MEMORANDUM
TO:
Peter MacKinnon, President
FROM:
Jay Kalra, Chair, Planning and Priorities Committee of Council
DATE:
February 25, 2010
RE:
Update to the Multi-Year Operating Budget Framework 2008/09 –
2011/12
________________________________________________________________________
On behalf of the Planning and Priorities Committee, I am pleased to convey the
committee’s thoughts regarding this year’s update to the Multi-Year Operating Budget
Framework 2008/09 - 2011/12.
The committee recognizes the primary consideration in updating the Multi-Year
Operating Budget Framework is the provincial budget and corresponding provincial
allocation to the university. In the absence of knowledge of the provincial budget, the
committee supports the 5.0% revenue increase projected in the update to the framework,
as consistent with the 5.2% increase requested of the province in the 2010/11 Operations
Forecast. The additional financial scenarios prepared, based upon a 0% increase to the
provincial grant to a 5% increase as a maximum, were viewed as prudent financial
planning devices.
In the event of a budgetary reduction, the committee supports any further budget
measures employed to attain a balanced budget be targeted and addressed through a
principle-based approach consistent with the university’s strategic plan and core
functions of teaching, research, and outreach and engagement. In the event of a decline
in operating revenue, the committee supports that additional administrative efficiencies
be sought as a first measure through a balanced and thoughtful approach, which
recognizes the many operational and regulatory commitments required of the university.
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The principle that the university will not mitigate a reduction in operating revenue by a
corresponding automatic increase in tuition is clearly held, and the principles of the
tuition strategy policies—that tuition rates be based upon comparability, access and
affordability and enabling quality—uphold this principle. As variable tuition rates are
applied by colleges, ensuring commensurate high-quality programs and support for
students is an essential requisite. The 4.5% tuition revenue increase presented within the
framework is reasonable. However, the committee notes that as tuition revenue is
presented as a projected base increase in revenue within the framework, this figure could
vary as a factor of enrolment or the decision of colleges to direct incremental revenue
towards new activities. Further consideration of those factors affecting tuition and
students is desired. The study undertaken by the Institutional Planning and Assessment
Office, in conjunction with the Information Strategy and Analytics Office, on tuition
rates, student debt, financial aid and alternative tuition models will enable the university
to make more informed decisions regarding tuition. Similarly, consideration of
comparability between national tuition rates at medical-doctoral institutions and regional
tuition rates will ensure the university’s tuition is situated appropriately. The committee
has briefly discussed the question of differential international graduate student tuition and
believes this is an issue the university must come to terms with philosophically.
As the operating budget is quite large, relatively small percentage changes in forecast
amounts can have large impacts in dollar amounts, particularly with regards to salaries, as
70% of the university’s operating revenue is expended on salaries and benefits. The
university is committed as an employer to competitive salaries on a national scale;
however, in turn, negotiated salary settlements will be informed by the provincial and
national economic climate and settlements elsewhere. In its discussions, the committee
has not focused on salaries and benefits other than to note that beyond the provincial
grant, salaries and benefits, as well as demographics, are areas of significant uncertainty
for the university.
The pension payments projected within the framework are valid, based upon the
temporary solvency relief approved by the province. The financial position of the
university’s defined benefit pension plans were assisted by investment income return
being greater than projected under the scenario analysis work; however, several years of
higher than normal investment earnings are required in order for the defined benefits plan
to become financially sustainable. The university’s pension payments are dependent upon
a number of factors, including collective bargaining agreements, the dates of filing of
actuarial valuations for each of the three defined benefit plans, changes to actuarial
assumptions such as mortality and investment returns, changes to actuarial standards, and
finally, changes to legislation (provincial and federal) governing pension plans. The
committee notes that future changes to projected pension payments are anticipated due to
the foregoing factors, the continuing efforts of the pension strategy working group, and the
university’s ongoing discussion regarding permanent solvency relief. The committee
believes the university’s response to its pension plans and resulting financial deficit has
been thoughtful and measured, and respectful of the university’s obligations to its
employees and retirees while continuing to explore funding and benefit strategies.
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There are financial risks implied in the Multi-Year Operating Budget Framework both on
the forecasted revenue and forecasted expenditures side. These risks primarily flow from
the possibility that the underlying assumptions of the framework may not hold, as
discussed above. The committee appreciates the complexities of university-level
budgeting and the risk factors which apply. Given the continuing financial uncertainty at
all levels—provincially, nationally, globally—the committee urges continued caution and
prudence over the coming year with respect to financial decisions and one-time funding
available to the university and colleges and units.
In summary, the Planning and Priorities Committee supports the update to the Multi-Year
Operating Budget Framework for the 2008/09 – 2011/12 planning cycle as a prudent and
responsible framework based upon the university’s present finances.
Jay Kalra, Chair
Planning and Priorities Committee of Council
c B. Fairbairn, Provost and Vice-President Academic