April 30, 2010
Welcome to the end of another academic year -- it's the last day of exams.
I'm going to spend a few minutes tonight talking about academic planning and the financial situation. They are related, but distinct.
We have now embarked on a crucial academic planning initiative. I want to assure you that I would be undertaking this exercise as a new Principal regardless of financial circumstances. In good times and in bad, our academic considerations must lead our financial decision-making -- we are, after all, an academic institution. This is a year-long process and there will be many more opportunities for input and discussion.
The development of a draft university plan is now in the hands of 6 senior faculty members. They will be inviting input and comments on discussion papers over the summer. In the fall, there will be more meetings, and consultations across units, not only within them. By next year, we will have an academic plan that will help guide us towards the best possible future for this great University.
There has already been a significant level of engagement to date, with much more to come. I thank everyone who has participated so far. Tomorrow's annual gathering of University Council, which includes all Trustees, will focus on academic planning, and I trust, as in previous years, it will be a day of learning, insight and valuable input.
I'm now going to take a few minutes to provide you with some context for the 2010-11 budget enclosed under item "I" in the Finance Committee update. A motion from the Finance Committee for approval comes later on the agenda.
I want to outline the progress we've made and the challenges that still lie ahead. Our financial situation remains serious, as discussed at the last several Board meetings.
To quickly recap:
All Ontario universities are struggling with a major structural dynamic: higher demand for post-secondary education with relatively shrinking support. In 1992-93, provincial grants accounted for 74% of our operating budget. Today, they account for less than half (45%).
This means that proportionately, we receive less money now than we used to. The gap between our operating expenses and provincial operating grant revenues is growing into a chasm. As you know, we face an operating deficit for the first time in decades and there is an academic impact. Faculties are facing restraint - many have reduced the number of adjunct professors, and some vacant tenured positions have been left open. Fewer teachers means larger classes and/or reduced course offerings.
Our students, staff and faculty are all affected. It becomes challenging, given the financial situation, to maintain the quality of a Queen's education, which is the hallmark of this institution.
We do need the continued support of trustees as we work together to protect our academic mission and the quality of the student experience in and outside of the classroom.
More than ever, philanthropy at Queen's is fundamental.
Advancement activities across campus raised $52 million this past year. And let me be crystal clear -- Queen's is absolutely dependent on the generosity of alumni and supporters. Most of the monies raised are targeted and can't go directly to the bottom line, but they do support student assistance, research, teaching, and services. We must, and will, continue to build on our fundraising efforts.
I'm pleased to report we have made real progress on the deficit for 09-10.
A combination of our efforts, and some good fortune (for example, a warm winter lowered our utilities costs) have reduced our in-year projected deficit from $8.3 million to $2.6 million. There is also some good news for Ontario universities in last month's provincial budget. Despite the $19 billion provincial deficit, Premier McGuinty reconfirmed his commitment to post-secondary education. Queen's is receiving $1 million in new money to fund growth.
The government will aggressively promote Ontario's post-secondary institutions abroad to encourage the world's best students to study and settle in Ontario - this will help Queen's attract more international students.
And now that the government has extended the current tuition fee framework for two additional years, we are in a position to budget more precisely for this time frame. Modest increases in student assistance and the announcement of additional Ontario Graduate Scholarships in 2011-2012 are also very welcome. Finally, as you know, our biggest operating expense - as in all public sector institutions -- is compensation. The government has introduced a bill that would immediately freeze salaries for everyone not covered by collective agreements. The government has also expressed the expectation that new agreements should contain no net compensation increases for 2 years. As a result, we will have to negotiate with employee groups in the context of the new requirements. These initiatives bring significant potential to stabilize our compensation costs.
But of all the provincial budget news, the one area I want to focus on is the unfunded liability related to our pension plan that we have briefed you on for the past 18 months. It has now become our biggest financial risk, as it has for many Ontario universities. The gap between employer/employee contributions and our current and future payout obligations is widening. Starting in fall 2011, after the next required pension valuation, we must set aside funding for additional special pension payments to address the unfunded liability.
A large portion of these payments are required by regulations that treat universities as organizations that could go out of business at anytime - these are called solvency payments. Five provinces exempt their universities from these regulatory provisions but so far, Ontario does not. Along with our colleague universities, Queen's will continue to press the government on this issue.
The university sector had submitted a proposed framework to enhance the long term sustainability of university pension plans, but this will take longer than expected to achieve, and there are new conditions to be addressed. Until this issue is worked out, we must prepare for a significant annual impact on the operating budget. I must emphasize that even were this solvency relief granted, it would not fix all the plan's problems. It's clear that a major restructuring of the plan will be needed. This will have to occur within the context of the next rounds of collective bargaining. Now, no faculty or staff member should be worried about their pension -- The plan IS protected. Everyone WILL get their pension when they retire. The issue is how we fund it.
Because of the pension issue, we will not be able to balance the budget by March 2012; to have to cut expenditures that fast and that far would have a drastic effect on faculties and units. A few months ago, it became clear we would likely not get solvency relief in the provincial budget and we needed to plan for a longer-term framework for getting back into the black.
We have proven that we can reduce the deficit. We will continue working as hard as we have been. I would like to make reporting on our progress a standing item for every future Board meeting until the deficit is eliminated. We can kill this deficit disease but obviously, I am loath to kill the patient at the same time. Our medicine is working, but it needs more time. This longer-term outlook underlies the budget presentation you will hear later.
Our collective goal is to continue to provide our students with a top-quality education.
We CAN maintain quality AND defeat the deficit.
To do this, we need 2 things. We need time and we need your support.
I would like to take this opportunity now to add my personal thanks to Patrick, Kerry and Janice, who have all had a tremendous positive impact on this University.
Although Kerry's second term as V-P Research ends in August, I am very pleased that he will continue his world-renowned research and teaching here at Queen's in the department of civil engineering starting in the fall. Over Kerry's decade of leadership, research funding at Queen's has more than doubled and for the past six years, Queen's has achieved the top ranking for faculty research awards based on the number of full-time professors per thousand who have won national awards. Kerry, on behalf of the University, thank you again for your stellar contributions to Queen's to date.
As you heard earlier, Janice Deakin is off to Western this summer to take up the post of Provost and V-P (Academic). Janice, on behalf of the University, congratulations! Thank you for your tremendous contribution to Queen's and the community over the past many years. We wish you all the best in your new role at Western.
Finally, this is Patrick's last day as V-P (Academic). He will be taking a few months to transition to the presidency of McMaster in July. This is Mac's gain and Queen's loss, but Patrick, your contributions will certainly be felt here for years to come. Thank you again for your significant leadership.