The Tech - Online EditionMIT's oldest and largest
newspaper & the first
newspaper published
on the web
Boston Weather: 53.0°F | Fair

Committee addresses budget deficit problem

By Linda D'Angelo

The proposals of the ad hoc committee convened by the Provost to address projected MIT deficits for fiscal years 1990-1992 include an increase in tuition rates and a reduction in salary increases, according to Provost John M. Deutch '61. These measures will assure that the burden of "closing the budget gap" falls equally on students, faculty, and staff, he said.

In a recently-completed report on the Institute's financial status, Vice President for Financial Operations James J. Culliton cited a $5.4 million deficit for the past year and projected a deficit of $3.0 million for this year.

"The need to provide competitive salary increases (particularly for faculty), a planned reduction in the number of undergraduate and graduate students, higher employee benefit costs (particularly for health care), increased unrestricted fund support to meet full undergraduate need, and a lower research base growth" were cited by Culliton as causes of the deficit.

However, the existence of $6 million deficits for the next few years does not present a real financial threat to MIT, Culliton said. In fact, the fiscal 1989 deficit "was funded through the use of income from current funds, a loan delinquency reserve no longer required, and a 1989 income from the research reserve."

Thus no "decapitalization" of the endowment occurred, Culliton said. "No endowment funds or funds functioning as endowment were used to meet the deficit."

Instead, it is the "growing imbalance" which these deficits represent that is of concern, Culliton said. The Institute is strong enough to withstand a few years of deficit, but, if not checked, such losses could "begin to really eat into endowment," he said.

To avoid such a danger the budget problem must be remedied "before it begins to spiral," Deutch said.

To this end, Deutch convened an ad hoc committee. The revised budget which resulted projected a deficit of $3 million in fiscal 1990, a break even budget in fiscal 1991, and a small surplus in fiscal 1992 if certain "very stringent targets" can be achieved.

The revenue and expense changes proposed in this revised budget are "very straightforward," Deutch said, and as long as the targets are achieved, this "budget plan will bring us into balance."

Increases in tuition rate, an increase in the self-help level, and an increase in graduate and undergraduate enrollment were proposed by the committee to enhance student-related revenues. Having remained constant at $4900 for four years, the self-help level (the amount which undergraduates are required to provide in some combination of term-time job and/or loans) was raised to $5300 for the 1989-90 academic year.

Deutch acknowledged that this "larger than desirable increase in tuition and self-help" was "burdensome" to students.

Despite these increases in both tuition and self-help, "the need to use MIT unrestricted funds continued," according to the report. The use of these funds to help "meet the full financial need of all undergraduate students" is necessary since "federal and other sources of scholarship have not kept pace with the expenses of a university education."

Among the expense changes proposed by the ad hoc committee was a reduction in previously planned faculty and staff salary increases. For fiscal 1989 this translated to a "less than desirable increase in salaries" which, according to Deutch, are "modest compared to the current market." The report added that it may "be imprudent to maintain this" lessened salary increase for the entire three-year period, and suggested that "alternative approaches ... be considered for fiscal 1991 and 1992."

In short, the committee proposed "actions not desirable either from the point of view of the students, or from the point of view of the faculty and staff," Deutch said. But these are "the kinds of steps that, unfortunately, are going to be necessary" in order to eliminate the deficit, he explained.

Culliton described the proposed changes as a "whittling" away at the budget -- an attempt to lessen the difference between revenue and expenses by adjusting variables such as tuition, self-help levels, and student enrollment. The budget will also undergo frequent re-evaluation as the committee continues to "look around for any other ways" to reduce the deficit, he added.

If the proposed "targets" are not achieved, "if things do not get better," the committee will try another method, Culliton said. "Looking at administrative functions and how they are performed" in order to determine how to do them more efficiently and reduce expenses is a possibility, he explained. This method of "downsizing" was used in the recent past and led to a "15 percent cut in MIT administrative costs," he noted.

Whatever the method, the committee does "not expect any one part of the community to pick up a larger burden than any other part of the community, " Deutch said. The budget deficit is a "problem we face as a community," he explained.