After a year of financial headwinds, the Faculty of Arts and Sciences (FAS) ended the 2026 fiscal year with an operating surplus of $31 million, and reported $792 in donations to the FAS and the Harvard Paulson School of Engineering and Applied Sciences (SEAS)—the highest level of annual giving in FAS and SEAS history.
Speaking at November’s Faculty meeting, Edgerly Dean Hopi Hoekstra said those positive trends, along with cost-cutting measures associated with a major administrative restructuring, will enable the division to hire more faculty in the coming year.
“We have taken difficult actions this past year, and because of that work, we’re able to increase hiring substantially,” she said, noting that there are 33 searches currently underway.
Still, in a presentation about the division’s $1.8 billion budget, Hoekstra and other FAS leaders cautioned that the positive financial news masks challenges, including a decrease in federal research grants, a draw in reserve funds, and deferred maintenance on about 265 buildings.
“The threats are not over,” said Julie Joncas, the division’s chief financial officer, “so we want there to be a healthy balance so that we can keep doing what we are doing.”
The surplus and donations that FAS saw last year, Joncas said, were limited almost entirely to restricted funds—money that has been earmarked for specific professorships, graduate students, and facilities. Unrestricted revenue, meanwhile, was in deficit, she said, leading the division to draw $38 million from its flexible reserves and issue $46 million in debt—bringing its total debt burden to $1.5 million. The division faces a $220 million annual shortfall in capital needs to maintain its facilities, Joncas said, though “we don’t expect to fix this gap overnight.”
Joncas noted that FAS’s operating margin—the percentage of revenue remaining after paying direct and indirect costs—was 1.7 percent last year. Universities typically target a 3 to 5 percent operating margin, she said, which allow them to cover expenses and still have the flexibility to pursue new initiatives.
FAS also benefited from the University’s 27.1 percent return on its endowment last year—the division drew 54 percent of its annual operating budget from the endowment—though the administration smooths out the endowment distribution every year to account for fluctuations in the market, targeting an 8 percent annual return to preserve capital while covering the cost of operations and inflation.
The financial news comes on the heels of a major FAS workforce restructuring, implemented in October, that consolidates functions and services across about 40 academic departments, 30 centers, and other units, and resulted in 165 layoffs. (New staff positions were added, so the FAS staff was reduced by a total of 150.) The effects of that shift will be reflected in next year’s financial report. But Hoekstra told faculty members that the restructuring is expected to save the FAS $18.5 million annually.
In response to questions from faculty members, Hoekstra said that that the layoffs did not target people who were senior staff or long-term employees. She also said that some major one-time costs associated with the restructuring—consulting fees to McKinsey & Company and severance costs for departing employees—would be recouped within 18 months.
Hoekstra declined to cite the cost of the consulting fees, saying that releasing the terms of the deal could put the company at a competitive disadvantage. She said that during the planning process, outside consultants “provided important data, including benchmarking data” and “helped us avoid making mistakes that other universities have made in the past.”
