Operating budget constraints and measures

Monday, March 4, 2024

Operating budget constraints and measures

A message from James. W.E. Rush, Vice-President, Academic and Provost and Jacinda Reitsma, Vice-President, Administration and Finance.

This is a difficult time in the post-secondary education sector in Ontario. As you know, financial pressures are affecting all institutions to various degrees. 

In November 2023, we briefed you on the financial state of our institution by email and at the Operating Budget Town Hall. Since then, the provincial government has announced its response to the Blue-Ribbon Panel report on the financial sustainability of post-secondary institutions. Although the announcement commits $1.3 billion over the next three years into the sector, it comes through various short-term commitments, and falls well short of the panel’s recommendations for sustainable funding measures.  

It will be several weeks before the Ministry of Colleges and Universities (MCU) confirms exactly how much of this funding will flow to Waterloo, but we estimate that the measures announced will only have a small impact on the revenue projection for next year’s (2024/2025) operating budget. Importantly, it is also clear from the MCU announcement that the tuition freeze will continue for at least three more years. 

Thus, the systemic pressures on our budget and the factors that make our revenue uncertain remain, and will affect our planning for the next budget year. We are sharing a more detailed version of this message on the Provost’s Office website, and a summary below.  

Planning for the 2024/2025 University Operating Budget 

During the most recent Senate and Board of Governors meetings, revenue and expense projections for the 2024/2025 operating budget were shared using the best available information at the time. Even with the new provincial money, it is clear that without significant constraints on our spending, we are forecasting a deficit of approximately $75 million in the 2024/2025 operating budget. 

To address this deficit, the budget proposal that will be brought forward through the governance approval process will include plans to implement a range of measures to help us balance our budget. Taking a multi-modal, proportional approach to budget measures will ensure that we continue to support the academic and research mission of the University, and other key priorities, while under ongoing budgetary pressures.   

These constraint measures for the proposed 2024/2025 operating budget include: 
 

  • a four per cent reduction to the base ongoing budget of all units (saving approximately $24 million); 

  • a twenty-eight per cent budget reduction for central University budgets such as the University Fund (approximate saving of $15 million); 

  • additional $3.5 million targeted ongoing budget reductions in areas where budget right-sizing opportunities have been identified through historic underspends; 

  • an additional one-time reduction of all unit budgets by two per cent in the 2024/2025 fiscal year (saving approximately $12 million); and 

  • a one-time contribution from central reserves to cover any remaining deficit once the above measures have been implemented. 

Reducing costs to this extent will be a significant challenge but is necessary, as we expect that expenses will continue to increase in the next several fiscal years, while projections of revenue growth remain flat with significant areas of uncertainty. Further work to balance the budget in the coming years will be required.  

Everyone has a role to play in ensuring we steward resources effectively 

In addition to these budgetary measures, we will continue to find ways to save costs and find efficiencies through coordination, rationalizing priorities, and through workforce planning. This will include implementing a limited hiring program, with few exceptions that will require enhanced approval processes, as well as reducing our non-salary spending including discretionary spending in areas such as travel, internal events, etc. 

To help realize more efficient ways of working, we need to shift our approach to operations: those with local budget decision oversight should be looking critically at how they allocate discretionary budgets, and all employees should be thinking about how to optimize individual practices. These changes will look different across the institution and will depend on the nature of the work. However, we all must begin to think critically about our daily practices and view them against the priorities of our institution. 

You can expect to hear more in the coming days about the limited hiring program, and leaders will receive more information when it is available about supports and resources as we navigate these changes.      

As multi-year planning continues, it will be important to address areas that can provide further alignment in processes and strategies for expense reduction. In addition, we will continue to look at ways to produce new streams of revenue; optimize existing revenue activities (such as exploring new models for high-quality academic program development); and the monetization of University resources to provide revenue streams that are capable of supporting project spending and external borrowing costs for priority capital projects, improvements, and deferred maintenance. 

As an institution, we remain committed to keeping you informed with operating budget updates and implementation measures in the coming weeks. You can also expect to hear more from support offices and your direct leaders regarding the frameworks and guidance that will be available as these changes take effect.   

Thank you for your ongoing commitment to the University of Waterloo and for your focus on working together to overcome these challenges.