IF YOU'RE looking for dull reading, Dean Ford's annual Faculty budget report is usually a good bet. Although the budget plays a big role in deciding such vital matters as tuition hikes and course offerings, few undergraduates ever see it. Fewer still would read it if they could see it full of mind-numbing statistics and confusing classifications, the report is rough going for students who aren't skilled in bookkeeping.

The report's readability is also cut down by its inherent inaccuracy. Last Fall, Ford warned that the Faculty would run a $1.7 million deficit in 1967-68. By the time the expenses had been toted up, however, the loss had changed to a profit of more than $1 million. That dramatic a shift is unusual, but every year's budget ends up looking better in June than it had when predicted in October, because Ford is intentionally liberal in estimating costs and conservative in predicting income.

But even if this year's budget doesn't end with a gigantic $2.4 million deficit that Ford predicted last month, it seems sure that the 1968-69 budget will have one of the biggest deficits in history. The basic reasons are simple enough: income is down and expenses are up. The rise in expenses surprised nobody, but the extent of their increase and the simultaneous drop in income make this year's trend unusual and disturbing.

Expenses have been increasing steadily for years. In 1958-59 the Faculty spent a mere $20 million to run the college. By 1966-67, it was up to $37 million, and last year it ballooned up to more than $41 million.

Ford predicts a total expense of more than $45 million this year--more than twice the 1958-59 expense and an increase of 8 per cent over last year. However, since several expense items--most notably the athletic budget and the administrative costs for travel and office expenses--are staying constant or falling, there are a few areas that will rise much more sharply than the over-all 8 per cent. Ford's budget points out a few of the swelling costs: *Salaries for corporation appointees--professors and teaching fellows--will rise 10 per cent, to $13.9 million.

*Wages and pension costs for employees will rise 9 per cent, to $3.6 million.

*Funds for student aid will be up 14 per cent, to $5.6 million.

*Library expenses will also be up 14 per cent, to $1.5 million.

THE BIGGEST jump, of course, is in salaries for corporation appointees. Part of the projected increase is illusory; Dean Ford always budgets salaries for every conceivable faculty post, but several departments never fill all their positions. Still, a good part of the $1.2 million rise--from $12.7 million last year to $13.9 million this year--is real, and seems to foreshadow an even larger growth next year.

Some $300,000 of this year's increase came from the teaching fellows' pay hike that Ford announced in September. An even worse blow may come next year. If all the recommendations of the Dunlop Committee are accepted, faculty salaries will rise by another $370,000. And while this year's teaching fellow raise apparently came too late to hamper many plans for faculty expansion, the Dunlop Report may force several departments to slow down their ambitious expansion projects.

But even with the semi-unexpected salary boosts, the continued rise of expenses is no surprise. The drop in income, however, is a surprise, and an unwelcome one.

Ford's predictons show a $560,000 drop in income, from $35.4 million last year to $34.8 this year. Unlike the expense column, where the blame was spread over many small increases, the cause of the income drop is immediately obvious. While most items contribuing to income show modest increases, the "Overhead from Research Contracts" entry takes a $480,000 drop.

Since last spring, the federal government and other large research foundations have been busily chopping away at their research contracts with universities. Those cuts do not affect the faculty budget directly. No grants go into the budget; instead, the faculty receives a percentage of each research grant as payment for overhead costs--such as maintaining the labs and offices for the researchers. So when the research contracts are cut, overhead payments drop correspondingly. The overhead costs, however, keep right on going, and the Faculty begins to lose money on its labs instead of breaking even.

LAST YEAR, the Faculty ended up collecting more of the overhead costs than Ford had predicted, and the unexpected money helped bail the budget out of its predicted deficit. This year, however, prospects are bleaker. The Faculty will still get its overhead percentage--7 per cent of all research money--but the total amount of research grants will be much lower. For the first time since the 1940's, the grant totals will drop, and Ford predicts 25 per cent less research money than would have come with normal expansion.

The question that leers out from all this minute computation, of course, is what happens if the Faculty does end up with its much dreaded deficit. Under Harvard University's unusual financing plan (called "each tub on its own bottom" by University phrasemakers), the Faculty of Arts and Sciences, like each other department of the University, must balance its own budget. It may borrow from the University if it runs short one year, but whatever it borrows it must pay back. Long-term expenses, therefore, must be offset by tuition increases for each individual Faculty in order to keep the bottoms under the tubs.

If the Faculty miraculously manages to keep its deficit below $500,000 this year, it will be in no trouble. The Faculty has built a reserve fund from past surpluses, and this "departmental balance" of $500,000 is expressly intended to ease year-to-year shortages. If the deficit exceeds the relatively meager limits of the departmental balance, however, Dean Ford will probably ask the Corporation treasurer for a loan. Presumably, if the deficits continued, the Faculty would have to decide either to trim its costs or raise its tuition.

This is where it gets interesting for undergraduates. The departmental balance and its $500,000 limit suggest that a Faculty faced by deficits would have no choice except to charge more or do less. There is, however, a third alternative: using funds from the University's endowment.

It is grossly improbable that Harvard would decide to subsidize a money-losing Faculty from endowment funds. There is, however, part of the Faculty budget that does not immediately appear on the balance sheets. In addition to the $500,000 balance, the Faculty has salted away an additional $9 million or so in the University's investment funds. The reason is obvious: while the departmental balance money is not really too active, the money put in the University funds is busy increasing itself. Harvard's investment policies have always been shrewd, and four times in the last 12 years the investment funds have had a 10 per cent capital increase. The income helps the Faculty; the important question, however, seems to be whether keeping the investment funds is a legitimate reason to boost tuition once more.

Ford is reluctant to say that this year's loss is the beginning of an unchangeable pattern; and he says clearly that the $9 million fund would be the first source to tap if the Faculty hits a big deficit. But he also points out that faculties and universities "are notoriously reluctant" to dip into these endowment funds, and the implication seems clear. If the deficits keep coming, the cost of being a Harvard man may rise more dramatically than it has before.