‘Our focus has been on resiliency.’

The fiscal year that closed on June 30 included economic headwinds and uncertainty around research funding, all while areas of the University undertook strategic restructuring efforts to reverse a trend of expenses outpacing revenues.

At the same time, the fiscal year included significant investments and achievements in research and discovery, raising hopes for life-saving medical treatments and shaping innovations to drive U.S. security and competitiveness.

Harvard’s annual financial report, released Thursday, detailed the results of the University’s financial management across these challenges and opportunities, including ending the year with a $100 million operating surplus.

The Gazette sat down with Harvard Executive Vice President Meredith Weenick and Chief Financial Officer and Vice President for Finance Ritu Kalra to discuss the financial results and ongoing economic pressures, as well as how the University is stewarding resources to its highest priorities.

This interview has been edited for clarity and length.

---

Gazette: How would you describe Harvard’s financial position at the close of the year?

Meredith Weenick: We see the year-end result in the context of a much broader transformation that began well before fiscal year 2026. Our stewardship has been focused on driving efficiencies and adapting our operations to meet the uncertainty of the moment. Our focus has been on resiliency. That’s not simply maintaining the status quo, but actually ensuring we have the resources to invest in our research and teaching, as well as other mission-related needs.

Ending the year with a surplus required lots of work in the Schools and units. We restructured our operations and reduced costs where possible. Without those interventions, we would have ended the year in deficit. I want to recognize that this is hard work, and it isn’t finished. We have to stay diligent across every aspect of managing the University to continue producing results that allow us to reinvest in our mission.

Ritu Kalra: As Meredith said, the surplus was a result of a tremendous amount of work. No School or unit was untouched, and that deserves acknowledgment.  

It’s also worth putting the number in context. A $100 million surplus on a $6.7 billion revenue base is a 1.5 percent operating margin. That’s only five days of operations. We don’t need a surplus for its own sake. We need one because it allows us the flexibility to pay for investments like renewing the labs, classrooms, and housing we’re obligated to maintain for the next century. It also allows us to make the new investments that are essential to generating new knowledge. Together with the strong endowment return, it means we’ve closed the year on solid financial footing. The pressures we face are substantial and sustained, and we have to plan accordingly. But our community should also feel a level of confidence in our financial stability. It was not easy. We are enormously grateful to everyone who got us here.

What does resiliency mean in a year of uncertainty around federal research funding, restructuring in several parts of the University, and a strong endowment performance?

Kalra: Resiliency means absorbing pressures and adapting to new realities while holding steadfast to our core mission. Flexible financial resources are key to that. They let us direct funds to where they’re most needed, and to invest in the areas with the greatest promise. This is also why we must continue operating with discipline. The strong endowment return is a boost, but markets can take back what they give, and the uncertainty persists. Resiliency is what lets us advance our priorities while the landscape is still shifting. 

Weenick: There’s also our human capacity for resiliency. We’re fortunate to have resources that provide some financial flexibility, but people power the University. I want to recognize everyone affected by the reorganizations and restructurings, and to honor the colleagues who have left our workforce through those painful decisions. People are the foundation of everything Harvard does, and building their capacity to absorb and adapt to change is as much a part of resiliency as our financial resources. 

“Meeting the moment means making sure that our staff, faculty, and researchers have the tools they need for whatever comes next.”

Meredith Weenick

What gives you confidence that Harvard’s research enterprise is positioned to continue to be a leading engine for discovery and innovation?

Kalra: Harvard is as committed as ever to research that serves the nation and the world. Even as the federal government stepped back from funding research this past year, the University stepped up. We spent over $1.2 billion in research activity; a third of it was funded by Harvard itself.

We’re working to diversify the external sponsors who support that work by deepening our engagement with foundations and industry. It’s not just a matter of bringing in dollars — it’s about collaboration, about rethinking how the University partners with others to advance research in ways that we couldn’t have imagined a decade ago.

Meanwhile, the discoveries keep coming, from bringing quantum closer to practical use to contributing to the development of a new FDA-approved drug for pancreatic cancer. Our faculty are uniquely positioned to take on society’s hardest problems. We intend for Harvard to remain the place where those breakthroughs happen, and to work with partners so they happen at a greater scale.

Weenick: It’s the University’s responsibility to provide the infrastructure for that research. We recently announced a $150 million investment in research to support access to the tools, resources, and capacity our researchers need in areas including neuroscience, immunology, quantum, artificial intelligence, and energy and climate. That’s our obligation in this time of uncertainty — to make sure our faculty, students, and staff know that work can continue at a time of remarkable opportunity for discovery.

Philanthropy — including endowment distributions and current-use giving — is the University’s largest source of operating revenue. How did that support help the University sustain its mission during a disruptive year?

Kalra: A grant cycle can be five years, while the work of discovery can take decades. Philanthropy provides the kind of long-term, committed support that matches the time scale of a research university. It’s infused in every facet of Harvard, and it mattered this year more than ever. Donors committed more than $1.5 billion in gifts received, and we received over $640 million in gifts for current use — dollars available to be spent immediately on the challenges at hand. At a time of real uncertainty, alumni and friends chose to invest in Harvard’s teaching, research, and students, and we are grateful to them.

Every dollar of the endowment began as a gift. The endowment is built on philanthropy, and then it’s amplified by the work that Harvard Management Company does to invest it. I want to thank Narv Narvekar and his team. This year’s 27.1 percent endowment return will support greater distributions for years, and generations, to come.

Weenick: One place we put philanthropy to work is financial aid. In fiscal year 2026, the University provided more than $775 million in financial aid, including about $265 million in need-based scholarships for Harvard College students in the first year of the College’s expanded program. The College is now free for students from families earning $100,000 or less, and tuition-free for families earning $200,000 or less. This is a University priority, and it is fueled by philanthropy.

Another area where donors have responded to the University’s urgent need to support the next generation of researchers at Harvard is through the Research Accelerator Challenge, which has already raised more than $100 million for endowed Ph.D. fellowships at the Harvard Kenneth C. Griffin Graduate School of Arts and Sciences.

Every gift, no matter its size, makes a difference. That generosity is what makes the University accessible and opens more opportunities for our students, faculty, and researchers.

With a strong endowment return of 27.1 percent and a $100 million surplus, even in a challenging year, what is the reason for continuing to focus on financial capacity?

Kalra: It helps to start with unpacking what the endowment actually is, because it doesn’t provide financial capacity in the way people assume. It’s not a bank account. It’s roughly 15,000 separate funds, each given for a particular purpose — such as cancer research or immunotherapy — and we can’t divert them to payroll or facilities in another School. We do spend from them every year: The distribution funds nearly 40 percent of our operating budget. What we don’t do is spend more simply because the market had a good year. If we raised the distribution whenever returns were strong, we would have to cut it whenever they weren’t. We smooth it deliberately so that faculty, researchers, and students across generations can work with some certainty.

“Even as the federal government stepped back from funding research this past year, the University stepped up. We spent over $1.2 billion in research activity; a third of it was funded by Harvard itself.”

Ritu Kalra

With the distribution already reflected in this year’s operating results, it’s worth unpacking the $100 million surplus because it nets two things that tell two different stories. The part of the budget we control — salaries and renewing our facilities — finished nearly $80 million in deficit, and that’s with a hiring freeze and after painful position reductions. Offsetting it is a $180 million surplus of restricted funds. These are gifts and distributions for specific purposes, and the surplus largely reflects timing differences between when the funds arrived and when we’ll spend them. The two aren’t interchangeable, which is why we keep returning to financial capacity. Even with the endowment fully at work, the flexible funds that pay for general operations are running a deficit.

Weenick: Which is why it is our obligation to run the University as efficiently and effectively as possible. That work is never done. Meeting the moment means making sure that our staff, faculty, and researchers have the tools they need for whatever comes next.

Understanding that the unrestricted portion of the University’s budget is running a deficit, how is Harvard approaching capital investment and priorities going forward?

Weenick: Investing in our physical plant is a key part of our stewardship. We need to anticipate the requirements of a university in the future — from educational spaces to research spaces to activities we haven’t yet dreamed of. That means making sure that we’re maintaining our buildings as we have them today, and making room for those spaces that we may need tomorrow. Our physical plant is vast, and its needs are enormous, particularly given the historic nature of our campus.

Our fiscal year 2026 capital spending of more than $950 million is roughly what it costs just to maintain our physical plant. Yet we need to address the backlog of deferred maintenance while also investing in the kinds of upgrades and expansions that today’s teaching and research require. That’s the financial capacity the University has to create by driving efficiencies, raising more money, and identifying other resources.

This isn’t a choice between buildings and people. These are the labs, libraries, and classrooms where our people do their work. But there are hard choices inside the physical plant, too. As we think about which projects come first, which come next, we need to make those choices with the long-term needs of the University in view.

Harvard leaders have previously spoken about the negative impacts of the federal excise tax on endowment earnings. How is the University managing such a large increase in that tax in FY27?

Kalra: This will be a significant headwind. Starting fiscal year 2027, the University is now subject to an 8 percent tax, up from 1.4 percent. We project that that will cost roughly $300 million a year, though the actual amount will depend on returns and how much of them we realize. In a year like this one, with a 27.1 percent return, the tax would be several times larger.

We’re already feeling it. The endowment distribution would have grown in fiscal year 2027, but we held it flat compared to fiscal year 2026 to account for the tax. Those are additional funds that would have supported research, teaching, and scholarships. Instead, we had to use them to pay for the tax.

In addition to the increased tax on the endowment and managing the impacts, what other factors are part of capacity and resilience planning for the University’s financial outlook?

Weenick: Maintaining Harvard’s academic excellence requires strategic choices. Harvard can do anything, but it can’t do everything all at once. Part of the University’s plan going forward is to make sure we have the room to continue to invest in the next new idea and the next opportunity for learning. Those are our highest priorities. It is going to require continued diligence and work to drive efficiencies to make sure that we can sustain our research and teaching mission as new opportunities emerge.

After a very challenging fiscal year 2026, it is important that we look ahead to what we will do with the University’s financial capacity. How will Harvard pursue excellence in service to the world in ways that we cannot even imagine today?