Introduction
Funding of institutions of higher education in Ontario has long relied on direct government funding (i.e. institutional grants) for instruction, investments, and research combined with contributions from students in the form of tuition and ancillary fees. These sources of funding have long been regulated by provincial government policies yet, in the past, the grant was routinely linked to total student numbers and would as a result grow as student numbers increased. Similarly, with multi-year tuition frameworks which outlined annual allowable tuition increases over three-to-four-year periods, universities were able to predict their tuition revenues and therefore prepare annual budget forecasts with some certainty and confidence.
Looking at the present
This is no longer the case. At present, Ontario universities continue to be negatively impacted by the provincial government’s imposition of a 10 per cent domestic tuition cut in 2019, followed since then by a year-over-year domestic tuition freeze. This, in combination with the more than 30 per cent decline in provincial grants for Ontario post-secondary schools since 2006-2007, leaves us struggling to adequately fund all priorities in year and unable to accurately predict our future revenues. This situation is made more complex by high inflation rates, the introduction of performance-based funding conditions which may negatively impact the grant portion of our revenues, and the recent announcement by the federal government of a cap on international undergraduate study permits. In contrast, what we can predict is that our expenses are outpacing our static revenue sources. As highlighted in the Fiscal Blueprint presented in Fall 2023, this current financial context requires us to address existing budgetary pressures. This includes diverting funds which should be set aside for known future costs including deferred maintenance and IT system upgrades to support the creation of annual balanced budgets.
Many of our peer universities provincially and nationally are similarly working to address the same issues. However, our unique composition (i.e. small size, existing cost structures, lack of adequate reserves, and absence of significant endowment funds) puts us at a higher level of financial risk. At this time, we are more vulnerable than other universities to policy changes because our current budget margin is razor thin and our ability to absorb shifts in our main revenue sources with our existing fixed costs is limited.
Looking to the future
Looking to the future and the longer term, at the time of writing this paper, the provincial government has given us no firm indication of their response to the Blue Ribbon Panel’s recommendations. As you will see illustrated in this paper, without additional revenues from grant and tuition sources, our fiscal situation in future years becomes increasingly more precarious. In addition, as our costs grow, and traditional revenue sources remain fixed, our spending power will continue to decline. As of today, while we are proposing a balanced budget for 2024-2025, looking forward there are no guarantees that we will be able to do the same in the out years, let alone keep the university in a fiscally sustainable position, unless we take action now.
The Integrated Academic-Research Plan 2023–2028 marked a continued commitment to our four strategic priority areas (i.e. Learning Re-imagined, Creating a Sticky Campus, Tech with a Conscience and Partnerships) in combination with a clear pledge to pursue enrolment growth to increase our revenues. Staying fixed on these priorities has ensured that our investments are strategic in nature and continuing to contribute to Ontario Tech differentiating itself from our competitors as a great place to learn, work, and play. This has led to our growing brand recognition and reputation which in turn is yielding high application numbers from both domestic and international sources. This is important as we have long known that a focus on enrolment growth will help to insulate us to some degree from immediate fiscal challenges.
Proactive steps
In addition to growing revenues through enrolment growth, and finding new revenue sources to fund priority areas, we are also taking proactive steps right now to control our expenses through finding efficiencies and controlling our spending. For example, upgrading our IT systems and software platforms will support improvements in administrative processes, allowing our staff to focus on the key aspects of their jobs rather than trivial and often burdensome manual administrative tasks. We have also asked financial managers to prioritize investments in student, academic and research supports while carefully considering and managing impacts on their teams’ workloads. This includes being constantly mindful of expenses and identifying opportunities for cross-department efficiencies (e.g. bulk purchasing practices). These proactive measures align with our ongoing prudent and fiscally responsible approach to finance, and our continued focus on operational excellence. By doing this, our goal is to reduce the need for reactive cuts in the future.
To accomplish this, key revenue and expense assumptions have been developed. The revenue assumptions are supported by multi-year enrolment growth projections. On the flip side, expense assumptions take into account increases in overall labour costs, as well as the need for further investments in student support and financial aid, and our IT and capital infrastructure.
