The market downturn has forced The University of Western Ontario to make additional cuts to operating budgets, put some building projects on hold and plan for the possibility of layoffs.
Relative to other universities, Western has been able to stave off much of the economic impact; however it is still feeling the crunch.
A worldwide drop in stock markets has cut or eliminated income from investments, forcing all universities to go back to their budgets for new areas to reduce spending. The impact at Western will not be known until individual budgets reflecting deeper cuts have been developed.
In a letter to all employees and a budget update released Wednesday, university administrators acknowledged the possibility of faculty and staff layoffs.
“Such (budget) reductions may necessitate lower faculty and staff numbers in some areas of the University,” states the letter signed by President Paul Davenport; Fred Longstaffe, Provost & Vice-President (Academic); Gitta Kulczycki, Vice-President (Resources & Operations); Ted Hewitt, Vice-President (Research & International Relations); and Ted Garrard, Vice-President (External).
“Our goal is to minimize the impact of these reductions through normal attrition, retirements, the potential for flexible employment arrangements, and careful scrutiny of the filling of current and future vacancies.”
The budget cuts are a result of a decline in university endowed and non-endowed funds.
Endowed funds are donations and bequests from donors with the intention that the principal – or the original value of the donation – will remain intact and only the investment income will be spent on areas the donor specifies. Non-endowed funds are drawn from a variety of sources and invested to generate revenue to support the operational needs of the university. The university is not required to keep the capital of non-endowed funds intact.
The university is in the second year of a four-year budget plan spanning from 2007-08 to 2010-11. For the final three years of that plan, the university had hoped to have investment income totaling $46.25 million – $18.55 million in 2008-09; $11.35 million in 2009-10; and $$16.35 million in 2010-11.
On Aug. 31, 2008, the non-endowed fund reserve was at $45.6 million. However the market decline has been so sharp that as of Dec. 5, 2008, the non-endowed fund reserve was projected to drop to -$15.75 million by the end of the budget year on April 30.
Recommendations will be made to the Board of Governors, as was indicated to the Senate Committee on University Planning and Senate prior to the holiday break, that the planned transfer of $18.55 million to the operating budget be withdrawn to keep the reserve in the black, says Western Provost & Vice President (Academic) Fred Longstaffe.
As a result of this revenue shortfall, the university will not be able to draw $46.25 million over the next three years for the operating budget as initially planned.
The markets have also hurt university endowments, which provide funding for student scholarships, awards and bursaries, and the salaries and benefits of 60 endowed faculty chairs.
These endowments are $17.6 million “under water” or below the total of the originally donated amounts. To salvage the investment, the university may reduce or eliminate the draws from these endowed investments.
In spite of the loss in income, Western remains committed to supporting student financial aid.
“Sustaining our levels of student financial aid remains a very high priority for Western,” says Longstaffe.
Western is looking for alternative funding sources, such as the university operating budget, to fill in the gaps. However Longstaffe says “any additional draws on the operating budget from one area will generate the need to reduce expenditures from the operating budget in other areas.”
In the case of reduced or eliminated endowment payouts, faculties will be expected to pick up the slack and pay the salaries and benefits of the endowed chairs, he adds.
Western remains determined to expand graduate education. While hope exists the province will maintain graduate expansion as a priority and fund its growth, “within the University, regardless of the status of the government funding, we are committed to our allocations in support of the graduate expansion through Western’s enrolment-based funding programs – the Enrolment Contingent Fund (ECF) and the Graduate Expansion Funds (GEF and GEF+),” states the update.
“These allocations will be made whatever the level of government funding.”
The university will also be making several reductions over the next few years.
The university is recommending to the Board of Governors the $6-million one-time funding match for Canada Foundation for Innovation (CFI) initiatives be temporarily shelved.
The university is expected to receive the results of the latest CFI competition in June, at which point “we will put in place the detailed plans needed to provide the funding support required,” says Longstaffe.
The Board of Governors will also be asked to withdraw a previously approved transfer of $12.2 million to the capital budget, which was to be used to support the Long-Range Space Plan of new construction. This will put Category 1 projects, such as renovations to the Physics and Astronomy Building, temporarily on hold.
Faculty and support units will be asked to do their part to reduce expenditures.
Each unit is expected to reduce base budgets for the next two years. Typically the base budget reduction is 3.0 per cent, but this will increase to an average of 5.5 per cent across campus. The additional reduction, allowing the university to maintain a balanced budget, may be doled out differentially amongst units.
With everyone experiencing tighter purse strings, the university is requiring all faculty and staff appointments or reappointments be approved by the appropriate vice-president and only “mission-critical” positions will be approved.
Funding from the provincial government remains uncertain. “We will have to wait and see,” says Longstaffe. However, the university is hopeful grant revenues will still be made available through the province’s Reaching Higher Plan.
University officials will provide recommendations to the Board of Governors about the endowments early this year. The Provost’s Recommendation on Faculty Budgets will be released in mid-February and this document will also include a brief report on the support unit budget recommendations.
University budget For a more detailed look at the operating budget update, visit https://uwo.ca/local_files/budget-update/Budget_Update_Jan_09_09.pdf.
A letter distributed to the Western community about the financial situation can also be viewed at https://uwo.ca/local_files/budget-update/PVP_Letter_Jan_09_09.pdf.