December 16, 2010
To the Queen's Community:
The Queen's Board of Trustees gathered in Kingston for its regular meeting from December 3-5. On the agenda was the presentation of the University's latest in-year budget projections. We are sharing those projections with you now to reflect on our progress, thus far, in meeting our 2010-2011 financial commitments.
The over-riding theme of this update is caution, as might have been expected.
As of the December 3 report to the Board, we are projecting a $4.6 million shortfall – slightly larger than the $3.8 million originally projected for this year. This in-year projection is an important indication of the ongoing challenges that face Queen's and the broader public sector in general.
The increase in the projected deficit is significant because of its primary cause: the continued impact of lower-than-expected returns on investments. We have made it clear in past updates that the 2008 downturn has had a profound impact, not just on the investment portfolios of universities, but also on their broader financial landscapes. Less money through investment income means less money than expected to help finance operations. Once a hole has been dug as deeply as it was in 2008, it takes significant time, effort and patience to orchestrate a recovery.
While there has been some recovery in the market, it has been sluggish and sporadic. The market has continued to face some challenges and those challenges have impacted and will continue to impact our bottom line. Budget projections assumed a 7.5% return on the Pooled Investment Fund, but year-to-date returns are closer to 6.5%.
This is not to say all our challenges are on the investment side. We have also faced a few unexpected challenges in the revenue column – again, not unexpected given the increasing pressure on individuals and institutions to keep a close eye on their spending. A detailed look at our projections will show you that we have a shortfall in grant-eligible graduate enrolments. That decrease has been somewhat offset by $400,000 in accessibility funding from the provincial government but the result is still a $300,000 shortfall in revenue from provincial government grants.
If there is a silver lining to be found in all of this, it will only be found through a collective commitment to reining in spending and living fully within our means. It will take far more than just minding our office budgets and keeping an eye on expenses, particularly in future years when we are likely to face having to make additional payments into the Queen's University Pension Plan. The decline in value of the plan's investments combined with the impact of lower interest rates makes a quick and seamless recovery improbable. It's going to take a combination of careful planning and conscientious, realistic decision-making to navigate through this period of instability and uncertainty.
Change will not come quickly. It will take several years of concerted and co-operative effort before we will be able to say we successfully managed the fallout from the 2008 financial crisis. We are powerfully aware of the impacts this atmosphere of austerity and financial restrictions has on all of us. Intense scrutiny of spending and making do with less is stressful and challenging and can often seem like a distraction from our primary purpose: powerful learning experiences and research excellence. Our collective commitment and diligence on financial matters, however, is the only way we will be able to serve our primary interests and continue as leaders in post-secondary education.
We remain thankful to the faculty, staff and students of Queen's for your continuing support and contributions.
Should you have any questions or comments, please do not hesitate to email us at firstname.lastname@example.org.
Bob Silverman, Provost and V-P (Academic)
Caroline Davis, V-P (Finance and Administration)