<p>ellemenope, Harvard’s Arts & Sciences relied on the endowment for more than 50% of its operating income (I think the number is in excess of 60%). So, a 30% drop in the endowment with an even bigger drop in income (among other things, the private equity funds are not making distributions at the moment or if they are not large like they used to be in the golden days) means a big drop in what they were counting on to cover operating expenses. However, it is pretty clear that the school has built up a costly, inefficient bureaucracy – it seemed pretty difficult to get fired from administrative jobs despite relatively weak effort in some cases – and there is room to cut (perhaps much more than 275 jobs) and still achieve the institution’s mission.</p>
<p>I think Harvard and other schools have other problems as well. There is no forced retirement age for professors. As professors’ retirement savings have been decimated, they decide to stay longer than they would have. Productivity may be lower than at earlier ages, but more importantly, they cannot attract the next batch of young professors whose research will keep the school strong.</p>