Discussion of the Institute’s finances and of future cost-cutting measures dominated Wednesday’s hour-long State of the Institute event at Kresge Auditorium, which was broken into three segments of roughly equal length. The first was an address by President Susan Hockfield; in the second, a panel including the president, Provost L. Rafael Reif, Chancellor Phillip Clay, and Executive Vice President and Treasurer Theresa M. Stone answered questions submitted online; and in the third segment, the same panel answered questions from the audience.
Hockfield opened with some good news. Undergraduate applications were up 17 percent after two years of roughly 8 percent increases, she said, demonstrating that “an MIT education is more sought-after than ever.” And as of June, she said, “of those planning to work, 88.8 percent of undergraduates and 81.4 percent of graduates had accepted a job.” Nationally, she added, the average was just 19.7 percent. Among other items in a litany of Institute achievements were the presentation of the National Medal of Science to one faculty member and one alumnus and MacArthur “genius” grants to a faculty member and three alumni.
The second half of the president’s address concerned the Institute’s finances. There, the news was, if not good, at least not as bad as had been predicted. At the beginning of the year, Hockfield said, MIT had predicted that its endowment would lose as much as 30 percent of its value; by the end of June, the figure looked to be more like 20 percent. In part, President Hockfield said, that was because annual giving was off by only 1 percent from the year before. “That was simply astonishing in a year where everyone was suffering the effects of the economic decline,” she said.
Nonetheless, the Institute is still calling for cuts of $60 to $70 million in fiscal year 2011, and much of the remaining discussion addressed the nature of those cuts, the reasons for them, and what they would mean for members of the MIT community.
First, Hockfield explained, administrators would, as they did in the last fiscal year, give the heads of various administrative units budget targets to meet, but how they met those targets would be up to them. “You all know far better than any one of us does how to use the resources we have to position ourselves to be a better place in two years, or five years, or 10 years,” said the president. “So these decisions will be taken at the unit level.” Indeed, she said, in fiscal year 2010, despite a mandate to cut $50 million in expenses, the Institute actually cut $58 million — a year after balancing its budget for the first time in years. That, she said, was “proof of the power of our distributed leadership.”
Because they aren’t drawing up departmental budgets themselves, the administrators on the panel were unable to provide specific answers to questions from the audience about the number of layoffs that the new budget targets would entail. They did acknowledge that because half of the Institute’s budget is salary and benefits, avoiding additional layoffs was unlikely, and that last year’s budget cuts of $58 million resulted in 105 layoffs since January. That figure, however, was not egregious, President Hockfield said, “particularly when you look at numbers from other places.”
As part of the panel discussion, Vice President for Human Resources Alison Alden explained the process by which MIT conducts layoffs, as well as the steps it takes to help laid-off employees find employment. She reported that of the 105 employees laid off since January, 25 percent have found new jobs.
During the segment of the event devoted to questions submitted online, Reif was asked why administrators are being urged to make all their cuts this year rather than distributing them over the next two years. “None of us, obviously, can predict the future, but we all anticipate that the economy will come back sometime soon,” Reif responded. “If we stretch the cuts further, we may face a situation in which we may be still cutting the budget when the economy is picking up, and other places are investing in spending.”
Hockfield opened with some good news. Undergraduate applications were up 17 percent after two years of roughly 8 percent increases, she said, demonstrating that “an MIT education is more sought-after than ever.” And as of June, she said, “of those planning to work, 88.8 percent of undergraduates and 81.4 percent of graduates had accepted a job.” Nationally, she added, the average was just 19.7 percent. Among other items in a litany of Institute achievements were the presentation of the National Medal of Science to one faculty member and one alumnus and MacArthur “genius” grants to a faculty member and three alumni.
The second half of the president’s address concerned the Institute’s finances. There, the news was, if not good, at least not as bad as had been predicted. At the beginning of the year, Hockfield said, MIT had predicted that its endowment would lose as much as 30 percent of its value; by the end of June, the figure looked to be more like 20 percent. In part, President Hockfield said, that was because annual giving was off by only 1 percent from the year before. “That was simply astonishing in a year where everyone was suffering the effects of the economic decline,” she said.
Nonetheless, the Institute is still calling for cuts of $60 to $70 million in fiscal year 2011, and much of the remaining discussion addressed the nature of those cuts, the reasons for them, and what they would mean for members of the MIT community.
First, Hockfield explained, administrators would, as they did in the last fiscal year, give the heads of various administrative units budget targets to meet, but how they met those targets would be up to them. “You all know far better than any one of us does how to use the resources we have to position ourselves to be a better place in two years, or five years, or 10 years,” said the president. “So these decisions will be taken at the unit level.” Indeed, she said, in fiscal year 2010, despite a mandate to cut $50 million in expenses, the Institute actually cut $58 million — a year after balancing its budget for the first time in years. That, she said, was “proof of the power of our distributed leadership.”
Because they aren’t drawing up departmental budgets themselves, the administrators on the panel were unable to provide specific answers to questions from the audience about the number of layoffs that the new budget targets would entail. They did acknowledge that because half of the Institute’s budget is salary and benefits, avoiding additional layoffs was unlikely, and that last year’s budget cuts of $58 million resulted in 105 layoffs since January. That figure, however, was not egregious, President Hockfield said, “particularly when you look at numbers from other places.”
As part of the panel discussion, Vice President for Human Resources Alison Alden explained the process by which MIT conducts layoffs, as well as the steps it takes to help laid-off employees find employment. She reported that of the 105 employees laid off since January, 25 percent have found new jobs.
During the segment of the event devoted to questions submitted online, Reif was asked why administrators are being urged to make all their cuts this year rather than distributing them over the next two years. “None of us, obviously, can predict the future, but we all anticipate that the economy will come back sometime soon,” Reif responded. “If we stretch the cuts further, we may face a situation in which we may be still cutting the budget when the economy is picking up, and other places are investing in spending.”
