1996 budget deficit is lower than expected


The Institute reported a deficit from operations of $8.5 million for the fiscal year that ended on June 30. This amount was $200,000 less than budgeted and $1.6 million less than the 1995 deficit. MIT will balance the budget with investment income of $1.6 million and principal of $6.9 million from the research reserve fund, which totals approximately $34 million.

The deficit declined slightly from the amount budgeted as the lower-than-expected indirect cost recovery from research sponsors was more than offset by lower-than-expected general expenses. "Academic and support units continued to operate under tight budgets and made significant efforts to reduce costs," said Glenn P. Strehle, vice president for finance and treasurer. "The reengineering effort and the early retirement incentive will provide important long-term benefits to reducing costs."

Expenses for the early-retirement incentive, which was offered to 1,384 employees and accepted by 642, totaled $52.1 million in fiscal 1996. The money was drawn primarily from unrestricted funds invested with the endowment of about $30 million, and from research sponsors who pay the portion of employees' salaries and benefits that is related to research. It had no effect on last year's operating deficit. Most of the projected annual savings of $7 million to be realized by the program, which is net of recovery from research sponsors, will be worked into the budget over the next two fiscal years.

Seventy-nine faculty members (or 7.8 percent of the total), including six athletic coaches, accepted the early-retirement offer. Those retirements began on March 31 and will end on September 30. Including only those that left through June 30, there has been a net decline over the past three years in administrative, medical, support and service staff of 437 full-time-equivalent employees (10.8 percent), Mr. Strehle noted in his annual report to the Executive Committee. Those reductions don't include retirements that took place after June 30, he added.

The retirement incentive and other departures resulted in the elimination of many positions that otherwise would have resulted in layoffs. "We're not all the way there, but we're well along," Mr. Strehle said. The staff reductions began with the 2 percent budget cuts affecting most units beginning three years ago. There were about 290 early retirements from non-research staff positions on campus and it is expected that only one-half of these positions will be refilled, he said.

Expenditures for the non-recurring costs of reengineering efforts totaled $6.5 million and included both software and people costs together with equipment purchases, Mr. Strehle said. This had no impact on the deficit, he added, as indirect cost recovery and unrestricted funds accumulated in prior years were able to meet these expenses.

RESEARCH FUNDING

Total research revenues of $720.9 million were up $8.2 million (0.7 percent) from the prior year. Funding from federal sources for campus research dropped by 0.7 percent to $271.5 million. This is the first time in more than a decade that MIT has experienced a decrease in federal support, Mr. Strehle noted. The leading research sponsor on campus was again the Department of Energy ($69.6 million, up 3.7 percent over fiscal 1995), followed by industrial support at $67.2 million-a rise of 19.7 percent after two years of substantial decreases, and the Department of Defense ($60.0 million, up 7.4 percent).

Lincoln Laboratory research revenues increased by $2.7 million to $343.2 million. This was the second year of a modest increase following several years of reductions.

Other sources of income for MIT-tuition, gifts, investment income, auxiliary activities and unrestricted funds-brought the total revenues and funds used to meet expenses of operations to $1.255 billion. Excluding the one-time effect of the early retirement plan on funds used and expenses, the increase was only 2.1 percent.

The slow growth of revenues, both in the recent past and projected for the next few years, continues to be a major challenge for the MIT administration. "We will continue to respond to this outlook, and both new sources of revenues and cost reductions will be important to our success," Mr. Strehle said.

Unrestricted gifts received during fiscal 1996 totaled $7.3 million, or 4.5 percent more than expected. The previous year's total was $5.1 million. This is the first time in five years that unrestricted gifts have contributed more than $7 million to operations, Mr. Strehle said.

Fundraising results established new records last year as $123.6 million in gifts were raised in the form of cash, securities and real estate. These funds will affect future financial results as the principal or investment income is used to meet expenses.

A version of this article appeared in MIT Tech Talk on September 18, 1996.


Topics: Administration

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