Deficit gone, budget balanced in 06/07
By Colleen MacPherson
Using a combination of careful planning, careful cost projections and strategic reductions to expenses, the University of Saskatchewan has managed to achieve what it set out to do three years ago - eliminate a multi-million dollar structural deficit and present a balanced budget for 2006-07.
At its meeting May 5, the Board of Governors was expected to approve next year's budget that includes expenditures of about $301 million and no tuition increase for the majority of students as well as $2.4 million in planned selective measures designed to complete the elimination of a $6.2 million deficit. The budget is viewed as a satisfying conclusion to a three-year cycle that began with the adoption of the Integrated Plan and an accompanying multi-year budget framework.
"Of all the developments we've seen over the past several years at the University of Saskatchewan, the one that I'm most pleased about is the dramatic improvement in our budget process," said President Peter MacKinnon. "The discipline of the process, the fact the Provost must sign off on the alignment of the budget with University priorities and the multi-year time period all led to much better consideration of our needs and resources."
The University's success in following through with a complex and challenging three-year plan has created a high degree of confidence on the part of governments in the institution's transparency, he said, "and in our systematic decision making. I'm offering an impression, of course, but it's an impression based on extensive discussions with governments at all levels, and indeed with others. There is confidence that we're doing the things we need to do."
MacKinnon's sentiments were echoed by Richard Florizone, vice-president of finance and resources, who said the 2006-07 budget is "very much on track with our plans." He added that, including tuition, the 4.7 per cent overall increase in the provincial government's base operating grant to the University for 2006-07 matches the operating forecast, proving the effectiveness of the process.
Budgeting based on multi-year projections "allows us to not be completely reactive year to year," he said, but the process is not without risk: a one per cent change in a projection translates to $3 million in the budget. For the University, identifiable risks on the expense side include labour settlements that exceed expectation and utility costs like natural gas "which have already seen some pretty wild swings."
On the revenue side, tuition projections continue to be a question mark. "We're like a two-income family," said Florizone, with about two-thirds of total revenue coming from the provincial government and one-third from tuition. And while the University is seeing graduate enrolment increase, undergraduate tuition is expected to be fairly flat as the number of eligible students level out in Saskatchewan and in other provinces.
That said, "we see things swing one way or another every year but we've still budgeted pretty effectively."
Looking at the budget in detail, total expenditures of $301 million in 2006-07 are up about $12 million over the previous year, but the majority of that difference is covered by the provincial grant, said Jim Spinney, director of budget planning. Included in the grant is enough money to allow the University to hold tuition at 2004-05 levels, he said, an arrangement that the government has indicated will continue into 2007-08. Had the grant not provided the funds, Spinney said tuition would likely have increased by a weighted average of 4-5 per cent.
The largest single cost for the University in 2006-07 is salaries and benefits which total about $223 million, or 74 per cent of all operating expenditures.
Spinney also pointed out the budget includes an increase in the allocation to the Academic Priorities Fund, from $375,000 in each of the past three years to $500,000 in 2006-07. "We're also saying that in 06-07, we expect about $1.25 million from that fund will be invested in institutional priorities, of which $500,000 will be directed to graduate scholarships." Combined with previous allocations, that means a total of $1 million will be used from the fund for graduate scholarships in the coming year.
This budget also continues a series of permanent selective measures that were begun in 2004-05 to address the deficit. The cuts, which this year amount to $2.4 million, are directed at the Colleges Agriculture, Pharmacy and Nutrition, and Commerce as well as the Extension and Facilities Management Divisions. There will, however, be varying degrees of success in achieving them.
Provost Michael Atkinson explained that when the selective measures were first identified, they added up to more than the $6.2 million necessary to eliminate the deficit "because we were practical enough to know we may not get everything done by 06-07." Building in that flexibility has meant the University is still able to balance its budget without having completed all the adjustments.
In the case of Agriculture, Atkinson said the budget adjustments will likely see the college lose some capacity "if they can't attract more students…so their progress toward meeting the original $1 million reduction will be slower." Commerce, on the other hand, is trying to address its reduction "with a different kind of budget that has more revenue as opposed to shrinking its activity."
And even if the target reductions are not made by the end of 2007, "we will follow through," he said. "This is not a case of getting cold feet. And we will continue to do other things because they make sense anyway."
Spinney added one-time adjustments in 2006-07 will also allow the University to rebuild its general operating reserves which, by Board policy, must be maintained at 1-4 per cent of planning operating expenditures. The reserves act as a cushion against any expenditure increases or revenue drop off over the year.
When it adopted the three-year budget framework, Spinney said the Board agreed to allow the reserves, which at that time were $5.7 million, to fall no lower than one per cent of expenditures in order to do what was necessary to eliminate the deficit and balance the budget by 2006-07. By the end of 2007, those reserves will be back up to $5.7 million.