Harvard's Financial Report (III)

Would someone who is better at math than I am please tell me whether I am crazy to regard this statement, from the Harvard Management Company's annual report, with extreme skepticism?

To maintain purchasing power, HMC’s investment professionals aim for a long-term annualized rate of return of approximately 8 percent, so the endowment appreciates even after a normalized 4.5 percent to 5 percent distribution rate. 

Two questions. 1. Who else in this business is these days distributing 5% on the theory that they will be generating 8% returns over the long run? 2. The difference between the planned return and the planned distribution, namely 3-3.5%, results in endowment appreciation only if the inflation rate is less than that over the long run. And I don't mean the general inflation rate, I mean the rate at which university expenditures inflate. Hard to predict what that will be, but historically it has been more than 3%, I think. For example, "Our benefits cost has doubled in the last 10 years," says EVP Katie Lapp in an interview with the Gazette. Benefit increases are promised to be contained going forward, but Lapp continues that the offer on the table to Harvard's unions entails increases "ranging between 2 and 3 percent in wages." Under these circumstances, it is hard to see how the endowment is going to grow or even stay level even under the improbable circumstance that the 8% and 4.5-5% figures are accurate. Are the quoted numbers any more than wishful thinking? And if not, what is going to become of Harvard, especially if it has to survive another recession? Harvard has a whole risk management office, which monitors everything from data security to the safety of day care centers. Are the governing boards watching Harvard's financial planning assumptions with the same steely eye? PS. Note that the distribution to the Schools will not be 4.5-5% even under these assumptions, since 0.5% will be retained by the center, as I discussed earlier.