Dear Colleagues,
We write today to provide an update on the work we must do together to address the financial challenges arising from ongoing shifts in federal regulatory and fiscal policy.
As you know, the federal government has terminated billions of dollars of multi-year research grants and contracts that had been awarded to Harvard. Dramatic reductions in the budgets of NIH, NSF, and other federal agencies that support research, with deep cuts in both direct and indirect cost payments, have been proposed. Although we have secured preliminary legal relief against the termination of our participation in the Student and Exchange Visitor Program, our ability to host international students and scholars on campus is subject to ongoing challenge. In addition, the reconciliation bill enacted earlier this month is expected to raise the federal tax on income from our endowment—the source of nearly 40 percent of the University’s annual operating budget—from 1.4 percent to as much as 8 percent. The combined impact of these and other federal actions on Harvard’s budget could approach $1 billion annually.
We hope that our legal challenges will reverse some of these federal actions and that our efforts to raise alternative sources of funding will be successful. As that work proceeds, we also need to prepare for the possibility that the lost revenues will not be restored anytime soon. Substantial bridge funding, including the allocation of more than $250 million to a research continuity fund for FY25 and FY26, is an important step to maintain core aspects of our mission for the near term, but additional steps are needed to address long-lasting declines in important sources of funding and increases in the costs of research and teaching.
To that end, updated budget plans for FY26 to be released this week build on steps initially announced in March. Leadership in each School and Unit will continue to reduce expenditures, streamline and simplify administrative processes, and make strategic, structural, and sustainable decisions that create greater financial capacity while accounting for distinctive priorities and needs. To preserve financial flexibility as we plan and implement longer-term solutions, the University-wide hiring freeze for faculty and staff will continue, with accommodations for extraordinary cases such as positions essential to fulfilling the terms of gift- or grant-funded projects.
The unprecedented challenges we face have led to disruptive changes, painful layoffs, and ongoing uncertainty about the future. As we meet these challenges together, we will continue to benefit from our commitment to one another and the commitment of Harvard and every research university to serving the nation and the world through our core mission of teaching, learning, and research.
Sincerely,
Alan M. Garber
President
John F. Manning
Provost
Meredith Weenick
Executive Vice President
Ritu Kalra
Vice President for Finance and Chief Financial Officer