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Vest addresses MIT's fiscal future in face of cutbacks

Federal budget actions are confronting MIT with "reasonably certain" annual losses that will reach about $36 million in 1999 and which have the "potential" to hit $125 million by 2002, President Charles M. Vest told the November 15 meeting of the faculty.

Projecting from the working documents of the federal budget, President Vest said that over the next seven years there could be "about a 30 percent decline in real dollars" in civilian research and development spending by the government.

While it is not clear what such a cut, if it came, would mean to MIT funding, Dr. Vest said that in most scenarios funding will go down.

How far down would depend both on available dollars and on "the policy environment," he said, citing academic earmarking, merit-based awards and cost shifting as some of the key questions.

He pointed out that the nation in the summer of 1994 came close to seeing the Department of Defense budget cut by 60 percent. It was "nearly miraculous" that the reduction was only 10 percent, he said.

"It was great that it didn't happen, but the probability is that if the lightning is striking around us it is going to hit us."

Dr. Vest cited as examples the Bates Laboratory, the Laboratory for Nuclear Science and the Plasma Fusion Center, all of which were in jeopardy recently.

"As we discuss, design and implement strategies for adjusting to a changing world, we are faced with a dilemma," he said in a letter that accompanied the call of the faculty meeting. "Never has the kind of research and education that MIT conducts with such excellence been so needed by the nation. Yet never has the environment seemed so daunting."

Principles that have guided federal R&D policy for decades are being questioned, he said, citing the importance of integrating research and teaching, the concept that merit should be the chief criterion guiding federal funding decisions in research, and "the recognition that investment in research is fundamental to our economic and national security and our quality of life."

MIT, Dr. Vest said, is already feeling the effects of shifting research costs from sponsoring agencies to universities. This has occurred through policy changes that have capped administrative charges, revised allocation rules and changed the means for supporting graduate student research and teaching assistants.

MIT has just three sources of revenue, he said: tuition and fees, sponsored research, and gifts and endowment income.

"As a matter of policy, we are trying to hold down the rate of growth in tuition. Federal support of sponsored research has leveled and is likely to decline significantly in the future. Moreover, federally sponsored research increasingly is encumbered with ever-expanding sharing requirements. The picture is brighter for private resources: last year, gifts to the Institute were the second highest in our history, and our invested funds also fared very well."

However, he told the faculty meeting, MIT's income sources are not growing fast enough "to keep the cost of our education programs affordable, to provide the flexibility to invest in new programs, and to maintain salaries that will enable us to attract and sustain the very best faculty and staff. We must find a solution to this problem. These are the reasons that we have hardened faculty salaries; trimmed the budget; looked for ways to provide higher-quality, more efficient services through reengineering; and restructured the support of our graduate students."

The basic challenge, he said, is to maintain and enhance the excellence of MIT in a period of "very broad transformation." He restated the eight Institute objectives "by which we've tried to drive all our budgetary activities and thinking."

The objectives are:

  • ������������������Maintain MIT's position as the world's leading institution focused on science and engineering.
  • Provide flexibility to develop new educational and research opportunities
  • Maintain merit-based, need-blind admission.
  • Moderate the rate of growth of tuition and self-help levels.
  • Compensate faculty and staff consistent with high quality.
  • Provide academic salaries from institute sources, the so-called hardening of salaries.
  • Continue efforts to diversify the faculty, staff and student body.
  • Improve the efficiency and value of the services provided to students, faculty and staff and to research sponsors.

While there is deep concern over reduced federal support, there is also concern about the growth of overall employment on the campus, Dr. Vest went on, saying that this "is one of the things that is at the heart of what we face today."

In the early 1980s, MIT achieved a reduction in force of about 400 people, but the size of the work force grew back to the same level, he said.

The lesson from that, he said, is that "we can't just eliminate jobs. We really have to redesign our work, reduce the amount of redundant work and improve work and processes so that we can stabilize."

The Institute is responding to the financial constraints in three ways:

  • By working on its own and with others to "advocate on behalf of the importance of research and higher education."
  • By enhancing its ability to raise private funds. This includes "building new and different kinds of partnerships with industry," an effort that "must be intellectually driven by what kind of education we need to give our students."
  • By making budget reductions in every unit, which, he said, is the hardest part, but which "has given us the only modicum of flexibility we have been feeling lately."

An important part of the drive to lower costs is reengineering, Dr. Vest said. The process has been controversial and has moved "agonizingly slowly;" mistakes have been made, and the Institute has not been adept "in engaging as many people as we should" in the process, he said. However, the number of faculty on the Reengineering Steering Committee has been increased and a faculty member is leading the student services reengineering team, he added.

It was necessary to hire reengineering consultants, he said, "to help us understand the methodology and to make determined orderly progress," but their involvement is nearly ended, Dr. Vest said, and by January will be "reduced virtually to zero."

A version of this article appeared in MIT Tech Talk on November 29, 1995.

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