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1990 deficit was $11M

By Brian Rosenberg

Operating expenses exceeded revenues by just over $11 million during the 1990 fiscal year, according to the FY 1990 Report of the Treasurer. The 1990 fiscal year, which ended on June 30, marks the second year in a row the Institute's budget has run a deficit.

The 1990 operating budget was also the first to break the $1 billion barrier, according to the report.

All of the Institute's $7.5 million in unrestricted gifts and income was used to meet the shortfall, and an additional $3.5 million came from reserves and accumulated investment income. None of the money used to balance the budget was taken from specific programs, noted Vice President for Financial Operations James J. Culliton.

According to Culliton, it is not unusual that all of the unrestricted gifts were used to balance

the budget. "Generally, the unrestricted gifts are used to balance the budget, and any unused money then goes into the endowment," he said.

Culliton said he expects a similar shortfall for the current fiscal year (FY 1991), but added that deficit projections are complicated by many uncertainties, especially the price of oil. The shortfall "isn't significant, at least in terms of one or two years," Culliton said. "It becomes major [if MIT has] growing deficits. We can certainly afford a few years of deficits [at the current level]," he added.

Several expenses went over their projected levels, but some sources of revenue also increased, Culliton said. Energy costs and MIT's matching contributions to employee pension plans both went up significantly.

Offsetting those increased costs was an increase in unrestricted gifts and a large amount of unused departmental funds, he said. "When you're dealing with a billion dollar budget, you have to expect major swings at the million dollar level," Culliton said.

Total operating expenses for FY 1990 were $1,063,613,000,

a 12.3 percent increase

over FY 1989 expenses of $947,175,000. Total operating revenues and funds for 1990 were $1,052,604,000, a 12 percent increase from the FY 1989 figure of $935,870,000.

Projections for the FY 1992 and 1993 budgets suggest that those budgets can be balanced without using any reserve money or investment income. Those projections include relatively high tuition and self-help levels, and relatively low salary increases, Culliton said.

Tuition increases have run between seven and eight percent annually in recent years, while salaries have gone up between four and five percent each year.

Financial condition still

sound, Culliton says

Despite the budget shortfall, MIT is in excellent financial condition, Culliton said. "The Campaign for the Future is going very well," he said. The campaign has gathered $517 million toward its mid-1992 goal, which was recently raised from $550 million to $700 million.

"Total gifts rose above $100 million [in FY 1990]," Culliton said. The 1990 total of $103.2 million represents a $24.8 million (32 percent) increase in gifts from the $78.4 million brought in during the 1989 fiscal year. "If you can sustain those levels of giving after the campaign is over, then you start to make significant additions to the endowment," Culliton said.

MIT's endowment to operating expense ratio remains one of the lowest among universities of similar academic standing. "MIT's endowment is roughly the same size as our annual budget," Culliton said. "Harvard's or Princeton's endowment is closer to four times their budget."

Culliton said MIT's endowment to budget ratio is low because the Institute is a comparatively younger school, and has not received major gifts on the same scale as other universities.