Pensions have been becoming an increasingly common theme among Wilfrid Laurier Universityโs budget these past few years โ and the issue is just going to get worse. According to Jim Butler, the vice-president: finance at Laurier, the university’s pension deficit is going to have a huge impact on its budget in the coming years.
โThe major difference would be, if you look at the multi-year, is that weโre anticipating cuts in 2013-14 and 2014-15, and thatโs solely the result of the increased pension costs to amortize the pension deficit,โ explained Butler when asked how this year’s budget differs from the one the university produced last year.
Since the actuarial information wonโt be fully available until the end of the year, Laurier is unsure to how big the pension deficit actually is, but Butler said that the sum is still pretty substantial.
Although WLU will run a break-even 2012-13 budget โ which was approved by the universityโs board of governors at the June 21 meeting โ Butler estimated the pension deficit to be around $85 million.
โIf you look at the budget youโll see that we got a good year that just ended, and weโre going to use surpluses generated in that year to plug the deficit for 2013. Without it we would run a deficit for 2013,โ he added, noting that the university will see an increase of revenue of about $17 million in 2012-13.
The university anticipates severe cuts for the 2013-14 and 2014-15 academic years and the compensation for employees is becoming more and more expensive.
โItโs basically that the actuary tells the employer in a defined benefit plan how much they have to put in for each employee every time it does evaluation,โ he explained.
โWeโre anticipating thatโs going to go up โ a lot.โ
With the recent passage of the Ontario budget and the recommendations put in place from the Drummond report, the funding for pension costs will be even more limited. The university, as a result, will have to divert funds that would go elsewhere into sustaining the pension plan.
โItโs a lot of money that doesnโt go into the classroom,โ Butler emphasized.
Pension plans arenโt the only thing that is costing the university. To keep up with an increasing student population, the university looks to greatly expand in the near future. The Global Innovation Exchange (GIE) building and the expansion of the Athletic Complex are the main projects.
โWeโre working on our long-term financing strategy for expansion,โ continued Butler. โWeโre kind of waiting for fund raising to see what finalizes there before put the final numbers of what we have to finance.โ
The public sector, including education, is facing quite the gloomy situation this year with the Ontario budget, a budget that has been forced to make cuts to the public sector to ensure it remains balanced. This will also have an impact on Laurier the coming years.
โNobody has really paid attention to that but thatโs coming at us, the whole system, starting in 2013-14 and then in 2014-15,โ Butler added. โFor Laurier itโs about $1.5 million less [in funding].โ
For now, Laurier is bracing itself for a tough road ahead, and with the ailing pension plan continuing to get worse, Laurier needs to be cautious in how it spends its money.
โWeโre in reasonable shape but Iโm a little bit worried about where pensions are going and how governmentโs going is continuing to react to their budget difficulties and how thatโs going to impacts our system,โ he concluded.
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