HMS is facing a deficit. Some fear things could get worse under Trump. | News

DDespite receiving $5 billion from about 1,400 school-specific donations, Harvard Medical School will run a deficit this year.

According to the medical school’s official news publication, just over a quarter of HMS’s operating income comes from “endowment income provided for operations.”

Of the remaining sources, 38 percent came from “sponsored support,” 11 percent from “educational income,” 8 percent from “gifts for current use,” and 15 percent from “other.”

According to an HMS Office of Finance document obtained by The Crimson, “Despite the optics of the Medical School’s endowment, HMS’s budget is consistently underfunded.”

“Deficit spending is a growing problem at HMS,” says the document, which details the school’s deficit spending policy.

At the 2024 State of the School address, HMS Dean George Q. Daley ’82 announced that the school was facing a $37 million deficit due to “a perfect storm of negative financial headwinds.”

HMS officials say the deficit is due to National Institutes of Health funding failing to keep pace with rising cost inflation, increased labor and construction costs and poor returns on capital – and could result in the re-election of former US President Donald Trump the money problems only get worse.

Declining NIH funding

The NIH has long been an important source of funding for Harvard and HMS researchers.

In 2018, the NIH was responsible for 71 percent of Harvard’s federal funding and half of all Harvard research funds.

In fiscal year 2024, NIH funding declined for the first time in 11 years. Since fiscal year 2003, NIH funding for HMS has declined 2.7 percent, adjusted for inflation.

In an emailed statement to The Crimson, Daley wrote that “the NIH is a tremendous driver of both human health and economic vitality” and that the U.S.’s position as a world leader in biomedical research is “sustainable “Based on funding from the federal government.” to support basic and translational science.”

According to some professors, HMS labs are feeling the pressure caused by a tight budget coupled with high inflation in recent years.

“The decline in the purchasing power of the dollar – particularly in an inflationary climate – is leading to a significant reduction in the ability of scientists to do their work,” said HMS Professor Reza Dana.

According to the HMS Deficit Spending Policy document, the HMS Treasury has established limits on the use of gifts and departmental expenditures.

The document also requires the tax office to draw up a plan to eliminate the deficit by the end of the fiscal year and work with various departments to achieve mutually agreed goals.

Harvard Medical School Dean George Q. Daley ’82 said earlier this year that the school was facing a $37 million budget deficit. By Marina Qu

Timothy T. Hla, a professor of surgery at HMS, said “it’s not getting any easier” to get research funding, a problem he attributed to more than just inflationary pressures.

“The costs for trainees such as postdocs and students have risen sharply. The cost of deliveries has risen sharply,” said Hla.

Hla also noted that it has become increasingly difficult to obtain an NIH grant nationwide, as the rate of successful grant applications has dropped from about 20 percent to less than 10 percent for some institutions.

“Researchers have been pushed from many different directions over so many years,” Hla said.

A “devastating” impact on the laboratory

Due to limited budgets, HMS scientists pursue a number of options to maintain their ability to conduct high-quality research.

Hla summarized many labs’ approach to the problem as saying that they should “just work harder” and pursue more “entrepreneurial avenues” – such as obtaining therapeutic development funding from pharmaceutical and biotech companies or venture capital firms – rather than relying solely on government grants to leave.

HMS microbiology professor Lee Gehrke wrote in an emailed statement to The Crimson that the decline in U.S. government research budgets at research universities “raises questions about the sustainability of research at private institutions that are required to make up the difference through philanthropy “to compensate for foundation grants.”

However, the transition to privatized research funding was not without resistance.

Earlier this year, HMS affiliates responded differently to the increase in private funding sources for HMS research, weighing the benefits of large funding streams against possible strings attached to the amounts.

Hla – whose lab is at Boston Children’s Hospital – said HMS is a “soft money institution” – one that does not directly fund researchers but instead requires researchers to use external funding sources, such as through the NIH.

Although laboratories at HMS-affiliated institutions such as Boston Children’s Hospital are not directly funded by HMS, the school offers several internal funds that educators can apply for. In addition, approximately one-third of the donations HMS receives contain conditions that require the money to be used in a clinical setting or for hospital-based research.

According to Hla, public universities typically provide more money to their researchers, so they have to spend less money on operational costs such as staff and materials.

To solve this problem, Hla said HMS should “support the talent it has” and invest more in its own faculty.

“If you lose human capital and stop training the next generation of biomedical researchers, it will have a devastating impact,” Hla added.

An “uncertain” future

With Trump facing a second term in the White House, many at HMS fear the school’s financial problems will only get worse.

The changing political landscape “only adds uncertainty to this already uncertain environment,” Dana said.

Such uncertainty “creates great anxiety,” particularly among young researchers, says Hla.

“I fear that the Trump administration will take unilateral action to cut NIH budgets,” Jeffrey Holt wrote in an email statement to The Crimson, on top of the already declining funding.

For Philip A. Cole, a professor of medicine at HMS, the last Trump administration’s proposed cuts to the NIH portend a bleak outlook.

Although Congress didn’t pass the cuts, the current federal deficit “could mean more motivation on the part of people to cut wherever they can,” Cole said.

NIH grants typically have two components: direct costs, which go to a laboratory’s principal investigator, and indirect costs, which go to an institution. Cole expects that indirect costs in particular – those used to finance infrastructure, utilities and laboratory renovations – could decrease.

“They are critical to all institutions,” Cole said.

Potential consequences of such cuts could include staff reductions and a change in the scope of biomedical research activities at HMS, Cole said, which would result in the school focusing more on industry partnerships to make up the difference.

“The pressure will be even greater because we cannot rely on the government to the extent that we have in the past,” Dana said.

But others hope that NIH’s bipartisan support will protect the organization from the most zealous members of the new administration.

“My experience is that we always have bipartisan support,” said former NIH director Elias Zerhouni in an interview with The Crimson.

“The people, the patients and those who talk to their legislators are saying, ‘Look, you can touch XYZ, but don’t touch my hope for a cure for my disease,” Zerhouni added.

“Scientists consider them influential. You’re not as influential as you think,” he said. “It’s the patients who truly protect the NIH.”

HMS Professor Jonathan C. Kagan also points to the naturally sinusoidal nature of scientific funding.

“Funding rates will go up and down,” Kagan said, but overall work at the medical school and affiliated hospitals “will continue.”

“History usually tells us that elections are much more likely to amplify extreme optimism or negativity,” Kagan said. “Change is occurring at a glacial pace in America.”

– Staff Writer Veronica H. Paulus can be reached at [email protected]. Follow her on X @VeronicaHPaulus.

—Staff writer Akshaya Ravi can be reached at [email protected]. Follow her on X @akshayaravi22.