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Institute Posts $6.3 Million Deficit

By Vinu G. Ipe
Staff Reporter

MIT posted a deficit of $6.3 million for fiscal year 1992, exceeding the $4.1 million projected in a May financial report.

The major factors contributing to the higher deficit were "a decrease in indirect cost recovery, an increase in unrestricted funds for undergraduate financial aid, and less than expected undergraduate tuition revenue," according to the annual report filed in September by James J. Culliton, vice-president for financial operations.

MIT's total budget is about $1 billion, and out of this, $700 million is research volume that goes to the Institute and Lincoln Labs, Culliton said. "We are decreasing in research volume, certainly at Lincoln Laboratories, and we haven't had much growth here. This affects the overall budget because the indirect costs associated with research pay for various support services at the Institute," he said.

J. David Litster, associate provost and vice-president for research, does not believe the budget deficit is a grave concern for research activities at MIT. "Research funding comes from external sponsors, and the coupling of research money and Institute costs is a complicated process. To a first approximation, though, I don't believe that a deficit in the Institute's own funds will affect research supported by money from elsewhere," he said.

Future deficits to increase

"I don't think this is serious for one deficit year. Certainly the Institute has the resources to accommodate a deficit of $6 million. It's when we look out into the future that we see the deficits increasing," Culliton said.

MIT had modest surpluses in the operating budget in the 1984-1988 fiscal years and modest deficits in the 1989-1992 fiscal years.

"We are currently projecting a deficit of $6.9 million for FY1993, $8.3 million for FY1994, and $5.1 million for FY1995," Culliton said in the September report. Fiscal years end on June 30 of the respective calendar year.

After some revision of these figures, including salary increases and tuition decreases, Culliton later "significantly increased" the projected deficits for the coming years.

"We have to do some fine tuning on both the revenue side as well as the expense side. The one revenue we explicitly control is tuition, but there is a lot of pressure to keep that from increasing. And despite the budget deficits, the Institute is committed to accept students on a need-blind basis, and we've had to stand up to scrutiny in the Department of Justice for our stand," Culliton said, referring to the Overlap Group proceedings.

"Some programs, such as the Campaign for the Future, which raised about $710 million over five years for the Institute, have allowed us not to be in dramatically poor shape, like some of our sister institutions that are now in severe deficit problems," he added.

Academic Council discusses deficit

The responsibility for oversight of the Institute budget rests mainly on the President, the academic provosts, and the senior administrative vice-presidents.

"They have had a series of discussions at the Academic Council, which also includes vice-presidents and deans, about ways to take a look at the operating deficit and how we can reduce it, whether through the consolidation of services, the use of total quality management as a way of increasing productivity, and considering various programs for continuance, or expansion, or elimination," Culliton said.

"My own view is that we will not touch academic departments; there might be certain programs cut, but we are not at all in the same shape as other universities in cutting whole departments," he added.

Plans are under way to ensure that, with good planning, the budget shortfalls are not disastrous. "For instance, faculty members go down and talk with funding agencies, the President and Provost and others testify before Congressional groups, the [National Science Foundation], and making the case that the best dollar for the economy is to put money in basic research in universities," he said.

"In writing the annual report, the attempt was to say that basically the Institute is financially strong, it has a strong balance sheet and strong reserves. But we can't let off on the austerities. This isn't totally bad; it keeps discipline in the community in terms of saying we have to run a lean operation and have to continually think about the future," Culliton said.