Harvard University is planning to cut yearly capital spending by as much as half as it faces a 30 percent drop in its endowment.
- Harvard, the world’s richest school, may slice a four-year, $4 billion spending plan to $2 billion to help it weather the recession, according to a Moody’s Investors Service report.
- Harvard is already cutting its budget, freezing hiring and offering early retirement to some staff, after its $36.9 billion endowment lost $8 billion in the four months ended Oct. 31.
- The cut, as much as $500 million a year, sets back the university’s plan, initiated 10 years ago, to expand its main campus in Cambridge, Massachusetts, across the Charles River in Boston.
- The Moody’s report reviewed Harvard’s $5.8 billion in debt, including $2.5 billion in bonds the university sold in December and January.
- The university broke ground early last year on its construction in Boston’s Allston section. The complex, on 8.5 acres, is set to house the Harvard Stem Cell Institute, the Department of Developmental and Regenerative Biology, and the Wyss Institute for Biologically Inspired Engineering, bringing together scientists from Cambridge and Harvard Medical School.
- The Harvard School of Public Health is also expected to occupy part of the complex. Harvard has estimated that as many as 1,000 people would work there. The construction is part of a plan to expand over the next 50 years on about 250 acres of land the school bought in Allston.
- In the meantime, the Stem Cell Institute and other departments targeted for the new location are being put in other university buildings in Cambridge and Boston.
- The school is facing other financial pressures. Undergraduate financial aid has doubled to $147 million since 2004. The Faculty of Arts and Science -- which has about $1.2 billion in debt, largely to pay for the construction of laboratory space costing about $800 million -- pays about $85 million annually in debt service, Harvard Magazine said in December.
- The university’s long-term target for its so-called endowment spend rate would “remain between 5 percent and 5.5 percent, with the university further adjusting spending levels” in 2011 and 2012 “to bring spending back in line with target funding,” Moody’s said.
Yale University have the same measures:-
- Yale University in New Haven, Connecticut on Feb. 24 postponed $2 billion in construction projects as well as reduced budgets and curtailed raises for employees after projecting a 25 percent drop in its $22.9 billion endowment for the year ending June 30.
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