At a November 8 reception in University Hall, the Faculty of Arts and Sciences (FAS) celebrated Michael D. Smith for his 11 years of service as dean, concluded last August, conferring on him an amusing rendering of all the faculty’s leaders, from the inception of the position in the late nineteenth century through his tenure. (Mark Steele, who conceives and creates the art for Yesterday’s News, won the FAS commission.) A pair of separate tributes to Smith, lastingly important to the faculty as a whole, were embedded in the annual report issued by his successor, Claudine Gay, covering Smith’s final year—and his cumulative impact.
First, the faculty data reveal that during Smith’s deanship, FAS appointed 364 ladder (tenured and tenure-track) members. Of this cohort, 312 remain at Harvard: 43 percent of FAS’s 734 faculty members as of the beginning of this academic year. Thus, even though the census remained largely steady in the wake of the financial crisis and recession (it was 709 when Smith began as dean, and has remained at 731 or slightly more since 2014), the faculty ranks have been substantially renewed, and become much more diverse.
The faculty has also continued to evolve in disciplinary terms. In the fall of 2007, arts and humanities positions accounted for 29.3 percent of the ladder faculty; that share has declined two percentage points. The social scientists held 34.3 percent of positions—a percentage-point more than now. Scientists held 26.7 percent of the positions—and now occupy 27.4 percent of the total. And the engineers and applied scientists have increased from 9.7 percent to 12.0 percent of FAS’s ranks (and will likely grow further after the facilities rising in Allston open in the fall of 2020, creating room for expansion).
Second, FAS closed its fiscal year 2018 books with a surplus under its version of Generally Accepted Acounting Principles (GAAP)—a stupendous result for an endowment-dependent organization that was hammered during the financial crisis and has subsequently been stretched by the costs of renovating its undergraduate Houses (for which the Corporation had authorized spending of $873.9 million as of last June 30—with work in progress on Lowell House, and yet to proceed on Adams and the huge Eliot-Kirkland complex).
A review of the detailed financial report is rewarding. Fiscal 2018 turned out as well as it did, despite the flat rate of endowment distributions, for several reasons. Capital-campaign largess helped to enlarge FAS’s endowment (pledges receivable decreased from $768 million to $657 million as donors fulfilled their gifts), so the absolute endowment distribution, which accounts for nearly half of revenue, rose some $12 million. (FAS’s endowment is now valued at $17.0 billion: the first year-end result nominally above the fiscal 2008 level of $16.7 billion—but worth some $3.3 billion less in real terms, adjusting for inflation.) And current-use giving, impelled by the campaign’s close, rose nearly $18 million for the year, to $115.7 million. Expenses rose just 2.3 percent, as FAS keeps a tight rein on its workforce.
Looking at capital items and the balance sheet, FAS reported spending $19.3 million fitting up faculty members’ laboratories, studios, and the surrounding buildings—a continuing expense to enable professors to do their research and teaching, and in fact less than the typical annual bill for such improvements. Long-term debt increased $149.3 million, to $1.06 billion, driven by House renewal, and reflecting the continuing strain of footing FAS’s construction bill. Importantly, its cash position was enhanced by $27 million during the year—giving Dean Gay some opportunity to make strategic investments—as the result of a restructuring of about $700 million of internal debt with the University at the end of fiscal 2016. That transaction, effected by levelling the debt-repayment schedule to lessen what would have been larger near-term obligations otherwise, means that FAS will owe bigger payments, especially toward the end of the two-decade agreement. In the meantime, however, it provides a modest cash cushion, without obligating the dean to further decapitalize endowment funds.
In effect, that represents a resetting of the generational balance. Under Dean Smith, FAS began addressing its largest deferred-maintenance item from prior decades (renovating the undergraduate residences), at a cost to current and future programs—during a period when endowment investment returns lagged Harvard’s expectations. Now, restructuring the debt creates a little current breathing room. In the future, as gift pledges are fulfilled, and (one hopes) endowment performance strengthens, that reset debt obligation should weigh less heavily.
FAS’s financial managers can, and will, fret about sustaining the fiscal 2018 results: the endowment distribution will rise this year, but current-use giving might fall. Strong royalty and nonfederal sponsored research revenues may turn out to be one-time phenomena. The cash benefits from the debt deal have peaked. A new president and dean may, rightly, have ambitions to do more or better. Negotiations with the graduate-student union could raise costs. And the new federal excise tax on endowment income looms over Harvard, beginning last July 1.
Withal, Michael Smith concluded his time in University Hall on a high note, on the metrics that matter most to him and the faculty he led: FAS’s intellectual strength, and its financial underpinnings. Small wonder that Dean Gay began her tenure noting, “I am enormously grateful for the strong foundation that his leadership has provided.”
