From the President’s Desk: 2020–21 Budget Planning Parameters

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Last week on this blog, I provided a brief update on planning for the 2019–20 budget.

Today, I am following up with more details on budget planning parameters for 2020–21. As I mentioned in my earlier post earlier, Provost and Vice-President (Academic) Steven Dew and Vice-President (Finance and Administration) Gitta Kulczycki have initiated the university’s usual three year budget planning process and have been working with deans, vice-presidents and other senior leaders to assess anticipated changes to both revenues and expenses in order to set preliminary planning parameters for the next three years. As always, these parameters are based on our best estimation of revenues and expenses given available information.

This year, we have a heightened level of uncertainty as we move forward with the planning process because there is still much we need to learn — chiefly around enrolment targets, as well as new performance-based funding criteria for post-secondary institutions and the U of A specifically. Keeping in mind this uncertainty, we have considered a number of factors in developing our budget assumptions.

First, let’s review the university’s two major sources of operating revenue. The U of A’s Campus Alberta grant reduction was 6.9 % for 2019–20. The Board of Governors approved the 2019–20 operating budget in March of 2019, and as is the university’s practice, once the budget is approved we do not reopen and amend it. Instead we will be making one-time in-year cuts (4.7% to faculties and an average of 8%, applied differentially, to academic support units) and applying the 6.9% as a base grant cut in developing the 2020–21 operating budget, to be presented to the Board of Governors in March of 2020.

Although we do not yet know how the U of A’s 2020–21 provincial grant will be impacted by the government’s next budget, we have assumed from information we have to date that the government plans an average cut to Campus Alberta grants across the system of 5% annually in each of the next three years. This, coupled with the base grant cut of 6.9% in 2019–20, means that we are assuming a total reduction of 11.9% to the university’s institutional operating base grant for 2020–21.

To help offset this assumed reduction are assumed increases in tuition, the university’s other main source of operating revenue. The province has lifted the tuition freeze and will allow for increases up to an average of 7% for the next three years. Solely for the purposes of setting planning parameters, we have assumed 7% increases on average to both domestic and international tuition for the next three years — except for international students entering in 2020 with the new program-based guaranteed tuition fees. A meaningful portion of tuition increases will be set aside to strengthen student financial aid. It is critical that we do this, as we cannot expect students in financial need to shoulder the burden of these challenges without assistance.

It is important to note that these are planning assumptions.assumptions. Actual tuition increases for 2020–21 will be developed through the normal annual consultation process, involving representatives from the Students’ Union, Graduate Students’ Association, and senior administration. Proposals developed through this process move through GFC and Board governance committees before coming to the Board for a final decision as part of the passing of the whole budget in March 2020.

On the expense side, faculties and units will continue to be responsible for any across-the-board changes to salaries, benefits, and merit (as per collective agreements with our associations). Typical inflationary pressures on supplies and other purchases should be anticipated at an annual 2% increase.

Taking all of these factors and assumptions into consideration, the following preliminary planning parameters have been set for the next three years:

For 2020–21:

  • -9.1% average reduction for faculties, which will be offset by the impact of increasing tuition
  • -9.4% average reduction for academic support units

For 2021–22 and 2022–23:

  • -5% reduction per year to all Campus Alberta grant funded portions allocated to faculties and academic support units in the new budget model

Please note that with the implementation of the new budget model beginning April 1, 2020, the reductions outlined in these preliminary planning parameters will affect faculties and academic support units differentially. As we evolve in the coming months and years, our priority is to provide an outstanding learning and research environment, with high quality academic support services underpinning the delivery of our core mission.

There is no doubt that these reductions are serious and significant, and we will need to make difficult decisions. I want to assure you that the executive team and the Board continue to work closely with government officials to ensure that they understand the reality of our financial situation and the major impacts that should be anticipated in the wake of these reductions. It is essential that we are given the information and the time we need to make strategic, responsible decisions in the best interests of our students and of this province.

However, as I said in my State of the University Address, while we must continue to advocate for our core values, we have a responsibility to work together to respond to our changing context. Deans, VPs, and other unit leaders have now received multi-year planning packages and will begin the process of planning for and implementing changes.

We stand on a strong foundation. Our programs are in demand and we have room to grow. We have developed tools that will help us make evidence-based decisions. And, we have plans for attracting alternative sources of revenue, which we could operationalize quickly if government removes related barriers. These include the U of A property trust and professional, course-based masters programs. And, we will continue to build on the strong philanthropic support we have enjoyed over the years.

I recognize — as do your senior leadership teams — that the coming weeks and months will not be easy. We ask for your active engagement in meeting these challenges and I would like to thank everyone who has sent us ideas through our suggestion form. In partnership with NASA, we have moved forward with a suggestion that we received from several of you — we have initiated a voluntary winter leave. More information on this will be disseminated shortly.

Each of us has a role. Together, we must devise innovative, collaborative solutions to find efficiencies both within our faculties, departments, and units, as well as across the institution to ensure the long-term well-being of this great university.

David H. Turpin
President and Vice-Chancellor

For more information on the budget, please visit our resource planning site.resource planning site.