Harvard University, the oldest and richest U.S. university, said it will review its employee benefits and seek new income sources as returns from its endowment investments droop.
Harvard will look for new ways to make money from its facilities and “vast intellectual resources,” while continuing to plan a fundraising campaign, the Cambridge, Massachusetts-based school said in its annual financial report released today.
Returns on the school’s endowment investments, valued at $30.7 billion, were little changed in the year ended June 30, while total operating expenses rose 3 percent to $4 billion, according to the report. The college also faces the costs of constructing or renovating 11 buildings in the nearby Boston neighborhood of Allston over the next decade, which was announced last month.
“The need for change in higher education is clear given the emerging disconnect between ever-increasing aspirations and universities’ ability to generate the new resources to finance them,” according to the report.
Harvard’s annual benefit expense doubled over the past decade to $476 million in fiscal 2012 and the university “cannot simply continue with the status quo,” Harvard said in the report.
Harvard had 16,505 employees in fiscal 2011, according to its website. The university offers employees health and dental plans, disability plans, life insurance, tuition assistance and other benefits such as subsidized passes for public transportation and access to Harvard athletic facilities, the report said. Almost all employees are covered by retirement plans.
“The university is committed to offering fair and competitive compensation to all its employees, but ultimately must balance our responsibilities to the workforce with our need to pursue the University’s broader objectives,” the report said.
Government research funds, which many Harvard faculty members depend on to carry out their work, also have been under increasing pressure, the report said. Excluding the effect of the American Recovery and Reinvestment Act, often called the “stimulus package,” revenue for federally funded research rose just 2 percent since 2002, when adjusted for inflation, Harvard said.
The university had $6 billion of debt on June 30, up from $1.3 billion in 2000.
Harvard President Drew Faust instituted a number of cost-cutting measures after the economic crisis that began in 2008, such as the consolidation of the university’s 17 million-volume library system. Similar efforts in information technology and purchasing will be expanded, the report said.
Faust has said that Harvard is planning a capital campaign during which fundraising activities will intensify for several years. While the school hasn’t given a target figure, the Harvard Crimson reported in April that the aim would be $6 billion.
“The financial crisis has acted like a tidal wave that, as it receded, exposed certain vulnerabilities with a new clarity,” the report said. “We likely will need to undertake an even more fundamental examination of our activities with the goal of more crisply prioritizing what we do and what we are willing to forgo.”