D. Ronald Daniel, treasurer to the Harvard Corporation, says the University's highest governing board uses two guidelines when determining each year's payout.

It aims to keep inflation from eroding the endowment while providing a reliable and steady stream of income for operations.

"Intergenerational equity, I think, is the key issue," Daniel says. "Are we making an appropriate balance of supporting today's faculty and students and the faculty and students that will be here in 10 or 20 years?"

Traditionally, Harvard has spent between 4.5 and 5 percent of its endowment to provide a steady 20 percent of the operating budget. But financial markets have been so strong in recent years that the University, in attempting to keep income level steady, has spent roughly one point below that.

Last year, for example, only 3.65 percent of the endowment was spent. That means Harvard could have spent almost $90 million more without violating its own standards of accounting for inflation. That's approximately two-thirds of the money Harvard took in from undergraduate tuition last year.

According to Vice President for Finance Elizabeth C. "Beppie" Huidekoper, the rationale has been that financial markets should not dictate year-to-year income because of their instability. During good times the University has tried to grow the endowment by not taking full advantage of the market's upswings.

"Harvard's conservative on this, but it's provided enormous strength to the institution," she says.

All the same, Huidekoper says that the University should be spending more of the endowment and is planning to increase the percentage payout.

Students agree that Harvard should spend more.

"There are a lot of student concerns that are being ignored. I think a lot of money could be used to lower tuition costs and to make Harvard accessible to more people," says Frank J. Gorke '99, a campus activist and a representative on the Undergraduate Council.

Though undergraduates are not experts, some financial gurus say the University could be spending more of its endowment while still maintaining its value.

A report by the National Association of College and University Business Officers shows that Harvard spent 1.1 percent less last year than institutions with similarly large endowments.

Thomas O'Brien, a former vice president of finance at Harvard who invented the model for spending the endowment back in 1971, questions how little the University is now spending.

Using historical data he says that the University could be spending anywhere between 4 and 6 percent on average. Harvard's average payout for the past 26 years is only 4.6 percent.

"The judgment is that 3.65 percent is on the low side," O'Brien says.