Expense assumptions

Ontario Tech has historically implemented a hybrid or two-step budget model. First, an incremental budgeting approach addresses mandated year-over-year cost increases (e.g. contractual salary increases, licensing agreements), automatically factoring them into the following year’s base budget. Next, a strategic allocation mechanism distributes any discretionary resources to support IARP priorities.

Operating expenses face several pressures, including inflation, the declining value of the Canadian dollar, rising costs for goods and services (e.g. software licenses, and library subscriptions), and necessary maintenance and repairs of aging facilities. Before the pandemic, the Ontario university system typically saw an annual operating expense increase of around four per cent. However, since 2021, many essential expenditures have spiked into double-digit percentages, with utility costs and software licensing fees increasing at similar rates.

Without further enrolment growth, our revenues grow by about one per cent annually. If we include the three-year grant funding, these revenues will grow by about 2.2 per cent. In contrast, using operating increases at half of CPI places our annual expense growth at 4.5 per cent. This includes a six per cent jump related to mandated salary increases, including across-the-board and annual progression adjustments. To help curb expense growth, academic and administrative units routinely reallocate existing budget dollars to cover inflationary and contractual increases. However, budget reallocations cannot on their own balance the budget.

When annual expenses are growing at a rate faster than annual revenues, a structural deficit exists ( Figure 4). Therefore, balancing the university’s budget relies on continuous enrolment growth to fund base operating expenses. For context, mandated salary increases are expected to exceed $8M annually over the next few years, while grant and tuition revenues remain stagnant. As a result, we must enrol more than 800 additional students each year just to meet salary obligations.