Multi-year operating budget framework
At the beginning of each planning cycle (the current cycle is 2012-2017), a multi-year operating budget framework is developed to support the university’s integrated plan. This framework is based on a number of key planning parameters, such as assumptions for the operating grant from the province, the level of tuition rates and student enrolment, salaries and benefits costs, and a number of other costs such as the operation of new facilities, utility rate increases, software and systems upgrades, and compliance costs associated with legal and regulatory changes. The long-term focus of the MYBF helps us identify issues earlier in the planning cycle and take corrective action to plan for budget changes that support our priorities. MYBF is a framework, not a budget.
Operating budget (or detailed operating budget, or detailed budget)
The university’s detailed operating budget, which represents about 50% of all university revenue, outlines the operating revenue the university expects to bring in and the operating expenses we are planning for related to core teaching and support activities in the upcoming year. Our budget year runs from May 1 to April 30. Our budgeted revenue is based on our provincial operating grant (including targeted funding), along with projections for tuition/enrolment and investment income. Our budgeted expenses are approximately 75% personnel, along with utilities, scholarships, insurance and other operating costs.
The annual financial report looks back to the most recent fiscal year (May 1 to April 30), outlining what we actually achieved in respect to the detailed operating budget for that year. Official audited results are provided each fall.
The operations forecast represents the university’s funding request to the Government of Saskatchewan’s Ministry of Advanced Education. This document is prepared and submitted each summer in advance of the provincial budget announcement in March of the following year. This document is key in outlining our priorities to government and the resources needed to fund these priorities.
Over time, there is wear and tear on our facilities. You can think of deferred maintenance as the “catch-up” activity we need to deal with – that is, the things we needed to repair, but haven’t had the funding to repair. We have a backlog of several hundred million dollars in deferred maintenance needs. For 2012-13, we have identified three critical projects, including replacing two chillers in the central heating plant, replacing two transformers in the Preston Avenue substation and a new boiler for the central heating plant.
The annual allocation the university receives from the Province of Saskatchewan for core academic activities.
The U of S has a mix of defined benefit and defined contribution plans. With defined benefit plans, the university assumes the risk; with these plans employees are guaranteed a set pension income. In defined contribution plans, the employee assumes the risk and their pension income is based on the performance of the markets in which they have invested their pension funds. In both cases, faculty and staff pay into a pension fund, and the university also makes matching contributions to that fund on the member’s behalf. In both cases, the money in the pension fund is invested, in order for it to grow over time. In the case of defined benefit plans, the employer is required to maintain sufficient funds in the plan to provide for the plan specified benefit. Accordingly, the employer may be required to remit additional contributions calculated on either a going-concern valuation basis or a solvency valuation basis. In recent years, with very low investment returns, and low long term bond yields the university’s defined benefit plans have been in a deficit position both on a going-concern and solvency basis.
- Going concern: This pension plan valuation method assumes that the plan is going to continue for the long term, and it is based on long-term assumptions regarding investment returns, regular retirement patterns, etc. Currently, all three defined benefit plans have a going-concern deficit and the university is required to remit additional contributions (from the operating budget) to the plans.
- Solvency: This pension plan valuation method determines the financial position of the plan as if it was winding-up. Simply put, this means comparing the assets (cash) of the plan at a point in time to its liabilities (obligations) and considering whether the pension plan contains enough money if we had to pay out every plan member at the same time, and based on current low rates of bond returns. In recent years, provincial legislation has provided exemptions for this (large) solvency obligation to institutions such as universities. Saskatchewan legislation provides for a three-year exemption from solvency payments. This three-year period expires December 31, 2012 and permanent legislative changes are under consideration. Currently, the university is remitting additional payments to the defined benefit plans based on only the going-concern valuation deficits. The legislative options under consideration include shortening the payment period for going-concern payments or extending the payment period for solvency payments.
Our third integrated plan which identifies our shared priorities in our four areas of focus: Knowledge Creation; Aboriginal Engagement; Innovation in Academic Programs and Services; and Culture and Community. These priorities represent the areas that we have identified as most important, and will guide us toward our ambition to become one of Canada’s and the world’s most distinguished universities.
Within its operating grant from the province, the university receives amounts targeted to specific uses that can’t be reallocated for other uses, such as the College of Medicine expansion. The university also receives restricted funding for research grants, donations and federal/provincial money for capital projects that cannot be reallocated for other use. The majority of the university’s total revenue falls into this category of restricted/targeted use. To illustrate, a research grant is provided with specific instructions on what the money can and can’t be used for. This is similar to when you receive a paycheck and a certain portion of that paycheck is allocated towards personal taxes.
A 2008-09 project that identified financial risks and pressures that could affect the university’s budget as a result of the global economic downturn. The project led the Board of Governors to direct the university to permanently reduce its operating budget by three per cent ($10 million) from what it would otherwise have been in 2009-10 and 2010-11.
Charges assessed for costs related to student services, which can include USSU, athletic, recreation, The Sheaf, student services, health and dental insurance, infrastructure and transit.
Strategic Enrolment Management (SEM)
SEM is a project to guide the long-term vision for undergraduate and graduate student enrolment, including numbers of students and composition of the student body, at the U of S.
Operating revenue plus targeted revenue equals total revenue. The university receives about $1 billion in revenue annually.
Transparent Activity-Based Budget System (TABBS)
TABBS is an internal budget system that is under development by the university and will link revenue and costs directly to academic activity. TABBS, which is expected to be implemented in 2015-16, will result in a new model that will inform decision-making about budget levels and reduce dependency on historical agreements. TABBS will: help align college and unit budgets with activities in a more transparent, comprehensive, and systematic way; link budgets to cycles of integrated planning; ensure resources are put behind strategic priorities; and, place responsibility for budgets at the appropriate college/unit and university levels.
Payment for credit instruction (degree or diploma). Tuition provides access to basic university-wide services associated with credit instruction. Tuition rates are not set to balance the budget, but set according to a board-approved principled approach (comparability, accessibility and affordability, and enabling quality). What this really means we will not raise tuition rates to offset our growing expenses.