As the Board of Governors approves next year’s budget, the University of Guelph is bracing for several more years of operating deficits, with rapidly dwindling reserve funds.
The general operating budget for 2024/2025 was approved Thursday, with an expected four per cent, or $20.9 million, increase in revenue, excluding grant allocations.
But expenses are expected to grow by 5.8 per cent, or $32.2 million, resulting in a $12.7 million deficit next year due largely to debt financing, inflation, employee compensation costs, pandemic impacts and infrastructure needs. Not to mention the domestic tuition freeze, which is set to last another three years.
Salaries and benefits due to the repeal of Bill 124 are expected to cost around $434.9 million next year, which is around 74 per cent of the general operating budget expenses.
Scholarships and bursaries account for five per cent of the budget, utilities three per cent, and operating costs 18 per cent.
Tuition and revenue growth accounts for around 46 per cent of the total operating revenue.
With the domestic tuition freeze continuing for another three years, and with “declining international student enrolment and tuition… we are severely constrained in our ability to generate revenue to offset increasing costs,” a report from the finance committee reads.
However, in 2024/2025 that revenue is expected to be around $261.6 million – $16.4 million more than last year.
“We were planning for a larger incoming class in the fall, and given the unexpectedly high acceptance rates, that class is even larger than we had put in our budget,” provost and vice-president academic Gwen Chapman said during Thursday’s meeting, as they’re anticipating 7,068 semester one domestic students in September, and 293 international students.
“We are probably in a stronger position given the enrolment, but we won’t be able to include it because it’s tentative” until the final stage is reached, president Charlotte Yates said.
She said costs will also have to be considered to ensure faculty can continue research and the student experience remains strong.
“There’s a lot of volatility,” she said, emphasizing that the budget for next year and the two-year plan to follow is a rough estimate given the quickly changing climate.
That anticipated deficit for next year includes unconfirmed one-time funding from the province through the postsecondary education sustainability fund.
In 2024 the province announced $700 million in funding for a post-secondary education sustainability funding, starting in 2024/2025, proportionally allocated to all institutions, with an additional $203 million for institutions with greater financial need.
There is no formal commitment for U of G’s portion of that funding yet, though they’re anticipating a three per cent increase in operating grants for 2024/2025.
Details regarding the top up fund for institutions with greater financial need have not yet been shared with institutions, so the budget assumes no top up until the details are clarified.
Moving forward, things aren’t looking much better.
“Despite our best efforts and the prudent financial management outlined in our budget plan, we will continue to face significant financial risks and, without additional government support, will face ongoing deficits in our operating budget for the next three years,” the report from the financial committee reads.
This will further diminish the university’s operating reserves, which have depleted significantly in the last few years.
In 2018/2019, the operating reserve sat at $81.4 million. This year, it’s expected to be as low as $19.8 million, and will likely only fund next year’s deficit before hitting bottom.
“The number of external shocks to the university over the last few months means that the university may encounter significant variances from our budgeted assumptions,” the report says.
“These factors are beyond our control and include shifts in government policy, fluctuations in enrolment, and global and economic uncertainties. These variables can result in revenue shortfalls or unforeseen expenses, posing great risks to the university’s budget targets and financial stability.”
