INTEGRATED PLANNING UPDATE
Council told cuts needed if annual $6-million deficit is to be avoided
The structural deficit revealed last fall to be facing the U of S became a stark reality April 15 when Budget Planning Director Jim Spinney gave Council a look at the size of the problem.
Spinney and Provost & Vice-President Academic Michael Atkinson gave Council the administrationís financial projections as it entered the final stage of preparing a 2004-07 multi-year budget for the Board of Governors to consider at its May 7 meeting.
The numbers reveal a growing gap between the Universityís revenues and expenditures which will produce multi-million-dollar annual deficits and a huge accumulated debt if major steps arenít taken.
And hints of the kinds of measures to be expected came out in Spinney and Atkinsonís presentation and also in a report from Council Budget Committee Chair Bernard Laarveld.
Spinney told Council the Universityís projected operating grant income from the province and its projected salary costs have changed a couple of times since last fall.
As of April 15, he said the administration projects that without substantial corrective measures, the University would run up annual deficits of $6.69 million in 2004-05, $6.13 million in 2005-06 and $6.26 million in 2006-07.
From a position of having $5.72 million in operating reserves today, those three consecutive annual deficits would deplete that reserve and plunge the U of S into an accumulated debt of $13.36 million by mid-2007, Spinney said.
He said the three-year financial projection assumes provincial operating grants of 1.52 per cent for 2004-05 (the amount in the recent provincial budget), 2.1 per cent for 2005-06 and 2.7 per cent for 2006-07. It also assumes three-year tuition revenue increases of three, four and four per cent, and spending increases for salaries and benefits of 3.69, 2.13 and 3.19 per cent.
Spinney and Atkinson said if the University is to avoid the annual deficits and accumulated debt, it will likely have to look at a combination of selective budget cuts and across-the-board levies for academic and administrative units across campus.
Spinney presented an example of a three-year schedule of budget cuts that would only partially counter the deficits in 2004-05 and 2005-06, but which by 2006-07 would fully eliminate that yearís projected deficit.
Total cuts of $1.98 million in 2004-05 against that yearís projected annual deficit of $6.69 million would still leave a net deficit of $4.71 million by spring 2005. Cuts totalling $3.95 million in 2005-06 against that yearís projected deficit of $6.13 million would leave another $2.18 million deficit that year, for a two-year accumulated debt of $6.89 million. By 2006-07 the selective and across-the-board budget cuts for academic and administrative units would be $6.26 million, fully offsetting that yearís projected deficit of $6.26 million. The University would then be in a balanced budget situation, but would have its 6.89-million debt from the 2004-06 years.
Spinney and Atkinson noted that if enrolments increase or the University has increased revenue from operating grants or other economic activity, these cuts could be reduced.
Laarveld said his budget committee favours a combination of selective budget cuts, increased efforts to find cost-efficiencies, attempts to raise revenues, fundraising, and possibly selling off assets that arenít part of the Universityís core mission.
The May 7 budget will reveal exactly what steps are planned.