It may be useful to indicate the major decisions made last winter which underlie the budget for the current year, 1970-71. As far as revenue is concerned, full-time tuition was increased $200 bringing the level for the current year to $2600. For the first time the President and Fellows approved the current expenditures of all of the Harvard College Fund, after the expenses of reunion classes, rather than putting $500,000 or $700,000 into endowment as has been done in recent years from this vital annual giving from alumni.

On the expenditure side, the starting salary of the assistant professors was raised from $9,000 to $10,000 with corresponding adjustment in non-tenure Faculty members at higher levels; the individual salary adjustments to tenure members were made as in the past. With tuition, board and room charges increased, the unrestricted contribution to student followships was increased by $600,000 to bring to $3.1 million the amount of unrestricted money going into graduate and undergraduate student aid in addition to $3.9 million in restricted funds. The $3.1 million is a little more than 11 per cent of all unrestricted income. The decision was also made to invest unrestricted funds in expanding loan funds to both graduate and undergraduate students by an amount of $150,000. On these major decisions and many more still to be made in the administration of the budgets of various departments and units, including unknown contingencies, will depend the outcome for the current fiscal year.

The Future 'Strong Measures'

The fiscal years immediately ahead, starting with 1971-72, are cause for great concern. Preliminary estimates on "best-guess" assumptions for 1971-72 suggest an actual unrestricted deficit-not a budgeted deficit-of about $1.5 millions in the absence of some extraordinary measures. That is far too large a deficit and strong measures are required to prevent deficits of that size. particularly in view of the longer term financial outlook.

This "best-guess" estimate was made by Humphrey Doermann, assistant to the dean for financial affairs. Among the assumptions he tentatively used are the following: on the income side, a $200 increase in tuition again with requisite increases in fellowships, except that students would be required to increase their self-help by $100 in the undergraduate scholarship budgets. No change in the composition of the entering classes is contemplated; 530 students in each class in the past three years have received some scholarship aid. All the income of the Harvard College Fund would again be available aside from reunion class expenses and scholarship gifts designated by donors as capital for named funds. Government contract overhead is presumed relatively unchanged. On the expense side individual salary increases were projected as in previous year and other costs were estimated on the best information available. But $1.5 millions is not an acceptable planned deficit.

A number of unfavorable factors also deserve special mention. The tightness in federal research contracts and grants and the decline in foundation support has a tendency to put pressure on the unrestricted income of this Faculty as investigators seek to maintain activities. The problem of the Joint Center for Urban Studies is illustrative. The Harvard College Fund-which produced a steadily rising income over the past decade, from $1.3 million in 1967-62 to $3.5 in 1968-69-showed a decline to $3.3 in 1969-70. Despite dedicated efforts, the Fund may not be able to maintain the past growth. Almost half of any projected increase in tuition income should be plowed back into scholarships and fellowships when account is also taken of higher room and board charges. Thus income for instructional purposes is difficult to raise while rapid cost inflation continues.

There are, moreover, a number of heavy expenses which will fall on this Faculty in the next several years for which there exist no adequate reserves. Sharply rising building maintenance charges will be levied on existing buildings and additional charges will be made for maintenance of new buildings now under construction. The Science Center alone is estimated to require $825,000 a year in maintenance and operation costs. Robinson Hall will come to this Faculty on the completion of Gund Hall; its modernization will require one million in addition to the two million required for the purchase of Robinson and Hunt halls. Funds are not available for the necessary modernizing of older laboratories and the older Houses. It will be most difficult to prevent co-residential living and other relations with Radcliffe from costing this Faculty money in the period ahead. The university assessment which is charged this Faculty for university-wide services was $522,000 the past year and is projected at $821,000 in the current year. This charge may be expected to grow, particularly as a new president of Harvard increases the administrative capacities of the university center. For these and other reasons the outlook for the unrestristed account of this Faculty is black. Moreover, any educational reforms will have to come from a redeployment of our Faculty resources rather than through expanding staff.

If it is any comfort, the financial picture at other institutions, and particularly private universities, is more severe. The press has reported Columbia University had a deficit of $11 million the last fiscal year; Yale was expecting a deficit of $1.5 to $2 millions for 1969-70. A projected deficit of $2 million for 1970-71 led to the announcement in early September of "an immediate restriction on all employment of new or replacement personnel which requires the expense of general funds." Last week Yale announced that $5.25 millions would be cut from the normal rate of increase of its budget for fiscal 1971-72, and over three years a 20 per cent reduction from previously projected budgets is envisaged. Princeton had a deficit last year of almost a million dollars and has projected a deficit of $2.4 million in the current year. In a sense this Faculty will have had a couple of years of lead-time without crippling deficits to consider the hard decisions that our sister institutions are now confronting under considerable pressure. It behooves us to use this year to plan our fiscal affairs well in the face of the severe financial stringency anticipated in 1971-72 and beyond.

The preparation in this Faculty for the 1971-72 budgets has already begun. What shall be appropriate policies in the face of the near-term and longer run outlook? I presented the factual background outlined here to a meeting of all department chairmen and budgetary officers on September 29th and to the Faculty Council on September 30th.

One possible response to the financial difficulties ahead would be to impose a job freeze throughout the Faculty or to require that as a general policy departmental authorized expense budgets for 1971-72 should be no larger than they were in 1970-71. Such a policy would constitute in effect roughly an 8 to 10 per cent cut in personnel. At the present time such gross methods do not appear to me to be appropriate. The needs and opportunities and the state of development of various departments and budgetary units differ greatly. A procrustean formula at this date is a poor tool.

Rather, I have chosen to meet for at least an hour with each chairman of a major department to review the situation for 1971-72 and to give the department some idea of the prospects for staffing appointments, both term and tenure, so that our relatively favorable position may be used to recruit the most able persons to help most effectively those present staff members who leave us in June 1971 to find the best possible jobs. In this cycle of sessions I am interested in the special problems of each department, what each can do to raise additional funds, to use restricted funds for more general purposes, to adjust courses and teaching methods and to eliminate least desirable expenditures in order to achieve higher order priorities.

Several conclusions are already evident with regard to expenditures for 1971-72:

For the departments considered as a whole, it is inescapable that in this labor-intensive industry there be an absolute reduction in the number of term appointments, annual lecturers and visiting appointments and that teaching assistance be carefully reviewed. Only the extent of this reduction through non-replacement of expiring appointments is uncertain.

Each department needs carefully to review its deployment of manpower. Are all courses equally necessary or can some be bracketed? This Faculty appears to spend about $200,000 a year on sophomore tutorial. Is this the best use of that teaching time or would it be better allocated to advising or course assistance?

There is need to scrutinize the substantial expenditures in the building and grounds area and work is in process to seek greater control over these costs.

The complex area of fellowships, scholarships and student loans is related to tuition levels and needs careful discussion.

I hope to have the meetings with department chairmen completed by early November when another overall outlook can be projected. I would then plan to report to the Faculty Council and to the Faculty as a whole before the Christmas recess on salary matters and other issues essential to financial and educational planning for the year 1971-72. I would also hope that members of this Faculty and students will be active in discussions of the basic and longer term financial questions raised in the Governance Committee paper on Harvard and Money.