But he is concerned about smoothly injecting this increase into the operating budget. "But would you jump from 3.65 percent to 5 percent in one year? I don't think so, that's too much."

$7.4 Billion

This is the value of Harvard's endowment at the end of fiscal year 1995. By 1996, the endowment's value had risen 26 percent to $9.1 billion, due mainly to the bull market, but just as important to this increase has been Harvard's frugal management of its precious nest egg.

So even if Harvard isn't paying out all of the endowment that it could, one perspective is that at worst the money goes right back into the endowment--for Harvard's many future generations.

Plus it's difficult to argue that Harvard doesn't allocate its operating budget wisely, the vast majority of which--49.5 percent--goes for faculty and staff compensation.

Harvard's faculty are also some of the best paid in the business. On average they make $107,000 a year, more than at any other Ivy League school.

Of course, the endowment provides extra funding to make these high salaries possible which, in turn, allows Harvard to recruit the most prestigious faculty.

Endowment and prestige then become chicken and egg, according to many officials.

"I think there's prestige associated with having a big endowment, and there's endowment associated with prestige," says one development officer.

$4.7 Million

The top fund manager at Harvard Management Corporation (HMC), was paid this much in bonuses and compensation in 1996, according to federal tax returns. Others in the top five received between $1 and $2 million in compensation.

HMC is a University-managed, not-for-profit corporation that invests Harvard's endowment. HMC officials defend the income levels of their money managers, arguing that Harvard must pay top dollar for top yield.

"For anybody to earn anywhere close to what these managers are, performance has to be excellent," says Jack R. Meyer, president of the HMC.

Compared with other schools, most of whom hire outside management firms, Harvard's endowment fared well in 1996, with its 26 percent growth rate beating the average university's by 9 percent.

Meyer adds that Harvard pays less than half of what it would if it contracted to external managers as most universities do.