By McGill Reporter Staff
The significant actions McGill has taken in response to severe reductions in tuition increases and government subsidies have begun to show encouraging signs, Provost Anthony C. Masi and Vice-Principal (Administration and Finance) Michael Di Grappa told Senate on Wednesday.
They emphasized that responsibly balancing the University’s budget, which must contain a surplus big enough to reduce the debt incurred as the result of government cutbacks, remains the essential objective for fiscal year 2015. Masi and Di Grappa provided a comprehensive update on McGill’s financial situation and a first look at parameters being used to build the budget for next year. They also indicated that efforts to stay on track must continue because the University’s funding climate remains precarious.
Di Grappa, presented highlights from the last fiscal year (FY2013). He highlighted salient figures from the University’s audited financial statements, which include operating, restricted, capital and endowed funds. Revenues totaled $1.18 billion while expenditures reached $1.14 billion. The small surplus was generated through earmarked restricted funds and endowments. Due to the government cuts, the operating budget, however, registered a significant cash shortfall in FY2013. Di Grappa said that the main indicators and trends last year included a slight increase in undergraduate enrollment, no increases in government capital funding, and McGill’s continued investment in student aid. He indicated that the greatest challenges remain pension liabilities, pay equity, the cost of McGill’s deferred maintenance, a drop in federal funding for indirect research costs, and uncertain provincial funding.
Masi followed by presenting the preliminary forecast for this year’s fiscal results. He indicated that thus far all signs point to the fact that the University will be on target to meet its forecasted $10.4-million annual deficit thanks to $43.5 million in cost-reduction measures. A more accurate forecast will be available in winter and will be used to generate the preliminary budget for FY2015.
Masi indicated that the University closed last fiscal year with a $13.1-million annual deficit. The Budget Book for FY2013 originally estimated that deficit would only be $7.4 million. That projection changed in December 2012 to $29.8 million. The actual closing deficit, due in part to a lower pension liability valuation, is relatively good news for the University’s accumulated cash deficit. Putting this number into context, Masi underlined that “all other things being equal, with a $13.1-million deficit last year and an estimated $10.4-million deficit this year, McGill will have added close to $25 million to its accumulated cash deficit.” This represents a 25 per cent increase in just two years. “To meet government debt repayment requirements, we must pay this amount back by generating surpluses of at least $5 million per year over the next five years,” he added.
Di Grappa reiterated that thanks to this year’s cost-reduction measures “we are moving well on our target for the year while other universities are starting to realise now that the cuts imposed in 2012 may indeed be permanent when all things are taken into account.” Masi underlined that the objective of the measures is to adjust the University’s spending to the currently volatile funding reality.
Looking ahead, Masi said that promised reinvestment by Quebec is supposed to start next year, but the actual amounts have yet to be confirmed by the government. There are clear signs however that the government will make changes to the formula that allocates funding among Quebec universities. “We do not know how much money McGill might receive under this new formula,” Masi indicated “but we continue to lobby the government to make sure it allows us to reach our McGill-specific objectives.” For FY2015 planning purposes, he said that the University is being conservative regarding these reinvestment figures. Masi also said that the financial insecurity is augmented by another major stumbling block, Quebec’s economic performance. “The government has maintained that that the reinvestment will depend on Quebec’s economic performance. Just this past week, the government announced it is already registering a $2.5-billion shortfall and will not be able to balance its budget this year – or next.”
Whichever way McGill’s funding will look like next year, Masi underlined that the University will allocate it based on its main strategic objectives. Those include targeted initiatives to advance McGill’s academic success, enhancing educational, research and extra-curricular life and learning for students at all levels. When asked how realistic it is for McGill to follow ASAP 2012 priorities while the University continues to face a difficult funding situation, the Provost indicated that the University’s current budgeting focuses on main core priorities. “If the government fulfills even a portion of its promised reinvestment, we will be able to meet those priorities.” He said however that the University must step-up its efforts in diversifying its sources of revenue. “Over the last five years for instance, the government has allowed us to deregulate some disciplines and we will continue to work with the government so that we can gain more flexibility to help us reach our mission-specific goals. We will also continue to make sure that we safeguard our ability to providing aid for students who need it.”
Masi addressed the hardship felt in certain units across the University as a result of this year’s cost-reduction measures. “We are working with units to have a clear on-the ground picture as the situation unfolds and are developing strategies to address emerging challenges, including redeployment of personnel to the hardest hit areas and services.” When asked how should McGill build contingencies to shield the University from fluctuating outside funding, the Provost replied that “the best long-term way to do that is to pay down our accumulated cash deficit and generate surpluses.”