Harvard’s $68 Billion Question

Harvard's endowment reached a record $68 billion and generated a 27.1% return, according to the annual financial report the Harvard Management Company released on Oct. 15. Over the same period, the University cut $104 million from salaries and wages, partly through layoffs, a contrast that has angered unions and faculty and prompted calls for Harvard to draw more heavily from the fund. Wellesley economist Phillip Levine, who studies university finances, told the Harvard Independent that a record endowment value does not translate into spending money.

Levine's central point is structural. Roughly 80% of the endowment is restricted by donors to specific purposes, and less than 5% is fully unrestricted. Harvard's payout rules smooth gains over several years, while new costs hit immediately. The endowment paid out $2.6 billion this year, about 39% of Harvard's $6.7 billion in revenue, at a 5% payout rate. The Harvard Corporation approves the payout annually as a dollar increase over the prior year rather than a percentage of value. Levine described endowment smoothing as a customary and valuable practice that prevents one strong year from reshaping the budget. The portfolio spans about 15,000 funds across seven asset classes, with private equity, including venture and growth equity, at 46%, hedge funds at 29%, public equities at 14%, and the remaining 11% in real estate, bonds, inflation-protected Treasuries, other real assets and cash.

The cost pressures are substantial. Federal research revenue fell about 20%, and nearly 33% when back payments on restored grants are excluded. Legal costs from Harvard's dispute with the Trump administration over research funding and international students reached $210 million, up from $126.6 million the prior year. The One Big Beautiful Bill Act, signed in July 2025, raised the endowment tax for the wealthiest universities from 1.4% to 8% starting with the fiscal year that began in July 2026, and Harvard estimates this will cost roughly $300 million a year. The fiscal 2026 report showed a $100 million operating surplus, but it was driven by restricted funds, while unrestricted funds ran a $78.7 million deficit.

Harvard has responded with spending reductions. Salaries and wages, the largest expense, fell 3.8% year over year, with the financial report citing a hiring freeze, attrition and restructurings. The Faculty of Arts and Sciences eliminated 165 staff positions over the summer to address what its leaders call a $350 million structural deficit. Ph.D. admissions in the sciences were halved, other divisions planned enrollment drops of 50% to 70%, the College closed the Dudley Community and the Phillips Brooks House Association lost about a third of its employees.

Critics, including labor unions, several faculty members and some economists, largely do not dispute that the University faces new costs but question whether they justify such sweeping cuts. More than 4,000 members of the Harvard Graduate Students Union (HGSU-UAW) struck on Oct. 27, and Harvard Academic Workers, representing about 2,600 non-tenure-track lecturers, preceptors and researchers, walked out on Nov. 10 after a final bargaining session ended without a contract. HGSU-UAW president Denish Jaswal said the union is prepared to stay on strike until Harvard moves. Levine, however, cautioned against larger draws, arguing that repeatedly raiding the endowment would erode gifts' intended purposes, while acknowledging that the restricted-fund constraint is sometimes overstated. Former President Lawrence H. Summers argued in an April 2025 New York Times op-ed that endowments exist for emergencies such as federal funding lapses.

Pressures remain unresolved. The 8% tax took effect with the new fiscal year, Harvard has held this year's distribution flat partly to help pay it, and a federal appeals court has yet to rule on research grants a judge ordered restored last year. As Levine put it, "$300 million is $300 million. That is not a trivial amount of money."