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2024-2027 estimated multi-year consolidated operating budget

As mentioned in the introduction to this paper, our fiscal situation in future years becomes increasingly more precarious (Figure 5). As our costs grow and traditional revenue sources remain fixed, our spending power will continue to decline. It is important to reiterate while we are proposing a close to balanced budget for 2024-2025, there are no guarantees that we will be able to do the same going forward, let alone keep the university in a fiscally sustainable position, unless we act now. As can be gleaned from the data presented herein, if we do not continue to grow or realize additional funding from government, and we cannot contain our costs, these projected budget deficits will become our reality. Our estimated budgets moreover, will be characterized by increased risk, moving from our currently low to moderate risk budget position into high risk territory.

Multi-year budgeting

Multi-year budgeting requires universities to take a longer-term perspective when making decisions to undertake new initiatives, and to fund existing programs and services over several years. Positive aspects of multi-year planning include improved long-term planning by providing assurances to units about service delivery, and greater emphasis on program evaluation and monitoring by giving time to implement and review. University budgets are best set after the winter term begins because there is a better indication of the current student enrolment patterns, the new student application data and, normally, the government’s direction on tuition. Further, it includes the ability to provide some stability in planning, greater transparency on revenue and expense strategies, and a longer time horizon for identifying and managing risks. As our largest expense is our investment in employees, the multi-year budgeting process provides more time for the hiring process.

Budget assumptions and financial planning for future years

As we plan for the 2024-2025 budget year, and the subsequent two years, the budget assumptions focus on growth in student numbers and hence greater enrolment revenues plus other incremental revenues, offset by costs associated with supporting growth in student numbers. The future years demonstrate the impact of the current year’s decisions on future year budgets. They also include some nominal assumptions for labour and operating contractual increases. With inadequate revenue increases anticipated from government until a formal announcement, most of the out-year expenses focus on supporting growth through faculty and staff hires, increased utility costs, and capital repairs.

Figure 5. 2023-2026 estimated operating budgets
FTEs 9,389 9,491 10,387 10,964 11,187
Domestic Tuition 60,875 64,670 72,774 79,562 83,782
International Tuition 33,844 37,539 39,460 43,310 43,063
Grants 82,227 84,876 86,974 87,730 88,252
Ancillary Fees 14,081 15,424 17,765 16,891 17,932
Other Revenue 4,940 14,539 17,735 17,522 18,348
Donations 1,784 2,336 2,694 2,115 2,136
Commercial Revenue 12,095 5,932 6,853 7,214 7,578
Total Revenue $ 209,847 $ 225,315 $ 244,255 $ 254,344 $ 261,091
FT Labour (113,301) (122,938) (130,944) (144,098) (154,801)
PT Labour (18,766) (21,995) (24,359) (22,377) (23,190)
OPEX (71,749) (74,902) (77,926) (79,157) (80,127)
CAPITAL (9,761) (7,512) (8,425) (7,973) (7,289)
Total Expenses $ (213,576) $ (227,346) $ (241,653) $ (253,605) $ (265,407)
PY Reserve Utilization 4,782 2,031 373 - -
Risk Contingency Fund
2,443 2,543 2,611
Net Surplus/(Deficit) $ 1,053 $ 0 $ 5,418 $ 3,282 $ (1,706)
Reserve Target (3% of total Tuition/Grant) (5,976) (6,318) (6,453)
Net Surplus/(Deficit) with Reserve $ 1,053 $ 0 $ (559) $ (3,036) $ (8,158)

Deferred maintenance and capital investment strategy

We have achieved an estimated balanced budget for 2024-2025 which includes setting aside over $5M per year for future deferred maintenance costs and/or new capital investments. To elaborate on this, the facilities portfolio alone at Ontario Tech includes 23 buildings encompassing more than 1.2M gross square feet of building space, with an estimated Current Replacement Value of $347M. Based on the paper entitled In Committing to the Cost of Ownership: Maintenance and Repair of Public Buildings, the annual capital renewal should be 0.5-1.5 per cent maintenance (i.e. $1.7–$5.2M) and 1.5-2.5 per cent savings (i.e. $5.2–$8.7M) of the current replacement value. If we continue to invest a meager $1.8M per year on projects to repair and/or replace infrastructure, by 2030, the accumulated deferred maintenance costs alone will exceed $20M. These costs, moreover, will continue to grow at a more rapid pace thereafter (Figure 6).

Figure 6: Cumulative deferred maintenance
Line graph showing the rapid pace of increase of deferred maintenance costs. If we continue to invest a meager $1.8M per year on projects to repair and/or replace infrastructure, by 2030, the accumulated deferred maintenance costs alone will exceed $20M.

Challenges in revenue growth and strategic investments

In addition to deferred maintenance, we must also save for other items such as enrolment fluctuations, unplanned external challenges (e.g. continued freezes on tuition and grants), and large-scale strategic priorities. As we look to the outyears, it is important to note that salary increases alone will continue to outpace revenue growth unless there are changes in government policies combined with continued enrolment growth above what is in our current scenario. Over the past five years the university has made cuts and reallocations to focus on its priorities, leaving little room for future strategic investments if no new net funding is realized. This forecast is presented as one possible scenario but also to message that we cannot continue to 'cut' our way out of our current fiscal situation.

Student growth and capital projects

Simply put, the university must focus on further student growth to fund key strategic differentiators and cover general costs. We will maximize the amount we can increase fees while also continuing to strongly advocate for improved government grants. However, while this budget table reflects revenue from growth, it does not do the same for the funds required to create more space to support this growth. The assumption is that this will come from government investment, philanthropic donors, and other development opportunities. As discussed at the May 2022 Board of Governors Strategy and Planning Committee meeting, we will continue to engage in conversations with interested development partners to explore opportunities for mutually beneficial capital projects on our lands. To fund future projects, and to protect our financial future, we must begin to establish reserves.