Paul L. Caron

Wednesday, May 6, 2020

Harvard Faces $1.2 Billion Shortfall Due To COVID-19

Following up on my previous posts:

Bloomberg, Harvard Sees $1.2 Billion Revenue Shortfall Due to Pandemic:

Harvard University, the richest U.S. college, is forecasting a revenue shortfall of nearly $1.2 billion over two academic years, showing how the economic effects of the coronavirus pandemic are crippling schools.

Harvard faces a drop of $415 million in anticipated revenue for the year ending June 30, and a further $750-million shortfall compared to budgeted expectations for the year beginning July 1, Executive Vice President Katie Lapp said in a statement Tuesday. ...

“The university is facing significant financial challenges which will require difficult decisions in the coming months,” Lapp said in the statement. “It is clear that additional cost saving measures will be needed in the coming months including the possibility of furloughs and layoffs of some members of our workforce.”

Harvard Magazine, Harvard Projects $750-Million Revenue Shortfall in Next Academic Year

For complete TaxProf Blog coverage of the coronavirus, see here.

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Yoo-hoo, Unemployed?

Don't tell me you got a job working at Harvard!

Posted by: MM | May 16, 2020 7:25:45 PM

"Why are you under the impression..."

I've flogged this to death, but force-feeding trolls the relevant facts is a hobby of mine. From p. 23 of Harvard's 2019 financials:

"Endowment and GOA returns liquidated from investments and made available for operations over the course of the fiscal year are distributed to University department and program budgets to spend, subject to donor restrictions where applicable

While the University has no intention of doing so, there are additional investments held by the University and the endowment that could be liquidated in the event of an unexpected disruption. While a portion of the endowment is subject to donor restrictions, there is $7.1 billion in endowment funds without donor restrictions and $3.7 billion of General Operating Account investments (GOA) that could be accessed with the approval of the Corporation and subject to the redemption provisions."

And that is the end of that.

Posted by: MM | May 11, 2020 7:31:06 PM

Unemployed: Details on Havard's credit rating and availability on p. 39:

Budgets can be changed, due to circumstances like the pandemic. I work at a financial institution that's done just that.

Posted by: MM | May 9, 2020 9:59:23 PM

Unemployed: "Feel free to cite otherwise."

Do you ever cite anything to qualify your claims? I've asked before and you've NEVER even bothered.

And weren't you saying in a prior discussion that you'd never make excuses for the wealthy white liberals who run Harvard? I guess that confirms your status as troll under the bridge around here.

Leaving your rank hypocrisy aside, I've already done the absolute basic research into this topic. That's something that separates you and I, in addition to my gainful employment.

From Harvard's CFO:

Harvard has been preparing for an economic downturn for years:

- Since 2014, revenue surpluses have totaled $750 million
- Colleges are reducing expenses and capital construction in response to shutdown
- Harvard reports $1 billion in cash and short-term investments
- They also have a AAA credit rating, a $1.5 billion credit facility, and a $2.0 billion undrawn balance in commercial paper, and interest rates are back down to record lows.

Yes, the endowment is mostly restricted, but they have plenty of financial flexibility to weather this storm. I doubt you'll respond to these facts. But if you do, it will only be because I've called you out personally.

Posted by: MM | May 9, 2020 9:03:29 PM

"Seems like the shortfall is well within Harvard's discretionary distributions from their very large endowment."

Why are you under the impression the returns from their endowment are not already spoken for in the budget in advance? Because it all goes to fund their budget. And it only funds 1/3 of their budget. Feel free to cite otherwise.

Posted by: Unemployed Northeastern | May 8, 2020 2:05:07 PM

Oh, Mr. Unemployed NE?

Would you like to show what passes for your financial expertise and comment on this?

Seems like the shortfall is well within Harvard's discretionary distributions from their very large endowment. Both this year AND next...

Posted by: MM | May 7, 2020 9:13:28 PM

Maybe they can dip into their 40 billion in reserves?

Posted by: Ned Crabb | May 7, 2020 7:03:39 AM

Harvard is sitting on about $40 billion in endowments. Excuse me if feel no sympathy for their whining. And I might add that this illustrates all too well that elite institutions, which once focused as much on building character as imparting knowledge, do so no longer.

Posted by: Mike Perry | May 7, 2020 5:27:56 AM