Each year the University of Alberta spends approximately $1.9 billion in support of its teaching, research and community services mission. The funds for this spending come from numerous sources and go towards thousands of costs, from salaries to software.
This is a guide to where the university's money comes from, where it is spent, who decides where it is spent and what rules are applied to guide these decisions.
Sources of revenue
- The university is a public institution, so its largest investor is the Alberta taxpayer. Approximately 52 percent of the university's funding comes from the provincial government.
- Tuition and fees -- the revenue from students -- represents the second largest source of revenue, at approximately 17 percent. This includes non-instructional fees for things such as athletics and health services.
- Revenue from the sale of services and products represents 11 percent of the institution's revenue. This revenue comes from such things as parking, residence fees and the bookstore, as well as cost-recovery programs within faculties, such as summer camps.
Other revenue comes from the federal government and other funding agencies (such as research funding), grants and donations, and investment income.
Not quite as simple as it seems: restricted funds
One might imagine that the budget is a single pot of money that the university can simply draw upon to apply to the priority of the day. It’s not that simple, however: many millions of those dollars can only be used for specific purposes that are spelled out by the individuals and organizations that provide the money. Those dollars are referred to as “restricted funds.” Around 43 percent of the university’s total revenue is restricted funding. Examples of restricted funds include:
- New university buildings: Individual buildings, which can cost up to hundreds of millions of dollars, are paid for primarily by the provincial government. Funds provided for a specific building must only be used for the construction of that particular building.
- Research revenue: Governments and other agencies provide money to the university to carry out research in specific areas. A grant is typically provided to a particular researcher to carry out particular research. That money shows up as university revenue, but it cannot be used, for example, to fund a new academic program or to repair an aging building.
- Philanthropic donations: The institution benefits from thousands of individuals and organizations that make philanthropic gifts to the university and members of its community. In most cases, such as those involving student scholarships and research grants, the giver of the gift specifies how the money can be used.
Unrestricted operating budgets
42 percent of the university’s consolidated budget is restricted. The unrestricted portion, 58 percent, constitutes the general operating budget, which the university can deploy as required. Note, however, that even among the general operating budget there are “non-discretionary” costs, such as the costs of electricity, heating and cooling, and insurance.
Where the money is spent
The consolidated budget of $1.9 billion is spent in several primary areas:
- Salaries and benefits represent the most significant expenditure. Of the $1.9 billion, just over 60 percent goes toward salaries and benefits.
- The next most significant expenditure, at around 16 percent, is for materials, supplies and services. These provide essential support across the university, from information technology to insurance, from libraries to teaching lab supplies.The remaining areas of expenditure include amortization of capital assets (the gradual expensing of an asset over a fixed number of years), utilities (heating, lighting and cooling), and scholarships and bursaries.
The budget pressures facing the university today
Today, the university faces significant financial challenges. Some of these challenges are external while others are internal. Externally, 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, there are additional financial issues to address. Although the 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, which includes the revenues from the Campus Alberta grant and tuition, and is used to support day-to-day operations, is in deficit. For a number of years, more money has been allocated to faculty and units to spend than has been received. This has resulted in a structural deficit that has been growing in the university’s operating budget, year over year. It is approximately $14M for the 2017/18 fiscal year. This challenge is exacerbated by the fact that the university has been relying on investment income to keep the deficit to this size. Investment income is subject to market volatility, and as such, reliance on investment income is both unwise and unsustainable in the long-term.
Immediate Financial Goals
The immediate goals are to ensure sustainable funding to support the institution’s mandate by eliminating the structural deficit and to reducing its 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.
Budget Planning Parameters for 2018-2019
Senior leaders across the university are planning for a 4% reduction to their operating budgets for 2018-19, with expectations of further reductions of approximately 2.5% in the following two years. Underlying those budget 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.
Achieving the targeted budget reductions represents a serious challenge for faculties and administrative units. However, failing to take action at this time would only deepen the long-term challenge. Inaction would not only lead to continued growth of the operating budget structural deficit, but it would also cripple the university’s ability to take action on our strategic goals at both the institutional and faculty level. It is critical for the university to develop several strategies and tactics for addressing both internal and external financial pressures to ensure its long-term financial position becomes more sustainable.
New Financial Planning and Budgeting Tools
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. A new activities-based budget model, specific to the University of Alberta, is also under development.