Thomas Hollister.

Thomas J. Hollister is Harvard’s vice president for finance and chief financial officer.

Stephanie Mitchell/Harvard Staff Photographer

Campus & Community

A difficult financial year met with preparation, sacrifice, innovation, and teamwork

8 min read

Belt-tightening helped Harvard offset loss of income, limit job impacts while maintaining the mission

More than a year after the decision by colleges and universities nationwide to move to remote learning following the onset of COVID-19, the pandemic continues to create financial challenges for institutions of higher education, even as many plan to bring more students back to campus in the fall.

Since the beginning of the outbreak, the Gazette has periodically checked in with Thomas J. Hollister, Harvard’s vice president for finance and chief financial officer, for updates on how the pandemic has affected the University’s finances. The Gazette recently asked Hollister to reflect upon the realities of the financial losses of the past year; how the community has come together in support of Harvard’s mission of teaching and research despite unprecedented challenges; and the outlook for the future, including new opportunities that lie ahead.


Thomas J. Hollister

GAZETTE:  Any opening thoughts on the past year?

HOLLISTER:  This pandemic period is much more than about finances. It’s been profoundly difficult for everyone, everywhere — losses of loved ones, economic dislocation, jobs lost in many industries, inequities laid bare and exacerbated, and, essential to our mission at Harvard, academics and research disrupted.

We have been guided by the framework for making financial decisions shared with the Harvard community back in April a year ago by President [Larry] Bacow, Provost [Alan M.] Garber, and Executive Vice President [Katie] Lapp: First, prioritize the health and safety of students, faculty and staff; second, do everything we can to maintain the excellence of Harvard’s educational and research mission; third, recognize that the strength of Harvard is its people. Thanks to these principles, and to so many community members who have been willing to sacrifice, innovate, and be flexible, our campus has remained safe, and the University has carried on successfully with its teaching and research mission, with minimal job-related impact.

GAZETTE:  What do the financial results look like for this unprecedented time in Harvard’s history?

HOLLISTER:  As expected, revenues this year are substantially reduced and will be down for the second year in a row. At the undergraduate level, for example, tuition revenue is lower due to fewer undergraduate students and higher financial aid needs, as well as lower room and board revenue due to remote learning. Across the University, we have, of course, seen less graduate student rental-housing income, [declines from] canceled executive education programs, far less dining and cafe revenues, reduced parking income, and reduced activity fees. We will not know how much revenue has been lost until the end of the fiscal year. There are still uncertainties that complicate Harvard’s financial outlook, and forecasting in a pandemic has been in some ways “best guessing.”

Beyond the numbers, it’s also important to underscore the very real sense of loss that many people within our community have felt this year. As I mentioned, there has been a lot of sacrifice across the University — very limited in-person teaching, research projects interrupted, Ph.D. careers upended, capital projects delayed or stopped, missed reunions and graduation ceremonies, in-person sports, dance, drama … all have been affected. It has been a difficult year for many.

“It comes down to the fact that the entire Harvard community has been terrific at controlling spending.”

GAZETTE:  Despite these very real losses, you said that Harvard has been able to very successfully limit job-related impact. How has the University been able to do this?

HOLLISTER:  It comes down to the fact that the entire Harvard community has been terrific at controlling spending. Our expenses for the first half of the fiscal year were lower than a year ago and less than we had forecast for the first half of the year. Being able to control costs is highly consequential, as it has enabled us to avoid any widespread furloughs or job layoffs. The Chronicle of Higher Education recently reported that 650,000 jobs have been eliminated in higher education in the last 12 months — this is one out of every eight jobs in higher education. Many private colleges and universities have had to resort to layoffs and also reduce retirement and pension contributions. We have not had to take those steps because everyone has pulled together and watched after every penny.

On an overall operating basis, the reduction in expenses is helping to offset the losses of revenue. As a result, hopefully our Schools and units will not have to dip too deeply into their reserves to fund losses from operations during the year, and hopefully the University can avoid a consolidated operating loss for the year. This would put us in a better position coming out of this difficult period.

GAZETTE:  You mentioned expense savings. Can you give us examples of some of these kinds of sacrifices that community members have made?

HOLLISTER:  Examples include lower spending for supplies, equipment, travel, food, consultants, energy, maintenance, capital projects, and lower compensation costs as a result of the salary and hiring freezes.

GAZETTE:  But you have also talked previously in this space about significant spending increases during the pandemic.

HOLLISTER:  Yes, that’s right. We have had to increase spending in specific areas such as testing and tracing costs, campus reconfigurations for safety reasons, and increased financial aid, particularly at the undergraduate level. I have not seen a recent estimate, but altogether this will be tens of millions of dollars for the fiscal year. The overall effort in expense savings, however, has offset these pandemic-related increases, and as I mentioned, is also offsetting the decreases in revenues.

We cannot declare victory yet. We should continue to be cautious in spending. I should mention that preparation by many people has helped us to weather this storm: strengthening financial disciplines since the recession of ’08/’09, building up liquidity at the University and reserves at the Schools and units, planning ahead with the “Recession Playbook,” downside-scenario financial planning, and close coordination with Harvard Management Company (HMC) have put us in a good position. The guidance of the Corporation Committee on Finance has also been instrumental every step of the way. All of these efforts helped position Harvard to better execute on the financial principles announced last spring.

“… hopefully our Schools and units will not have to dip too deeply into their reserves to fund losses from operations during the year, and hopefully the University can avoid a consolidated operating loss for the year.”

GAZETTE:  Speaking of HMC, what’s the outlook for the endowment?

HOLLISTER:  The stock market has been doing well, and hopefully it will stay that way. A good stock market helps endowment results. Based on the fiscal-year-to-date performance of the endowment, the Corporation decided this week to increase the distribution for the coming fiscal year from a 1 percent increase to a 2.5 percent increase. This will provide more funding for all endowed activities. The increase is consistent with Harvard’s intention to distribute as much of the endowment’s earnings into operations as it responsibly can every year in order to fund academics and research. It is our largest single source of revenue across the University.

GAZETTE:  Anything else you’d like to add?

HOLLISTER:  The Harvard community has exhibited extraordinary resilience this past year. All of the Schools and units adapted swiftly to the pandemic environment, continued on with the mission, and, in the face of it all, found new ways to advance pedagogy and research. Our researchers have been remarkably dedicated to finding ways to continue making a difference in the world. I imagine that many of them worked in shifts at all hours of the night and day with their personal protective equipment to progress with their research. How magnificent is it that both the Moderna and Johnson & Johnson vaccines trace their roots to laboratories at Harvard Medical School and Harvard-affiliated hospitals?

Remote learning has taken enormous strides across all of the Schools with improving techniques and experience and many new pedagogical approaches, including the new online master’s program at the Harvard Graduate School of Education, hybrid classrooms at Harvard Business School, and guest lecturers from across the globe participating in virtually every classroom.

We have also discovered new ways of doing work. For example, my colleagues in central finance pivoted immediately to remote work with great success every day for well over a year. These are people in accounts payable, treasury, payroll, procurement, financial reporting, sponsored programs, and student financial services. It has been a privilege to be a part of it. We now, like the rest of the campus, are trying to figure out how best to do our work in the future with flexibility for our colleagues and efficiencies for the University.

I have been so impressed by the way the Harvard community has pulled together, and looked out for each other so that we can make it through this difficult period. As we look forward, we have a unique opportunity to create a brighter future by harnessing the new ideas and approaches that have been demonstrated throughout the pandemic. Let’s capitalize on these recent pedagogical advances, the new approaches to work, the new ways of managing resources efficiently, and strategically focus on increasing selective investments in things we care about — academics, research, diversity, inclusion, and belonging, and continue to advance our shared mission, together.

Interview was lightly edited for clarity and length.