Vest report outlines future priorities, financial struggles


In this year's annual report, addressed to the MIT community, President Charles M. Vest stated that "together, we have the opportunity to lead the most intense period of change and redefinition of MIT since the post-war years."

Although the essay in the Report of the President is usually addressed to a larger audience beyond the campus as well as the MIT community, Dr. Vest noted in his introduction to his essay titled "MIT -- A Path to the Future" that "this year my report is directly addressed to the MIT community alone, because I believe that we have reached a watershed and must craft a more explicit vision of our future and an intellectual and financial plan for realizing it."

Dr. Vest reviewed MIT's many accomplishments in the 1980s and 1990s in educational and research programs, student support and campus development, and also outlined many of the challenges to the Institute's continuing success, including shifting patterns of research support, public concern about the cost of education, and increased competition for the best students and faculty with other universities.

"We must make continued investments in people and facilities in order to remain great, yet our financial underpinnings and opportunities are changing rapidly," he wrote.

INSTITUTIONAL PRIORITIES

"As always, the new intellectual directions of the Institute will be determined by the faculty. Our institutional goal is to create the infrastructure of services, facilities and support to enable them to pursue their ideas and activities in as vigorous a manner as possible," Dr. Vest said. He then outlined a number of academic priorities in such areas as information technology and intelligence sciences; neurosciences and studies of the brain and mind; basic biology and its interface with engineering and medicine; the environment; 21st-century business practice; entrepreneurship; visual and performing arts; new media; complex systems; and blending of technology, management, economics and policy.

In terms of the infrastructure to support faculty and students, Dr. Vest spoke of the need to commit resources to enhance the learning environment; residential campus life; support for undergraduate and graduate students; faculty startup and innovation funds; the number of faculty chairs; and construction or major renovation of research, teaching and residential facilities.

THREE-PART STRATEGY

In order to achieve these goals, Dr. Vest reiterated the three-pronged strategy that the Institute leadership has been following for the past several years: "building public understanding and support, managing our assets well, and developing new financial resources."

The Institute continues to campaign for private and governmental support. MIT's advocacy efforts "are helping to create new understanding and support in industry for university research and education, and they have had a significant influence on the federal government's stance as well," Dr. Vest wrote. "After six years of essentially level funding, both the administration and Congress, in an increasingly bipartisan manner, now are supporting stronger research budgets. The issue of federal entitlements, however, still threatens these budgets in the ensuing years."

Many steps have already been taken to improve MIT's fiscal discipline and management. "We have reengineered several of our administrative services, outsourced many functions, cut back some administrative paper flow, and reconfigured many of our operations," Dr. Vest noted. "This has been difficult and controversial. Much has been accomplished, but more remains to be done."

Other ways in which MIT has adjusted to "new financial realities" include absorbing over $50 million in annual costs associated with sponsored research that used to be paid for by the federal government, using Institute funds to fully support the academic year salaries of almost all faculty, and reducing the size of the staff as employees leave or retire.

In the area of fund-raising, "increased private support is a dominant and absolutely critical component of our strategy. Simply put, the financial structure of MIT must change substantially," Dr. Vest wrote. "This requires that our support from traditional constituencies such as alumni and alumnae, other individual donors and foundations must grow substantially," he wrote.

Thus far, "the outlook is good" for this strategy, Dr. Vest said. MIT has seen three consecutive record years for private fund-raising. Industrial support of research has grown from 15 percent of research volume in 1990 to almost 20 percent in 1998. And partly because of strong contributions and successful investment, MIT's endowment has more than doubled in recent years, growing from $1.40 billion in 1990 to $3.68 billion in June 1998.

FINANCIAL PLAN

"During the last nine months, we have worked with the Executive and Investment Committees of the MIT Corporation to develop a new vision and plan for deployment of our financial resources," Dr. Vest wrote. The evolving plan is based on four basic assumptions:

  • Because of low inflation and pressure to control the cost of education for students, "it is appropriate and prudent that we continue to hold tuition growth to modest levels."
  • Because of competition for top faculty from peer institutions and a tight labor market in technical and administrative positions, "compensation must continue to rise at reasonable real rates."
  • Undergraduate financial aid will also remain a top priority. "We must continue our commitment to the important principle of need-blind admission, and therefore must maintain strong programs of need-based financial aid."
  • Through prudent management and increased private support for facilities and infrastructure, MIT aims to restrain the growth of indirect cost rates charged to research sponsors under new federal guidelines.
NEW EXPENDITURES

Part of MIT's financial plan also involves major new expenditures in three areas -- graduate student support, facility maintenance and renewal, and new construction:

"We must take bold action to substantially reduce the price of graduate education, or, equivalently, the cost felt by programs and research projects," Dr. Vest wrote. "To accomplish this, we intend to eliminate summer tuition for research-based graduate students, and to create a large number of graduate fellowships to support recruitment of the very best graduate students to MIT."

  • ������������������Despite an active history of maintaining and renovating buildings on campus, "we have identified very substantial deferred maintenance across our physical plant. We will undertake a broad program to upgrade existing facilities and infrastructure, especially where it will support innovation in teaching and research and enhance the quality of campus life," he said.
  • ������������������Planned buildings as well as those already in existence account for the third area of major new expenditure. "We are establishing priorities, schedules, and private funding goals for new construction during the next 10 years," Dr. Vest wrote.
FUNDING THE PLAN

To pay for the goals outlined in the Institute's plan, MIT will seek a substantial infusion of new funds (with an increased emphasis on private support) and will also make changes in fiscal management.

"MIT must embark on a new capital campaign with a fund-raising goal in excess of $1 billion during a seven-year period," he wrote. "We have every reason to believe that this goal is attainable. Indeed, during the last year MIT has received several gifts of $15 million and above. Substantial planning and preparation for the campaign has already been accomplished, and in the months ahead we will be working with the community to refine and articulate its goals and priorities."

The Institute will also apportion more of its earnings from the endowment and other invested funds toward projects outlined above. "We plan to provide at least the normal rate of growth of distributions to Pool A funds; however, a portion of the earnings above that, together with some earnings on unrestricted funds, will be allocated to Institute-wide improvements -- primarily to the support of graduate education, to our program of renewal of facilities and infrastructure, and to our program of new construction."

Third, Dr. Vest noted, "increased expenditures require improved control." The Institute will create and follow a 10-year financial plan covering operating and capital expenses, which "at all times will be keyed in part to investment performance during the preceding three years and to the growth of other resources. We will be prepared to suspend some of these expenditures in a pre-planned manner if our financial performance decreases dramatically.

"We will improve and simplify our system of funds, budgets and plans. We will make budgeting a clearer and more direct process for meeting our academic goals. We also will remain dedicated to improvement of our financial and management systems and processes," he wrote.

In closing, Dr. Vest paid tribute to the people of MIT, all of whom "have brought us to our current extraordinary position on the world stage. It will be your vision, creativity, abilities, values, sense of mission and will to excel that will create the MIT of the 21st century. It will be a grand adventure."

The text of the President's Report is now available online and is being mailed by President Vest to all members of the faculty this week.

A more formally published version will be distributed on campus by Mail Services to DMCs and building lobbies at the beginning of November; distribution will be announced in MIT Tech Talk. The report also will be printed in the MIT News section of the January/February issue of Technology Review.

A version of this article appeared in MIT Tech Talk on October 21, 1998.


Topics: Administration, MIT presidency

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