It's been a year of big spending for Harvard.

With the promise of an extra $2.1 billion in its coffers as the capital campaign nears a successful conclusion in December, the administration broke from its recently conservative fiscal policies.

There were hints of this financial confidence when despite the endowment's summertime $1.3 billion plunge, administrators continued to implement long awaited--and expensive--changes. According to some officials, the market ills spurred by the Asian financial crisis even served as a catalyst, proving that Harvard could survive financial downturns.

In September, following the lead of competitors like Princeton, Stanford and Yale, Harvard added $10 million to its budget for financial aid, improving individual packages by $2,000 each.

Later in the fall the University announced an increase in endowment pay out--the percentage taken from the endowment each year--symbolizing a greater financial commitment to current students.

In addition, Harvard has planned--and in some cases begun--the renovation of older buildings and the construction of new facilities. The Holyoke Center, for example, was renovated for $1 million this spring. The result? Doors.

Behind the scenes the Harvard administration asked for a dean's resignation and appointed a new vice president for government, community and public Affairs.

After this year, both Harvard's physical face and its public persona will have undergone a makeover.

Ups and Dows

University officials attributed the yo-yo effects of Harvard's endowment to stock market turmoil, not changes in alumni giving or troubles in the $2.1 billion capital campaign.

Quoted at an all-time high of $13 billion in June 1998, the endowment, Harvard's stockpile of funds, lost 10 percent of its value during the summer months--three percentage points more than the forecasted drop of 7 percent. Harvard was not alone; universities across the country experienced losses of 6 to 10 percent.

The rapid plunge followed five years of higher-than-expected endowment growth in schools around the United States brought on by the bull market. Havard's funds grew by 20.5 percent during the fiscal year that ended last June.

The University's financial managers expressed optimism about the long-term stability of their investments, and spent accordingly. In December the administration announced a plan to add $95 million from the endowment to the University's operating budget. The changes will make possible financial aid reforms, new construction and new hiring within the Faculty.

Double the Billion

Time is running out in Harvard's quest for $2.1 billion. Fortunately, the six-year University-wide capital campaign has been largely successful, inching 7 percent closer to its goal in the past year.

The Faculty of Arts and Sciences (FAS), with $48 million left to raise, is the only school lagging behind. But Harvard's administrators are confident that FAS will meet its goals.

"Indeed, I trust we'll go over the top!" Dean of the Faculty Jeremy R. Knowles wrote in an e-mail message.

Harvard has raised $1.981 billion since the beginning of the campaign in May 1994. The libraries and endowed professorships, always sticking points for campaigns, remain short of their goals. The library system needs another $30 million for Widener renovations. Only 16 of the 40 planned professorships have been funded.

Since the beginning of his presidency, Neil L. Rudenstine has placed fundraising at the top of his agenda, and now, with six months left, he is stepping up the number of meetings with large donors and phone calls to generous alumni.

Over the last several months officials have tried to change their strategy, educating donors about the benefits of less glamorous gifts like those to the library.

Harvard will most likely institute the "challenge method" to solicit new gifts. Donors have their gifts matched from a fund made up of money earmarked for that purpose.

"A lot of time is being spent figuring out how to readjust our efforts in funding," says William H. Boardman, associate vice president for capital giving.

Coming From Behind

The story of last year was Harvard's reluctance to join the pack in raising financial aid benefits. Starting with Princeton University, quickly followed by Stanford and Yale universities, school after school announced that they would overhaul their financial aid policies, increasing aid to middle class families.

While Harvard spent more than a million dollars trying to keep "within shouting distance" of its "peer institutions" by increasing aid packages on a case-by-case basis, it found itself outbid by much of the Ivy League.

Sources told The Crimson that Rudenstine had long wanted to make a financial aid policy change, but Knowles balked at the prospect of spending more money.

In the fall of this year, Harvard announced its own financial aid initiative, a plan with a purpose different than other schools' initiatives.

The University added some $10 million to its annual financial aid spending, giving $2,000 additional dollars to every student receiving aid.

The aim, administrators said, was to free up more of students' time, relieving them of the burden of work requirements or loans. Harvard's plan dwarfed some other schools--in both size and mission. It was some three times larger than Yale's plan, for example.

Building Frenzy

The portion of the capital campaign devoted to building projects will both make old structures suitable for modern use and erect buildings that will serve new needs.

Harvard has pledged to renovate Widener Library, Harvard Hall, Holden Chapel and University Hall, rebuild the clock tower atop Memorial Hall, construct a home for its newly inaugurated center for Genomics and Proteomics, and revising its plans for the Knafel Center for the Social Sciences.

The Widener project is by far the most ambitious, pegged at $52 million.

Because of heat, humidity and sunlight, book decay has long been a problem for Harvard's largest library, which does not have a climate control system in the stacks.

The project will add air conditioning, a sprinkler system, a new fire detection system and two new reading rooms to Widener. The University plans to begin the renovation sometime after Commencement and will erect a sky crane at the Mass. Ave. gate near Wigglesworth.

The University Hall renovation--expected to cost between $8 and $10 million--is largely aimed at bringing the building into compliance with the Americans with Disabilities Act and will add an elevator to the north side of the building. In addition, the project will include an overhaul of the heating and electrical systems and will add slightly more office space.

Early last fall, amid protests from local residents, Harvard agreed to go back to the drawing board for the Knafel Center, a new building intended to house programs in government and international studies.

The center, slated for construction in the neighborhood of the Swedenborg Chapel, was seen by some Cantabrigians as an example of insensitivity to the local community, which uses extensively the small park in the area the Center would be built. The University agreed to amend its plans for the Center in light of the bad blood unleashed by its secret purchase of acres of land in Allston two years ago.

Less than four months after unveiling plans for a $200 million science initiative in the Faculty of Arts and Sciences, the University had selected an architect, location and preliminary design plans for a $25 to $30 million life science center, which will house the newly-created Center for Genomics and Proteomics.

Current plans call for the 50,000 square foot building--roughly the size of University Hall--to connect to the new Naito Chemistry Laboratory, which will itself be completed in September.

This year, Harvard also revealed plans to build a $6 million office and retail building on the site of the Harvard Provisions Company and Skewers restaurant.

And over the year, Harvard literally plowed ahead with the $20 million Maxwell-Dworkin computer science and electrical engineering building, which is being paid for by gifts from computer giants William H. Gates III, Class of 1977, and Steven A. Ballmer '77, also a former Crimson executive. The building, named for the donors' mothers, Mary Maxwell Gates and Beatrice Dworkin Ballmer, is being built on a site near the law school.

In the Spotlight

The resignation of Divinity School Dean Ronald F. Thiemann attracted national media attention--months after the thousands of pornographic images found on his computer led to his departure. The images did not include child pornography or any other illegal type.

In November he told the school community he was leaving for "personal and professional" reasons after 13 years as dean.

According to one source, the pornographic material was found on Thiemann's Harvard-owned computer by technicians who were servicing the machine. The source told The Crimson that people from computer services had been encountering these images for over a year but had not reported them.

The presence of the images on his computer violates the school's official policy, which prohibits storing material that is "inappropriate, obscene, bigoted or abusive."

Thiemann, a minister of the Evangelical Lutheran Church in America, is now receiving spiritual counseling from other church members.

Bishop Robert L. Isaksen of the New England Synod of the Evangelical Lutheran Church of America said in an interview last month that the church's investigation into Thiemann's action is "just beginning." The church officially opposes pornography.

There is, however, no indication that the University will pursue the matter further.

Total Makeover?

Over the past year Harvard has been reshaping the image it presents to the outside world in an effort to foster better relations with the local community. This makeover comes in the wake of a year that saw such town-gown ruptures as the Allston land purchase, in which the University revealed it had secretly purchased more than 50 acres of land, and the proposed Knafel Center.

In January Paul S. Grogan assumed the role of the University's vice president for government, community and public affairs, Harvard's advocate and representative at the federal, state and local levels.

Coming from the helm of an urban non-profit Grogan, a veteran of local politics and city planning, brought a shift in focus to the vice president's office. His predecessor James H. Rowe III '73 was known in Washington circles and involved Harvard heavily in Congressional lobbying.

Now, said Harvard's state and federal lobbyist Kevin S. Casey in a January interview, Harvard must look locally. Grogan's approach emphasizes the need to foster the "symbiotic" relationship between Harvard and its host town.

This semester Grogan focused on learning about Harvard and issues surrounding higher education. He has worked to build ties with local leaders and to communicate the school's interest in the community--by publicizing PBHA community programs, for example.

In his effort to change Harvard's image as a rich and aloof neighbor, Grogan announced plans to restructure the News Office, the organ of the University that publishes the Gazette and speaks to the outside world on Harvard's behalf.

Former Director of the News Office Alex Huppe resigned in February to become vice president of PSC International in Washington, D.C.

A month later, Grogan appointed Joe Wrinn as the new director of news and public affairs.

According to Wrinn, with the burgeoning news industry, the office can no longer keep up with all of its duties.

"We are simply not prepared right now to answer the volume of questions that come through the office," Wrinn says.

Wrinn's appointment kicks off a series of changes. Through the News Office, Grogan plans to release more Harvard publications like the Harvard Guide. The two also plan to restructure the News Office and expand its staff and budget.

These changes should result in a change in Harvard's presentation strategy.

"We do a really good job of reacting to news that comes to us, but I think we could do an even better job of making advances to the media," Provost Harvey V. Fineberg '67 said in an interview last month.

Medicare

With the focus on Harvard local image, it was supposed to be an easy year for the Washington lobbying team.

The Higher Education Act had passed the year before and university officials predicted they could shift their focus back home, having secured federal support for student aid and research for the time being.

But, according to Rudenstine, a crisis presented itself.

The Balanced Budget Act of 1997 placed caps on Medicare spending--federal aid to hospitals--that had helped to pay for the expensive teaching mission of academic medical centers. The cutbacks in Medicare spending came at a particularly difficult time for American hospitals, as private insurers have moved to pay less and less of the per-patient cost of treatment over the last five years, instead ceding this job to less generous managed care programs.

Across the country, teaching hospitals were hit with unprecedented losses, and Harvard was no exception.

Harvard's teaching hospital, Brigham and Women's, for example, posted a $10 million deficit, while Mass. General Hospital lost $11.6 million in the first quarter of this fiscal year--last October through December.

"This year we'll muddle through," Rudenstine told The Crimson, "but within 12 to 24 months, we'll be looking at disaster....It is not an abstract concern."

With the quality of American medical education seemingly jeopardized, the University turned to Washington to fix the problem, lobbying hard to emphasize to lawmakers the urgency of the problem. Rep. Benjamin L. Cardin (D-Md.) came up with a solution, proposing a system that would tax health insurance premiums to create a trust fund for graduate medical education.

But the Cardin's proposal is not expected to pass, and for the time being, Harvard is far from out of the woods.