Budget Questions and Answers

 

Updated: December 5, 2019

1. What is the impact of the 2019 provincial budget on the University of Alberta?

We will not know the full impact of the budget on the University of Alberta until we have received our formal budget letter.

However, the following preliminary details are available:

  • A $44M (6.9%) cut to the U of A’s Campus Alberta grant in this 2019-20 fiscal year.
  • Infrastructure Maintenance Program (IMP) funding, which was $35M last year, has been reduced to zero on a one-time basis for 2019-20.

Over the longer term, the budget also signals a major shift in government policy around the funding of post-secondary education, as recommended by the MacKinnon Report. These changes will be rolled out for the 2020-21 budget. Also starting next year, the tuition freeze will be lifted and institutions will be allowed to increase tuition on average by 7% each year for three years.

2. 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?

According to the accounting standards the University of Alberta is required to use, we have a reported an average $90M consolidated surplus over the last five years. This is not cash available for spending.

3. 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?

Most of the consolidated surplus consists of funds that are restricted. From 2014-15 onward, the Government of Alberta required that we reflect endowment contributions and endowment capitalized investment income as part of our surplus.  It is important to understand that 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. The consolidated surplus also includes restricted funds that exist in our operating budget, including employee future benefits, ancillary services (which are self-funded), and carry forwards held by faculties and units. Any residual funds in those years were expended to invest in capital, internal research projects and creation of board-approved endowments.

As a consequence, the surplus as reported in consolidated financial statements is not cash available for spending.

4. How will the University of Alberta address the in-year reduction of $79M for 2019-20?

We are absorbing as much of the cut at the institutional level as possible, and applying the residual amount differentially between the faculties and academic support units. At the institutional level, we have cancelled all possible maintenance and infrastructure projects, drawn upon limited financial reserves for investments (pending the approval of the Board) and applied our small contingency fund. These actions total $34M. The remaining $45M shortfall will be handled through a one-time, in-year cut of 4.7% to the faculties and an average in-year cut of 8.0% to the academic support units (applied differentially). 

5. Will the cuts be applied across-the-board?

No. Faculties must deal with a 4.7% cut. Academic support units face an average cut of 8%, applied differentially.

6. What about the coming year—what are the plans for 2020-21?

A detailed look at preliminary planning parameters for 2020-21 and the following two years is available here.

Overall, the following preliminary planning parameters have been set for the next three years:

  • 2020-21: 
    • -9.1% average reduction for faculties, which may be reduced by the impact of increasing tuition
    • -9.4% average reduction for academic support units 
  • 2021-22 and 2022-23: -5% reduction per year to all grant funded portions allocated to faculties and academic support units in the new budget model

Please note: 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.

 

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

There are several areas where we need clarification. This includes future enrollment targets, the magnitude and implications of cuts to research agencies, budget impact on clinical services, new mandate for labour negotiations, elements and impact of the new provincial funding model, and government receptivity for proposals for extraordinary tuition increases.

8. What will be done to address the cut for 2019-2020?

The university will endeavor to address as much of the cut through central funds as possible. This will include actions such as the immediate cancellation of some deferred maintenance contracts planned for this year, using a modest in-year operating surplus, and seeking board approval for drawing on our investment reserve to help in the short-term. These actions will help to reduce the burden by about a half. The residual will be allocated as a one-time cut to faculties and units. Final decisions for 2019-2020 will be made in early November and planning for 2020-21 will begin in mid-November.

9. Will tuition increase in future?

The provincial government has decided that students should bear a higher proportion of the cost of postsecondary education and therefore announced that the tuition freeze will be lifted in each of the next three years. Averaged over all programs, tuition cannot increase by more than 7% in each of the next three years. It is our intention to take advantage of this new flexibility in setting tuition increases.

Although raising tuition will mitigate some of the reduction to the Campus Alberta grant, we will not put all of the burden on our students or their families. We are committed to setting aside a meaningful portion of incremental tuition rate revenue to establish a significant needs-based bursary program for our most needy students. We will also continue to urge government to increase their support for needs-based financial assistance in this province.

10. What is the university doing to help students?

We are committed to setting aside a portion of incremental tuition rate revenue to augment our needs-based bursary program for our most needy students. We will continue to urge government to increase their support for needs-based financial assistance for Albertan students.

11. Will there by layoffs?

Yes. Given that our greatest expenditures are on salaries and benefits, we know layoffs will be necessary, in addition to the closing of positions that are currently vacant, or become vacant due to attrition. Because we anticipated these cuts, many faculties and academic support units have not been filling positions over this year; this has helped to create some savings that are now being used to address the in-year cuts. However, this will not be enough to meet reductions. As more layoffs become necessary, we will not act reflexively, but through careful, considered actions that are in the best interests of the long-term health of our university. We will, of course, continue to respect our collective agreements.

12. Will there be a hiring freeze?

Even in tight financial circumstances some hiring must occur, so a hard freeze will not be implemented.  Nevertheless, in the absence of government direction on future enrolment targets, we will need to be extremely prudent about hiring.  To ensure only critical hiring is carried out in the coming months, no position can be advertised without either decanal or vice-presidential approval.

13. Will there be salary reductions?

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

14. Will there be voluntary severance or voluntary retirement programs?

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

15. Will these budget challenges affect the presidential search?

No. The search for President Turpin’s successor will continue as planned.

16. This is a significant cut—how will the university manage it?

Deans, chairs, vice-presidents and others will work in a transparent and collaborative manner 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.

As we move into the planning cycle for our 2020-21 budget, we have developed a strong toolkit that will enable us to make the best decisions possible. This toolkit includes:

  • For the Public Good—strategic goals which are not resource-dependent
  • 3-year budget planning
  • Prudent unit- and faculty-level planning
  • New activities-based budget model that allocates our resources to mission-aligned activities and provides the transparency senior leadership needs to see how potential changes in enrolment, tuition and research activity could affect faculty budgets over time
  • Administrative processes benchmarking initiative
  • Data warehouse and data dashboards
  • Completion of major reviews of our bicameral governance system, we have the decision-making channels we need to make effective, strategic decisions together
  • Asset Management Strategy
  • Space utilization and classroom optimization
  • Philanthropic/advancement strategy which has resulted in record totals in the last four years

17. 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, and as a result, must address the 2019-20 cuts by finding efficiencies, applying savings, and reducing expenditures.

In the longer term, the government will be lifting the freeze on tuition as of Sept 2020, which could provide an increased revenue stream; however, it is very important to understand that this will not replace the full extent of the cuts. The government needs to provide further direction on enrolment flexibility and targets to fully understand the potential of this lever.

In addition to tuition, some other 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

18. 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.

19. Is the university considering the consolidation of faculties?

Given a cut of this magnitude, we must be open to considering all options; however, this is not a step we could take lightly.

20. 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 must consider all options, including changes to programs and curriculum. Such changes would continue to go through all normal governance processes and procedures for program and course closures and allows for students to receive adequate notice and support through such a change.

21. Why is the university considering these kind 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 worldwide. 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.

22. How will the university continue to maintain its aging infrastructure, especially in light of this year’s cut? 

We continue to look at how we can reduce the size and operating cost of our infrastructure with the lowest impact to the university community. For the remainder of this budget cycle we have cancelled a number of deferred maintenance contracts where possible to cut costs. 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 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.

23. 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 needs and may not be salvageable or financially viable.

24. 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 through the Governments 2019 Capital Plan. These funds are provided through specific government grants and are ‘restricted’. This means they can only be used for government approved renovations and upgrades which are both targeted at reducing deferred maintenance, improving sustainable asset utilization, and reducing the risk of critical failure. The multi-year Lister Classic Towers modernization project has been funded with the government’s approval through a mortgage. Again approval for this was predicated on all of the funds being restricted to the use that Cabinet approved.

25. Given these changes in funding, we will 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 senior leadership needs to see how potential changes in enrolment, tuition, and research activity could affect faculty budgets over time.

26. How can the university continue to move forward on For the Public Good strategic initiatives?

This is precisely the time when such investment is critically important. We must continue to invest in strategic priorities that strengthen our areas of excellence and position us to attract new resources to support our research and teaching mission.

27. 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.

28. What are the budget implications on research?

We are still in the process of assessing the provincial budget’s impact on research and innovation, and the government’s funding agencies (Alberta Innovates).

It is important to note that the loss of all Infrastructure Management Program (IMP) funds in this year poses particular challenges to our research enterprise. For example, keeping our labs and equipment up to date requires buildings to be properly configured, renovated and maintained. Without IMP, new equipment may not have a place to go. Reliable operation of existing labs may become challenging.

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

We are still in the process of assessing the provincial budget’s impact on clinical funding. 

30. 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).  

31. 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.  

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

The University of Alberta enjoys one of the lowest 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.

33. 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.

34. 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?

It is too soon to say how eligibility for financial aid may change. We are committed to ensuring that we assess and disburse these funds in a way that supports those students with the greatest need.

35. Why are faculties and units allowed to retain carry forward savings and unspent endowment earnings with no penalty?

Faculties and units have made deliberate decisions on their spending; a number have chosen to set aside funds for particular future initiatives, for example a start-up grant, a renovation for a new researcher, savings dollars to replace a piece of equipment or upgrade systems, and so on. Others have chosen to expend their budget allocations.  We have respected the choices that leaders have made in how they spend their monies; it would create significant disincentives to do otherwise.

36. 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.

37. 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.  On a preliminary basis, we have examined this idea and are uncertain whether or not it is operationally viable. 

38. 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