Messages to the Community
16 July 2013
Dear members of the McGill community,
We last updated you on 11 June regarding McGill’s financial situation after the closing of the Voluntary Retirement Program (VRP). We promised to report back to the community by mid-July on how the VRP and other cost-reduction measures would affect the University’s financial situation and in particular the operating budget.
Based on careful analyses by the Budget Office, Human Resources and Financial Services, we are confident McGill can achieve the $43.5-million expense-reduction target by the end of this fiscal year (30 April 2014). Further, we believe that we will be able to do so without having to resort to large-scale staff dismissals.
Our approach to tackling the sudden and severe pressures on our operating funds, due to unanticipated reductions in government funding, was to spread the effort broadly while protecting McGill’s core academic and research missions. In addition, we promised to do everything possible to minimize job losses even as we reduced the number of positions at the University.
You will remember that the cost-reduction plan included the following measures:
- a one-year salary freeze taken by most, but not all, of our employee groups;
- 3 per cent salary reductions and a salary freeze for senior administrators;
- 7 to 9 per cent reductions in the operating budgets of all Vice-Principals, as well as the Provost’s and the Principal’s offices;
- 5 to 7 per cent reductions in the operating budgets of all administrative units;
- 3 to 5 per cent reductions in the operating budgets of all Faculties;
- a hiring freeze, effective until further notice;
- numerous non-salary cost-saving measures;
- the Voluntary Retirement Program.
More than 250 of our colleagues took the voluntary retirement package. This number exceeds our forecast and will produce almost $18 million in savings as of fiscal year FY2015. The VRP, combined with the other expense-reduction efforts, bring us to 95 per cent of our cost-reduction target.
In order to close the remaining gap, Vice-Principals and Deans have devised additional plans for permanent savings in their operating budgets. They will implement these plans by the end of this fiscal year. The plans will entail the abolition of some positions, but these reductions can be achieved mainly through attrition, the non-renewal of some term contracts, workforce efficiencies and reorganisations resulting in strategically targeted position abolitions. Decisions about these reductions will be made by individual units, based on their local needs and requirements.
The last few months have been difficult for everyone in the McGill community, and the full implementation of the required measures will test our mettle in the coming months.
In total, including departures as a result of the VRP and those needed to close the required cost-reduction gap, McGill’s administrative and support staff will have been reduced by more than 300 positions by the end of this fiscal year. Human Resources (in particular the Organizational Development group) and the entire senior administration are working closely with Faculties and support units to develop appropriate plans to ensure critical services are maintained and that our core missions, guided by our strategic plans, such as ASAP 2012, are protected.
We take this opportunity to thank you for your hard work, your understanding and, above all, the financial sacrifices you have made to help us avoid an unwelcome scenario. As a result of this collective effort, and barring further shocks to our funding models, we are set to propose a balanced budget for FY2015 that will include a five-year plan to repay the debt we incurred in FY2013 and FY2014, in order to comply with budget rules set by the Quebec government.
We have come a long way and for that the McGill community should take pride, but we must remember that this is not the end of the road. We must be diligent in sustaining our financial position because pressure on McGill’s operating budget, including a growing pension deficit, deferred maintenance costs, and pay equity agreements, will last for the foreseeable future.
Adapting to major change is never easy, but it can and often does provide new opportunities for personal, professional and academic growth. As we move forward, we will continue to support each other to ensure McGill remains a vibrant world-class intellectual community, a great place to work and a force for good in our society.
For more information on McGill’s financial situation and the cost-reduction strategy, please visit the budget cuts site and its FAQs. If you would like information about measures in your unit, you are encouraged to speak with your supervisors.
The response to this financial crisis has demonstrated, once again, that McGill’s people are this University’s greatest strength.
Thank you for your dedication to McGill and your continuing contributions to our great community.
Professor Anthony C. Masi - Provost and Acting Principal
Michael Di Grappa - Vice-Principal (Administration and Finance)
11 June 2013
Update following the closing of the Voluntary Retirement Program
Dear members of the McGill community,
The Voluntary Retirement Program (VRP), which was offered to eligible administrative and support staff aged 60 and over, closed on June 3. We offer our best wishes and sincere thanks to colleagues who opted for voluntary retirement.
The success of the VRP and other measures, such as the one-year salary freeze taken by some employee groups and your cost-saving ideas, brings us much closer to our required operating budget reduction of $43.5M. These measures entail sacrifices on the part of McGill staff, but will greatly minimize recourse to involuntary staff dismissals. However, it is apparent that we will have to reduce the University’s payroll costs by means of such dismissals.
An evaluation process is now underway to determine the final number of positions that will have to be eliminated. A primary objective in the development of the budget for FY2014 was to minimize the negative effects of the government cuts on our community. Details on these measures will be shared early to mid-July. Inevitably, this waiting period will continue to be difficult.
Some units have had more employees opt for voluntary retirement than others. Consequently, very careful and detailed planning is underway to face these challenges. We are working with VPs, Deans and Directors to assess the impact and determine how resources can be redeployed to areas that face more serious gaps.
McGill is confronted with a complex situation and there are no easy solutions. Many questions will arise this year in terms of University finances and the effects on our community. We all need to be open to doing things differently. Our strategic priorities must be used to guide us through these unfamiliar waters. We have to simplify work processes and adapt to a rapidly changing set of circumstances. More information will be available shortly on the programs, tools and support that will be available.
We are working as quickly and as diligently as we can to bring clarity and stability under circumstances that require thorough analysis and sound next steps. After a period of adjustment, if we work together, McGill and all of us will emerge stronger.
If you have questions about how McGill is responding to the recent cuts to university funding, please visit the budget cuts website or email us at budgetcuts [at] mcgill [dot] ca.
In this period of transition, we encourage you to reach out to colleagues, your teams and Human Resources (HR) to manage these changes.
Thank you for your patience and understanding.
Anthony C. Masi, Provost
Michael Di Grappa, Vice-Principal (Administration and Finance)
4 April 2013
Dear members of the McGill community,
Last week the Principal wrote to the community to outline the rather bleak financial situation that the University is facing. She also outlined a series of measures that will be included in the proposed budget for fiscal year 2014, which begins on 1 May 2013. These actions are deemed necessary to ensure four goals, namely that:
- the University remains compliant with the funding rules and repayment of deficits established by the government of Quebec (e.g., the Ministry of Higher Education),
- we protect our core academic and research mission and fundamental values,
- we act in a fiscally responsible and prudent manner as the steward of funds, public and private, entrusted to McGill,
- and, most importantly, the chosen measures minimize the effects on people and programs due to reductions in the number of employees and reduced spending power.
Subsequent to the Principal’s message, there have been some questions regarding the breadth and scope of the cuts and the measures proposed to deal with them. We take this opportunity to clarify some key elements of the plan for dealing with the cuts to our grant.
1. How much money has the University lost due to the government cuts to McGill’s operating grant and the rescinding of scheduled tuition increases?
The cuts represent a net loss of $38.3 million over the period 1 January 2013 to 30 April 2014. As a result of rescinding scheduled tuition increases, McGill will receive $18 million less in tuition revenues than anticipated. Consequently, total lost revenues over FY2013 and FY2014 add up to a $56.3 million reduction in base funding.
We were later told to expect a small amount of additional income from the government in the amount of $4.4 million for FY2014 and FY2015, and to count on a 3% increase in tuition starting in FY2014. Consequently, as the Principal indicated, we have a net shortfall of approximately $43 million to cover in preparing the budget for FY2014, which will be submitted to the Board of Governors for approval at the end of April 2013.
2. Insofar as the government has proposed to reinstate these amounts over time starting in FY2015, why can’t McGill just include these amounts into its accumulated operating deficit?
Doing this would double our accumulated deficit in less than 5 years, which we will in any case have to repay sooner rather than later. Spreading the pain will make it twice as painful in the long run.
Given the timing of the announcement of the tuition freeze at FY2012 levels in September 2013, and the severe cuts to our government grant in December 2012, the Board of Governors has allowed us to place $25.1 million dollars onto McGill’s accumulated deficit for FY2013. Even so, it is unlikely that we will be able to produce a balanced budget for FY2014, and as a consequence we will probably add another $10 million to our deficit for FY2014.
Further, the government has indicated that it expects a repayment plan over a five- to seven-year period for the amounts that are transferred to the accumulated deficit rather than cut from the budget immediately. Consequently, we will indicate in our budget submission to the Board how we plan to accomplish this repayment. The University will also have to sign an agreement with the Ministry regarding our repayment plan.
To put it simply, the proposed reinvestments starting in FY2015, and which depend on economic conditions at the time, will at best provide some limited funds to help us start repaying the additional deficits we must incur, but no more.
3. The government has also indicated that there will be a three per cent indexation of tuition and that they will compensate for the loss of tuition increases. Shouldn’t that help our finances?
For the average student, indexation of 3% represents an increase of approximately $70 per year. So, McGill can expect to receive around $1.4 million in additional tuition revenues starting in FY2014. This is not sufficient to cover even a small percentage of the revenue losses we are experiencing. As noted above, compensation for the loss of tuition increases will be included in the overall provincial reinvestment promised starting FY2015, but how that promised amount will be distributed among universities is still a subject of debate in Quebec City. McGill will not be compensated directly for the amount of tuition it has lost, and how much of the future funding it will get is uncertain, given economic conditions in Quebec.
4. Are other universities in Quebec taking actions similar to those being considered at McGill?
Each university in Quebec will have to take whatever actions they deem necessary to deal with the cuts based on their own particular circumstances. Each university knows its own situation better than it does those of others. One thing we do know for sure is that McGill operates under a very different, higher-cost model than other universities in the Province. To a greater extent than other institutions, we have full-time students being taught by full-time faculty. This model has built-in quality assurance mechanisms, but it also reduces degrees of freedom available to us to deal with budget cuts of the magnitude we are facing.
5. Some universities are using one-time capital reserves to cover operating costs in the short-run, so why isn’t McGill doing the same thing?
McGill has a very serious and unique deferred maintenance problem that has been well documented. In order to deal with these matters, especially those related to the health and safety of students, faculty, and staff, we have already been borrowing against future fiscal years’ allocations. Therefore, there are no surplus capital funds to transfer to operations. In addition, capital is one-time-only money; it is not recurrent base funding. It may alleviate the problem for a year or two, but then we will still have to find a way to deal with the shortfall in operating grant revenues, while facing an even more serious deferred maintenance issue on our physical plant.
6. In her message, the Principal indicated that the measures being implemented would preserve as many jobs as possible, so does that mean involuntary lay-offs are inevitable?
We expect that between $6 million to $7 million dollars can be cut from various non-personnel line items in next year’s budget. However, as has been stated many times, 75% of all operating expenses are related to people, in the form of wages, pensions, and benefits. Given the magnitude of the cuts that have been imposed on McGill, we must reduce this overall expense. There are several ways in which this can happen.
First, there is a certain level of “natural attrition” that occurs in any large organization, our University included. One measure to reduce positions, therefore, is simply to impose a hiring freeze alongside natural attrition, accompanied by a workforce planning project for minimizing impact. But, this still won’t get us to the level of cuts required.
Second, where possible, and with mutual agreement when necessary, McGill will implement a salary freeze, to which MAUT has already subscribed for FY2014, whereby announced wage increases are foregone to provide relief to the bottom line. If an agreement to postpone wage increases cannot be reached with the relevant employee groups, other actions will have to be taken to achieve the requisite financial targets.
A third measure relates to voluntary retirement. Some members of the University community may be thinking about retirement. Along these lines, a well-crafted, voluntary retirement incentive arrangement may help people make this choice now rather than later. Such a plan is being proposed and will be in place from 2 April to noon on 3 June of this year. This week, eligible individuals will receive details by mail through a personal correspondence.
Finally, and only as a last resort, if attrition, wage freezes, and voluntary retirements do not produce the necessary reduction in the University’s wage bill, then we will have to consider terminations due to financial exigency. It must be clear to the community that this will be considered as a last option to meet the necessary cuts.
If we have to resort to terminations, these will be handled according to the terms and conditions of the collective agreement or an individual’s employment contract, and will respect fully the provisions of the Quebec Labour Code.
7. What about expenditure reductions that are not related to personnel costs?
In addition to personnel-related measures, we must also cut expenditures in targeted areas or as a percentage of overall unit budgets by specified amounts. As noted above, there may be as much as $7 million in potential savings in this regard. In addition, we are exploring with each major unit head (Deans, Vice-Principals, and directors of large units) how the cuts can be made in such a way as to reduce the impact on the academic mission, however every sector of the McGill University community will be affected by one or more of these measures.
It has been our intention to clarify the broad parameters of the approach we are taking to deal with these unprecedented cuts in government funding that have been imposed on McGill, and indeed the entire Quebec university system. We realize that there is still uncertainty in the meaning of these measures for individual members of the McGill community and we are sorry for the inconveniences that this might cause.
Your Deans, Vice-Principals and directors will be working closely with Financial Services and Human Resources to develop unit-level allocations for next year’s budget, and to plan workforce adaptations in light of the funding cuts. We understand that many questions may remain and that others may arise along the way. Please do not hesitate to write us at budgetcuts [at] mcgill [dot] ca, or on the Red Blog (http://blogs.mcgill.ca/red), or to speak directly with your manager. We will also regularly update our website dedicated to budget cuts (www.mcgill.ca/budgetcuts) with answers to the most frequently asked questions.
The proposed measures should allow the University to address the immediate financial crisis in a way that does not compromise the mission, vision, and longer-term success of McGill. These are not easy times, but McGill has faced tough times before and prevailed. We will do everything we can to help manage these difficult cuts in the least disruptive way possible for our community members.
Prof. Anthony C. Masi - Provost
Mr. Michael Di Grappa - Vice-Principal (Administration and Finance)
March 26, 2013
A Message from the Principal Heather Munroe-Blum
Following the Summit, some media reported that the cuts to Quebec’s universities had been reduced by 75 per cent. This is not the case. In reality, we face the same level of cuts -- $38 million for McGill in this year and next. The government offer provides some flexibility in the time frame and removed the threat of monetary penalties for not taking the cuts now, but we must implement them.
As well, the Government has described reinvestment beginning in 2015, economic conditions in Quebec permitting. The Government is setting up a work group to review how this funding would be allocated to universities, and we do not know what portion McGill will receive. Given this, and the significant economic uncertainties, we cannot responsibly count on this investment.
In addition to uncertain government funding, McGill’s operating budget must cover increased compulsory expenditures in certain areas, including contributions to the McGill Pension Plan, new obligations under the Pay Equity legislation and urgent building maintenance and repair. These compulsory costs have grown substantially.
Because of these cuts, McGill’s accumulated deficit (non-GAAP) will increase by 30 per cent this year (2012-13), from $93M to $120M, and is on a trajectory to double by 2019. To act responsibly, we must begin to reduce costs substantially now. We must look to the long term and do everything we can to protect our core mission and keep McGill a vibrant, internationally competitive institution of higher learning.
These new financial realities will lead to hard decisions that will affect all employee groups: executives, managers and unionized groups. We have considered the thoughtful suggestions from the McGill community, and we will be discussing with each of McGill’s employee groups a menu of options to reduce expenses, such as salary and hiring freezes, an early retirement program for administrative and support staff, and cuts to services and programs.
Compensation (salary and benefits) makes up 75 per cent of our core operating costs, and if we are unable to reduce expenses to the needed level through these measures, we will have to explore job losses.
This is a tough time for everyone at McGill, and everyone will be asked to make sacrifices and pull together for the collective good of our University. McGill has faced threats before, such as the repercussions from the meltdown of financial markets. We came out of those crises stronger. We will do the same this time.
An Unprecedented Challenge
February 8, 2013
McGill is facing the most serious financial challenge in its recent history. I wanted to use this space to provide our community with some background on how the University got here, why we think the situation is so serious, and to solicit your input on what we can do to address it.
One year ago, in February 2012, when we were planning our budget for this fiscal year (May 1, 2012 to April 30, 2013) and projecting it over a five-year horizon, the government of Quebec had promised increases in both government funding and tuition—increases that would be steady and regular over the period.
With the promise of these extra resources, we put initiatives in motion that cannot now be stopped in a matter of months, as the government has asked us to do.
In September we were informed that there would be no tuition increases, reducing by $6 million dollars the revenues we projected in the FY2013 budget. In December, just before the break, we were told that Quebec would cut 5.2% or over $19 million in funding for McGill this year. The government suggested that these cuts would persist into at least FY2015.
Nearly 75% of McGill’s core operating budget goes to salaries, and we have contracts, commitments to staff and other expenses that cannot be reversed so suddenly. Costs other than salaries (such as energy, space, equipment, office and lab supplies) represent about only $160 million per year, and with most of the year over, most of that money is either already spent or committed to third parties.
The coup de grace came last week when the government announced that if universities fail to make at least 50% of their imposed cut in this fiscal year (before April 30), we will also lose the “conditional grant”, or last installment, on this year’s transfers. For McGill that figure is approximately $32 million.
Some of you may remember, or have been told about, the drastic funding cuts of the mid-1990s—not a good time for the Quebec university system and not a pleasant time at McGill. However, at least then we had time to plan in order to reduce the impact of those cuts on our academic mission because the government of the day informed us they were coming and that they would last for five years.
But as you can see, the first cut (the tuition freeze) was announced four months into our fiscal year, and the second cut (the reduction in our operating grant) was announced nearly three-quarters of the way through our fiscal year. And the threat of holding back the last installment comes with only 90 days left in our fiscal year. Each week seems to bring new and worse news. VP Di Grappa in his blog post lays out the interesting and disturbing chronology of policy reversals.
McGill has achieved and been able to maintain its position as one of the world’s top universities despite scarce financial resources, because we plan for the long-term and we execute on those plans. But these cuts, combined with reductions in provincially funded research and associated indirect cost recoveries, represent an unprecedented assault on McGill, and indeed on higher education in Quebec. We will do everything we can to protect McGill’s core mission of teaching, research and service to the community, but we face an extraordinary challenge.
Find this post and the latest news on budget cuts and McGill's financial situation on the Red Blog, and join the community discussion there.