Pulled up by a humming economy-and Wall Street success during the last five years-Harvard's endowment has soared. But the University's top decision-makers have played it cautious, fearing a market drop.

But over the past ten years the payout-the percentage of endowment money withdrawn and used in the budget every year-has not kept pace with the market, as top administrators hoarded Harvard's money for a rainy day.

Now, in one fell swoop, Harvard has increased the payout by 20 percent, a quantum leap away from an average increase of about 10 percent per year. The fiscal conservatism of the last decade seems to have been thrown out the window.

"It's out of character," says Provost Harvey V. Fineberg '67. "This is a rather bold move for Harvard."

But despite the attention given to the move,Harvard is really doing nothing more than gettingback on track.

Last year, Harvard spent 3.3 percent of itsendowment income, a figure Jeremy R. Knowles, deanof the Faculty of Arts and Sciences, calls "jollylow."

"Four-and-a-half percent we view as aconservative rate," says Naomi G. Richman, seniorvice president for Moody's Investors Services, anexpert in college investment strategies. "We wouldview 3.3 percent as an extremely low payout."

University administrators defended the lowrate, nothing that while they may have been usinga smaller portion of the endowment, the actualdollar amount of the payout grew at about 10percent each year.

And though this move will add about $95 millionto the University's budget, in reality it will dolittle more than make Harvard conservative again,rather than miserly.

A Careful Balance

Thomas O'Brien, Harvard's former vice presidentfor finance and architect of its current savingsystem, calls the new payout estimate "verymodest," adding that most schools now target for a5 percent payout.

O' Brien invented the formula for coming upwith the payout rate, which is based on findingthe perfect mix between spending today's moneyversus tomorrow's.

According to O'Brien and current Harvardofficials, the 4.5 to 5 percent rate, Harvard'straditional average, allows for the right mix.

O'Brien's today/tomorrow philosophy is oneother Harvard officials seem to strongly support.

"There must be an equilibrium between today'sstudents and tomorrow's students and today'sfaculty and tomorrow's faculty," says D. RonDaniel, Harvard's treasurer and a previousopponent of the change.

"We are below what we think is a fairdistribution of today's wealth with tomorrow'swealth," said Elizabeth C. "Beppie" Huidekoper,vice president for finance. "It's time to giveback to our own."