Many questions have been asked of us about the projected shortfall in university resources. One of the main questions has been “Why do we continue to speak about the $44.5M projected deficit when we have reduced this gap and the university’s financial situation has changed since 2012?”
This question requires a response in two areas, firstly about us continuing to communicate about a $44.5M gap when we have taken actions to reduce this gap, and secondly that a Multi-Year Budget Forecast (MYBF) developed in 2012 requires periodic updating to reflect the current reality.
On the first question, we have chosen to be consistent in communications and use the original $44.5 million as a reference point and talk about our progress towards it, rather than issue constantly changing goals. In other words, when our budget improves (whether due to actions or to updating of projections based on new information) we will express this as reducing the gap rather than changing the target. Each approach (reporting progress or changing the target) has merits and disadvantages, but in the end the same information will be reported – for example, either we will have made $44.5 million progress by 2016, or we will have reduced the gap to $0.
By way of background, in April 2012 we identified a significant projected annual gap between revenue and expenditures of $44.5 million by 2016. This was a result of an initial $10M forecasted gap; the March 2012 budget announcement that our grant for 2012-13 was 2.1% rather than the 5.8% requested; and indications from environmental scans that we would likely be receiving no more than 2% increases over the next few years in our operating grant. We revised the MYBF to reflect this new information, with the result being a $44.5M gap. As of April 30, 2013 we have reduced this gap by $15.5M in permanent savings. These savings incorporate planned actions and adjustments resulting from updated assumptions; the largest component (about two-thirds of the total) was savings from workforce planning in administrative positions. We have continued to express the projected gap to 2016 as $44.5M with $15.5M of permanent savings to date, or if one prefers we could say the remaining gap is $29M.
It is important to note that the MYBF represents a financial projection based on the best assumptions available. It is also important to understand that the budgetary actions we are taking are to avoid a large forecasted deficit. This forecast continues to be relevant as we make periodic adjustments to the MYBF and we have incorporated within the savings the amounts for actions taken and for changes in assumptions to date. However, as we are reaching the halfway point of the planning period in April 2014, we are committed to a systematic revision and new release of the MYBF in order to reflect all changes in relevant parameters. The updating of the MYBF in 2014 will enable the university to validate the projections to ensure they are as accurate and up-to-date as possible.
To view the original Multi-Year Budget Framework (2012-2016), please click here.