Nov. 11 (Bloomberg) -- Harvard University's $36.9 billion endowment may face ``unprecedented'' losses as America's richest school joins Ivy League peers and other U.S. institutions buffeted by the economic slowdown.

President Drew Faust cited ``the global economic crisis'' in a letter yesterday to faculty, students and staff. Harvard, in Cambridge, Massachusetts, most likely will receive less from donors, and U.S. government grants and contracts ``will be subject to the intensified stress on the federal budget,'' forcing ``financial constraint'' at the school, Faust said.

Colleges and universities across the U.S. are struggling with the worst financial crisis since the Great Depression. State university systems in Georgia, California, and New York are firing employees, postponing maintenance and cutting library subscriptions. Among private schools, Middlebury College in Vermont is canceling student trips and Colorado College, in Colorado Springs, said it will chop at least $500,000 from its budget.

``Given the breadth and the depth of the present downturn, even well-diversified portfolios are experiencing major losses,'' Faust said in the letter. ``While we can hope that markets will improve, we need to be prepared to absorb unprecedented endowment losses and plan for a period of greater financial constraint.''

In the Ivy League of eight elite private schools in the northeastern U.S., Cornell University in Ithaca, New York, and Brown University in Providence, Rhode Island, have imposed temporary freezes on hiring from the outside for non-faculty jobs. Cornell has also halted new construction.

Acknowledging Hardship

Brown is relaxing rules barring students with outstanding tuition balances from registering for classes, an acknowledgement that some students and parents face hardships, Provost David Ketzer said in a letter on Oct. 31.

At Dartmouth College, an Ivy League school in Hanover, New Hampshire, the administration is studying reductions in spending. The school lost 6 percent, or $220 million, from its endowment in three months, the Dartmouth student newspaper reported yesterday. Roland Adams, a college spokesman, didn't dispute the figure.

Princeton University, in New Jersey, said in a statement today that it will delay some construction projects and that less money is available in salary pools for raises and new hires. No budget cuts are necessary, and the school plans to make $3 million to $4 million in additional financial aid available to prevent students from dropping out because they can't afford tuition, the school said.

The other Ivy League schools, the University of Pennsylvania in Philadelphia and Columbia University in New York, haven't announced spending reductions.

Endowment Return

Harvard's endowment returned 8.6 percent in the year ended June 30 compared with the 13.1 percent loss for the Standard & Poor's 500 Index with dividends included. The Harvard fund provides money for more than a third of the university's annual operating expenses, Faust said. Support from the endowment totaled about $1.6 billion in fiscal 2008, according to Harvard Management Co. of Boston, the school's investment arm.

John Longbrake, a spokesman for Harvard, would neither specify how much money the endowment may lose nor how its declines might affect university operations.

Harvard's Faculty of Arts and Sciences derives about 52 percent of its revenue from the endowment, according to Harvard's annual financial report. The School of Public Health, which relies on grants and outside funding, receives 13 percent of its revenue from the fund.

Free Tuition

Faust also said the university would continue offering free tuition to students whose families earn less than $60,000 a year and reduced tuition to families with annual incomes of as much as $180,000.

Federal research funding to Harvard increased 4 percent, to $535 million, in fiscal 2008. About $435 million of the total came from the Department of Health and Human Services, according to Harvard's annual report. Gifts from donors rose 11 percent, to $236.6 million.

Harvard officials have engaged in preliminary talks to sell some of the university's stake in private-equity funds held by the endowment, a person familiar with the negotiations said on Nov. 5. Longbrake yesterday didn't respond to a request for updated information on the talks.

To contact the reporter on this story: Julie Ziegler in Boston at jziegler@bloomberg.net.

Last Updated: November 11, 2008 16:24 EST