As indicated in our last blog, the two of us have noticed a couple of cases where people have suggested that the university’s projected deficit is due to the administration’s “pet projects.” The idea behind these statements appears to be that the multi-year operating budget framework is inflated by unnecessary costs for things the administration wants to do, and that budget cuts would not be needed if the administration did not have these plans.
So that is the assertion. What is the reality?
Reality is that the operating budget covers the university’s core activities, where regular, predictable costs are rising faster than revenues. These cost increases, not new or special projects, are the source of the projected deficit.
So what are the areas of cost increase in the budget projection? Here are the top 3 growing or new line items that were the basis of our projected expenditure growth from 2012/13 to 2015/16, and upon which our budget adjustments to date have been based:
- growth in salaries and benefits: By far the largest element, this represents the built-in cost increases (based on employment agreements) to pay the existing complement of faculty, staff and leaders.
- pension going-concern annual payment: Pension payments are required by our regulators. This payment is required for the university to meet its pension obligations.
- capital renewal: This new line in the operating budget is for $5 million to fund RenewUS, the university’s program of maintenance and renewal for core academic buildings and begin to address the university’s deferred maintenance. The highest priorities for these funds are the Arts tower, Murray building, physics and biology.
Other, smaller increases include college and unit non-salary expense budgets, central utilities and library acquisitions.
By comparison to our expenditures, our base operating grant and tuition revenue are projected to increase by a lesser amount over the same period. The projected increases in these key revenue sources are less than the projected increases in salaries and benefits alone.
There are also a number of items that do not contribute to our projected deficit:
- There are several “flow-through” items in our budget, where expenditures are exactly matched by targeted revenues. These include new funding for the College of Medicine, new funding for the College of Nursing, health sciences new space and tuition revenue directed to colleges.
- The Academic Priorities Fund is constant at $3.5 million per year to support college and university priorities in the third planning cycle. Student scholarships and new faculty positions have been among the largest uses of these funds – but since the amount of the fund has been constant, it, too, has not contributed to growth in our projected deficit.
- Outside the operating budget, there are projects and subsidiaries like the Canadian Light Source and the Global Institute of Food Security. These do not draw significantly on the operating budget and do not contribute to the projected deficit.
So it would be fair to say the administration’s “pet projects,” based on growth in the operating budget, are to pay faculty and staff, to fund pensions and to fix existing academic buildings.
If you hear someone refer to the “administration’s pet projects,” ask them which projects they mean – and whether they are truly part of the operating budget and therefore our projected deficit.
Brett and Greg
The growth in expenditures and revenues can be found in our 2012 multi-year operating budget framework, which we have shared widely. That framework remains valuable and useful for visualizing the relationships between key drivers in the university’s budget such as major revenues and expenditures. It will be systematically updated based on 2013/14 year-end results.