The deficit has decreased each year since Knowles has been dean.
He also said he would like to leave Harvard "positioned for the next century."
The boundaries of academic diciplines must become more blurred, Knowles said.
"It must be intellectually flexible, nimble in organizational terms and responsive to changes in society," Knowles said.
"Intellectually, one of my concerns is to lower the boundaries between classically defined disciplines," Knowels said. Nature and knowledge were not tidily divided into the subjects of University departments. So often, exciting advances occur on the edges, of our fields, which are the edges of some-one else's."
He also said that Harvard must respond to changing information technology.
"You've got to be able organizationally to respond to changes in learning--how teaching is done, how information is made available," the dean said.
"If you think of IT (information teachnology), there are a lot of hard decisions going to be made in the coming years," Knowles said.