Daniel Barkowitz | November 17, 2008
"Letter to the community on MIT finances"
You may notice on the home page a new announcement from President Hockfield about MIT's financial situation. The announcement reads as follows:
Letter to the community
on MIT finances
To the members of the MIT community:
Ambitious forward motion is MIT's signature; we celebrate initiative, innovation, relentless improvement and creative change. Yet as the world's financial markets continue to decline, they forecast a global reduction in resources. In that context, our challenge is clear: together we must chart a financially prudent path forward, but one that sustains and fosters the essential character of MIT.
As we reported in late September at the State of the Institute, MIT has the latitude to approach the current financial realities in a deliberate way, because of three recent significant advances: we begin from a balanced budget, we smooth our endowment payout to distribute the effects of market volatility over several years, and, across the Institute, we have carefully accumulated cash reserves that can buffer a tough economic period. These facts cannot fully insulate us from the chill of the markets, but they do afford us the time to make thoughtful, coordinated choices. Through the fall, we have steadily responded to the rapid economic flux; for example, as market conditions worsened in October, we recognized that delaying the renovation of the W1 residence hall offered an important opportunity to preserve financial flexibility.
Today, as market uncertainty continues, we want to share with you the further steps we will take to reduce spending, while protecting and fostering the creative, dynamic and stimulating environment that defines MIT.
The impact on Institute revenues
The global economic contraction will likely compromise all of the Institute's major revenue streams: endowment, tuition, gifts and research. Market declines have affected even the most diversified portfolios, including MIT's investments, which will reduce the endowment funds available to support our operations. In addition, we anticipate a decline in net revenue from tuition; we will retain our commitment to need-blind admission and need-based undergraduate financial aid even as we expect that some students and their families may feel the weight of new financial difficulties. (Please consult the Financial Aid office for more information). And, while MIT's donors have remained staunchly generous through past downturns, some may now be constrained in their giving. We also expect that pressure on the nation's budget will lead to continued stagnation, if not declines, in federal funding for research. As we plan, we must incorporate all these anticipated revenue reductions.
Planning for financial constraint
The continuing uncertainty about the length and depth of the economic downturn makes accurate predictions impossible. However, we must take action now to plan for a protracted period of financial constraint, while at the same time remaining flexible for a future in which the economy may improve or worsen.
Taking all these factors into account, we can reasonably anticipate the need to decrease spending by about 10-15% over the next two to three years. In the current budget planning cycle for FY10, we will plan for a base budget reduction of 5%. Future years will undoubtedly require additional cuts by all units. As all of you who manage budgets know, achieving a base budget reduction of this magnitude is a very serious exercise; we will tackle it together, through a careful three-year implementation plan, beginning with a number of practical short-term actions.
Practical steps in the short term
In the coming weeks, we will present specific steps to launch the planning process. In the meantime, we encourage each of you to think about the most effective ways we can cut spending while advancing our core strengths in support of MIT's mission.
In the very near term, it obviously makes sense for every part of the Institute to look hard at each expenditure. We must be very cautious in hiring, relating each hire to core needs, and we should take particular care in making decisions that create long-term financial commitments. At present, we do not expect mandated spending cuts for the current fiscal year. However, achieving significant savings this year can help prevent more painful future choices; early savings will compound, so that a dollar saved today gives greater long-term budget relief than one saved a year from now.
Developing a long-term approach together
As we plan for the longer term, given the budget reductions we anticipate for FY11 and beyond, we can and will use this moment to tailor our financial choices to better position the Institute to seize emerging opportunities. To that end, we will set in place a broad, deliberate, inclusive process, in which all branches of the Institute will work together in the coming year to reassess our priorities and the use of our resources.
The past year has included an ambitious and vitally important process of planning for MIT's future; integrating that planning work with new fiscal constraints will make the Institute stronger, more efficient and more effective. The world values MIT for its unrivaled education, pioneering scholarship and real-world innovations. Together, we need to design new operating strategies that draw on more limited financial resources, without sacrificing our values or our mission of world-changing education, research and service.
In approaching this challenge, we have actively consulted with the Academic Council and department heads, as well as with other faculty and administrative leaders. To further define the budget planning process described in this letter, we will continue these discussions. As plans develop and the global situation evolves, we will keep the MIT community involved and up to date.
The months ahead will test us all. But they also present an opportunity for us to demonstrate our deepest strengths as a compassionate community, driven by innovative thinking and action.
Sincerely,
Susan Hockfield
PresidentL. Rafael Reif
Provost
For prospective students, you may want to review our core financial aid principles on our web page. I think in these difficult economic times, it remains important to understand that MIT will stand behind its commitments to students (both current and prospective).
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Responses To This Entry:
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I have a question: If I am an American Citizen living outside the US, which form should I use? the FAFSA plus CSS or the Foreign forms? thank you for your answer!
Posted by: Anonymous on November 17, 2008 05:49 PM
that's funny
I'm an international student living in the US since I was 8
Posted by: deng on November 17, 2008 06:22 PM
Use the forms pertaining to your citizenship. If you are a US citizen or permanent non-resident, you complete the FAFSA and Profile regardless of where you live (inside or outside the US). If you are an international student, you need to complete the International Student Financial Aid Application, again regardless of whether you live inside or outside of the United States.
Posted by: Daniel Barkowitz on November 17, 2008 07:23 PM
What about dual-citizenship holders?
Posted by: sasha on November 17, 2008 08:18 PM
It should be based on how you are applying for admission in this case. I would suggest the US forms if you have US citizenship.
Posted by: Daniel Barkowitz on November 17, 2008 08:27 PM
So does this mean anything for financial aid?
Posted by: Kelly ('13 Hopeful) on November 17, 2008 09:03 PM
It means that we will honor the same committments we have made before and that we will not have a retrenchment or reduction of financial aid.
Posted by: Daniel Barkowitz on November 17, 2008 09:10 PM
Does that apply to Internationals too, or are you anticipating a tougher selection process?
Posted by: usman on November 18, 2008 03:25 AM
As you know, usman, I am not an admissions officer, nor do I get involved in selection, so I can't comment on their process, but I do know that we are using the same process for awarding of financial aid for international students as we used last year, and we are not shying away from our committment to need-blind admission or need-based, full-need financial aid for any populations.
Posted by: Daniel Barkowitz on November 18, 2008 10:27 AM
I am an international student, and I have two inquiries for the financial aid application: Is the income tax form the only required documentation to be submitted? Also what does "source of emergency funds on arrival in the US" mean?
Posted by: lwq on November 20, 2008 10:17 AM
