Letters to MIT Community

Letter to the Community

Thursday, February 19, 2009

We begin the spring semester knowing that challenging work and hard decisions lie ahead, as we determine how to strengthen our education and research mission with diminished resources. But we also know that MIT’s work matters very much in the world, from shaping the World Wide Web to advancing the frontiers of research in cancer, AIDS and infectious disease; from creating low-carbon energy technologies to designing sustainable buildings; from launching technology start-ups to assisting entrepreneurs in developing nations; from influencing American economic policy in a time of crisis to educating our extraordinary students. By extension, as we respond to the pressure of economic contraction, it matters very much how we shape the future of MIT.

Today, I want to provide an update on our revenue sources and on immediate steps we are taking to cut costs to meet our fiscal challenges, while sustaining our excellence in research, teaching and service.

Monitoring our resources

We continue to anticipate declines in most sources of support, coupled with an increasing need for student financial aid. To briefly review the current conditions:

Endowment: Like virtually all major institutional endowments this year, MIT’s endowment has lost significant value. On June 30, 2008, our endowment stood at close to $10 billion; by December 30th, the value had dropped approximately 20-25%. If recent trends do not dramatically worsen or improve, we anticipate that the total annual endowment decline could approach 30% by the end of this fiscal year. Assuming 5% endowment payout, a 30% decline translates into an eventual $150 million reduction in funds to the Institute’s operating budget.

Gifts: Despite these very difficult financial times, our donors have continued their generous support. As of January 1, 2009, cash gifts received align with the average over the past three years. I have been heartened by gifts from several donors who contributed more this year than in the past, demonstrating how much they value MIT’s role in the world. However, as economic uncertainty makes future commitments difficult for many, pledges for future gifts have fallen by more than 40%.

Financial aid and tuition: By this point in a typical year, 10-20 student families would have asked us to reconsider their financial aid standing because of a lost job or other change in circumstances. This year, we have already approved more than 40 such requests, and we can expect that the downturn’s impact on MIT families will grow. As we have stated before, we will retain our commitment to need-blind admission and need-based undergraduate financial aid. Taking into account increased need, particularly among middle-income families, and decreased Institute revenues, MIT’s budget for next year includes a substantial increase for financial aid and only a modest increase in tuition.

Research funding: Reversing a three-year trend of very little growth, over the past seven months our campus research volume has increased 10% compared with the previous year. In addition, the provisions for research funding in the just-passed American Recovery and Reinvestment Act put the nation back on track for the doubling of research and development budgets at key physical science agencies over the next decade. Many federal agencies that fund work at MIT received additional allocations for research projects and infrastructure, including $1 billion for NASA, $2 billion for DOE Office of Science, $580 million for NIST, $350 million for DOD, $10 billion for NIH and $3 billion for NSF.

Cutting budgets, creating value

The marked decline in our endowment and in projections for future gifts, together with the expected increase in need for undergraduate financial aid, require that we make substantial budget reductions across the Institute. In this effort, the Administration must lead. We have made immediate cuts across the Office of the President and of the VP for Institute Affairs, planning for a 10% reduction for FY10. Achieving cuts on this scale requires more than simple belt-tightening; it demands new ways of thinking about how we can work more effectively at lower cost. One example is our recent move to combine some functions of the MIT News Office and Technology Review, which will produce both substantial savings and more effective ways of bringing MIT’s story to the world.

As you know from previous letters in November and December, we have asked all units to make budget reductions, with the goal of achieving an Institute-wide savings of at least $50 million in next year’s budget. We have asked academic units, in aggregate, to reduce their base budgets by 4.9% and administrative units by 8.7%.

In our effort to control spending, the members of Academic Council, senior administrators and department heads will forgo salary increases next year. I have declined any salary increase for the current academic year and will do so for the next. In the same spirit, senior faculty have overwhelmingly requested that we direct available salary funds to those members of our community with lower compensation. Accordingly, a small pool for salary increases will be available for faculty members earning less than $125,000 a year and for full-time staff earning less than $75,000 a year. With these salary thresholds, approximately 40% of faculty, 50% of administrative staff and an overwhelming majority of support staff will be eligible for modest raises for the coming year. Service staff will receive increases based on their three-year negotiated contract.

Controlling hiring: To preserve flexibility, we have chosen not to impose a blanket hiring freeze across the Institute. However, we will sharply slow hiring and will reserve it for core Institute needs. Some units have already decided to suspend hiring. Going forward, all hiring that impacts the General Institute Budget will require approval by the Provost, for academic units, or the EVP, for administrative units.

Institute-wide Planning Task Force: As announced last week, we have launched an Institute-wide Planning Task Force to identify strategies for trimming costs while serving our mission. The Task Force includes nearly 200 faculty, students and staff. Even as the Task Force carries out its work this spring, all of MIT’s units, departments, labs and centers must seek similarly creative, practical ways to sharpen our focus, strengthen our most critical activities and eliminate those that may have served us well, but may no longer build momentum for the future. We also encourage members of the community to suggest cost-cutting ideas through the new MIT Idea Bank.

Brighter news

As sobering as are the current economic trends, brighter news in several realms shines through:

National Academy of Engineering (NAE): Professors Yet-Ming Chiang, Mark Drela, Ned Thomas and Jack Dennis were among the 65 new members newly elected to the NAE. Reflecting the strength of MIT’s School of Engineering, 20% of nominated MIT faculty were elected, compared to 10% of all nominees.

Admissions: After three straight years of 8% increases, applications for undergraduate study accelerated further still, with a 17% increase over last year. Of the 5,019 students who applied for early action, we admitted 10.8%. We already anticipate an extremely strong Class of 2013.

Building projects: All of our major building projects – the David H. Koch Institute for Integrative Cancer Research, the extension for the School of Architecture and Planning and the Media Lab, the new building for MIT Sloan, and the improvements to Vassar Street – continue on schedule and on budget. Last fall we decided to delay the W1 residence hall renovation; however, thanks to an anonymous donor’s recent targeted gift, we will move forward with the repair of the building’s exterior. Securing the building’s envelope will save money by protecting the structure from further deterioration until we can proceed with the full renovation.

Faculty renewal: In response to the faculty renewal program we announced a year ago, an unusually high number of our more senior faculty members have chosen to move to emeritus status, even while continuing to serve the Institute through research or teaching. Just as we value their lasting intellectual contributions, we also value their willingness to help the Institute open the door to the next generation of faculty stars. Fostering this process of renewal is absolutely central to the long-term health of MIT.

* * *

Almost 70 years ago, in the midst of another national economic downturn and on the eve of the nation’s entry into WWII, then-MIT President Karl Taylor Compton framed MIT’s role and captured our enduring purpose and aspirations:

“To make democratic government workable [our forefathers] established a great system of education. We of the Massachusetts Institute of Technology are a part of this system. While our immediate objectives are to discover and to teach the truth, especially in the realm of the physical world and man's adjustment to it, our ultimate objectives are those of our nation: to promote freedom and opportunity ... For truth, in the form of exact knowledge, brings freedom and opportunity to those who gain it. Our task is to implement this vision on a global scale.”

I am more convinced than ever of the profound importance of MIT’s mission in education and research. These are difficult times, times that call for leadership in values, integrity and aspirations. It is a kind of leadership that MIT can and will provide, both here on our campus and in building a network of global engagements in service to the world.


Susan Hockfield


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