Budget Questions and Answers

 

Updated: April 1, 2020

What is the impact of the 2020 provincial budget on the University of Alberta?

The University of Alberta received a 11% cut to provincial funding in the Government of Alberta’s 2020 budget. This reduction in provincial funding includes an overall 8.9% cut to our Campus Alberta grant and another 2% reduction from the elimination of targeted enrolment expansion as a separately funded item.

The total 11% reduction to our 2020-21 budget is in addition to a 6.9% cut applied to 2019-20 funding levels. The total reduction is $110.3 million over the two years.

Did the U of A need to revise its budget for March 31, 2020?

Yes. The university had prepared a budget assuming a 5 percent cut to 2020-21 provincial funding. That proposed budget was scheduled to go before the Board of Governors on March 13. The budget has since been revised in light of the province’s 2020 budget, which included a much deeper than anticipated cut to the U of A (11 percent instead of 5). The revised budget has now been approved by the Board on March 26, 2020.

Does the U of A have to present a balanced budget to the government? 

According to provincial legislation, the university is required to present a balanced budget. A  request made with other Alberta post-secondaries to the government to have severance costs deficit-financed was not successful.

How does the U of A plan to balance the budget? Will cuts be applied across-the-board?

Our priority is to maintain high-quality education and research.  The budget includes an average 12.3% reduction to faculties, offset by tuition that starts to flow to faculties in the new budget model, bringing the net reduction to 8.3%.  In the case of the academic support units, an average reduction of 12.8% has been differentially applied. The budget also raises tuition an average 7%. When the budget is rolled out on April 1, each faculty will receive a differential cut as per the implementation of the new budget model.

What does the university still need to learn to fully understand the implications of the provincial budget?

The key area of uncertainty is related to new performance-based funding metrics. 

As the Government signaled in the October budget, work to implement the performance-based funding model is currently underway. Fifteen percent of the university’s Campus Alberta grant in 2020-21 is at risk ($82.3M), relative to our performance on four metrics. The first year of the model sees the inclusion of a consolidated total expenditure target, an administrative expense ratio target, enrolment targets (domestic, international and indigenous students), and expectations regarding non-Alberta government research revenues. Failure to reach the targets within stipulated tolerances will result in a loss of funding, to be applied in the 2021-22 year. These metrics form part of an Investment Management Agreement to be signed between Alberta Advanced Education and each post-secondary institution. The Minister recently advised that with the disruptions caused by COVID-19, the final implementation of the IMA is being deferred to May 31. 

Future years will see the addition of more metrics, with more funding at risk. The amount will increase to 25% of the Campus Alberta Grant at risk for 2021-22 and to 40% at risk for 2022-23 and onwards.

Will tuition increase in future?

Yes. The provincial government has determined that students should bear a higher proportion of the cost of postsecondary education and therefore announced that the domestic tuition freeze will be lifted for the next three years, starting in September 2020. 

2020-21 tuition proposals were developed in consultation with the Students’ Union and Graduate Students’ Association. They include an average 7% increase, with the following exceptions:

  • Current (admitted prior to Sept 2020) international undergraduate and course-based graduate students (4%)
  • Current (admitted prior to Sept 2020) domestic and international thesis-based graduate students (7% with rebate that will reduce increase to 2.67%)
  • Students in specific course-based Master’s programs

What is the university doing to help students?

We recognize that an average 7% tuition increase is significant for students, and we cannot expect those students who face financial hardships to shoulder the burden without assistance. As a result, the university will also be increasing student financial aid significantly. For 2020-21,15% of the net increase to domestic tuition will be dedicated to student financial support, and we will continue to direct 7.55% of all international tuition to support international students. We are also expanding efforts to grow philanthropic support for student awards and bursaries.

Will there be layoffs?

Yes. With the $110.3M cut to the university’s operating budget, there have been and will continue to be job losses. In the fiscal year ending March 31, 2020, we project a total of 400 lost jobs in 2019-20 through attrition, lay offs, and retirements. For 2020-21, we estimate a loss of approximately 635 additional positions.

Will there be a hiring freeze?

Yes, there will be a freeze on hiring, understanding that there will be (very) limited circumstances where a recruitment must proceed. 

Will there be salary reductions?

Any changes to compensation would need to be negotiated with our associations.

Will there be voluntary severance or voluntary retirement programs?

No. Reviews of past programs indicate anticipated savings were not achieved.

This is a major cut—how will the university manage it?

Deans, chairs, vice-presidents and others will work to make decisions in the best interests of the long-term health of the university. Many solutions and decisions need to be made at the departmental, faculty, and unit level. Our primary goal will be to focus on protecting the quality of the research and learning environment at the U of A. Other institutions have made these kinds of cuts in the past, and we will be able to learn from them.

Options that are being considered and/or implemented:

  • Imposing a hiring freeze
  • Reducing staffing in administrative functions
  • Using information from the first set of data from our participation in an international administrative benchmarking program to improve efficiency and effectiveness in administrative processes
  • Curtailing travel and hosting expenditures 
  • Revisiting service agreements with contractors, pushing for savings and reduced costs 
  • Reducing caretaking costs, moving to lower minimum required standards (cleaning protocols in response to COVID will continue as needed)
  • Deferring energy management program investments at least for 2020-21 
  • Consolidating one or more library locations 
  • Deferring some capital projects funded from operating sources, at least for 2020-21 
  • Reducing our leased space and repatriating groups/units back to university owned buildings 
  • Using a data-driven approach to look at metrics in our classrooms and realign program and section offerings where it makes sense to do so 
  • Increasing revenues through a variety of strategies

What is the university doing to increase alternative revenues?

We are actively exploring additional revenue opportunities. In the short term, though, we have few options for increasing revenues aside from raising tuition and tuition increases have been approved for 2020-21.  In addition to tuition, some future sources of revenue could be:

  • Increased enrolments—both domestic and international
  • Land Trust (although this will take some time to achieve)
  • Course-based, professional masters degrees (market-priced)
  • Encouraging other revenue generating activities where appropriate

What impact with the government’s new Investment Management Agreements or performance-based funding have on the U of A’s budget? 

This is still unclear. As the Government signaled in the October budget, work to implement the performance-based funding model is currently underway. Fifteen percent of the university’s Campus Alberta grant in 2020-21 is at risk, relative to our performance on four metrics. The first year of the model sees the inclusion of a consolidated total expenditure target, an administrative expense ratio target, enrolment targets (domestic, international and indigenous students), and expectations regarding non-Alberta government research revenues. Failure to reach the targets within stipulated tolerances will result in a loss of funding, to be applied in the 2021-22 year. These metrics form part of an Investment Management Agreement to be signed between Alberta Advanced Education and each post-secondary institution. The Minister recently advised that with the disruptions caused by COVID-19, the final implementation of the IMA is being deferred to May 31.  

Future years will see the addition of more metrics, with more funding at risk. The amount will increase to 25% of the Campus Alberta Grant at risk for 2021-22 and to 40% at risk for 2022-23 and onwards.

The Government of Alberta has indicated that the U of A has had a $90M surplus, averaged over 2013-14 through 2017-18. Is this true?

Alberta has financial accounting rules that do not accurately represent the university operating surplus, chiefly because the government requires the university to include endowments as part of surplus.  Endowments are gifts from donors that are legally required to be maintained in perpetuity, with investment income to be generated to support spending allocations directed to the purpose for which the donation (endowment) was provided, and to preserve the economic value of the spending in perpetuity. Please refer to the statement, “The Facts on the University of Alberta Surplus.”

Why don’t we use this surplus to cover the government reductions and pay for any increases in expenses, such as increases in salaries and benefits?

The surplus is not an accurate depiction of the university’s position as noted above. There is not a surplus for the university to otherwise apply.

Does the university plan to increase the number of international students as a way of increasing operating revenues?

Increasing international enrolment at tuition levels that cover the full cost of the program could help us mitigate losses in government grant revenue, while also providing high quality education to students from countries where access to higher education is limited. However, any increase in enrolment would need to be balanced by increases in international student supports and services and be done in a manner that does not displace domestic students.

What additional financial pressures could the university face due to COVID-19?

Protecting the health and safety of our community in the face of the COVID-19 pandemic has led to a number of emergency measures being put in place. All needed resources have been devoted to support this effort, including enhanced cleaning protocols. In addition to these immediate pressures, there are a number of longer-term factors that could significantly affect the finances of the university. It is important to note that there is too much uncertainty at this time to be able to determine or even predict the eventual outcome.  However, some areas where we could see change include:

  • Declines in investment earnings caused by enormous volatility in the markets
  • Risks to international student enrolment and tuition if borders remain closed into September 2020
  • Reduction in ancillary revenues, such as parking and residences, due to move to remote delivery of most university activities and services
  • Decrease in gifts and donations as donors, businesses, and organizations face financial constraints
  • Decrease in research funding as government, industry, and other partners deal with reduced resources

Is the university considering the consolidation of faculties?

Given a cut of this magnitude, we must be open to considering all options including major academic restructuring.

Will the university be cutting programs and courses?

Programs and courses are created and closed on a routine basis. Given the magnitude of the reductions, we will continue to make  changes to programs and curriculum. Such changes would continue to go through all normal governance processes and procedures for program and course closures and allow for students to receive adequate notice and support through such a change.

Why is the university considering these kinds of structural changes?

The provincial government is implementing the three central recommendations for postsecondary education in the MacKinnon Report. We must recognize that these changes are part of a larger global trend in how public universities are funded. We can learn from our peer institutions who have already made these kinds of changes in response to similar pressures. They have maintained their excellence in teaching and research, and do so with, in most cases, significantly lower levels of public funding. We have a responsibility to make decisions now that will ensure that the U of A is a stronger, more sustainable institution 5 years from today.

How will the university continue to maintain its aging infrastructure? 

In Budget 2020, the government restored infrastructure maintenance funding to 2018/19 levels. This is a critical pool of funding that must be and will be applied to deferred maintenance but we must continue to look at how we can reduce the size of our infrastructure with the lowest impact to the university community. The university's integrated asset management strategy, Taking Care of our Campuses, acts as a roadmap to navigate our best options when it comes to determining the role of buildings and future maintenance projects. The strategy emphasizes the importance of evidence-based decisions to reduce risk to our infrastructure, ensuring that we continue to focus on our core mission of teaching and research.

Will the university be closing facilities?

In June 2019, the university Board of Governors on the recommendation of the General Faculties Council approved an Integrated Asset Management Strategy to maximize the use of good space, minimize the potential for critical failures that would affect the core mission, reduce operating costs and start to reduce our significant deferred maintenance burden. This strategy will guide any future decisions over the closing or mothballing of facilities. F&O are actively working to better utilize our best facilities and we will likely discover that not all of our current assets are suited to today’s or more importantly, tomorrow's needs and may not be salvageable or financially viable.

To date, the following buildings have been or will be closed or decommissioned: Alumni House, Michener Park, Ronning House at Augustana.

Will existing capital projects continue or could we use that funding to mitigate the cuts?

The Dentistry Pharmacy renovation and the Garneau electrical upgrade continue to be funded by the government. These funds are provided through specific government grants and are ‘restricted’. This means they can only be used for these specific  approved projects.

Given these changes in funding will we continue with the implementation of the budget model?

Yes. The budget model is a critical tool that will assist us with planning. Because it allocates our resources to mission-aligned activities, it provides the transparency we  need to see how potential changes in enrolment, tuition, and research activity could affect faculty budgets over time.

How can philanthropy assist with a budget cut?

Although donations often come as restricted funding, philanthropy is vital. It helps us be competitive in the global market for top talent and gives us the added capacity to tackle complex problems. Donor investment puts our students, teachers and researchers at the forefront of discovery and innovation, and inspires and equips them to turn new knowledge into real solutions - to the benefit of society in Alberta, Canada and the world. Philanthropy supports students in accessing life-changing education, and in achieving outstanding results.

What are the budget implications on research?

The provincial government is cutting spending across most ministries and agencies. This in turn results in reduced research funding that would otherwise be provided by these organizations. For example, Alberta Innovates was cut an additional $11M.

What are the budget implications on clinical funding from provincial sources?

The provincial budget maintained health spending at its current levels, but has engaged in a review of how healthcare is delivered. At this point in time, funding for clinical activities at the University of Alberta is continuing.

Can benefits be restructured to help with the budget cuts?

Yes. However, any change to benefits must be negotiated between the Board and each of the associations for academic staff (AASUA) and support staff (NASA). 

Will the university’s budget affect our defined benefit pension plans in any way?

No. The university participates in two multi-employer defined benefit pension plans: the Universities of Alberta Pension Plan (UAPP) and the Public Service Pension Plan (PSPP).  It is useful to note that the terms and provisions of those pension plans may only be changed with very defined processes established within each plan.

If enrolment grows but hiring does not, how will the growth be managed?

The University of Alberta has one of the lower student/faculty ratios in the U15.  Deans and chairs will review curriculum structure and the teaching loads in their units.  In most cases, over the coming years, the student/faculty ratio will rise, class size will increase and fewer sections and courses will be offered.  The curriculum restructuring required will be undertaken with the goal of maintaining a high quality learning environment. Growth will take into account program flexibility and capacity.

Can we consider imposing a "carbon tax" within the university, imposing cuts or penalties to salaries of staff that have a parking pass, while allocating those funds to enhanced green infrastructure upgrades?

No. Salaries are governed by contractual agreements, and the university cannot unilaterally impose cuts or penalties to them.

Along with increasing needs-based student financial aid, will the university broaden the qualifications for such aid, given that more students may not be able to manage the tuition increases?

As we increase the available pool of financial aid resources to address student needs, supported by the tuition set aside for student financial support recently approved by the Board,  we will ensure that the means by which we assess and disburse these funds results in supporting those students with the greatest need. A recent example is the current modification to our needs based funding application that allows students to provide information regarding any financial impacts arising from the COVID-19 pandemic. This additional information allows us to ensure targeted support for these unique circumstances.

Would an increase in parking revenue contribute to reducing the budget deficit?

No. Parking revenues contribute to the operations of ancillaries at the university.  We expect ancillary operations to cover all of their own costs, including establishing reserves for operations and capital improvements.  Ancillary services receive no funding other than what they charge the users directly for the services provided.

Would the university consider a voluntary reduced hours and salary work week for its regular continuing employees as a cost saving measure?

All ideas are welcomed and will be considered. 

This is a stressful time. Where can we go for support? 

For more information on the support resources available for all staff, please see:

Employee and Family Assistance Program (EFAP)

Resources for health and well-being 

Life events support