MIT to Cut Spending After $1 Billion LossBy Nathan Collins
Hurting from investment losses of $1.2 billion in the last two years, MIT will tighten its belt, President Charles M. Vest announced.
Academic departments, labs, and centers will reduce annual spending by $4 million, a reduction of about 1 percent, Vest wrote in a Nov. 19 letter to faculty and staff.
Administrative divisions will cut spending by more than $12 million, or about 4 percent.
Vest also announced a $6 million cutback in the Presidential Fellowships program, which funds first-year graduate students.
The cuts will take effect with MIT’s 2004 fiscal year, to start in June 2003.
Provost Robert A. Brown, who will oversee the academic budget cuts, was not available for comment.
Fellowship cuts raise concerns
Graduate Student Council President H. Sanith Wijesinghe G said that MIT is well positioned in key areas, such as biotechnology, so that competition for faculty should not be a problem. “The question is, where will there be money” to attract professors, he said.
The GSC is concerned about about student life and the cost of living, Wijesinghe said. “Our concern is what the cap on a raise in stipends [might be]. That is an issue we’re trying to get a handle on.”
An additional worry is that Presidential Fellowships, which fund about 200 new graduate students this year, will not see increases next year. “If it’s going to go, departments will have to figure out” ways to get more money for students, Wijesinghe said.
“I know the Provost is trying to get ... money into these fellowships,” Wijesinghe said.
Interest payments suspended
In addition to departmental cuts, interest payments from a class of internal Institute accounts known as “Pool C” will be diverted to “support the 2004 Institute General Operations,” Vest wrote.
Dean for Student Life Larry G. Benedict has pledged to cover the interest in student “Pool C” accounts, but it is not yet clear what effect, if any, Vest’s announcement will have on other interest-bearing student group accounts.
Benedict has “a contingency fund from which I will take the money to fund the equivalent of the Pool C interest,” Benedict wrote in an e-mail.
“This whole process will be invisible to the student groups so there is nothing they need to worry about,” he wrote.
Salary slowdowns concern Seale
The reductions will also mean that “salary increases will be lower than in recent years,” Vest wrote.
MIT does not anticipate decreasing professors’ salaries, but Vest did not rule out the possibility. “Because we want to continue to keep our salaries competitive ... we do not anticipate making salary cuts,” he wrote.
Undergraduate Association President Josiah D. Seale ’03 said that he was concerned about maintaining competitive faculty salaries. “A lot more institutions are trying to find [technical] professors,” and are competing with MIT for faculty, he said.
Seale said that keeping good professors was essential to maintaining a healthy academic environment.
Economic downturn in a time of rising importance for technology is “definitely unfortunate” for MIT, Seale said.
Cost of pension fund increases
In addition to last year’s investment losses of $810 million, MIT’s pension fund “is experiencing negative investment returns,” Vest wrote.
MIT Treasurer Allan S. Bufferd ’69 explained that with investment shortfalls in the pension fund, MIT will need to contribute more money to the fund -- raising its employee benefit rate from 18 percent to 22 percent -- in order to cover the costs of current and future retirees.
Additional contributions to the pensions will come from “funds, contracts, grants, and the Institute General Budget,” Vest wrote in his letter.