The 2010-2011 Budget – Meeting the Challenge
Dear members of the University community / Boozhoo / Aanii / Kwe kwe,
The past five days have been full of events for the University community, with Stephen Lewis’ lecture on cancer prevention, the symposium “L’Université Laurentienne : berceau de la culture et de l’identité franco-ontariennes”, the tribute to Molly Hancock, the launch of the French version of the case study on the Northern Ontario School of Medicine at the Librairie Grand Ciel Bleu, the University’s 50th birthday launch at Great Hall, the dinner organized by the Regroupement des professeures et professeurs francophones de l’Université Laurentienne, the conference and banquet organized the School of Human Kinetics, the return of La Nuit sur l’étang on campus and the annual Gerry Lougheed Jr Volunteer Appreciation Dinner with over 500 students from residence.
As we celebrate our 50th birthday, I can’t help but reflect as to how far both the university and the community have come since 1960. As I was recently reminded, Laurentian had humble beginnings as a few rooms above the movie theatre in downtown Sudbury. Over the years, faculty, staff and students have overcome many challenges to get us to where we are today.
A Challenging Year
This past year has been a challenging one in many regards. The global financial crisis has changed the world within which we live, work and study. Our community is hurting, our staff is doing more with less, and our students are taking on increasingly more debt to fund their education as their tuition fee increases continue to outpace inflation.
We serve close to 300 more students this year but have 12 fewer faculty and 37 fewer staff members than in 2008-09. Why? Because the province has not been in a position to fully fund enrolment growth, nor able to fund cost escalation. We therefore rely on tuition fee increases, spending reductions and growth funding discounted by 20% and usually confirmed at year end, to offset our compensation cost pressures.
While difficult choices have been made, and more are yet to come, we need to put things in perspective. Our faculty complement is still above what it was in 2006-07 and our staff complement is still above what it was in 2005-06, in both cases when we had several hundreds more students on the Sudbury campus. We still offer one of the best student-faculty ratios among Ontario universities. We have a multi-year plan to regain sustainability that is well known to the university community and we are on track in implementing it. Our long-term capital debt ratio is one of the lowest among Ontario universities, while the returns of our endowment funds and pension plan are quite favorable compared with other Canadian universities. Our Facilities Condition Index (FCI) is within the provincial average.
Much To Celebrate
In spite of the budgetary challenges of the last year, faculty, staff and students once again rose above, and provided us with much to celebrate:
• Our admissions are up by 11%, one of the largest increases in the province, while witnessing an increase in our average entry grade;
• Student satisfaction, as measured by the Globe and Mail, is up;
• Our job placement rate post-graduation remains one of the highest among Ontario universities;
• Our national recognition is up;
• We’re the sixth fastest growing university in research intensity in Canada;
• The construction of the Vale Inco Living With Lakes Centre is well underway;
• Our forensic science program became the first program outside of the US to receive the prestigious FEPAC designation;
• Our engineering students just won a prestigious Canadian Engineering Competition, after winning the provincial competition for a second year in a row;
• Our accounting students finished second in the highly respected Ontario CMA case competition;
• And so much more!
The 2010-2011 Challenge
Challenging conditions lie ahead:
• The federal government is projecting a deficit exceeding $55 billion;
• The provincial government is now projecting a deficit of $20 billion;
• The provincial government’s 2005 $6.2B Reaching Higher plan for post-secondary education expired in 2009-2010;
• The provincial tuition framework expired in 2009-2010;
• Cost escalation in the post-secondary sector is exceeding 5% per year.
The three-year Plan for Regaining Sustainability approved by our Board of Governors in 2009, calls for the University to balance its budget by the third year, i.e. by 2011-12. For the current fiscal year, which covers the period from May 1, 2009 to April 30, 2010, we expect to achieve our target of a $4 million deficit. Our collective task is to develop a budget for 2010-11 with an operating deficit no larger than $2 million (as outlined in the plan), while making the best choices to continue making progress on our four key goals and performance indicators, through a decision-making process that is consultative, transparent and fair. This budget is to be delivered to the Board’s Finance Committee on May 31st, followed by a presentation to Senate and approval by the Board of Governors in June.
While it’s not ideal to approve a budget two months into a fiscal year, we will have fewer uncertainties then on the direction that the provincial government will take on operating funding and on our enrolment confirmations for 2010-11. It will also give time for more meaningful dialogue on options.
Our Working Assumptions
• Provincial grants represent over 60% of our operating revenues. The provincial government has not advised what the operating grant framework will be for next year. For prudent planning purposes, we are assuming zero growth on a per student basis. Though we do not know whether the provincial tuition framework will allow tuition changes, we are assuming an across-the-board increase of about 4% next year (per the last framework).
• Our three year Plan for Regain Sustainability calls for an enrolment increase in 2010-11, though we do not know if growth will be fully funded. We are assuming that we will grow by about 250 FTE students, and that the growth will be funded at current levels (80%).
• Overall, our revenues are unlikely to shrink, but should only grow modestly in 2010-11.
• Almost 80% of our operating expenditures are dedicated to staffing-related costs (salaries and benefits). This is quite typical for any university, however it does present challenges as the projected cost inflation for 2010-11 significantly outpaces our projected revenue growth. All else remaining equal, increases to salaries and benefits alone will require an additional expenditure of $4 million next year over this year’s actual expenditures.
• We will not have to face any additional pension obligations with the expiration of the temporary pension relief measures in Ontario.
The above-mentioned working assumptions may change as we receive more details on the measures arising from the provincial budget announced on March 25th. For instance, since Thursday, the province has advised the university sector that :
• The 2009-10 enrolment growth and the 2010-11 projected enrolment growth would be funded (details to follow);
• The Facilities Renewal Program (funding for deferred maintenance) will be reduced to $26M from the 2009-10 level of $40M;
• Funding for 1,000 spaces in faculties of education will be removed, in recognition that there is an over-supply of qualified teachers in Ontario. Implementation of this reduction will begin in 2011-12;
• The funding for the Ontario Trust for Student Support (that matches private and corporate donation to endowments for students in financial need) will be maintained at the 2009-10 level of $42.5M;
• The government’s fiscal plan provides no funding for compensation increases for future collective agreements. In this memorandum received from the Deputy Minister, the province indicates its intention “to respect all current collective agreements. When these agreements expire and new ones are negotiated, the government will work with (universities) and bargaining agents to seek agreements of at least two years duration that do not include net compensation increases.” Further, the government introduced legislation which, if passed, would freeze compensation structures for non-bargaining employees for two years. More details can be found here.
There are two questions that I am often asked. The first one is why are there still job postings when we are reducing spending? The answer is that there is always mobility among faculty and staff ranks but that overall, our staffing has gone down. The other question is why are we contemplating further faculty and staff reductions when enrolment is on the rise? The answer is that the three-year Plan for Regaining Sustainability clearly spelled out the need for an increase of 1,035 students by 2011-12 over 2008-09, while reducing spending annually by $3.5 million in 2009-10, $2.0 million in 2010-11 and $2.1 million in 2011-12.
Budgeting A Plan
I often say that we don’t plan a budget, we budget a plan.
We have set four key goals for the coming years. These goals emerged from what you told me during the 52 meetings I held with all departments last year. At its October meeting, the Board of Governors streamlined the content of the 2008-2011 Strategic Plan from 132 to 50 actions, aligned with these four key goals (10 actions per key goal plus 10 other operational requirements). This document identifies the accountability and overall importance of each of these 50 actions as determined by the Executive Team, as well as the implementation status as of last October.
At each meeting, the Board monitors our collective progress against ten performance indicators.
• National recognition : We are expected to continue enhancing our national reputation, as well as our overall level of research activity.
• University of choice : We are expected to continue increasing our enrolment by a percentage above the sector average, the percentage of university applicants from Northeastern Ontario and Simcoe-Muskoka choosing Laurentian, as well as the overall number of French-speaking and Aboriginal learners.
• Student engagement : We are expected to continue raising the graduation rate, as well as the percentage of students who would return to Laurentian.
• Community responsiveness : We are expected, in absence of better indicators, to live within our means and increase our revenues beyond operating grants, tuition fees and ancillary revenues.
Without limiting the options available to the Budget Committee, I have articulated the following five preliminary parameters to the Budget Committee to guide the development of the 2010-11 operating budget :
• Choices should be informed by our four key goals. Modest resources should be set aside to support carefully selected new initiatives advancing these four key goals.
• We need to make tough choices looking at a two year window, reallocating human and financial resources as required from lower to higher priority areas, while reducing the operating deficit to $2 million in 2010-11 and balancing the operating budget in 2011-12.
• Reductions to the proportion of the operating budget allocated towards bursaries, scholarships, student services and the library, all measured in rankings of Canadian universities, should be minimized.
• The overall proportion of courses available in French should be sustained.
• Resources in Simcoe County should be increased to better meet student needs.
These five parameters are preliminary and subject to change based on the input received during consultations.
The Leadership Group has also expressed a desire to revisit current policies and procedures associated with carry-forwards, charge-backs, research overheads and indirect costs.
As discussed with the Leadership Group on January 28th, with the Board of Governors’ Finance Committee on February 8th, with Senate on February 9th and March 16th and with the Board of Governors on February 26th, we are initiating our consultation and decision-making process for the 2010-11 budget.
The intention is to engage with all of you as follows:
• The Budget Committee will work with each dean and administrative department to review resources required in terms of programs, courses and non-academic functions.
• Vice-Presidents and I met today with the Faculty Council of Social Sciences and Humanities and will meet with the remaining Faculty Councils as follows :
o Faculty Council, Management : April 9th
o Faculty Council, Professional Schools : April 21st
o Faculty Council, Science and Engineering : April 21st
o Faculty Council, Library : April 28th
• On Friday, Robert Bourgeois, Vice-President, Administration, emailed you a copy of two PowerPoint presentations being used in meetings with Faculty Councils, which will also be used tomorrow, March 30th, at the University community meeting, scheduled for 9 am on the 11th floor of the Parker building.
• Members of the Executive Team will meet with representatives from faculty, staff and student associations in the coming weeks to consult on the 2010-11 budget. Questions will be provided in advance to enable a more informed discussion.
• Senate will be consulted.
• We will keep the University community informed through my blog.
• Specific questions may be asked to the university community, gathering your answers through www.surveymonkey.com. This will allow for more useful and meaningful input on specific matters, as opposed to more general feedback.
• You are always welcomed to email myself or members of the Executive Team with questions and comments. You can also email your thoughts to email@example.com. All comments received will be reviewed by the Budget Committee and the Executive Team.
2011-12 and beyond
The #1 priority for the new Vice-President, Academic and Provost, Dr. Robert Kerr, working in close collaboration with Dr. Louis Marquis and Dr. Patrice Sawyer, is to lead the process to update the Academic Plan approved by Senate in 2001. This exercise will also inform the budget decision-making process for the coming years.
Although the Board requires us to develop a budget with operating deficit of no more than $2 million in 2010-11, please keep in mind that it requires a balanced budget in 2011-12, necessitating more difficult decisions. Beyond that, we will have to begin to repay the cumulated deficit starting in 2012-13.
In short, we are facing a series of financial challenges over the next several years that don’t lend themselves to simple, pain-free solutions. Our expenditures are growing more quickly than our revenues, and are projected to continue to do so for some time. Our cumulated deficit will continue to grow, forcing us into more difficult decisions.
My challenge to you is the following: while continuing to make measurable progress against our four key goals, what opportunities haven’t been explored yet to further enhance our revenues or slow down our expenditure increases, both in the short and long term?
You have told me that providing context and discussing issues with the university community early on in the budget decision-making process is important. We all want to make sound and strategic decisions based on the best available information.
We must continue to protect the university’s mission, invest in strategic initiatives that support our four key goals, and preserve our long-term options for academic, research and enrolment growth.
Laurentian’s future is being built by the energy, talent and contributions of every student, faculty and staff member. It is a bright future, but it depends on making sound decisions today. I am confident that we will make the right decisions, knowing that we are keeping Laurentian strong for generations of students to come.
As usual, I welcome comments and questions on the topics discussed in my blog postings, or any other matter that may be of concern to you. My email is: firstname.lastname@example.org