Several Harvard Professional Schools Move Online for Fall
…and the endowment distribution is decreased, as the College completes its plans.
SIX of Harvard’s professional schools announced today that they will offer online-only instruction this fall, as the coronavirus pandemic continues to curtail safe education in residence. Separately, the University has determined that distributions from the endowment—the largest single source of operating revenue for the schools—will be decreased, rather than increased (as had been budgeted), for the fiscal year beginning July 1. And the College (facing unique challenges associated with dense undergraduate housing, dining, instruction, and extracurriculars) and other Faculty of Arts and Sciences entities (the graduate school, engineering and applied sciences) expect to announce no later than early July how they will operate, amid increasing signs that is preparing for remote teaching—even for students who in residence.
Professional Schools Move Online
Today, Harvard Divinity School (HDS), Harvard Graduate School of Design (GSD), Harvard Graduate School of Education (HGSE), Harvard T.H. Chan School of Public Health (HSPH), Harvard Kennedy School (HKS), and Harvard Law School (HLS) announced their fall academic plans—all moving to online instruction for at least one term, suggesting a much emptied-out campus this autumn.
HDS will conduct fall instruction online, and will examine public-health conditions in determining what to do in the spring 2021 term.
Similarly, GSD “will continue with remote teaching through the entire Fall 2020 semester. All university-related international travel and non-essential domestic travel are prohibited. All in-person school-wide events and public programs are cancelled.”
HGSE will “focus on a fully online experience during 2020–21.” Dean Bridget Long amplified:
Our decision largely centers on continued disruptions to residential learning in the wake of COVID-19. In addition to the strong likelihood of intermittent periods of quarantine (orders to remain at home), we expect distancing measures will need to be in place through the entire academic year to continue to mitigate the spread of the virus. This scenario presents many challenges and likely multiple interruptions to an on-campus program, which would result in a severely altered experience that could compromise the HGSE learning experience. In addition to the public health conditions, we know that continued travel restrictions may limit many students’ ability to join us in person on Appian Way. Based on our specific context, programs, and diverse student body, we are not confident we can bring students to the HGSE campus in a safe, equitable, sustained way.
And in a message to students late this afternoon, HLS dean John F. Manning wrote, “We have all hoped these past few months that the upcoming academic year could begin, at least in part, on campus. However, in light of the daily news about the continuing health risks of the pandemic, advice from public health experts, and the very real concern that testing will not yet be available on the scale or frequency needed to adequately monitor COVID-19-related illness in the Harvard community, we have found it necessary to conclude that Fall Term 2020 will be online.”
Harvard Medical School previously announced that first-year instruction would be online, so that upper-level students can pursue their clinical and other learning (see the May 13 announcement in the link above).
Endowment Distributions Decreased—and Assessed
The distributions from the endowment will be reduced by 2 percent during fiscal year 2021; prior guidance had led to budgets based on the assumption that the distribution would increase by 2.5 percent. Those figures reflect the funds disbursed from each unit in the pooled investments held by each school, unit, or program that has endowment assets. In addition, a 3 percent assessment will be levied on all distributions—resulting, effectively, in a 6 percent decrease in the funds received from endowment distributions, widening the gap from the prior budget guidance to 8 percent or more.
For perspective, endowment distributions provided $1.91 billion for academic operations in fiscal 2019, the latest year reported (up from $1.82 billion in the prior year). Deans and others might have expected the sum to increase to roughly $2.0 billion in the year about to begin: the 2.5 percent budgeted increment, plus a like amount for distributions from new gifts for endowment that result in more units owned (largely proceeds from the $9.6-billion Harvard Campaign as pledges are fulfilled). Instead, it may decline to perhaps $1.8 billion to $1.85 billion—a nine-figure reduction from budgets drawn up this past spring.
But the funds yielded from the 3 percent levy on endowment distributions will be recycled to the deans, providing resources to defray the added costs of coping with the pandemic, possibly including investments in remote learning; physically altering research and teaching spaces to maintain social distancing; supplying personal protective equipment; testing for the virus; and so on. Effectively, the Corporation has decided to tap funds distributed from all endowments to contend with school-level large, continuing costs of responding and adjusting to the coronavirus, to sustain the overall academic mission safely. Each endowment-supported academic function undergoes a one-year drop in support, to pay in part for sustaining the larger academic entity.
The deans are thus proportionally less squeezed by the new distribution rules for fiscal 2020. But they have the enormous challenge of figuring out how to defray higher costs (coronavirus adaptation; potentially, financial aid as well) with likely lower revenues (for example, as residential executive and continuing education is suspended; possibly from reduced tuition, room, and board income as foreign students are deterred by visa restraints and travel hurdles, and as all students consider the health outlook and some decide to defer enrolling or take a gap year rather than accept remote rather than residential teaching).
•One faculty’s outlook. As Faculty of Arts and Sciences (FAS) dean Claudine Gay wrote in a message yesterday:
We expect to end the current fiscal year (FY20) with an operating deficit of $42M due to the costs of campus de-densification, the rapid pivot to remote instruction, and the cancellation of continuing education programs. Looking ahead to FY21, which begins on July 1, the Corporation has decided that the endowment distribution (the revenue source that funds nearly 50% of the FAS budget) will be reduced by 2%. For the FAS, this decision means we will receive about…$48M less than what was originally budgeted for FY21 (and $15M less than the FAS received in the current fiscal year). [The $48-million reduction from planned distributions is equivalent to about 3 percent of FAS’s operating revenues.]
Additionally, the Corporation has decided to implement a one-time special assessment, an extraordinary step, taken in recognition of the urgent need for unrestricted funds to meet immediate challenges. The assessment takes 3% from all restricted funds and makes them available for immediate use by the School toward student support and other pandemic response needs. This assessment is being applied across all Harvard Schools. The flexible funds provided to the FAS through this mechanism will total approximately $23M and will help us to address some essential elements of our pandemic response….While welcome, these funds are not scaled to the challenge we face in responding to the pandemic. The cumulative impact of these two endowment decisions, the payout reduction and the special assessment, is that the net distribution to fund our wide range of activities will be down by 6%. [Emphasis added.]
“The full financial impact of the pandemic on the FAS will be significant,” Gay continued, “in the hundreds of millions of dollars, on par with that of the 2008 financial crisis, if not greater. And those impacts will not be limited to one year; we are on a changed trajectory that will persist for some time. The challenge before us is to enable necessary transformation of the FAS to ensure that we remain a vibrant research community and continue to define excellence in education.” (Beyond identified cost-savings and efforts to boost income—freezing salaries, saving $15 million; reducing capital spending; aiming to augment revenue-generating extension education; and encouraging philanthropic support—Gay said, “[G]iven reduced activities on campus, furloughs for fully or partially idled workers will also be necessary.”)
Athough FAS is heavily endowment-dependent, the effects of the new circumstances may be more pronounced in percentage terms elsewhere. Harvard Business School produced large operating surpluses in recent years, and invested some of those funds in an endowment reserve—$65 million in fiscal 2019, and $100 million in fiscal 2019—further accelerating its expected distributions, which were anticipated to increase at a “high single-digit” rate in the current fiscal year. Downshifting to the new realities of fiscal 2021 might pinch accordingly.
•University perspective. In an interview with The Harvard Gazette, Thomas J. Hollister, vice president for finance and chief financial officer, said that depending on the year-end value of the endowment, the 2 percent reduction in the distribution would still likely result in the largest percentage distribution of market value “in many years.” (The share of market value distributed is typically about 5 percent annually.) Among the costs and losses of revenue intended to be covered in part by the 3 percent, one-year assessment, he cited “room and board rebates and students’ moving costs, as well as expenses in the coming year to enhance the excellence of remote learning, provide increased financial aid, reopen and reconfigure labs, as well as many other steps across campus to create a protective public health environment for the community.”
Step 1: University-wide, the distribution will be reduced 2 percent. Thus, an endowed fund (for example, in support of a professorship, a research program, financial aid, or library materials) that yielded a gross total of $1,000 in the current fiscal year—and was until recently budgeted to yield $1,025 in fiscal 2021—will instead provide $980: an absolute decrease of $20, and a decrease relative to budgeted expectations of $45.
Step 1a: All distributions are subjected to various assessments—to pay for the University’s central administrative operating costs, academic support, and for other purposes. In its 2019 financial statements, for example, the Faculty of Arts and Sciences (FAS) showed the distribution for central administrative operations—an assessment on its gross endowment distributions—of $85 million (and there were others). In 2016, Corporation member Paul J. Finnegan, Harvard’s treasurer, explained such assessments as covering “critical functions through the University and Schools,” including “student services, academic planning, facilities operations and maintenance, finance and human resources, and information technology, as well as other aspects of general administration.” Depending on the school, such assessments might now total 25 percent or more of the funds distributed from an endowment account annually—effectively reducing the gross distribution from that $1,000 in the current year by one-quarter or more, yielding a net, spendable amount available to the school or unit.
Step 2: All distributions from endowment funds will then be subjected to an additional 3 percent assessment for fiscal 2021. Those funds will be made available to deans to cope with the unforeseen costs of adapting to the COVID-19 crisis, as described above.
As a result:
- the $1,000 distributed in fiscal 2020 would decline to $980 next fiscal year because of the 2 percent reduction in the distribution rate;
- that distribution, after usual assessments, would in turn decline to a lesser net amount; and,
- after the additional 3 percent assessment on the reduced ($980 gross) distribution, the net would decline further.
Thus, in net terms, after the existing assessments and the special 3 percent assessment apply to the reduced gross distribution, the fiscal 2021 amount available for use to pay for the professorship or academic program would effectively decline by 6 percent compared to this year.
The College’s Conundrum
During a June 3 Zoom town hall for current students, those about to matriculate in the class of 2024, parents, and others, College dean Rakesh Khurana and colleagues—registrar Michael Burke; dean of undergraduate education Amanda Claybaugh; and dean of students Katherine G. O’Dair—laid out their process for deciding whether undergraduates can be in residence in the coming year, and answered pressing questions.
Khurana stressed that the College is eager for all student to be back on campus as soon as possible. But given Dean Gay’s principles for deciding how to proceed—assuring health and safety; protecting the academic enterprise; sustaining the community’s breadth and diversity; and maintaining access and affordability—he pointed to the many uncertainties. How could members of a coronavirus-safe community conduct a social life? What physical adjustments need to be made in facilities? How can community members with varying degrees of risk all be made safe—and how can virus testing be conducted at scale?
In light of those questions, Khurana said, students’ experience will assuredly be different, and not just for the short term. Moreover, whatever community emerges will depend on its members’ shared responsibility for one another’s safety: the adaptation is a shared enterprise.
Burke outlined FAS’s working groups, 11 in all, charged with planning for the fall and beyond (he co-chairs the executive committee). He acknowledged that matters under consideration include modifying the academic calendar and schedule, given the constraints on accommodating instruction within existing teaching spaces. The largest Science Center lecture hall, he noted later, nominally seats 500; modified for social-distancing, its capacity might be 87 students.
Claybaugh, acknowledging uncertainty about whether all, some, or no students would be in residence, suggested that whatever decision is made, the likelihood is that most teaching and learning would be conducted remotely (given those capacity limits, problems of getting students into and out of teaching spaces, and so on). The hurried move from residential to Zoom remote instruction in the spring is not the template for fall, however. Faculty members and teaching staff are being instructed in best practices, she said later, including breaking up lectures into smaller units, divided by break-out discussions, group exercises, and other innovations—all intended to increase interactivity, student engagement with professors, and student engagement with one another (the hallmarks of the best online education now created at the University).
She also noted that many students this past spring recorded challenges in learning remotely: varying computer and Internet capacity, the unavailability of suitable workspaces at home, and the dislocations imposed by trying to attend class from time zones around the world. The College, she said, would intervene where necessary to remove the technological hurdles; work on finding suitable study and learning spaces; and record class sessions so students could participate at a normal working hour in their local time zone. Grading will revert to normal standards and processes, after the “emergency” system used this past spring.
O’Dair noted the challenges of dorm and House residence, dining together, and otherwise being a close social community. Students not comfortable coming to campus, if it indeed is open, may stay away and study remotely, she said, and leaves of absence will be granted as usual. (If many students defer a semester, however, the panelists said that in future semester, rising full classes may bump into students who deferred and want to return, suggesting that capacity constraints on the size of a Harvard class in residence in a given year might arise.)
Whatever future emerges, she said, it will not look like campus life before this past mid March. No one has answers yet to myriad questions: How will libraries and gyms be adapted? What will athletics and sports look like?
Summing up, Khurana said Harvard College’s strengths increased its challenges. Some 98 percent of students live on campus—unlike the situation at many colleges and universities, including peers like Yale. That enhances community—and vastly complicates operating in light of pandemic constraints. He stressed that no one can choose the times she or he lives in, but everyone can choose how to respond to circumstances—including supremely challenging ones like those prevailing now. “Our experience energizes us,” he said, urging members of the community to embrace their roles as citizens responsible to and for one another.
“I’m looking forward to welcoming you in whatever way the campus unfolds in the fall,” he concluded. Finding that way forward may be even more fraught in light of today’s announcements by the professional schools, which have, by far, fewer residential challenges to safety and health during a pandemic than does Harvard College.
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