Financial Sustainability and Preliminary Budget Planning for 2018–19

In the 2017 State of the University Address, President David Turpin informed the community that Objective 22 in For the Public Good would…

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In the 2017 State of the University Address, President David Turpin informed the community that Objective 22 in For the Public GoodFor the Public Good would be a focus for us over the coming months. To achieve the ambitious aspirations to advance teaching, learning, and research outlined in the institutional strategic plan, the University of Alberta must stand on a strong financial and operational foundation. As laid out in Objective 22 of For the Public Good, we are committed to securing and stewarding the financial resources we need to deliver on our core mission, and to developing better financial planning tools and processes so that we can use those resources to the benefit of the public good.

Our challenges

The university faces significant financial challenges. Some of these challenges are external while others are internal. Externally, we are keenly aware that the Province of Alberta is managing a difficult fiscal situation, which could ultimately impact the Campus Alberta grant. The government is also in the process of a significant review of the funding formula underlying the Campus Alberta grant, and the framework for tuition and fees. As well, the university faces continued inflationary pressures in our consumption of goods and services, including the cost of utilities.

Internally, we have additional financial issues to address. Although our consolidated budget, which includes both unrestricted and restricted sources of funding, is in a positive position, on the operating budget side, the picture is different. The operating budget includes the revenues from the Campus Alberta grant and tuition, and thus constitutes the university’s main source of funds to support our academic enterprise and day-to-day operations. In this case, we have been allocating and spending more than we have received in unrestricted revenue for a number of years. As a result, a structural deficit has been growing in the university’s operating budget now reaching almost $14M for the current year. Our challenge is compounded by the fact that the university has been relying on short-term investment income to keep the deficit to this size. Investment income is subject to market volatility, and as such, reliance on short-term investment income is both unwise and unsustainable in the long-term.

Our immediate goals

Over the last several months, the senior leadership team has been reviewing the financial situation of the university and developing several strategies and tactics for addressing these pressures and challenges to ensure the university’s financial position becomes more sustainable. The immediate goals are to eliminate the structural deficit and to reduce our reliance on investment income to fund ongoing base expenditures. The long-term aim is to deploy investment income — a valuable, but variable, source of income — to one-time funding for institutional strategic initiatives.

Preliminary budget planning parameters for 2018–19

At Deans’ Council on Oct. 18, preliminary budget planning parameters for only 2018–19 were discussed and set with the senior leadership team. Underlying those preliminary planning parameters are two key assumptions about the Campus Alberta grant and tuition. Given Alberta’s challenging fiscal position, and uncertainty regarding the government’s ongoing reviews of the postsecondary education funding model and tuition framework, the university has made the conservative assumptions that there will be no increase to the Campus Alberta grant and no increase to tuition and fees over the next three years.

Based on these assumptions and the other financial challenges outlined above, deans and administrative unit leads will begin preliminary budget planning for the following reductions to their base budget allocations:

  • 2018–19–4.0% reduction
  • 2019–20–2.5% reduction
  • 2020–21–2.5% reduction

Years two (2019–20) and three (2020–21) are preliminary forecasts. See Oct 26 post for clarification.See Oct 26 post for clarification.

All members of the senior leadership team recognize that achieving these budget reductions represents a serious challenge for faculties and administrative units. However, we also recognize that failing to take action at this time would only deepen the ultimate challenge. Inaction would not only lead to continued growth of the operating budget structural deficit, but, as important, cripple our ability to take action on our strategic goals at both the institutional and faculty level. We must face the challenge and reduce our spending for the future financial sustainability of our university.

New multi-year budget planning and accountability process

To assist in this and to enhance long-term planning, budgeting, and accountability across the university, the senior leadership team has also developed a new multi-year planning and accountability framework. Deans and other senior leaders in each faculty and administrative unit/portfolio will begin by preparing and submitting a preliminary multi-year budget with preliminary plans and strategies for achieving the budget reduction targets. During November and December, these will be reviewed and discussed in detail with each dean and unit head to understand the high level implications.

Upcoming Campus Forum

There is no doubt that difficult decisions lie ahead, and we will need to work together to face our collective challenges. On November 9, 2017 at noon — 1 pm in Education North 2–115, we invite faculty, staff, and students to a campus forum where we can further discuss initiatives now underway to reach our Objective 22 goals. Please register if you are able to attend. The event will also be livestreamed.

We look forward to your engagement in these important issues over the coming weeks and months.

Thank you,

Steven Dew, Provost and Vice-President (Academic)

Gitta Kulczycki, Vice-President (Finance and Administration)

Please note: This message was revised and updated at 11:50 am on Oct 26, 2017 to reflect additional information provided in a subsequent post.a subsequent post.

Please visit the Objective 22: Financial Sustainability area of the For the Public Good website for more information on the structural deficit, multi-year budget planning and accountability framework, budget model development, and uPlan.Financial Sustainability area of the For the Public Good website for more information on the structural deficit, multi-year budget planning and accountability framework, budget model development, and uPlan.