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Outgoing Chairman Gray Says Endowment Too Low

By Ramy A. Arnaout
Senior Editor

First of two parts.

Next June will mark an important changing of the guard at MIT, as Chairman of the Corporation Paul E. Gray '54 will step down after 10 years at his post.

It will also mark a more personal milestone for Gray, who will have spent all but two of the past 47 years studying at, working at, or running the Institute.

In that time - starting as an undergraduate in 1950 and eventually becoming president and chairman - Gray has seen and overseen one of the greatest periods of growth and diversification of MIT's history and has earned a reputation as a committed educator and skilled budget handler and fundraiser.

Gray shared his views on the endowment, undergraduate education, and other issues in a recent interview with The Tech.

The endowment is too low

The endowment, an all-purpose nest egg whose interest defrays a large part of the cost of educating students, is "perhaps the major responsibility of the chairman," said Gray, who spearheaded the Institute's record-setting $710 million fundraiser in 1992.

But while MIT's $2.1 billion endowment is the 10th largest in the nation, it is not high enough, Gray said in the interview.

"Any way you look at it, the Institute is underendowed, in absolute or per capita terms," Gray said. A 10th-ranked endowment is not commensurate with MIT's other standings like the quality of programs, faculty, or admitted students, he said.

The numbers bear that view out: As one yardstick, U.S. News & World Report's annual rankings have put MIT in the top five for academic reputation, student selectivity, faculty resources, and overall score for many years.

Worse, endowment per student ranks near 20th in the nation, according to The Chronicle of Higher Education. "We are not satisfied with being" that low, Gray said.

But the discrepancy is easier to see than it is to explain, Gray said. "Not anyone around here will give you a conclusive answer," he said, but suggested that admissions practices may be in part to blame.

Many Ivy League schools give preference to legacies or people with other alumni connections, whereas MIT does not, Gray said. "Consequently, at Harvard, Dartmouth, Princeton, and [other universities] a significant portion of the class has family ties that go back two, three, or four generations. That develops family loyalties," he said. On par, those loyalties can translate to lucrative gifts, he said.

But legacies are not the only connection, Gray said; business schools also play a role. "Harvard, Stanford, and Penn have much larger MBA programs than we do - 10 years ago, larger by an order of magnitude," he said. Graduates of those programs "go on to be captains of industry, and as such are a source of large gifts."

Endowment lowers tuition costs

The practical importance of raising the endowment can be seen comparing the price of tuition to the total cost of a year's education at MIT, Gray said.

"If you count the total cost of education at MIT per student, you get a number approximately double that of tuition," Gray said. Tuition was $20,100 last year, compared with a cost of education of $37,000, according to the Chronicle.

The $17,000 difference comes from two sources, Gray said: current gifts and the endowment.

Although the endowment is important, it is hard to speculate on where it is headed, Gray said. Because the Institute likes to save it for last-ditch, rainy-day spending on research or salaries, the endowment depends in large part on the future of federal research funding.

That funding in recent years has been uncertain, Gray said. However, funding this year has been better than expected, thanks to strong lobbying from academia and industry, he said. "Research budgets have either been slightly up or slightly down," he said. "That's not an accidental result."

President Charles M. Vest and other university leaders "made the case that if research is not sped by government, it will not be sped by corporations, and if it is not supported, it will impinge on our ability to innovate" as a nation, Gray said.

But the future remains unclear, Gray said. "Those arguments succeeded in this first year. But the question is, will it succeed" in the long term, he said.

"If it fails, that means a major realignment," Gray said. "How would that affect the cost of education? I don't know. If we try to maintain research, it will be stressful. If we try to cut back, it will have less of a strain, [but] it will mean a reduction in staff and a reduction in programs."

Gray has seen this kind of crisis before, although not on this scale. During his years as chancellor - a special deputy-to-the-president position tailor-made for him - he was able to tweak MIT's budget to account for declining research spending in the late 1970s; he did the same about 10 years later. "But in neither case was the reduction [in federal spending] as dramatic as it is now," he said.