Operating Budget Deficit Updates

Queen’s is working to address a significant structural deficit and return the university to a balanced operating budget by 2025-26. The university began acting on its current fiscal year deficit in the spring of 2023 by implementing a hiring freeze and imposing a reduction on faculty and shared services budgets. These efforts have reduced the projected deficit to $48 million from initial projections of $62 million.

Communications delivered through university channels (Queen's Gazette) and those distributed by the Office of the Provost and Vice-Principal (Academic) regarding the budget situation will be posted here:

January 17, 2024: Budget Presentation to Special Meeting of Senate

November 30, 2023: Update on Queen's Operating Budget Deficit

October 26, 2023: QMPG Town Hall Slides

October 16, 2023: Email from Provost Matthew Evans to all staff and faculty

July 6, 2023: Queen's budget planning update (Queen's Gazette)

May 18, 2023: Queen's projects 2023-24 deficit (Queen's Gazette)

Projected Operating Budget Deficit FAQs

Queen’s is facing a significant operating budget deficit. We are projecting a deficit of approximately $48 million, which is less than the budgeted deficit of $62.8 million announced in the spring. 

In large part, this reduction in the deficit is due to delayed hiring linked to the hiring freeze enacted in spring 2023, as well as intentional decreases in expenditures as the university focuses on balancing the budget. This is not sustainable as faculty hiring will need to be prioritized. Faculty renewal is key to the university’s success.

While this is somewhat positive, a $48 million deficit remains an urgent concern and it requires that we take action, and rethink how we do things in the present and well into the future, to ensure the ongoing financial sustainability of the university.  

Like other institutions in Ontario, Queen’s has been experiencing growing financial pressure due to a provincial tuition cut and freeze for Ontario students beginning in 2019 that has cost the university an estimated $180 million so far.  

We have also experienced decreased international student enrolment during and following the pandemic that has not recovered as quickly as anticipated and at a slower pace than other Ontario universities. Increasing costs and inflation have added to the budgetary strain. 

It will take significant effort from faculties and shared service units to reduce costs and reach a balanced budget within the next two years. But we cannot remain solely focused on the short term, we must also look to build a long-term future for Queen’s that’s fiscally sustainable, where we can invest in our research and education mission, and where we can improve our standing in the world.  

As challenging as the steps to reach structurally balanced budgets will be, once achieved, this will enable us as a university to focus on building our research and teaching capacity and invest in academic excellence. The university must remain a competitive institution, with world-class faculty and students of the highest calibre.

Queen’s Audited Consolidated Financial Statements report on the university’s annual financial results and track all of its financial activities across six separate funds. The operating fund represents about 65 per cent of the total revenues of the university. The other 35 per cent of total revenues are spread across the five other funds that include money that is externally restricted, such as research and donor funds. This is why the university reported an overall surplus of $15.6M at the end of the 2022-23 fiscal year, but also projects an operating fund deficit.

In general, donations to Queen’s cannot be applied to the university’s operating budget as the donors involved have specified clearly how they would like the funds to be used. The university must honour these agreements. Mr. Smith’s major gift will go towards supporting STEM education at Queen’s through the transformation of engineering education. 

In reducing expenditure to reach structurally balanced budgets, we are making every effort to limit the impact on staff – the university understands how hard staff work and how much staff contribute to our overall success. We are evaluating all options with the intent to minimize people impacts as much as possible while appreciating the size of the operating deficit requires focus and urgent action. 

The university recognizes that the budget situation may create a great deal of uncertainty within the community, and it is understandably a very difficult and stressful time for many. There are many supports available at the university, including the Employee and Family Assistance Plan, and everyone is encouraged to seek out those that will be most useful. 

Queen’s made the decision in 2022-23 to pay off the remaining internal loan for the Queen’s Centre project, which is why there was a one-time $30 million payment to the capital fund. If the university chose not to repay this debt from existing capital reserves, future-year operating fund allocations would have been required to pay off the balance, impacting budget allocations available to support the academic mission. Addressing this debt ensured we do not need to pull from the operating budget in future years.

No funding plan existed for the $30 million Queen’s Centre debt; this is something that has been addressed – the Board of Trustees will not approve a capital project without a full funding plan (and the process is regulated by the Board of Trustees Capital Projects Approval Policy). This was the only internally financed capital project without a full funding plan.

Paying the loan was an interfund transfer, where the funds were moved from capital reserves (reducing available funds) to internally financed capital projects (reducing this debt). Essentially, the university can give itself a loan, borrowing from carryforwards (reserves) across the university – but it must pay these funds back, and this was the case with the Queen’s Centre payment.

DBRS Morningstar’s May 2023 ratings report for Queen’s University listed the university’s expendable resources, defined as unrestricted net assets, most internally restricted net assets, and internally restricted endowments, at $768.6 million. The majority of the $768.6 million is not available to help mitigate annual operating deficits because those funds are restricted for specific purposes outside the operating budget.

These funds include capital and research reserves, to support current and future campus building construction and infrastructure renewal, and research projects; the pension reserve, to fund potential future pension commitments related to past service (the university is responsible to fund pension deficits related to past service, should they arise); sinking funds, committed to servicing future debenture repayments (paying back bonds the university has borrowed); and operating contingencies, which are there to help mitigate annual deficits. However, this year, the operating contingencies were drawn down to $136.7M and will likely be drawn down by a further $48M by April 30, 2024. Continuing to rely on the operating contingencies for on-going expenditures in excess of available budget is not sustainable, and puts the university in further financial risk in the years ahead.

The operating budget needs to be supported by a reliable and stable source of funding.  Essentially, we need to know that the funds exist – to pay salaries and to keep the lights and heat on, as examples. The Pooled Investment Fund (PIF) is invested in accordance with Queen’s Statement of Investment Policies and Procedures, which is approved by the Board of Trustees. The fund can reap higher returns, but it comes with risk and market volatility. The university, with the approval of the Board of Trustees, made the strategic decision to continue to limit the operating budget allocation of income for ongoing operating budget expenditures to $5.2M, given the noted volatility risk. The excess returns move to the capital reserves (for capital investment priorities, as world-class facilities are essential to support the university’s academic mission), or cover losses in years of PIF returns less than $5.2M (which has happened in two out of the last four years, in 2019-20 and 2021-22). It would not be responsible to use such a volatile source of income to fund base operating expenses.

Increasing international enrolment is a priority and over the past year, several initiatives have been implemented by Undergraduate Admission and Recruitment, including:

  • Additional internationally based recruitment staff and the introduction of a peer ambassador program.
  • Making offers earlier in the admission cycle.
  • Increasing post-offer outreach, events, and individual student touchpoints.
  • Expanding international financial awards across all faculties. 
  • Piloting a January intake (2024).
  • New technologies to expand and enhance Queen’s brand awareness in key international markets, and to improve the applicant journey.
  • Implementing recommendations from an organizational and operational assessment of international undergraduate recruitment operations. Undergraduate Admission and Recruitment is currently developing an action plan to improve the institution’s ability to attract international undergraduate students. Strategies will include:

Ø  Enhanced marketing and communications in partnership with University Relations, to unify messaging, and implement targeted approaches to reach international students in additional countries in Southeast Asia, sub-Saharan Africa, and Latin America. Further diversifying and increasing our international student population will not only enrich the student experience but provide Queen’s with greater flexibility during times of geo-political uncertainty.

Ø  Further improvements to processes, and student support.

Ø  Continued collaborative work with faculties to address recruitment barriers, using market research to inform academic program development to design and adjust offerings to meet international student demand, needs and preferences.

Ø Reviewing international student tuition by faculty, and developing a framework that supports enrolment goals, incentivizes international students, and allows for longer-term planning. 

Increasing undergraduate international student enrolment requires coordinated efforts among the faculties/schools, the Global Engagement office, and Undergraduate Admission and Recruitment.