At two information sessions held on October 31, Dr. Craig Monk, Provost & Vice-President, Academic and I presented an update on the budget and its impact on the university. These sessions are part of university leadership’s commitment to budget planning and decision making. We are also committed to timely communication and transparency as we navigate our path forward.
The following provides an overview of the information we covered in our presentation. As you read, it’s important to remember that there are many unknowns at this point. We wanted to share what we know, what we don’t know, and what it means for us today. No decisions about the nature and timing of budget reductions have been made yet.
We will be posting regular updates on the budgeting process and have set up an email address, email@example.com, for you to submit any questions or ideas. We appreciate your patience and understanding as we work through this process.
OVERVIEW OF PROVINCIAL BUDGET 2019 AND IMPACTS ON THE SECTOR
The Government of Alberta released its 2019 budget on Oct. 24, 2019. There were a number of impacts to the post-secondary sector and they are outlined below. Most importantly, the government stated that it will be moving to a new funding model for the sector based on recommendations from the MacKinnon report.
Summary of the changes
- The provincial government called for a budget reduction of 12.5 per cent over four years for the post-secondary sector.
- For this current fiscal, the government implemented a five per cent reduction to the Campus Alberta Grant (CAG). This amounts to a cumulative reduction of $118 million across all post-secondary institution (PSI) budgets.
- The Consumer Price Index (CPI) limit for tuition increases has been suspended for three years beginning in the 2020/21 academic year.
- Under the new rules, institutions can increase tuition by up to seven per cent on average across the institution, with a 10 per cent limit for a single program. The government will not continue with the tuition freeze backfill from previous years.
- An additional reduction for the sector was put in place when the government suspended the Infrastructure Maintenance Program (IMP) for the current fiscal year.
- Grant reductions this year are retroactive to April 1, 2019. This is the beginning of the government’s fiscal year and three months before the end of the MacEwan fiscal year.
What’s expected of us
- The government outlined several expectations and outcomes that will be measured.
- The university is expected to immediately reduce administrative spending to five per cent of the total budget.
- Academic programs, access and quality must be protected as a first priority when considering solutions.
- More requirements to report on institutional performance metrics are expected. These may include financial targets, enrollment, completion and other outcomes.
- Our “impact assessment” plan must be submitted to the Minister of Advanced Education by December 2, 2019. This plan must be approved by the Board of Governors.
IMPACTS ON MACEWAN
There is still a lot we don’t know. We are waiting until we receive our Campus Alberta Grant letter to fully understand the impacts of the changes. What we do know is that this is an unprecedented challenge for us. We must find savings or revenues to balance the current budget very quickly while also ensuring our decisions further reduce costs in 2020/21.
This is what we know
- The university’s revenue is made up primarily from three sources: the Campus Alberta Grant, tuition and fees, and sales of services (space rentals, for example). The Campus Alberta Grant accounts for 45.5 per cent of our budget revenue.
- MacEwan’s budget must be balanced and is approved by the Board. Our board-approved 2019/20 budget prior to reduction is $253.2 million.
- Our Campus Alberta Grant has been reduced by 7.9 per cent, retroactive to April 1, 2019. This is the highest reduction within the sector and amounts to a $9.1 million reduction in our grant. The government calculated reductions based on an average of operating surpluses over five years. We are assuming a 6.5 per cent reduction to our grant for next year.
- The overlap between the Government of Alberta and MacEwan fiscal years presents an additional challenge as we are required to compress 15 months of reductions into eight months or less.
- The suspension of the Infrastructure Maintenance Program (IMP) accounts for approximately $3 million outside the Campus Alberta Grant in this fiscal. Government has indicated that some type of IMP funding will be restored in 2020/21.
What we don’t know
We are in discussions with ministry officials to determine specific details around the planned reductions and future enrolment targets. Only when we have this information will we have the full implication of the announcements.
- Government has indicated that a new funding model is coming for 2020. No details are available yet, but more information is promised for January 2020.
- We expect that a new, performance-based funding model will be implemented, which will impact the university’s future Campus Alberta Grant. The new model will provide targets for enrolment, among other things.
- The specifics of further reductions to our grant are unknown. As we plan for next fiscal, our working assumption is a further 6.5 per cent reduction.
OUR APPROACH TO THE CHALLENGE
Along with the entire sector, we are being asked to be more efficient, find other sources of revenue and reduce administrative costs. MacEwan has always been a strong steward of the public resources with which we have been entrusted, and we have invested deliberately and thoughtfully in our classrooms and learners. This will not change.
MacEwan also has a reputation of being nimble, innovative, and entrepreneurial. We must harness these strengths to address the challenges in front of us.
Determining where reductions will come from
It is not possible to implement across-the-board reductions to the university budget, which includes considerable fixed costs.
After we take into account our fixed costs and those costs that support our core academic functions, we arrive at what we refer to as our “manageable budget,” which is mostly comprised of salary and benefits for non-instructional faculty, non-faculty support staff, and discretionary non-salary costs in all areas of the university. The manageable budget represents approximately $100 – $110 million dollars.
We need to find approximately $17 million in reductions in our manageable budget.
Our approach to this will include:
- Protecting the core function of the university—teaching and learning—and maintaining the quality of the student experience. Investments to retain and recruit instructional faculty, and direct costs for the critical academic supports will continue.
- Considering all available options and levers, including revenue generation, maximizing our enrolments and how best to apply the changes that will be allowed under the tuition and fee model.
- Following the government’s direction to reduce administrative costs to five per cent of our overall budget.
- Using a university-wide perspective for budget planning and informing decisions with sound data.
We know that with these levels of reductions, there are simply not enough non-salary savings or revenue growth opportunities available to balance the 2019/20 and 2020/21 budgets without position loss. There are hard decisions to be made and we understand that this process will be difficult for everyone. We value the contributions that all of our employees make to the university and we will approach these challenges with empathy and respect.
Our priorities in approaching this challenge
We have a strong foundation grounded in student success and teaching excellence. We are building on this foundation to establish priorities for our budget planning. We also must make decisions today that are in the long-term best interest of MacEwan. Some of our priorities for and potential approaches to decision making include:
- Maintaining quality teaching and learning experiences for our students.
- Continuing to invest in faculty and teaching.
- Maintaining critical campus services.
- Focusing on centralizing administrative units to accomplish the university’s mandate.
- Prioritizing operational efficiencies and supporting them with investment.
- Increasing revenues through tuition and fees in 2020 and in ancillary areas to offset reductions.
- Continuing with currently approved campus development projects.
Senior leadership will work over the coming weeks to develop a reduction plan and will consult within their portfolios and across the university to identify solutions. Deans and senior-level managers will play an important role in this process.
We are seeking board approval of our plan on November 13 and will submit the plan for government approval on December 2.
We are committed to transparency and timely communication including bi-weekly updates on our progress and other information sessions as needed. Please submit any questions or ideas to firstname.lastname@example.org.
On behalf of the senior leadership team, thank you in advance for your patience and understanding as we move forward to address this challenge.