The Faculty of Arts and Sciences successfully decreased its budget deficit by more than half in the last fiscal year—reducing the remaining gap from $35 million to just $16 million—several FAS administrators said yesterday.

The new deficit figure was revealed at a meeting late last week with Leslie A. Kirwan, dean of Administration and Finance for FAS. Dean of FAS Michael D. Smith is expected to announce the number at the Oct. 4 Faculty meeting, according to FAS spokesperson Jeff Neal.

The recent drop matched a prediction voiced by Smith at a Faculty meeting last May, one month before the conclusion of the fiscal year.

The deficit decline also marks a further development as the school approaches a balanced budget—a goal which Smith has promised will occur by fiscal year 2012.

Some administrators said they are sanguine that FAS might even post a surplus this year.

In December 2008, Smith stood in front of a packed Faculty Room in University Hall for his monthly Faculty Room in University Hall for his monthly Faculty meeting, asking departments to cut budgets by 10 to 15 percent. For the last two years, Smith has been leading the charge to shrink the FAS deficit, decreasing the original $220 million gap by half at the end of the 2009 fiscal year, and by an additional two thirds by the end of FY10.

Though the operating budget of FAS had decreased from $1.2 billion in fiscal year 2008 to $1.1 billion this year, the budget will be slightly stronger in fiscal year 2012 due to a 4 percent increase in the distribution the school will receive from the University endowment.

Several administrators have said that in the face of cuts already enacted, the remaining $16 million offers a less concerning challenge.

But senior executives, including Kirwan, are concerned that the environment of more severe budget cutting might return, according to administrators who attended last week’s meeting.

“They don’t know how long [the increased payout] will last,” said one FAS administrator, who wished to remain anonymous to preserve relationships with central administration.

The administrator noted that last month’s volatile market movements have particularly increased concerns that the endowment value may again drop in the coming year.

That would only further complicate FAS’ current financial situation. While the school is on track to meet Smith’s goal of having a balanced budget by the end of this fiscal year, FAS is still facing long-term debt obligations.

Some administrators were unsure how the school planned to pay back its debt, but pointed to a combined reliance on the FAS reserves, which stood at $138 million in 2008, and funding from the University’s capital campaign.

In the last Faculty meeting of the previous academic year, Smith struck a more optimistic note than he had in previous years.

“It's good news,” he said at the May meeting, even lightly joking about the return of two-year-long absent cookies to the meeting.

—Staff writer Gautam S. Kumar can be reached at gkumar@college.harvard.edu.

—Staff writer Julia L. Ryan can be reached at jryan@college.harvard.edu.