MIT will remain "a great place to work and learn" while the Institute wades through a period of financial belt-tightening, President Charles M. Vest and others told the community at a town meeting Monday in Kresge Auditorium.
"Working Toward MIT's Mission in an Era of Constraints," sponsored by the Administrative Advisory Council II, gave several hundred members of the community an opportunity to hear Vest, Provost Robert A. Brown and Executive Vice President John R. Curry discuss recent events and issues and respond to questions.
The 2004 fiscal year (July 1, 2003 to June 30, 2004) is a "standstill budget," Vest said. "No new things have been added, and it pinches around the edges, but it's a livable budget." Vest and Brown said that fiscal 2005, however, will be "a very challenging year." Curry said in response to questions at the end of the meeting that this may include leaving employment vacancies unfilled while shifting responsibilities to others, phasing out some contract employees and possibly imposing staff reductions.
The good news, Vest said, is that MIT has outstanding faculty, students and staff; continues to accomplish cutting-edge research in emerging areas such as computational and systems biology, nanotechnology, neuroscience, earth systems and other fields; has increased its research funding; and is making innovations in teaching and learning. It also has created new facilities for residential and community life and enhanced the student experience, he said.
"One real bright spot is that our research volume is growing 8 to 9 percent after 15-plus years of barely keeping up with inflation," thanks to bright new faculty members and work in new fields, Vest said. Of the Institute's 964 faculty members, 318 have joined since 1996. The same size faculty is bringing in 7 to 8 percent more research funding.
The bad news is that the financial constraints created by the downturn in the stock market since 2001 are real. Fiscal 2004 budget calls for no growth. The declining investment returns of the past three years will cause declines in distribution from the endowment. The endowment, valued at $1.5 billion in 1991, grew to almost $6.5 billion at its peak in 2000. It has now dropped back into the $5.5 billion range and distributions have declined accordingly. The endowment is expected to provide 3 percent less to the fiscal 2004 budget than it did to the fiscal 2003 budget.
In addition, the slower economy has increased the cost to the Institute of the pension plan. "We have to pay what we owe to retirees," Vest said.
MIT's operations are supported by tuition, sponsored research and gifts (including returns from the endowment). While research supported some 60 percent of Institute operations two decades ago, that figure is around 33 percent today. In contrast, operating support from gifts, endowment income and other private sources has grown from just over 20 percent to 43 percent today. Tuition has consistently supplied around 25 percent of operating expenses, half of which are salaries and wages.
The large growth in endowment in the 1990s allowed the Institute to invest in some core priorities, primarily faculty and student support. The institute now pays the academic-year salaries of virtually all of its faculty, whereas faculty members used to have to raise 30 to 50 percent of their own salaries through research contracts and grants.
In addition, the Institute stopped charging graduate students tuition during the summer when they were only doing research. More money also is being provided in financial aid for graduate students.
Growth of the endowment also helped support major renovations in classrooms that have fostered teamwork and distance education, as well as helped fund an ambitious campus-wide building program that is changing the face of the Institute.
Because the current capital campaign met its goal two years ahead of schedule, the administration, with the support of trustees, increased the goal from $1.5 billion. Currently at $1.62 billion, the campaign now aims to raise $2 billion by the end of fiscal 2005. Although Vest said that last year was "our second-best fund-raising year ever," MIT may feel the effects of the economic downturn in the future. "The story is still overwhelmingly positive," he said.
Although the budget for campus renovations is taking a $5 million hit, existing construction projects will continue on course, Curry said. The Stata Center garage is scheduled to open June 2, and the building itself, which will include new dining spaces for the community and introduce infant care on campus for the first time, will open in early 2004. The Dreyfus Chemistry Building project is scheduled to be completed this summer.
Starting this summer, Massachusetts Avenue will again become a construction site for the next two years. Although no one welcomes having it dug up again after the recent storm drain work, Curry pointed out that "the street is a mess" between Memorial Drive and Central Square. The new Massachusetts Avenue will feature more trees, a new road surface, new sidewalks, bike lanes and a generally more appealing approach to Central Square.
Although Memorial Drive and Massachusetts Avenue will both undergo major transformations around MIT in the coming years, only the redesign of Vassar Street from end to end is an MIT-funded project. Curry called this streetscape work "one of the most significant enhancements to this campus."
Vest closed his comments by characterizing MIT as a bold institution, confident in its future and committed to its abiding principles of diversity, openness in education and research, and service to the nation and the world.