Financial Town Hall February 26, 2013
Question and answer period
Below you will find a list of questions asked at the February 26, 2013 financial town hall, along with responses to these questions. Questions were taken from those submitted online to www.usask.ca/finances, Twitter and from those in attendance at the town hall. Please note that responses have been edited to allow for readability, and similar questions were grouped and responded to once. A video recording of the town hall, including the full answers given in response to the questions below, can be found above.
What we are looking at is a widening gap over a period of four years (2012-2016) between the university’s expenditures and its revenues. By the end of that four-year period (2016) the growth in our expenditures is projected to be $44. 5 million greater than the growth in our revenues, as outlined in our Multi Year Budget Framework.
By analyzing key drivers, we know on the revenue side that two per cent increases in basic government grants to universities, based on the current environment in Canada, are really good. Projecting based on two per cent annual increases is a change in Saskatchewan because until last year we had a government that was supporting post-secondary education with much higher increases per year. We can also project what will happen with enrolment, with tuition fees, with investment income and so forth.
On the expenditures side, the key drivers in our budget are also outlined – the biggest one by far is the growth in the cost of compensation for faculty and staff. These costs grow at our university, as they do at other universities, for a variety of reasons. We also know that we must account for payments to our defined benefit pension funds and we currently estimate those payments to be in the order of $10 million per year when fully called on.
Another new pressure that has arisen during this operating budget adjustment process is the critical issues of deferred maintenance. The current level of maintenance expenditures is not adequate to keep up with what is required to maintain our buildings. This will lead to our RenewUS project as another expenditure from the operating budget.
Again, it is no one action or event creating the gap between revenues and expenditures; it is the combined effect of all of these factors.
A description of lean methodology is process enhancement and continuous improvement. It looks at the services we provide to the entire campus and works with staff to provide better service and remove inefficiencies in the system. In terms of TransformUS, which is a prioritization process, they are separate systems, used to achieve different outcomes but working towards the same goal of financial sustainability. In terms of our integrated planning, it falls under the stewardship of our resources, our operating grant and of student tuitions.
The university has made a conscious investment to expand our advancement functions over the last couple of years, not only in the central office but across all colleges. We expect to see increased activity and we would expect to see a major new fundraising campaign coming from them in the next year or two.
Advancement generally builds these funds over longer periods of time to which we are seeing great benefits now for work that was started 20-30 years ago. Because of the time scales involved, we will not see much benefit by 2016 from advancement work that is just starting now. Advancement tends to be more of a long-term strategy.
There is no easy way to help someone through a lay-off or termination process. We have arranged for transition firm to work with employees who request or require additional support to help them in the transition. For example, employees who are given notice have a career transition consultant available to them immediately to support them in privately and safely working through the emotion of the news until they are ready to go home. This may include walking with the employee off campus or see them safely home if this is requested.
These individuals are not campus security, these are trained counselors who know how to best support our employees through this process.
TransformUS is not just about making cuts. This process is about coming out of it as a stronger university with our resources focused around our priorities in a way that is sustainable on an ongoing basis. To do that requires not just making cutting and balancing budgets, but also investing in our priorities.
The mandate from our Board of Governors is to look at every aspect of our operating budget and that includes compensation and complement for every part of our workforce, including our senior administration. Compensation of senior administrators is driven by a principle-based model. We do not look to pay more when the university is doing well and less when it is doing poorly. We look to pay people relative to the market for each type of position and according to a target point in that market. So far we have not looked to changing the compensation principles of any group including senior administration.
In recent years, senior administration has not received increases in compensation.
In the short term we can look at slowing the growth of our senior administration compensation. However, a change in senior administration compensation strategies is a discussion for the Board of Governors to have. One per cent decrease in overall senior administration compensation is $70,000 per year when compared to the projected $44.5 million deficit. We also need to think in terms of long-term compensation strategies and try to adjust for the short-term as well. Compensation strategies for all staff groups look at market and how much is invested in merit.
One our strategic priorities are to recruit and retain outstanding faculty and staff. One of the ways we do that is by providing competitive compensation. Because we use the market model, we can speed up or slow down the growth according to the financial circumstances. The Board of Governors looks at the senior administration compensation on an annual basis and uses the market model to make strategic decisions to speed up or slow down to match the market.
In addition to undergraduate and graduate students being members of the TransformUS task forces, the presidents of the USSU and GSA are members of the Operating Budget Adjustments Steering Committee. This will allow our student leaders to get an overview of all of the projects going on, not just TransformUS, and help us identify which of those projects will be of particular interest to students.
The challenge for student participation in a four-year process is that many of the decisions and impacts will not be made or realized until after the students are gone. However, we need the student voice in the discussions and there are a variety of ways for it to occur. They can send in questions, comments and ideas to usask.ca/finances/contacts, they can attend the town hall meetings.
A policy entrenched with our Board of Governors is to set tuition fees on the basis of three principles – comparability with similar programs at other institutions, considerations of access and affordability and considerations of what is needed to enable quality. The financial need of the university is not a criterion for determining tuition.
Over the long term, a multi-year approach to evaluating and setting tuition fees would be a desirable model. This would allow longer planning cycles for both the university and its students. However, for the short term we will continue to evaluate and set tuition on an annual basis.
Within that estimate we also include long-term disability payments. We have taken into account the anticipated decision of the superintendent. Those regulations have not yet been approved, but we expect them to be shortly. What that would mean is that we would not have to pay solvency payments.
At the last valuation for all three defined benefit plans, the solvency deficit was about $216 million and the current regulations would require us to pay that over a ten year period which would amount to between $25-35 million depending on where our investment income is and what the latest projections were with respect to mortality rates.
In revising that downward and anticipating that we will have going concern payments, we are estimating that we are going to be looking at something like $10 million with some increase for the long-term disability contributions which will likely start during this integrated plan, and anticipating the going concern payments will be in the order of $7-10 million. These values will depend on where we end up at the end of December 2013 and what the actuarial valuations are.
Government relations is an area of activity that all senior leaders across the university are involved in. One of the characteristics of being a university in Saskatchewan is that we have especially wide and deep connections in the civil service and in the government. We have access to the government that other universities in other provinces simply do not have. We make use of those connections in order to make plain at every opportunity the ways in which what our university furthers the good of the province.
We also look for commonalities with the priorities of the government. We are looking to explore those possibilities and make those cases in a wide range of different contacts. The focal point within a 12 month cycle is the operations forecast that we submit to the provincial government annually. We try to present a case for the importance of the investment that the government makes in our institution in which historically our operating grant has been in excess of $300 million. We want to show that the province is receiving far more in return for their investment by spending a significant amount of time explaining what we do with what we already receive, including learning outcomes for students and the impact of research on our communities.
In addition, we also want to position our projections of cost increases and our identification of new costs or new opportunities that the university faces. It is not a one-time event during the year but rather a continuous relationship and cycle of activities involving many people.
One of the lobbying efforts we are undertaking is to improve our sustaining capital grant over the long term. We received $14 million in funding for a sustaining capital grant on $4.5 billion in assets, which is approximately .3 per cent of our assets to be used to maintain our infrastructure. Across Canada, the recommendation for maintaining this level of infrastructure is 1.5 per cent. One per cent would have enough impact to hold the university firm for a significant duration of time. We need to reduce our deferred maintenance and improve our facilities, this is critical for our future and important in terms of our operations and sustainability of costs for our facilities.
We cannot speak on behalf of the government. We do know that the Government of Saskatchewan has many priorities and urgent needs, and higher education is one of these. What we can do is make the case for the impact of higher education for the people of the province. We know through conversations with other institutions across Canada that a two per cent increase to the operating grant is still very good by comparison across the country. We also do not see great increases or decreases when resource revenue goes up and down, unlike some of our counterparts.
The Board of Governance has directed us to “leave no stone unturned”. With that comes an openness to explore all costs. If we are not the best option for providing a service, then we should consider other options. However, the university is bound by its collective agreements and labour legislation, and the university is committed to those contracts and obligations. Our first priority is to look internally using systems such as continuous enhancement and improvement of our processes before resorting to outsourcing.
No, none of these decisions will be made and in fact prioritization will be up to the task force and the criteria they identify. There will be rumours and speculation, and no unit or program should jump to the conclusion that they will rank low with respect to the criteria that is yet to be determined by the task forces. None of us will know the result until they are done their work.