Harvard weighs its next moves amid the federal funding standoff

Harvard, the nation's oldest and richest university, is weighing its next moves after refusing to make key changes the White House has demanded. (Sophie Park/Bloomberg/Getty Images via CNN Newsource)

About 24 hours after the Trump administration said it would freeze more than US$2 billion in federal grants and contracts, Harvard University’s research arm began to assess the fallout.

The impact is already acute at Harvard’s School of Public Health, where professors are scrambling to salvage their research into tuberculous and cancer treatments.

Harvard - the nation’s oldest and richest university – has emerged as a new symbol of the Trump resistance after refusing to capitulate to a series of policy changes the administration had demanded. Now, having put itself in an uncertain position, Harvard must weigh its next moves.

John Shaw, vice provost for research at Harvard, emailed colleagues Tuesday evening asking them to notify the Office for Sponsored Programs of any funding disruptions they become aware of – and what steps they ought to take.

“While there will inevitably be important research that will suffer as a result of the funding freeze, we are asking for your help in assessing how best to preserve vital work and support our researchers, while using institutional resources responsibly through this disruption,” he wrote, according to an email reviewed by CNN. “This is meant to stabilize the research environment while we gather information, coordinate decision-making, and strive to protect what matters most.”

Professors at the Faculty of Arts and Sciences, home to Harvard’s undergraduate and PhD programs, were notified in a separate email that a town hall would be arranged in the coming days to answer questions, according to the email.

The funding freeze threatens as much as $9 billion in federal money for Harvard. Beyond the practical implications of losing those funds, it’s not clear how far a standoff could go.

“The extent of the tentacles into the university by the federal government are sometimes obvious and sometimes not,” said one Harvard professor who was not authorized to speak publicly. “They’re doing lots of scenario planning about what could happen to each of the schools.”

Several members of Harvard’s board of oversight referred CNN to the university press office. The university also declined a request from CNN to interview President Alan Garber.

The concerns over funding come as the Department of Homeland Security on Wednesday threatened Harvard with stripping its ability to enroll international students if it fails to meet federal demands. Homeland Security Secretary Kristi Noem gave the university until April 30 to provide records on international students’ alleged “illegal and violent activities,” or risk losing its Student and Exchange Visitor Program certification, which enables higher education institutions to issue certificates of eligibility for nonimmigrant student visas.

Other concerns expressed by the professor include losing the university’s tax-exempt status, which the IRS is making plans to rescind, according to two sources familiar with the matter – as well as a decision by the federal government to stop granting visas to foreign students, who make up more than a quarter of Harvard’s enrollment.

“I’m not even sure what it would mean to lose that status,” Harvard economics professor Gregory Mankiw said. “We don’t have shareholders or pay dividends, so I’m not sure what they’d be called.”

“It’s unclear how we’d be taxed.”

Not-for-profit organizations that benefit from the tax exemption can lose it if they violate a number of rules, including for political activity. Rescission would be a rare move by the IRS. Decades ago, the IRS pulled tax-exempt status for a Christian university on the basis of discrimination.

A final decision on rescinding Harvard’s tax exemption is expected soon, the sources said. An attorney for the university didn’t immediately respond to a request for comment; CNN has reached out to the Treasury Department, of which the IRS is a bureau, for comment.

Harvard’s $53.2 billion endowment could be another area of concern. Legislation recently introduced by Republican Rep. Mike Lawler would raise the tax rate of endowment income from 1.4% to 10%. Late last year, Garber told faculty the potential hike was the “threat that keeps me up at night,” The Harvard Crimson reported.

“If the tax comes in, that means the university is going to have to cut back on something,” Mankiw told CNN.

“What we do is teaching and research. The question becomes: would society be better with less research or less teaching? It will be a lot of difficult choices for the school to make,” he said.

An unprecedented situation

The unprecedented situation could force Harvard into a lengthy and expensive legal battle with the Trump administration.

“There isn’t a playbook on how to manage this,” Stetson University law professor Peter Lake, who is also the director of the Center for Excellence in Higher Education Law and Policy, said in an interview with CNN. Lake is a graduate of Harvard College and Harvard Law School.

A group of Harvard professors, through its chapter of the American Association of University Professors, preemptively filed a lawsuit last week seeking to stop the administration from coming after university funds. The lawsuit alleges the Trump administration violated the law by freezing funds without going through the protocol, established under Title VI of the Civil Rights Act, which prohibits discrimination and is in part designed to ensure institutions receiving public money comply.

AAUP counsel did not respond to CNN for comment. The federal government has not responded to the lawsuit.

Harvard could file its own federal lawsuit seeking to block the administration from wrongfully taking its funding, with potential legal arguments over First Amendment protections, retaliation or claims the government violated their civil rights under Title VI.

If Harvard files a suit that moves through the federal judicial system, it could result in a judge having a conflict of interest because of a connection to the university. Harvard law school grads make up a significant portion of the federal judiciary, and they hold four seats on the U.S. Supreme Court.

The government could also take Harvard to court; a federal agency providing funding to an institution can initiate fund termination proceedings or refer the matter to the Department of Justice for legal action if they believe Harvard is not compliant.

If the Justice Department gets involved, it could file a lawsuit against Harvard seeking judicial intervention, which could give the federal government more leverage over Harvard through judicial oversight for years.

In that case, according to Lake, “If they wanted to, they could literally walk to court every week and say, ‘Well, look what Harvard didn’t do today.’”

The university may be considering a pivot away from its hard-line stance toward brokering an agreement that would avoid the legal system and tamp down the tension that’s sparked months into Trump’s term. And Harvard is not without some of its own leverage, Lake said, with its far-reaching global connections.

“We’ve seen (Trump) do this pretty much consistently everywhere – hard bargaining, you know, nuclear-option-type conversation, very strong language. And so perhaps the thinking is, meet fire with fire,” Lake said. “I think they’re aware of the fact that the president prides himself on ‘the deal,’ and perhaps that’s how you find your way to one.”

Harvard hired two attorneys with deep Republican connections. Robert Hur, who was appointed special counsel and investigated President Joe Biden’s handling of classified documents, and William Burck, who served as a special counsel to President George W. Bush and recently helped law firm Paul Weiss negotiate with the Trump administration to lift an executive order targeting the firm.

A long fight

While Harvard has gained public support, so has the Trump administration.

Mark Goldfeder, director of the National Jewish Advocacy Center, said on X in response to Harvard’s rebuke Monday, “And no University- however entitled and self-important they feel- can dictate to the federal government how it should allocate taxpayer money. Harvard is free to continue discriminating, but we don’t have to pay for it.”

Lake said he and other Harvard alumni never imagined the school could become so controversial.

“I think we’re used to prominence on things, but being so much in the enemy-of-the-state mode is a very different feeling,” Lake said. “But we’re not alone. It’s higher education, it has clearly lost a lot of social trust, and has folks that really are very opposed to some of the things we’re doing. And it’s going to be a hard ride back to gain the public trust that can defuel some of this energy.”

At a faculty meeting this week, according to a person present, the dean of one of Harvard’s schools told those assembled that Monday’s rejection of the administration’s demands was just the first salvo.

“This is a four-year fight,” he said.

CNN’s Hanna Park contributed to this report.

Written by Kara Scannell, Lauren del Valle and Jeff Winter, CNN