Deakin on budget: ‘Tough times are coming’

Western faces an uncertain financial future as several challenges are predicted to squeeze the university budget, almost assuring annual deficits between $45 million-$109 million by 2019-20, unless significant changes are made to revenue growth and cost reduction, university officials explained in a pair of town halls this week.

“Tough times are coming; there is no doubt about it,” Janice Deakin, Provost and Vice-President (Academic), told staff and faculty during her presentation.

Even though the province’s debt continues to soar ­– now topping $310 billion – universities may see “a sprinkling” of money given prior to the provincial election, scheduled for next year. But Deakin did not mince words when explaining the potential fallout from less government funding due to the province’s “monstrous debt.”

A serious challenge to the university budget involves the new provincial funding model for postsecondary institutions.

Currently, the revenue universities receive from the government is based mainly on student enrolment. That means government grants grow in lockstep with student numbers. That worked out well for Western since raising first-year enrolment from 4,350 to 5,100 students.

But that all ends. A new three-year agreement, which goes into effect this year, requires universities to estimate enrolment over the next three years. Once those numbers are set, universities must remain within 3 per cent on either side of that figure.

The province will not level penalties if enrolment falls below that number. However, institutions that exceed enrolment levels by 3 per cent won’t receive any additional funding.

“We’ll have a block grant. Our Sept. 1 enrolment count of last year – our enrolment in terms of full-time equivalent undergraduate side – becomes our funding envelope,” Deakin explained. “In that block grant, incremental students will now only bring with them incremental tuition. Chasing revenue by chasing incremental growth is now not in place.”

Tuition will not bridge the gap either.

Since 2013, undergraduate tuition cannot increase by more than 3 per cent annually. Professional programs can increase 5 per cent annually. That cap was set to expire in August, but the province extended it for two years in December 2016. It now continues until 2018-19.

However, with only one year remaining on that tuition framework, the university is bracing for what happens next. Almost 50 per cent of the university’s $743.5-million operating revenue comes from tuition.

With a 3 per cent increase in tuition, the operating revenue increases by 1.5 per cent. So, if planning for that 1.5 per cent annual increase in the budget for the next five years, and if expenses rose at a rate of 3 per cent, Western would see an annual deficit of $65 million. Should expenses run at 4 per cent, that would jump to $109 million.

Even if the university could find a way to drive operating revenue up to 2 per cent, it would still mean a deficit of $45 million (with 3 per cent hike in expenses) or $89 million (with a 4 per cent hike in expenses).

“Clearly, in neither of those cases, is that a sustainable way of running a university. At the end of the day, it is going to change our trajectory on our year-over-year revenue increases,” Deakin said. “It’s going to be a challenge because we’re going to have less and we’re going to have to figure out ways we could run the revenue rates higher.”

Another budget uncertainty includes Bill 148, the Fair Workplaces, Better Jobs Act. That act calls for a boost in the minimum wage to $15 per hour, as well as a requirement that all part-time, contract and casual workers be paid the same hourly rate as full-time staff performing the same duties. This may add between $2 million-$9 million to university expenditures.

Deakin said the university is now at a point where they need to be creative in ways to grow revenue and control expenses.

Revenue suggestions could include everything from higher tuition for professional and non-credit program courses; increasing online courses/programs; fundraising campaign; and even increasing fees on the university’s ancillary services, such as The Book Store, Continuing Studies and residences. At the moment, Food Services and Hospitality Services do not make contributions to the operating budget.

On the expenditure side, budget cuts to units, which would result in job losses, and possibly forfeiting compensation increases – which is a negotiation issue.

Deakin could not estimate how much those measures would save.

Reducing where the university currently spends money, such as research support, international aspirations, library acquisitions and student aid would also have to be looked at, Deakin added.

“How long can the government do this to us? I don’t know. We’re going to have to do something. It will be a matter of making choices and, hopefully, all of them won’t be long term,” she said, adding there needs to be campus input when it comes to making what will be major decisions.

“We need to be engaged in the conversation. We need to evaluate the things that we value the most at the university, and then figure our way through what is a downturn,” Deakin said. “We don’t want to screw up the brand; we don’t want to wreck the student experience; we don’t want to give away any of the gains we made in terms of the quality of our students. We do have options – the conversation needs to take place. What are the imperatives, what are the things we’re not going to horse trade, then figure it out, with those off the table.”