Key Takeaways
- • Harvard's endowment stands at $53.2 billion, but more than 80 percent is held in roughly 14,000 restricted funds that cannot be reallocated at will, leaving about $9.6 billion in unrestricted endowment assets.
- • Combined with the $6.9 billion annual operating budget, Harvard has roughly $16.5 billion in unrestricted funds, according to Crimson calculations cited in the report.
- • Federal actions include freezing $2.2 billion in federal research funding, a proposed endowment tax increase, and a directive to the IRS to revoke Harvard's tax-exempt status.
- • Harvard Medical School CFO Julie Joncas warned that drawing $300 million a year from unrestricted funds would exhaust them in about a decade.
- • Harvard typically makes roughly $2 billion, under 5 percent, of endowment returns available for operations each year and has not announced plans to tap the endowment.
Summary
Harvard faces mounting pressure to draw on its endowment as federal actions threaten its finances. The Trump administration has frozen $2.2 billion in federal research funding, proposed raising the endowment tax, and directed the IRS to revoke the university's tax-exempt status. Researchers have received stop-work orders, and Harvard Medical School has announced imminent layoffs. Former Harvard President Lawrence H. Summers wrote in an April 4 New York Times op-ed that wealthy universities should be prepared to draw down their endowments in emergencies, arguing that covering federal funding lapses qualifies.
The endowment, however, is not a conventional reserve. According to The Harvard Crimson, more than 80 percent of the $53.2 billion pool is held in more than 14,000 restricted funds donated for specific purposes. The remaining $9.6 billion is theoretically available, which combined with the $6.9 billion annual operating budget gives Harvard about $16.5 billion in unrestricted funds. Harvard's annual financial report says the university has no intention of liquidating endowment assets but retains flexibility for unexpected disruptions. Harvard typically uses roughly $2 billion, less than 5 percent, of endowment returns for operations each year.
Eastern Michigan University business professor Howard Bunsis, who has audited university finances, wrote that Harvard could absorb a substantial but one-time hit, noting that reserves exist for temporary revenue declines. Former Vassar College president Catharine Hill wrote that extraordinary circumstances may justify relaxing normal endowment spending rules. Harvard's fiscal 2024 report, however, states that spending significantly more than sustainable levels would undermine intergenerational equity.
Schools dependent on federal funds face tighter constraints. Julie Joncas, CFO of Harvard Medical School, told a town hall that the school's unrestricted funds would last only a decade if it drew $300 million annually to cover lost federal funding and its deficit spending. Other options include bond sales, as Harvard has done twice this year, and philanthropy, though private funders such as the Howard Hughes Medical Institute and the Gates Foundation each have annual budgets under $10 billion, far below the NIH's nearly $48 billion. Thomas P. Lockerby, who leads fundraising at Phillips Academy Andover, said some Harvard donors have signaled they would give more if the university tapped unrestricted endowment funds to support research. The University did not respond to the Crimson's request for comment.
The endowment, however, is not a conventional reserve. According to The Harvard Crimson, more than 80 percent of the $53.2 billion pool is held in more than 14,000 restricted funds donated for specific purposes. The remaining $9.6 billion is theoretically available, which combined with the $6.9 billion annual operating budget gives Harvard about $16.5 billion in unrestricted funds. Harvard's annual financial report says the university has no intention of liquidating endowment assets but retains flexibility for unexpected disruptions. Harvard typically uses roughly $2 billion, less than 5 percent, of endowment returns for operations each year.
Eastern Michigan University business professor Howard Bunsis, who has audited university finances, wrote that Harvard could absorb a substantial but one-time hit, noting that reserves exist for temporary revenue declines. Former Vassar College president Catharine Hill wrote that extraordinary circumstances may justify relaxing normal endowment spending rules. Harvard's fiscal 2024 report, however, states that spending significantly more than sustainable levels would undermine intergenerational equity.
Schools dependent on federal funds face tighter constraints. Julie Joncas, CFO of Harvard Medical School, told a town hall that the school's unrestricted funds would last only a decade if it drew $300 million annually to cover lost federal funding and its deficit spending. Other options include bond sales, as Harvard has done twice this year, and philanthropy, though private funders such as the Howard Hughes Medical Institute and the Gates Foundation each have annual budgets under $10 billion, far below the NIH's nearly $48 billion. Thomas P. Lockerby, who leads fundraising at Phillips Academy Andover, said some Harvard donors have signaled they would give more if the university tapped unrestricted endowment funds to support research. The University did not respond to the Crimson's request for comment.
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