Yet eliminating staff positions and programs does not mean that money will flow back into KSG’s general pool, as donated funds are often earmarked for one specific research purpose.

“The difficulty is that there’s all kinds of complicated constraints that have come by way of various donors,” says Littauer Professor of Public Policy and Administration William Hogan. “If a donor has contributed X amount of dollars for center Y, you can’t just get rid of center Y and take the money.”

As a result, Newman says, the school has asked its development office to focus more on raising unrestricted funds. Although officials throughout the University have worried that the national economic recession will lead to a drop in donations, Newman says that contributions to KSG have remained steady.

Yet the school’s youth—it was founded in 1978—means that it has relatively few alumni to draw on for donations. And since many of its students go on to public service, they usually cannot make the substantial contributions of others schools’ wealthy donors, Newman says, gesturing from her Littauer office across the river to the Business School.

Despite these disadvantages, in the past the school pursued deficits to encourage growth—a solution that has now become infeasible.

“Especially in the current weaker environment for both investment and giving, we cannot risk the health of our academic programs by permitting deficits to grow,” University Provost Steven E. Hyman writes in an e-mail.

The End of An Era

The 1990s were a period of great expansion for the Kennedy School. Over the last five years, it has increased its faculty positions by almost 40 percent, while launching new programs such as the Center for Public Leadership and the Carr Center for Human Rights Policy.

To fund these additions, the school has been running budget deficits for the last several years—in 2001, it was $3 million.

But as the deficits coincided with a national economic boom, the school’s growing endowment could at least partially meet the demands of its growth.

Yet in the new economic climate of the last year, and particularly since Sept. 11, the school’s budget could no longer absorb million-dollar shortfalls.

Kennedy School executive programs, many of which are run in Washington, D.C., saw a drop in enrollment—and some were even cancelled—following Sept. 11, leading to a loss in revenues.

“We’ve taken a fairly substantial hit because of Sept. 11,” says Peter Zimmerman, KSG’s senior associate dean for program development and executive education. “Basically, Washington froze up.”

Earlier this year, the school closed its Washington office and terminated or sub-let its leases in various Cambridge buildings in an effort to cut real estate expenses.

But KSG purchased the leases when real estate prices were high and was forced to sub-let in a declining market, taking what Newman called a “significant loss.”