with regard to scholarship and facilities; the ability to sacrifice some things now so that sacrificies don’t have to be made in future years; the willingness to look at 20 year periods for investment results.
Gonig forward, I haven’t heard of a willingness to do any of those things, so Harvard, in the future might be faced once again with the situation it now faces… not enough money to do all the things that the university is currently doing (up to the end of fiscal 2008) and all the things that it wished to do in the immediate future. Furthermore, because the dollars paid out were so high in the past eight years (and again, a lot of that had to do with the two 20% plus payout increases at the end of President Rudenstine’s tenure), you can’t start increasing dollars at this point. There should have been much more moderate increases so that the dollars could have continued to increase (in real terms) at this time. There’s still plenty of time to get it right going forward. Is there a will to do so?
With regard to The ART, my point was that there was a tremendous amount of waste and also special dealings that went on in the past. The ART could have existed very well without all of that; what’s the word I want to use… oh, yes, chicanery.
2/13/2009 11:30 am
So Annon, where do the ones you DO hire come from?
2/13/2009 2:42 pm
UMass, WPI, BU, Holy Cross, Georgetown, Fairfield, NYU
2/13/2009 2:48 pm
Sam,
Yes, I remembered that you were in favor of long-term planning and constant real dollar payouts. But your posts recently have all been about how the economy means that Harvard MUST immediately cut back. I guess I don’t understand how you reconcile these two views. Do you think the constant-real-dollar thing is just an aspiration, and that under the current discourse of ‘payout percentage’ there is no way to express the larger vision — i.e., ‘can’t get there from here’? Or just that costs are too high in absolute terms right now, and the recession is a convenient way to enforce that opinion?
Anon,
Your displeasure with the college’s liberal-arts identity is now on the record: you seem to think there’s something wrong with kids coming out of Harvard with “no practical experience.” Harvard is not (or perhaps I should say ‘should not be’) in the business of providing practical experience to students. You and I agree on the importance of writing sentences and critical thinking, but if you think those can come only from practical experience then I do not think all of those words mean what you think they mean.
I also can’t determine which subjects you think are ‘harder’ (and therefore more worthy). In any case it seems clear to me that there’s a correlation (but NOT necessarily a causal link) between the following two Harvard-graduate characteristics: a) being an engineering or lab-science concentrator; and b) being a person you, Anon, would like to hire. So I’d suggest that you interview more of that kind, and fewer of the other kind.
Pip pip,
SE
2/13/2009 2:52 pm
“UMass, WPI, BU, Holy Cross, Georgetown, Fairfield, NYU”
I don’t see why you’re so upset with Harvard then; you’re getting staffed up (and probably saving some dough by rejecting the big-ego kids you’ve interviewed from Harvard). All is well.
College counselors would do well to advocate the above schools to kids who at 18 are FULLY CONFIDENT that they want to join a company like yours (whatever that is). And Harvard kids who aspire to a company like yours should be aware of the statistical disadvantage they face, and work to compensate (by, for example, taking Accounting at MIT).
As a teacher of English I’ll stay focused on that whole “well read” thing you mentioned.
Standing Eagle
2/13/2009 3:12 pm
And those are excellent liberal arts colleges. Georgetown, Holy Cross, BU, NYU have excellent Classics Departments, btw.
2/13/2009 3:29 pm
Yes, but it doesn’t sound as if Anon has been hiring the classics majors. (Which is of course not to say that his new employees didn’t have broad tastes in electives.)
2/13/2009 3:31 pm
That is great. My receptionist has a BA from one of the those schools - in Classics mind you. Greek, Latin all that. Can’t follow directions to save her life.
I grant you that it is very important to know and understand history and the classics (went to catholic school - it was drilled into us at a very young age). But, what exactly can you do with that degree if you don’t have any practical knowledge as well? What is the baseline and what are the requirements to get out of high school and then college? These days it appears to be parents who can pay the bill.
I don’t disagree with you, RT. But tell me this (perhaps I am prejudice though) which countries do you believe truly prepares high school students for university and beyond and why?
My friends at MIT said they had to lower the admissions standards just so Americans could get in.
Your serve.
2/13/2009 3:50 pm
Do the work yourself, Annon (are you just one Annon?):
Here’s the url of my department’s newsletter:
http://www.fas.harvard.edu/~classics/links/notabene.html
Check out the commencement issues. The answer is: law school, medical school, more academics, teaching, dance, venture capital, nothing specific, falconry, etc. An undergraduate degree prepares you for life, not for a specific job. That’s your job when you hire the person, or the graduate/law/medical/business school’s job.
So why haven’t you fired your receptionist? Answer: because her classical training makes her own directions better to follow than the ones you give her. Right?
Last question a different one. International students compete equally for admission with US students and both do very well at the top level. Short answer: New Zealand (seriously) — and many others, including US, though we will do better if we as a society valued teaching the way we value ibanking.
Gotta run.
2/13/2009 3:51 pm
SE
You said “Or just that costs are too high in absolute terms right now, and the recession is a convenient way to enforce that opinion?”
Yes, costs are too high today, but most importantly costs have been too high for a long time. That is the problem and that’s what I’ve said in the past.
If you have a cost structure that needs “x” dollars to help support it (i.e. an endowment payout) and the support for those “x” dollars (the endowment) is predicated on the endowment rising year after year, then you have no margin of safety if the endowment does not go up every year or heaven forbid, goes down 30%. That is what is happening now.
The cost structure of the university, and not only this one, was based on a crucial assumption, an assumption that was specious in nature. The assumption was that Harvard had enough money relative to its cost structure. That was true (but even then, with no margin of safety) as long as the endowment kept going up.
In the past several years, no matter what some senior professors said, Harvard barely had enough of an endowment relative to its cost structure. It certainly doesn’t now.
The reason all this (the cutbacks) is going on is because the university is trying to get its costs in line with its income. SE, it’s not a question of wanting to do it, it’s a question of must do it. No one wants to see something like this, but not to do so would be financial suicide and would be catastrophic for future generations of scholars.
In the next ten years, a number of small and medium size liberal arts colleges are going to fold. A number of major research universities are going to scale back substantially. The universities are going to have to make do with less; they won’t be able to be all things to all people as they have been for the past twenty years or so. This is a fact.
The Rev should be leading a large prayer service in Memorial (mandatory attendance as in days of old) with a sermon centering on the meaning of being humble when markets are going through the roof. He also better ask for a large uptick in markets for fiscal 2010, because, as I showed with Columbia’s financial pronouncements, all hell is going to break loose if they markets are not up substantially.
Don’t shoot the messenger for bearing these tidings. All I’m trying to tell you is the reality of the situation. It didn’t have to be this way and hopefully lessons have been learned so that it is not this way in the future.
2/13/2009 3:54 pm
One small point re: Sam Spektor and Standing Eagle’s discussion about how to spend the endowment-MA state law limits the percentage of an institution’s endowment that can be spent in any given year. So, because Harvard did not do the long-term budgeting/planning that Sam has recommended, the University is now unable to spend counter-cyclically. I don’t know the numbers, but it is easily possible that the Corporation could set the endowment payout at the maximum allowable by law, and the payout might still fall in real dollars. Had the payout rate not increased so quickly, the University would be much more capable of doing just the kind of counter-cyclical spending that SE recommends.
MA state law also prohibits spending from any endowment fund where the current value is less than the value of the original gift (i.e., if the fund is “underwater”). So, most funds created in the last 2-4 years probably aren’t spendable.
There have been talks about repealing those limits, but then you get into the question of whether or not it’s prudent to spend so much of the endowment. The WSJ had an article a couple of days ago that talks about these issues, though not in re: Harvard. http://online.wsj.com/article/SB123432521248071761.html
2/13/2009 5:00 pm
RT:
First, it has been recommended to fire her - wrong hire to begin with; should never hire someone with a classics abckground to do office work-wrong skills.
Second, the reason there is a division of labor is just that. Receptionist do different things than CFO’s, analysts, lawyers,etc. BTW, I didn’t hire her. So, even though I did that job when I was 15, it makes no economic or practical sense to do it now. Do you do your assistant’s work or you TA’s work. I think not. Dumb remark professor and a little too smart assy I might add from someone who is usually a bit more intelligent than most on this blog.
So, all the grad students you teach are prepared for life as we now know it now because they have liberal arts degrees. Let’s see no job prospects, lots of debt, looming inflation and oh, yeah no job prospects regardless of education level - that is fulfilling?
We just lost 3 mm jobs in the U.S. Were are your students seriously going to get a job in June? You have union protection. They have debt coming out their ears to pay for their eduction and your sinecure (as well as your fellow “teachers”).
So, answer the questions as posed professor.
TTFN!
2/13/2009 5:49 pm
OK it’s Friday p.m., so one more shot.
Sorry if I seemed smart-assed to you Annon, but we just have fundamentally different ideas of what higher education does or should do. And your view of what I and many engaged in college and university teaching do (which includes doing my own xeroxing) is just such a caricature it’s hard to find common ground for discussion.
I’m not sure what you mean by “practical”. If you mean kids these days have been coddled and don’t have practical skills (as opposed to specific training) — i.e. they’re not “handy”, don’t know how to change a spark plug (or why they might need to), can’t paint a ceiling, screw shelving to a wall, etc. then I’d probably agree. I mowed lawns for money as a kid, drove trucks, stevedored, short-order cooked, etc. through college, and it’s kept me very practical.
If you mean that not everyone should go to college and do a liberal arts degree. and we need more trade and vocational schools, then I would probably agree also, and the infrastructure jobs will in large part go to people with such training (which they may do after getiing a BA of course). I think the way US society sees the lack of a 4-yr. college degree as a deficiency is deplorable. Maybe Sam’s collapsing colleges will convert to such vocational schools (seriously), and that wouldn’t be a bad thing. A lot of PhD programs would better serve their discipline by offering MAT programs. And so on.
But neither of these possibilities seem to me to be informing or explaining what comes across as an almost seething rage against the notion that a non-vocational liberal arts degree, such as is common throughout US society, might have merit, might also prepare one for thinking about the job or jobs one then trains for (on the job or in grad. school), and yes, thinking about life, and what it means to be a human being, citizen of a particular country, within a complex world with a history that matters right now, peopled by other cultures with different languages, and so on. Why would institutionalizing ignorance about all of this be a noble or expedient goal? I’m serious, so you answer my question
Finally, if I were an architecture professor or engineer, would my students be in any better position next June than the ones I actually teach? And do you want everyone to be an architect, engineer, accountant, banker, and to have trained for that from age 18?
This will probably be it for me, and I think I did answer your questions — not that I’m obliged to. TTFG
2/13/2009 9:55 pm
What was in Larry Summers’ D.E. Shaw Pitchbook?
http://blog.atimes.net/?p=552
2/14/2009 1:12 pm
RT — Alas, lavish spending did NOT end in 2006. Perhaps it did in your department and in other smaller departments. But the luminary faculty continued the tradition. The caterers continued to cater, the musicians played on, and the wine at dinners flowed. Talk to the administrators who had to pay and justify the bills and who had to deal with the financial folks. Exceptions were made and approved.
2/14/2009 1:38 pm
Anon 1:12, I didn’t express a view on post-2006, just on Sam’s suggestion that there was a new austerity between 2001 and 2006 — beyond using single-vendor copying paper and the like. But agreed on all of this: time for a change!
2/15/2009 2:45 pm
Late arriving to this fascinating conversation. I’m totally with Sam on the ART, and Richard, if you knew how much money Harvard had poured into it, I think you might feel differently. I was a member of the ill-fated review committee Neil commissioned on that — Dan Steiner chaired it — and Neil buried the report after Brustein, ahem, persuaded him that its recommendations were misguided.
But I’d like to offer a larger point — the lack of transparency about where Harvard is spending its money. Why shouldn’t the size of the ART subventions over the years — and the number of dollars lost because departments buy their copy paper from different vendors — and the administrative staff costs of small departments — be open for public discussion? My personal guess is that the savings by addressing #2 and #3 are not so great, after all, but none of us has any way to know for sure. I, like Richard, think the Summers administration brought us a bit of highly selective show austerity, the end of the supposedly wasteful practice of professors deciding where to buy cement, while #1636 and its chauffeur sat outside Mass Hall.
No one will ever disclose the more embarrassing individual scandals Sam mentions — and I have had the experience of walking up to the check-in counter with a faculty colleague for the same flight at Logan, and having us part ways so he could go into the first-class lane. But everyone will do their jobs more rationally and efficiently if they know where the real costs are. The exercise of emailing an input address with cost-saving suggestions based on guesswork didn’t make a lot of sense.
2/15/2009 11:21 pm
Good points, Harry. I have a parallel for your Logan lane-divergence. My inherited, 80-yr. old, finally broken, Widener desk needed replacement two years ago and I asked if there might be one lying around that I could get (free). I was told I could have a custom-made one, custom-ordered by a colleague who decided he/she didn’t actually like when it was delivered!
2/16/2009 11:56 am
Ah yes, I hope the notion that the upper classes at Harvard need designer furniture has perished in the recession. Once while I was dean I was taken over to Charles Webb to see about having a nice new desk made for me. I was offended, which I felt rather badly about, because plainly the intent was to flatter me. Anyway I liked the aura emanating from the old one, so I kept it. I’ve also been to a few over-the-top retirement celebrations in my day, particularly one where the retiree himself planned the event.
By the way, here is a nice example of a place where transparency would be helpful; it came up in a recent discussion at a faculty lunch. Do you know whether it’s cheaper to place an international call or to send an international letter? None of us did, and the answer isn’t obvious — it depends on what rate plan Harvard has contracted for. When I learned how much we pay for phone service, I offered that I’d rather have a teaching fellow than a telephone, which I had not intended to be alliterative but one of my colleagues suggested would make a good title for a Crimson column.