Harvard's $68 Billion Endowment Can't Shield It From Mounting Budget Pressures

Harvard University's endowment grew by more than $11 billion to nearly $68 billion in fiscal year 2026, buoyed by a 27.1 percent investment return — its strongest since 2021 — according to the university's annual financial report released Thursday.

N.P. Narvekar, chief executive of Harvard Management Company, said the year's gains were driven primarily by venture capital, public equities and hedge funds.

Harvard also posted a $100 million operating surplus, reversing the $113 million operating loss it reported a year earlier. But Chief Financial Officer Ritu Kalra and Treasurer Timothy R. Barakett cautioned that the surplus amounts to a 1.5 percent margin on $6.7 billion in revenue — "an insufficient measure of Harvard's financial health."

The report showed that unrestricted funds — the money that pays for day-to-day operations — ran a $78.7 million deficit. The portion of the budget Harvard directly controls, including salaries and facilities renewal, finished nearly $80 million in the red, offset by a $180 million surplus in restricted funds. Kalra noted that the endowment comprises roughly 15,000 separate funds, each designated for a specific purpose and barred from being diverted to payroll or campus upkeep.

Cost-cutting proved central to the turnaround. Salaries and wages — the university's largest expense — fell by $104 million, a nearly 4 percent decline that officials attributed to a hiring freeze, attrition and restructuring. Total expenses dropped more than 2 percent to $6.64 billion. Executive Vice President Meredith Weenick said that "without those interventions, we would have ended the year in deficit," while acknowledging that the reorganizations had cost colleagues their jobs through "painful decisions."

The endowment tax looms as the biggest source of uncertainty. Under the One Big Beautiful Bill Act enacted in July 2025, the tax rate on endowment earnings will rise from 1.4 percent to 8 percent, a cost Harvard projects at roughly $300 million a year. Because the university was required to book the effect of the law this year, its tax liability jumped from $317 million to $1.9 billion. Kalra said Harvard has held its fiscal year 2027 endowment distribution flat in order to absorb the tax — funds, she said, that would otherwise have supported research, teaching and financial aid.

Even as federal research funding receded, Harvard spent more than $1.2 billion on research activity this year, a third of it funded by the university itself, and announced a $150 million research initiative in September.

Harvard's 27.1 percent return trailed several peer institutions: Stanford reported 31.7 percent and the University of Pennsylvania 27.4 percent, while Brown returned nearly 20 percent and MIT just over 10 percent.