All Ontario universities are facing serious financial challenges.
Over the past several years at Queen's (and many other universities), a gap has grown between our operating expenditures and the provincial grants we receive.
Provincial grants have traditionally made up the bulk of our revenue, but over time, they have become an increasingly smaller percentage of our budget.
Provincial funding has become primarily tied to enrolment increases, as the government tries to accommodate the double cohort as well as increased postsecondary education participation rates.
Queen's made a decision not to grow undergraduate enrolment in order to maintain a quality teaching and learning environment. In many ways, this has been positive for Queen's. The National Survey of Student Engagement and other surveys have consistently rated the university higher than most of our Ontario and Canadian peers.
But our decision to keep enrolment steady has compounded the gap between provincial funding and our rising costs.
As this graph shows, tuition fees and endowments have covered part of this gap, but it continues to widen year by year. Between 2004-05 and 2007-08, the gap increased by $40M and will continue to grow.
Graph: Provincial Grants as a Proportion of Operating Revenue
Our costs have also increased in a number of areas:
In a concerted effort to reduce the student/faculty ratio, Queen's has invested significantly in faculty hiring - we've increased our faculty complement by 90 (11.5%) since 2004-05.
We have also increased the amount of student assistance funded from the operating budget by $4.3M or 20% over the last five years to a total of $25.7M in 2008-09. In addition, a further $12M of student assistance funds are allocated through income from Endowments.
Research funding has increased by 24% since 2003, which has allowed Queen's to remain highly ranked as a research intensive university. This increase has required significant investment by the university to adequately support it, and to ensure continued compliance with funding agency and other legislative requirements.
In response to a shortage of space and our aging facilities, we are renewing our infrastructure. Some projects, including new residences and parking lots, will pay for themselves over time. Others, including new academic buildings (e.g., Chernoff Hall), campus renovations (e.g., University Avenue) and the Queen's Centre, are being funded in part through donations, fundraising and targeted grants. But operating funds will also be required for some of the renovation projects. Most Ontario universities are also having to use operating funds to support infrastructure.
The Fall 2008 stock market upheaval impacted all of our investment portfolios. The income from our endowment funds that primarily fund student assistance and Academic Chairs, will have fallen by 7.8 per cent by 2010-2011.
In addition, like most Ontario universities, Queen's has a pension issue. We have an unfunded deficit and it is our largest financial risk.
The 2010-11 Budget Report shows an estimate of the special payments the university would have to make, based on certain assumptions about the future, amounting to a $38 million hit on the operating budget by 2012-13. This would be over 9% of our revenues - a serious cause for concern.
The provincial government has responded with a new plan. There is no direct financial assistance, but the government is giving universities time to come up with clearly articulated plans to ensure their pension programs achieve long-term sustainability before the special payments kick in.
The province has yet to issue new regulations on the precise details of the relief program. In the meantime, Queen's is preparing to re-engage employee groups to discuss go-forward options. Employees will most likely see their contributions increase, their benefits decrease, or possibly a mix of both.