Last week, Harvard released a financial report with a chilling fact: its deficit sits at a staggering $34 million, compared to the $7.9 shortfall in 2012. Harvard is perhaps the best-known Ivy League school, prestigious and powerful. It’s also the world’s richest school So how did this happen?

The Boston institution has an annual budget of $4.2 billion, so $34 million is just less than 1% of the total revenue. Harvard officials say that the number is significant, but completely manageable.

Drew Gilpin Faust, Harvard’s president, says “every revenue stream upon which institutions of higher learning depend has come under pressure. Harvard has not been immune to these trends and we have to adapt.”

Harvard plans to combat its deficit in the coming year by switching up healthcare benefits, narrowing the list of vendors, and making services like libraries and technology more efficient and effective.

The school also talked of plans to bring in more revenue through the sale of technology developed there. But this could be a significant challenge if federal spending cuts like this year’s sequester reduce the amount of funding for university research and laboratories.

Whatever changes do happen, Harvard says it wants to protect “the integrity of the high-quality teaching and research that has allowed Harvard to lead throughout the centuries.”  Its current staff roster includes the likes of Henry Louis Gates, literary critic, scholar, writer and intellectual; Lawrence Lessig, director of the Edmond J. Safra Foundation Center for Ethics; N. Greg Mankiw, former chairman of President G.W. Bush’s Council of Economic Advisors; and David Petraeus, KKR Global Institute Chairman and former CIA director.

“We will need to meet those challenges by acting thoughtfully and decisively as a community; we will adapt where circumstances demand it; and we will remain steadfast in defending the values that make Harvard an essential contributor to the pursuit of knowledge in the world.”

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