How did MIT determine that it needed a 5% ($50 million) budget reduction for FY’10 and $100-$150 million in reductions over the next 2-3 years?
In FY’09, MIT had a balanced General Institute Budget for the first time in over a decade. However, a significant portion of the Institute’s general revenue support (21% of the operating budget) comes from the endowment, which will vary with fluctuations in the economy. This includes not only direct unrestricted endowment payout to the operating budget, but also payouts to support specific areas (such as financial aid or a particular department) that the operating budget would otherwise have to pay for. A simulation of a number of different market scenarios shows that the Institute would develop a budget deficit in the neighborhood of $100 to $150 million if expense growth continued at a steady rate while endowment values declined. This analysis showed that the Institute would need to reduce expenses by $50 million in FY’10 and, if endowment performance did not improve significantly, another $50 million in each of FY’11 and FY’12 to put the Institute back on course for a balanced budge
