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After a turbulent year for the University and its finances, Harvard is set to grapple with an uncertain economic outlook in 2021, University Vice President for Finances Thomas J. Hollister said in an interview with The Crimson Thursday.

“There are three critical factors that we just don't know how they're going to behave. One is the pandemic itself. We all hope that we'll be back to normal, you know on campus in the fall, for example. We also have the uncertainty of the economy and the capital markets,” Hollister said.

Despite global economic turmoil, Harvard Management Company reported strong returns on its investments in the 2020 fiscal year. The endowment climbed to a historic high of $41.9 billion as of September — making it by far the largest university endowment in the world.

Hollister acknowledged HMC’s success, but stressed that the endowment returns do not present a complete picture of the University’s financial standing.

“We are very fortunate that the HMC had a comparatively strong year and that really has helped the overall financial picture for this year, but that alone is not enough to offset the other significant revenue declines, nor relieve us of the necessity of watching every penny,” Hollister said.

Harvard lost $138 million in revenue in fiscal year 2020, according to the University’s annual financial report.

Hollister also said the University has been operating at a deficit — spending more than it is earning — throughout the year. Harvard is set to do the same in 2021.

Hollister said the current status of undergraduate life poses a financial challenge. Harvard plans to invite about half of its student body to reside on campus in the spring, decreasing the revenue it draws from room and board. Nevertheless, Hollister said, the University’s expenses have increased, owing in part to the cost of personal protective equipment, testing and tracing programs, and increased financial aid.

In a September interview with The Crimson, University President Lawrence S. Bacow estimated that the school spends “tens of millions of dollars” in COVID-19 testing, among other pandemic-related costs.

Activists have, throughout the year, also urged the University to draw on its assets to compensate workers for the duration of the pandemic. Harvard most recently faced criticism for its decision to reduce pay for direct staff and stop compensating idled contract workers beginning on Jan. 15.

In an interview with The Crimson on Wednesday, University President Lawrence S. Bacow defended the decision due to Harvard’s other financial commitments.

“We have literally thousands of people that we’ve been paying full time who have had no work since March. And we’ve tried to do as much as we can,” Bacow said. “But we also have responsibilities to students and faculty and staff, and we have to prioritize the academic enterprise as well.”

Hollister likewise defended the decision.

“Well I think there's an impression that Harvard has unlimited funds. And as the CFO, I can quite certainly say that's not the case,” Hollister said. “We're deficit spending this year.”

Hollister noted that administrators have drawn on the endowment to help correct the University’s pandemic-related losses. The Harvard Corporation announced in June that it would make 3 percent of the University’s restricted endowment funds available for immediate use as part of a “special assessment” of Harvard’s assets.

“There's also an oft-voiced perception that the endowment is somehow hidden away, and unused as being hoarded, when in fact, it's the opposite. Earnings from the endowment are distributed annually without fail, and it's our primary revenue source for both teaching and research,” Hollister said.

The University’s total student revenue dropped to $1.1 billion in fiscal year 2020, according to the annual financial report. The University increased its financial aid payments by 5 percent, totalling $645 million in scholarships, during the same period.

When asked if Harvard has enough money to continue operating while the pandemic rages on, Hollister had a muted response.

“Hope so,” he said.

Correction: December 11, 2020

A previous version of this article incorrectly stated that Harvard's total student revenue dropped by $1.1 billion. In fact, it dropped to total $1.1 billion.

—Staff writer Ellen M. Burstein can be reached at ellen.burstein@thecrimson.com. Follow her on Twitter @ellenburstein.