“Until two weeks ago, we didn’t have a budget crisis. There was no forecast that we were in a budget crisis,” said David Monod, chair of the history department at Wilfrid Laurier University.
“Something has happened that has led people to decide that we are in a budget crisis. Something has changed.”
Monod was one of the many Laurier faculty and staff who attended the “Town Hall 2014: Laurier’s Financial Future” presentations given last week in Waterloo and Brantford. While Monod said the discourse has been that the university is in a good financial state, the presentation countered this with the recommendation that Laurier make a two per cent budget cut in the 2014-15 financial year to balance a forecasted deficit of $12.3 million.
This deficit could reach $21.9 million by the end of 2017.
On Thursday, Jim Butler, vice president: finance and administration at Laurier will be making this recommendation to the board of governors.
“We wanted to educate everybody on the financial picture next year,” explained Butler on the reasoning for the Town Hall event.
His presentation covered the three main areas that are hurting Laurier’s finances: a revenue/cost squeeze, pension expenses and deferred maintenance.
Revenue/cost squeeze is a result of Laurier’s expenses being higher than its revenues. Both are increasing, but they are forecasting that the gap between them will continue to widen.
As the cost of pensions continues to rise, this is also becoming an issue.
Lastly is that, starting this year, the university is planning on budgeting for deferred maintenance for Laurier buildings. In the past when maintenance issues at the university arose, the money was pulled out of operations as happened last year when $5 million had to be found to fix a leak in the Science building on campus.
Butler explained, however, that Laurier should be setting aside $7 million per year in order to maintain the condition of all buildings.
“I’m trying to budget for it rather than just waiting for something to happen. Enough is enough; we’ve put it off too long,” he said.
This year, they will be putting aside $1 million.
These factors have been contributing to Laurier’s increasing structural deficit which, according to Butler, isn’t anything new.
“We’ve been sending warning signals for a while now, even as recently as the June budget. We indicated that there would be a cut because of these factors.”
In fact, the university has been able to operate with the deficit for years.
“That’s because we budget conservatively and we usually end up with a surplus,” Butler explained. “I use the surplus from the previous year to balance the budget for the following year.”
The surplus is known as ‘appropriations.’ But these appropriations are being depleted due to the factors outlined above.
In the 2013-14 financial year, appropriations were at approximately $10.6 million. By 2015-16 they will be depleted to $833,000.
The 2013-14 deficit was $7.9 million and, as such, the appropriations were able to balance the budget. But according to the forecast, in 2014-15 this deficit will be projected to be $12.3 million, $17.6 million in 2015-16, and $21.9 million in 2016-17. This means that cuts will need to be made in order to balance the budgets each year.
There are three options to help deal with the increasing deficit which Butler outlined.
The first two options involved deferring cuts or increasing the cut to four per cent. However, Butler is recommending the third option: a two per cent cut in 2014-15.
But in order for the budget to balance, this two per cent cut must be coupled with liberal assumptions in mind.
This means the assumption is made that the government will pay for every student and that underspending will continue to happen as it has historically.
With these liberal assumptions tied into the forecast, the two per cent cut in 2014-15 will be followed by a 4.73 per cent cut in 2015-16 and a 3.57 per cent cut in 2016-17.
“We told everyone to start planning for two per cent on the assumption that we would get permission,” said Butler. “If it’s something different than that we’ll tell them to model it differently.”
According to Monod, for the faculty of arts, this means cutting $672,000 next year.
“$672,000 cannot be taken out of the faculty of arts budget without it affecting the number of teachers who are in classrooms… So what’s going to happen is you will have fewer teachers in classrooms next year for students.”
With the proposed cuts for the next three years, Monod said this will result in a total of a $2.5 million cut for the faculty of arts.
This may not result in laying people off, he continued. Instead, it will be a combination of no re-hires of faculty and cuts to contract academic staff.
If the two per cent cut is passed, the integrated planning and resource management (IPRM) process will inform how the cut is applied.
And according to Monod, students should be unhappy that these budget issues will be impacting them.
“I think students should be getting angry about that,” he said. “Because you’re paying the same tuition. Any you’ll either have less choice or bigger classrooms. That’s the only thing that can happen.”
If Butler’s recommendation is passed at the board of governors meeting on Thursday it will progress to Senate in February.
