Harvard’s FAS faces a $350M deficit: Here’s why the budget crisis runs so deep

Harvard University’s Faculty of Arts and Sciences (FAS) is facing an estimated structural deficit of approximately $350 million, a financial shortfall that will require significant changes to its long-term budget.

The deficit, announced by FAS Dean Hopi E. Hoekstra in an email to faculty and staff, represents about 20 per cent of the faculty’s annual operating budget, according to The Harvard Crimson. In her message, Hoekstra said the deficit reflected a rise in operating costs, an increase in the federal endowment tax, and uncertainty over future US federal funding. The dean added that the financial imbalance leaves the FAS with little capacity to absorb shocks or make strategic investments in academic priorities, The Harvard Crimson reported.Rising costs and federal funding pressuresThe deficit projections come as Harvard continues to adjust to higher long-term costs and evolving federal policies. Hoekstra stated that recent increases in the federal endowment tax, coupled with possible cuts to federal agency budgets and reduced research reimbursements, have placed additional strain on FAS finances. According to The Harvard Crimson, the FAS has been undertaking a broad cost-cutting initiative.

Non-essential capital projects have been paused, Ph.D. admissions have been sharply reduced, staff hiring has been frozen, and the budget for the current fiscal year has been kept flat. The measures reflect growing concern over the fiscal impact of President Donald Trump’s administration and its potential effect on university research funding.Committee recommendations and financial reviewThe $350 million estimate was developed by the Faculty Resources Committee, a group that previously advised the FAS during the 2008 financial crisis. The committee was reconvened earlier this year and will present its findings in detail during the FAS’s monthly meeting, The Harvard Crimson noted. Hoekstra said the school will now concentrate on achieving long-term sustainability. The Task Force on Workforce Planning, established in the spring, has proposed a more efficient administrative model, which may include restructuring or reductions in staffing. The dean confirmed that the design phase of this new model will begin in winter and continue through the spring.Financial performance and long-term sustainabilityThe FAS ended fiscal year 2025 with an $8 million deficit, according to figures shared by Hoekstra and quoted by The Harvard Crimson. Although the faculty had not recorded an annual deficit since 2020, the dean explained that it has consistently faced a structural deficit, meaning costs have grown faster than revenues. In fiscal year 2023, the FAS reported a surplus of $62 million, which declined sharply to $3 million the following year. Hoekstra emphasised that addressing the deficit would require decisive, long-term action to preserve the faculty’s academic strength and financial stability. “The scale of the problem requires decisive, long-term action to ensure the continued health and vitality of the FAS,” Hoekstra wrote in her email, as quoted by The Harvard Crimson. Hoekstra added that the faculty’s focus will be on aligning resources with its academic mission to make deliberate and sustainable financial changes. She stated that early action will provide more time to implement thoughtful adjustments that preserve the FAS’s core priorities, The Harvard Crimson reported.Factors driving Harvard FAS’s deep $350M budget crisis• Structural deficit: The FAS has a persistent long-term imbalance where annual operating costs consistently exceed revenues, creating a financial gap built into its budget.• Rising operating costs: Essential expenses such as staff salaries, facilities maintenance, and research support have increased steadily, putting continuous pressure on available funds.• Federal endowment tax: Recent increases in the federal endowment tax have directly reduced the income Harvard can allocate to core academic programmes and operations.• Uncertain US federal funding: Potential reductions in federal agency budgets, lower research grant awards, and decreased reimbursement rates for indirect research costs add further unpredictability to the FAS budget.• Historical deficits: Previous annual deficits, including the modest $8 million shortfall in fiscal year 2025, reflect an ongoing pattern rather than a temporary financial setback, emphasising the structural nature of the crisis.