After the Pandemic’s Peak
The good news is that the bad news isn’t so bad. That’s a quick interpretation of dean Claudine Gay’s annual report on the Faculty of Arts and Sciences (FAS), and the accompanying financial results for fiscal year 2021, discussed with colleagues yesterday afternoon at the faculty’s monthly meeting. Her report came in the context of:
•navigating from a community shut down by the coronavirus in the spring of 2020, through a year of remote teaching, and now to a successful (so far) resumption of on-campus learning;
•plotting a path toward relaxing some of the constraints put into place to cope with the pandemic—like scaling up the number faculty searches significantly; and
• achieving financial results far better than those initially feared.
The Dean Reports
In 2020, staring into the pandemic and a largely depopulated campus with teaching all online, Gay bluntly wrote, “This year is different.” The faculty were reminded then by FAS’s finance staff of her June 2020 outlook, which warned of the financial impact from the pandemic that “will be significant, 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 fall 2020 forecast projected a $100-million-plus loss for fiscal 2021, including a large cash deficit that could drain FAS’s reserves, limiting its ability to pursue new research fields.
What a difference a year makes. Gay is far from consigning the coronavirus to history. Indeed, when undergraduates returned in late August, overwhelmingly vaccinated, there was a spike in transmissions, so testing and tracing had to be ramped up and distancing and masking mandates reinforced. But since then, she told colleagues Tuesday, the incidence of cases has been low, and all asymptomatic or mild. With the advent of pediatric vaccination and booster shots, she said, FAS was examining what steps need to be taken to accommodate unmasked teaching in the spring term—including assessments of the 80 or so classrooms where a six-foot distance from teacher to students can be maintained, and provisions for those who still feel uncomfortable in unmasked settings.
In her remarks, Gay was able to focus on the faculty’s noncrisis work. Given that the faculty’s financial position is “much stronger than we had anticipated” (see “Forward-Facing Finances,” below), she said, and the University’s very strong endowment results promise increased distributions in the future, FAS can begin making some “targeted investments” to address some of the “constrained aspirations” during the prior year. Notably, she announced that she has authorized 18 additional faculty searches, bringing the total to a robust 66 this year—a down payment toward reversing the decline in the faculty ranks during 2020-2021, when many searches were halted (see “The Faculty Fallout,” below). FAS will also spend $5 million to equip departments and other spaces technologically for hybrid work, meetings, and faculty job presentations, and to enhance classroom teaching technology. The aims, she said, were to advance the faculty’s long-term mission without overextending itself or overspending its available resources in the near term.
The dean’s written report highlighted academic progress made despite the pandemic, illustrating “the past year’s efforts to build and sustain a strong faculty and advance the pursuit of our teaching and research mission.” In fact, alongside the pivot to online teaching and other crisis adaptations, Gay has pushed forward a sweeping effort to adapt FAS’s structures and processes and to engage the entire faculty in strategic planning for its academic future (an effort brought to public notice on the morning of the faculty meeting).
The references to this work in her annual report message were restrained: she wrote about “[setting] the stage for more informed financial decision-making as well as future efforts to create enhanced financial and organizational flexibility across FAS as part of our ongoing pursuit of long-term academic excellence.” Those efforts seem grounded in the collective way faculty members helped plan the response to the pandemic and adjusted operations to conserve FAS’s resources, the better to proceed toward excellence in research and teaching in the years ahead:
[W]e’ve learned more, about who we are and what we can do. That we are not only an old and venerable institution but also a fast-moving and nimble one. That broad academic excellence offers not only scholarly diversity and opportunity but also a deep well of insight from which we can draw to chart our course. I am eager not just to “get back to normal” but to build toward an even better version of who we can be with the benefit of the hard-won insights of this year.
As examples of those sorts of advances, Gay focused on a humanities initiative and the recently announced doctoral program in quantum science and engineering. The former engages a cohort of postdocs, graduate students, and faculty members focused on research around the theme of “Place and Planet” (environmental humanities), broadly defined. An undergraduate component offers a dozen sophomores immersion in diverse humanities fields and approaches (a course called “Making It”), followed by a semester-long research experience. The quantum initiative, a further intensification of investment in basic and applied science, with significant donor support, will, as Gay put it, “push the boundaries of how we acquire, process, and communicate information and interact with the world around us.” Together, the initiatives illustrate “how, across disciplines, faculty are harnessing the power of connection, collaboration, and broad academic excellence to engage society’s big questions and to make the world better.”
In all, after FAS withstood unprecedented threats to residential research, teaching, and learning, Gay began redirecting attention to progress across a broad spectrum of academic interests—while emphasizing faculty collaboration in common causes. As she told colleagues Tuesday afternoon, “There is that space now” to turn from the past toward a period of resumed, careful investment, accompanied by FAS-wide conversations where faculty members and their leadership “describe together where we want to go”—and how to get there. She repeated an “invitation,” extended during the October faculty briefings on the strategic planning, “to be founders” of the “new FAS” as Harvard approaches its four-hundredth anniversary in 2036. Acknowledging that it may be difficult to turn to that kind of expansive engagement after nearly two years of confined contact and limited in-person work, Gay assured colleagues that the strategic planning and implementation would unfold through the 2023-2024 academic year. “We want to take our time” to determine the FAS’s future, she said, “but not 400 years.”
The Faculty Fallout
Among the immediate priorities will be replenishing the faculty’s somewhat diminished ranks. During the 2020-2021 academic year, the ladder faculty—the core tenured, associate, assistant, and some other professorial positions—shrank, from 728 to 711. According to the faculty-trends section of the annual report, the reduced census reflects the suspension of many searches in April 2020, part of the pandemic belt-tightening. Although some new members, who accepted offers in earlier periods, joined the FAS during the pandemic year, there were 34 departures, stemming from retirements (12), moves to other institutions (11), unsuccessful promotion reviews (7), and deaths (4). The basic pattern established in the 2007-2008 period, before the financial crisis and Great Recession constrained FAS finances, thus remained intact: an FAS with between 710 and 739 ladder faculty members—respectively, the level first reached in the earlier period, and the peak cohort in 2017.
Nina Zipser, dean for faculty affairs and planning, reported that 20 ladder-faculty members were scheduled for tenure reviews during 2020-2021, 18 stood for tenure, and 16 were successful. FAS also conducted 31 ladder-faculty searches during the year, resulting in just 11 offers. (Typically, not all offers are accepted, and those that are accepted do not always immediately result in relocation to Harvard: there is often a lag of a year or more.) So Dean Gay’s authorization of 66 searches this academic year is significant.
Even so, Zipser said, given the typical new-arrival timeline, it could take a couple of years to get the faculty cohort back up to 720 (given attrition in the meantime). The competitive environment doesn’t make it easy to grow: for instance, Yale, which had even stronger endowment returns than Harvard and just launched a $7-billion capital campaign, reported 40 arts and sciences faculty retirements last academic year (when it offered an incentive program)—but is doubling its usual rate of searches to 71 this year. It has 676 ladder faculty members now.
Turning to recruitment, Zipser reiterated the message from last year’s annual report: in tenure-track faculty searches, the FAS is consistently attracting an applicant pool less diverse than the cohort of recent doctoral recipients. The data then, she reminded the faculty, showed that “We weren’t totally utilizing the pool of Ph.D. candidates” in all fields. Although this year’s cohort is small, “We’re still really, really underrepresented the demographics of the Ph.D. pool,” she emphasized, despite better performance in social-science searches. “This isn’t easy work,” she acknowledged. “It takes a lot of very deliberate effort to change the composition of your pools of applicants,” including early outreach to rising candidates well before a search is authorized, partnering with historically black colleges and universities (which award a disproportionate share of doctorates and professional degrees to black students), and other affirmative steps. The larger challenge, she said, was changing perceptions about Harvard as a place for people of color to work.
Zipser and Sheree Ohen, associate dean for diversity, inclusion, and belonging, work with a newly appointed team of senior advisers on faculty development; their mission is to visit departments to discuss best practices for inclusive hiring and diversity. According to the report, Ohen separately launched a cohort of Faculty Liaisons for Inclusive Excellence: 42 departmental representatives committed to “advancing sustainable inclusive excellence.” Based on a survey of arts and humanities and social sciences faculty and staff, the reported noted, the liaisons are focusing on “diversifying the faculty and decolonizing the curriculum and classroom.” (The latter, it was explained separately, means developing and implementing cultural diversity within all aspects of the learning experience—space, pedagogy, syllabus, concepts, lessons, speakers, literature, science—and then “decenter[ing] the white Eurocentric, mostly male, narrative” by promoting equity and inclusion in the classroom and disrupting “the implicit bias…that tends to oppose diversity of thought and discredit minoritized communities and cultures.”)
Zipser also reviewed new research indicating that the service load (committee work, for example) may fall disproportionately on women at all ranks (and, at the tenured level, on faculty who identify as members of underrepresented minorities). Such commitments can cut into time for research, thus affecting a candidate’s tenure prospects—and a reputation for unequal burdens can also affect recruiting. She also summarized accommodations made for tenure-track faculty and those who are parents during the pandemic year, so they can extend or postpone the time to tenure review, to make up for lost research and writing opportunities, and coaching and professional-development resources that have been deployed for tenure-track and non-ladder faculty members. One hopes they can look forward to an academic job market recovering from the extensive cutbacks imposed across much of higher education.
It is perhaps a sign of senior professors’ concern for their younger colleagues’ prospects and development that during the question period, the service burden and tenure clock elicited the most attention and concern. No questions focused either on Dean Gay’s strategic-planning ambitions, or on the faculty’s finances.
Scott A. Jordan, who became dean of administration and finance three months ago, presented an overview of FAS’s unusual financial structure, as context for a brisk review of its surprisingly robust recent financial results. As he pointed out, endowment distributions accounted for about 53 percent of fiscal 2021 revenues (37 percent of which are restricted, and 16 percent restricted), and current-use gifts about 8 percent (5 percent restricted, 3 percent unrestricted). In a year of unusually low enrollment (because of student leaves and deferrals of admission during the pandemic), tuition (net of financial aid) contributed just 7 percent of revenues—compared to 9 percent from the Division of Continuing Education (DCE). Sponsored-research funding accounted for 13 percent of FAS’s revenues, and fund transfers and other income for the balance.
Against expectations of a nine-figure operating loss and a large cash deficit, FAS in fact realized a $51.3 million operating surplus (versus $15.8 million of red ink in fiscal 2020, when the pandemic imposed costs and decreased revenues in the final third of the year), Jordan reported. It also realized net cash generation of nearly $120 million, tripling the prior-year result.
Of course, many one-time factors influenced these unexpected outcomes. Clearly, faculty and staff members responded to Dean Gay’s early-2020 call to restrain nonessential spending. Combined with the compensation freeze for nonunion employees during fiscal 2021, retirements encouraged by the University incentive program, controls on staff hiring and much-reduced faculty recruiting, the economies directly related to the pandemic (no travel or events, reduced building operation and utility costs, and a sharp reduction in capital spending) had their effect. On the revenue side, donor contributions (particularly current-use giving), sponsored-research support, and DCE enrollment in online courses all exceeded expectations.
Among the factors Jordan highlighted, net tuition, fees, and room and board revenues decreased $89 million—more than the 2020 forecasts predicted, as fewer students than anticipated took up the College’s offer to live on campus (while taking classes remotely). The $12-million increase in DCE tuition and fees partially offset this loss, and clearly exceeded earlier expectations. Although the rate of distribution on each unit of endowment owned by FAS was held level, total distributions rose $16.5 million, reflecting gifts and other changes that increased the number of units attributed to the faculty. Current-use giving rose nearly $22 million, and other income rose $16 million, with an especially large jump in royalty income.
On the expense side, salaries and benefits decreased $28 million during fiscal 2021 (a figure exaggerated by the $16-million charge for the retirement incentive incurred in 2020)—an abrupt turn-around from 4.7 percent growth in the prior year. Space and occupancy, supplies and materials, and other expenses all declined, even as FAS spent about $23 million on pandemic costs (testing, building infrastructure, and technology).
All contributed to the positive financial results. Underneath these figures, other items in the faculty’s financial supplement, not covered in Tuesday’s presentation, merit some attention:
•Financial aid—institutional scholarships and external grants to undergraduate, graduate, and DCE students—decreased with lessened enrollment, declining from $299 million in fiscal 2020 to $263 million this past year. Undergraduate aid declined from $211 million to $174 million. (Significantly, because FAS uses all the funds from its restricted financial-aid endowments, the decreased spending this past year enabled it to conserve some of the unrestricted funds it usually uses to cover the complete aid budget. Those unrestricted resources are the faculty’s principal means of investing in new programs.)
•FAS and other faculties received some pandemic relief from the central administration: the annual Academic Initiatives Fund assessment—a $13.2-million cost for FAS in fiscal 2020—was suspended for the year. (Nor did FAS have to repeat a $10-million transfer, made in 2020, to shore up University Dining Services when the campus was closed that spring.) In addition, FAS’s financial supplement discloses $40 million in “special resources support…received to help defray costs associated with the pandemic.” In part, this likely reflects FAS’s share of $20 million distributed from the office of the president and provost to deans to defray direct pandemic costs (testing, tracing, personal protective equipment); the rest requires further explanation. All these items presumably contributed to shoring up FAS’s cash position.
•Finally, as planned, FAS reduced its capital spending to $131 million in fiscal 2021, a 28.3 percent decrease from the prior year. Accordingly, its construction work in progress, an asset, decreased about 30 percent, to $70 million.
Even with the unusual one-time items affecting the year, FAS’s finance team is clearly feeling a whole lot better about its position and prospects than they were a year ago. From projected deficits, FAS managed to emerge with solidly positive earnings and cash generation. The biggest drag on fiscal 2021 revenues—reduced tuition, room, and board fees—is being reversed, and then some, in the current year, as students have returned from leaves and deferrals in record numbers. (The associated costs for building operations, food service, and so on of course resume as well.) Pandemic expenses are lower, even with students and professors in residence. And although the University’s unexpected endowment returns do not translate into immediate largess for the faculties, they hold the promise of greater growth in future distributions than deans had formerly anticipated.
In that context, Jordan told the faculty Tuesday, Gay can feel confident about making the targeted investments she announced, like the increased number of searches: a step toward recovery from the constraints imposed at the outset of the pandemic. Given that breathing room, and the new economic budgeting model introduced as part of the strategic planning she has inaugurated, FAS can begin thinking about its future priorities and commitments from a place of relative strength no one imagined in April 2020.