University plans to delete deficit by 2013

The 2011-12 operating budget plans to limit enrollment, fund faculties and solve the pension deficit

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Graphic by Janghan Hong

This fiscal year is projected to be the University’s last in deficit.

Queen’s 2011-12 operating budget features a plan to bring the current $14.2 million deficit to zero by April 30, 2013.

The budget was approved at a May 6 Board of Trustees meeting.

“The Board gave us some very definite instructions that this will be the last year of the deficit,” Vice-Principal of Finance and Administration Caroline Davis said. “We will need to focus on this and give it our priority.”

This year the deficit will be reduced to $3 million by drawing on the reserve funds from previous years. This includes $5.2 million from the $8 million Employee Future Benefit Reserve, which consists of operating funds set aside for post-retirement benefits. $6 million will be taken from the $34 million Queen’s faculty reserves.

The remaining $3 million deficit will be covered by cost savings and revenue generation in the upcoming year.

Although this is the third consecutive year that Queen’s operating budget has projected a deficit, Davis said she’s confident the University will manage.

“Queen’s has been in a difficult financial situation before and we’ve always come through, so we will again,” Davis said.

The budget includes a projected $6.3 million cost reduction and revenue generation plan that has yet to be fully developed. Without this $6.3 million, next year’s budget won’t break even.

Davis said several ideas for new sources of revenue have been proposed during sessions with University administrators, the Board of Trustees, Senate and elected alumni. Ideas from the community are also being accepted via email.

“We could have some activities on campus here in the summer time,” she said, adding that money-making initatives could include summer camps and programs for highschool students transitioning into university.

The new budget also reflects some changes the University is looking to make academically, such as limiting enrolment to stabilize growth.

In a preliminary report issued this past January, the Enrolment Planning Task Force recommended that next year only 100 extra first-year students be accepted. This is mainly due to limitations on student services and Queen’s infrastructure. Contrary to the task force’s recommendation, current numbers in the budget project an additional 320 students for the 2011-12 academic year.

The budget plans to limit student enrolment by decreasing the number of additional incoming students each year. This will affect revenue generated from tuition as well as provincial funding because it’s based on the number of students enrolled, Davis said.

By limiting enrolment, the amount of provincial funding Queen’s receives won’t increase.

Last fiscal year the revenue generated from tuition fees was $164 million, while the University received $181 million revenue from provincial grants.

In 2010-11, Queen’s received about 5.6 per cent of the Council of Ontario Universities Operating Grant, less than McMaster University and the University of Waterloo. The University of Western Ontario received the highest percentage of the grant with just above nine per cent.

Another academic initiative included in this year’s budget is the four-year Academic Initiative Fund, which funnels $2 million back into the faculties each year. Faculties have already applied for this year’s funding and have been allocated varying funds.

Davis said it’s up to faculties to decide which of their departments receive or lose funding.

This fiscal year the fund will be split, with $806,400 going towards faculties and $631,000 going towards other cash reinvestments, which includes one-time initiatives such as online course development.

“The Academic Initiative Fund really is something that is aimed at the future development of how the faculties interrelate with the students, so it should have a benefit for the students,” Davis said.

Pension deficit

The biggest challenge facing this year’s operating budget is the pension plan deficit, said Vice-Principal of Finance and Administration Caroline Davis.

Risks associated with the budget include a reliance on reserves, as payments towards the pension plan deficit are going to dramatically increase in three years time.

Due to a recent economic recession and low interest rates, Queen’s pension plan doesn’t have enough money to support the pensions of retiring employees.

A preliminary valuation done last August estimated that the University would have a liability of $325 million if all pensions were to be paid at once.

“This fiscal year the payments are $8 million only … [the government is] giving us a three year [solvency exemption] holiday with fairly small payments, but then we have to pay the whole thing spread over 10 years,” she said.

In 2016 and 2017 Queen’s will need to pay an additional $34 million towards the pension plan. Davis said that while some of this will come from reserves, Queen’s currently doesn’t have enough funding to pay the amount.

In ongoing negotiations with employee groups, the University is looking to increase the percentage that employees pay to three per cent of their pensionable earnings.

It’s projected that in 2016 a quarter of the pension plan payment will be charged to the faculties and the rest will come from the operating budget for that year.

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