Last year at this time, Harvard financial experts were running scared about the long-term effects that prolonged inflation, a depressed stock market and drops in government and foundation funding could have on the University.

Since then, the stock market has risen (the value of Harvard's endowment is almost back up to the $1.4-billion high it reached in June 1973), but inflation and drops in outside funding continue to be serious problems for Harvard and every other private university.

But the 1974-75 Financial Report to the Board of Overseers, released this week, indicates that although the university deficit increased from $1 million in 1974-5, Harvard has a much better idea now of how to deal with the fiscal problems it will face and what the effects will be in the future.

Havard Treasurer George Putnam Jr., '49 and Financial Vice President Hale Champion both said this week that if the general upturn in the nation's economy continues and private support holds up, Harvard should be able to escape with a deficit of only several hundred thousand dollars in 1975-76 and break even or run a small surplus in the following year.

The key to whether the University can reach the break-even point in 1976-77 is the Faculty. The University's balance sheet, a summation of over 20 different budgets, would have been in the black this year if the $2-million -deficit Faculty were discounted.

Dean Rosovsky, working with faculty financial planners and Champion's office, has projected that the Faculty will pull out of the red for 1976-77. Rosovsky is counting heavily on the Harvard College Fund and other alumni donation plans to help the Faculty accomplish its goal, because government and foundation funding have fallen off steeply in the past few years.

With this drop in outside support, student fees have become the single most important source of income, surpassing government money for the second straight year in 1976-77. Although nobody will come right out and say it, this income is what Harvard is probably going to milk the most. There's no doubt that student tuition will continue to rise annually for a number of years (at least until the end of the decade), and it seems certain that Harvard will also try to get more mileage from its staff and facilities by bringing in more students.

This has already occurred in two faculties, Design and Education, and was primarily responsible for turning a 1973-74 deficit into a surplus in 1974-75 at the Education School. Yale and other Ivy League schools also have started "cramming."

Some of the implications from this solution are obvious and have already raised student ire at the Design School and Yale. Sooner or later students here are also going to begin to notice the trend.