University releases new budget breakdown

The 2013-2014 budget model will attempt to fix financial constraints by promoting new sources of revenue

The Provost is spearheading a new budget model in order to address the University’s unsustainable financial state.

Approximately $9.3 million in reserve funds were used to balance the University’s $445.9 million operating budget, compared to $10.3 million in reserve funds for 2012-13 and $11 million in 2011-12.

The budget, which outlines operating costs for the 2013-14 academic year, will address significant decreases in government grants given to the University to cover its operational expenses in order to ensure future budgets are financially sustainable, Provost and Vice-Principal (Academic)Alan Harrison told the Journal

via email.

The report explained that government grants represent 44 per cent of budgeted operated revenues in 2013-14.

The government of Ontario is reducing per-student operating grants and is expected to fund 600 graduate places for 2013-14.

The University is expected to see an approximately decrease of $1.6 million in government grants this year, and a permanent reduction of $3.3 million in 2014-15.

“Government grants form a significant portion of Queen’s operating revenues, and such a dependency, especially during periods of fiscal difficulty, is a major risk,” Harrison said.

He said the provincial government is spending less money on universities in order to balance their budget, resulting in Queen’s receiving fewer grants per student.

If enrolment increases throughout Ontario, the school could risk relying on diminishing government grants, he added, forcing the University to spend more of its reserve funds to cover operating costs.

“All of this helps to explain why it is crucial to diversify revenue sources, which will make us less reliant on government funding, and hence less at risk,” Harrison said.

With the new budget model, the University is hoping to create new chances for revenue, giving faculties and schools the chance to initiate new revenue-generating activities, and create their own budgets. With the new budget model, revenue that faculties and schools create through areas such as enrolment will flow directly to them, decreasing government dependency.

The new budget model integrates activity-based budgeting which provides faculties and schools the opportunity to receive funding in order to generate revenue.

Activity-based budgeting funds university initiatives based on the revenue they are expected to generate. Instead of a set amount of funding allotted to each faculty and school, additional funding is a possibility for new activities, while those that produce less revenue may receive less funding.

“The faculty will … have more to spend if it engages in an activity that will generate new revenue,” he said.

The chance at receiving a larger budget for a valuable activity may motivate faculties and schools to generate more revenue, he said.

“Faculties and schools … are in the best position to ensure they are aligning their resources with their academic priorities,” Harrison said.

Unless interest rates and investment returns increase before next summer, the school will have to make annual solvency payments of $35 million in the fall of 2015. The school’s pension plan faces concerns, Harrison added.

“Our financial projections for 2015-16 contain an unallocated amount of projected revenue that is sufficient to cover the solvency payments,” Harrison said.

The $35 million necessary to pay these solvency fees will come out of a contingency fund, which is money put aside for emergencies and unexpected economic pressures.

“If the contingency funds were used in this way, the budgets available to faculties and schools net of these solvency payments would probably be unchanged from 2013-14 levels, which would make financial management very challenging,” he added.

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