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$6.2M Budget Deficit Lower Than Projected for FY 1994

By David D. Hsu
Staff Reporter

MIT concluded fiscal year 1994 with a deficit of $6.2 million, $4.1 million less than projected, according to a report issued by Vice President for Finance and Treasurer Glenn P. Strehle '58.

This is down from the $10.1 million deficit recorded in FY 1993.

The deficit decrease resulted from several factors, including a lower draw on unrestricted resources which resulted from lower expenses, according to Strehle.

The decrease is not expected to affect the FY 1995 budget - with an estimated deficit of $8.9 million - or re-engineering plans, Strehle said.

"The continued search for ways to improve efficiency and self-imposed conservatism across the Institute were important to this [year's] outcome," Strehle said in Tech Talk.

Underexpended budgets for academic programs, administrative support, and other related expenses also saved $3.4 million, according to Tech Talk. Unrestricted funds used for undergraduate financial aid decreased $2 million, while unrestricted resources increased by $2.6 million.

MIT's revenues come from four sources: tuition, overhead recovery from research, gifts, and earnings from the endowment, according to Senior Vice President William R. Dickson '56. During the past few years, MIT has had to draw money from the endowment to cover insufficient revenues. Reduced endowment cuts future earnings, which is an unacceptable choice, Dickson said.

"The factors that caused the favorable budget in 1994 are largely non-recurring, but do show a large effort by faculty and staff," Strehle said. Factors include decreases in employee benefits, tuition revenue, and student financial aid.

Because these factors change from year to year, the Executive Committee has not made any budget changes for the immediate future, said Director of Financial Operations John A. Currie.

Another liability is the lower indirect cost recovery on research programs. The indirect recovery for FY 1994 declined $3.9 million, according to Tech Talk.

Indirect research costs are shared by MIT and the government, company, or other sponsors, but the contracts and formulas have changed in recent years. "We believe that the indirect cost recovery on research programs will be slightly less favorable than in previous years," Strehle said.

The Institute's total expenditures in FY 1994 were $1.138 billion, and revenues, funds, and gifts amounted to $1.132 billion, according to Tech Talk.

Re-engineering effort unchanged

The deficit decrease was unrelated to the re-engineering plan, according to Dickson. "I think it had more to do with constraint on the part of people at MIT," he said.

The re-engineering effort aims to streamline support services without affecting quality, Dickson said. Thus, MIT can moderate increases in tuition and provide funds for new initiatives, he said. The effort will evaluate everything from mail circulation and custodial services to the process of appointing people and purchasing equipment.

"The first meaningful effect [of re-engineering] would take place in fiscal year 1996," Strehle said. A deficit of $1.1 million is projected for FY 1996, and a surplus of $2.7 million is expected in FY 1997, according to Tech Talk.

"The future is based on the optimism on the re-engineering program," Currie said. "It's too early to tell if we'll meet that timetable."