Fall 2009 Letter to the Community


To the Members of the MIT Community:

The arrival of almost 3,000 new students and 50 new faculty brings a wonderful sense of renewal, accentuating the past year's many successes, from the Institute's growing research funding — up nearly 8% in the past year — to MIT's increasing role in the national debate on such critical issues as U.S. energy strategy. Despite a year of widespread financial uncertainty, MIT has not been distracted from its mission.

As at many colleges and universities across the country, the global economic downturn will continue to present MIT with serious challenges this year. However, because our community has already proven its ability to adjust course without losing focus or momentum, we approach these challenges with clarity and confidence.

The value of a balanced budget and prompt budget action

We count four important factors in our favor. First, we build on the foundation of a balanced budget, an important achievement last year. Second, in carrying out the budget-cutting process begun last winter, many units wisely addressed the magnitude of a multi-year budgetary challenge by making greater reductions right away; as a result, the Institute was able to budget $58 million in savings for Fiscal Year 2010, substantially more than our $50 million target.

Endowment returns
Third, although MIT's endowment has suffered in the downturn, the impact has been less severe than the 30 percent decline we had braced for in last winter's dire economic environment. As of June 30, 2009, MIT's endowment value declined 20.7% from a year before, reflecting the net effect of a 17.1% loss in investment return together with an inflow to the endowment of $143 million in new gifts and an outflow from the endowment of $518 million in spending for Institute operations. For this relative financial resilience we thank our colleagues in the MIT Investment Management Company for their steady, disciplined work.

The Institute-wide Planning Task Force
Fourth and finally, because we structured our response to the downturn to allow time for careful, farsighted budget-reduction planning, we now have the benefit of cost-cutting suggestions from the community and the thoughtful, creative work of the Institute-wide Planning Task Force. The Task Force of almost 200 faculty, staff and student leaders has developed a set of innovative proposals for strengthening MIT while reducing costs and enhancing revenue. Their recommendations are now the subject of lively community discussion, and we encourage you to offer your input online, at upcoming community forums, or through the State of the Institute. Already the MIT Idea Bank and the Task Force process have produced important, commonsense suggestions that we have begun to put in place, such as improving our travel system through online booking and expense reporting; developing electronic pay-stubs; and replacing many bulk mailings on campus with digital communications. Once the Task Force has gathered community feedback and has issued its final report in October, implementation of more far-reaching proposals will begin.

Impact on personnel
The beginning signs of a possible stabilization of the economy, the proactive steps we have all taken since last winter and our endowment results have, together, somewhat reduced the total budget reductions the Institute will need to achieve. Nevertheless, the budget-cutting process is far from over. Certainly the most difficult budget reductions involve decisions to reduce staff. MIT units, with help from Human Resources, employed a range of strategies to keep layoffs to a minimum. Even so, since January there have been 105 layoffs to meet reductions in the General Institute Budget (GIB). Understanding the enormous impact on those involved, in carrying out these decisions we always aim to adhere to best practices and have striven to act with great care and individual consideration. Our Human Resources Department continues to make every effort to help affected employees find new job placements within MIT or elsewhere.

Commitment to core strengths
As we look for new savings, we will continue to protect our core strengths and preserve our core values. For instance, to maintain the breadth and excellence of our undergraduate student body — represented by another remarkable incoming class — we will maintain our unwavering commitment to financial aid; in fact, we increased the budget for undergraduate financial aid for this year by 9.8%. We have also continued our commitment to the pace of building a culture of inclusion and of hiring new faculty.

Adjusting to a new reality
Going forward, responsible stewardship requires that we continue to prepare for a range of economic conditions, both better and worse. Last year, anticipating a range of economic outcomes, we projected that we would need to reduce the GIB by $100-150 million over the course of two to three years. Given current conditions, we now believe that reducing our budget by between $120-130 million will be sufficient to reset the GIB in line with the reduced value of our endowment.

Reaching our budget goal will require an additional reduction of $60-70 million from the GIB, reflecting a decline in endowment payout commensurate with the decline in endowment value. We plan to complete this reduction by the end of the 2011 academic year by pursuing two parallel paths: While we continue to ask units to reduce their own spending, we aim to minimize the need for unit-by-unit cuts by aggressively seeking Institute-level solutions, such as those emerging from the Task Force Report. If the economy continues to stabilize, this reduction would permit us to return to normal growth in FY2012; conversely, any future economic disruptions would demand renewed reductions.  We also aim to compress the cycle of budget-cutting from three years to two, a vital factor in maintaining the momentum of excellence and community cohesion.

Moving MIT toward its future
This letter presents a sobering reflection on difficult cuts already made and further cuts to come. Though such reductions may be painful, they are indispensable to preserving the present and protecting the future of MIT. We are confident that MIT can not only adapt with sufficient speed but can also set an example of creative adaptation for other institutions to follow.

We can capitalize on our practical, problem-solving, collaborative culture to devise innovative ways to adapt to a constrained economy. As a community that values results, we can strike a workable balance between consultation and decisiveness. We can bring the right people to bear on each decision, in good faith, with shared respect for data and facts. We can build on the mutual respect of decision makers for the interests and insights of deeply informed stakeholders, and of stakeholders for the responsibility of decision makers to assure a thriving future for MIT.

We look forward to tackling this challenge with you in the months ahead.

Sincerely,

Susan Hockfield
President

L. Rafael Reif
Provost


Topics: MIT presidency, Staff, Campus services, Administration, Students, Faculty

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