I apologize in advance to a dear friend of mine who brought this story to my attention, probably not aware that I'd use it in the manner I'm about to.
But it seems Harvard is about to let some 275 employees go (none of them faculty, thank God) as a result of the worsening economy and its declining endowment.
Yes ladies and gentlemen, times are tough at Harvard, what with a devastated endowment now all the way down to $28.5 BILLION DOLLARS. Yes, that's right. $28.5 BILLION DOLLARS. Let's try and put that into perspective, shall we?
If Harvard were to liquidate its endowment, it could educate every resident of Syracuse NY--every man, woman and child--at full tuition.
If Harvard were to liquidate its endowment, it could simply give every one of its employees a check for $1.7 million.
If Harvard were to liquidate its endowment, it could offer each of the 275 unfortunates $103.6 million in severance pay.
And if my math is right, if Harvard makes 2% this year on its $28.5B, it would kick off enough income to pay each of the fired folks a salary of $2 million.
You wanna know the biggest crime of all? Harvard's endowment isn't TAXED (nor are other endowments). That's because Harvard is "tax exempt", a status non-profits have come to enjoy in our society. The open question right now is whether Harvard or any other institution racking up billions of dollars in endowment money isn't looking and acting like any other corporation. I think they are, and I applaud moves underway in several states to question the tax exempt status of the mega endowments.
Harvard and its fellows in academia seem quite good at producing advocates of soaking the rich as coherent policy---but only when we're not talking rich universities....
Wednesday, June 24, 2009
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3 comments:
1. Harvard's Med, Law, Dental, Government, Divinity grads and so on are "advocates of soaking the rich as coherent policy?" I tend to think of the 70,000 Harvard Business School grads out there, people like Mitt Romney, George Bush, Meg Whitmen, Michael Bloomberg, and those leading most of corporate America, as capitalists. But that sorta screws with that whole anti-intellectualism/sour grapes talking point out there aimed at taking ill-informed shots at Harvard.
2. The endowment doesn't work like a big pot of money the Schools all dip into at will. 94% of it is restricted by donors for very narrow, specific and sustainable uses. When the value goes way down across the board in a way not seen since ~1930, despite heavy diversification, the Schools' operating budgets have to be adjusted to make up the shortfall and keep those initiatives (faculty chairs, libraries, research areas, financial aid) going. HBS took significant cost-cutting measures, including deep faculty comp cuts, capital projects reduction, before taking a close look at how every department operates and resetting the way the School does business with an eye to the future, and in the process, it identified 16 positions that no longer fit the new operating model.
That really sucks, most of all for those 16 and the people around them. But the thinking is all towards long-term goals, and not to liquidate everything and make this year an easy one to ride out, as your perspective would have.
GHP--a spirited defense, as would be expected. A couple of things:
1. Sure, there are lots of capitalists who've graduated from Harvard. But no one would confuse Cambridge with John Galt's place in Colorado.
2. While I used liquidation in my examples, I would think you'd not be confused into thinking that was what I was advocating. I was using liquidation in order to show how much twenty eight and a half billion dollars is. Surely even the six percent not spoken for (over a billion dollars alone) could have gone to mitigate these decisions?
I wonder how many coonskin coats it would buy.
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