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At $6.2M, budget deficit smaller than expected

MIT completed the fiscal year that ended June 30 (FY 1994) with a deficit of nearly $6.2 million-$4.1 million lower than projected, Glenn P. Strehle, vice president for finance and treasurer, has reported. The deficit in FY 1993 was $10.1 million.

As recently as last May, it had been feared that the deficit might even be as large as $14.1 million, Mr. Strehle said in a year-end report to the MIT Executive Committee.

"The favorable results relative to the budget reflect the efforts of faculty and staff to control costs," he said. "The continued search for ways to improve efficiency and reduce costs and self-imposed conservatism across the Institute were important to this outcome."

"Unfortunately," he noted, "we still had to expend more than $4 million of funds functioning as endowment and these resources will not be available to generate investment income in the future."

According to the report prepared by Mr. Strehle and John A. Currie, director of finance, deficits of $8.9 million and $1.1 million are projected for fiscal 1995 and 1996, respectively, but a surplus of $2.7 million is forecast for FY 1997 based on the anticipated success of the reengineering effort now underway.

But the report warns of "adverse exposure, or risk, items that are not accounted for in the budgets for future years."

These exposure items, it explains, include the possibility of lower ILP (Industrial Liaison Program) income, more demand for undergraduate student financial aid, slower growth of tuition revenues, higher employee benefit costs, and possible further erosion in indirect cost recovery from the federal government.

The report also noted that research funding levels both on and off-campus "are expected to continue to be limited in growth over the next few years."

The reasons for this reduced growth, it said, include reduction and redirection of the Defense Department budget, general government budget constraints, redirection of research funding to other universities (in some cases through Congressional earmarking), and the effects of the economy on industrial sponsorship of basic research.

Total campus research in FY 1994 was $354.2 million, up $4.2 million from the previous year. Research volume at Lincoln Laboratory decreased $18.9 million to $336.9 million.

The report notes that the "favorable closing" in FY 1994 resulted from underexpended budgets for academic programs, administrative support and other related expenses totaling $3.4 million, a reduction of $2 million from the budget in unrestricted funds required to supplement undergraduate financial aid, and a favorable increase of $2.6 million in available unrestricted revenues.

These positive elements were partially offset by erosion of $3.9 million in indirect cost recovery on sponsored research programs, but still made possible the $4.1 million savings from the projected budget deficit of $10.3 million. The erosion of indirect cost recovery is recurring and results from negotiations with the US government as part of the closing of FYs 1986-92.

MIT's total operating budget in FY 1994 was $1,137,500,000, with operating revenues and funds totaling $1,125,000,000.

This left an operating gap of $12,438,000. Unrestricted gifts, grants and bequests totaling $6,246,000 reduced the gap to the final deficit figure of $6,192,000.

Expenses in FY 1994 included scholarships and fellowships totaling $60 million, up 1.5 percent compared to FY 1993.

Of this total, $33.6 million was used for undergraduate student financial aid and $26.4 million for graduate student financial aid.

A version of this article appeared in the October 19, 1994 issue of MIT Tech Talk (Volume 39, Number 8).

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