FAQ

Projected savings from the salary freeze total $14.9 million.  The actual savings realized from this measure will depend on the number of employee groups affected.

Meetings took place this past week with all employee groups.  All have been asked to accept a one-year salary freeze. They are expected to respond following discussions with their executives or members.

Academics and academic administrators have also agreed to a salary freeze. In addition, on top of a salary freeze, Senior Administration will also take a 3% pay cut.

The salary freeze will apply for one year, effective May 1, 2013.

The hiring freeze will not provide immediate savings, but it is an important step in containing costs. This measure will also help to ensure that the University realizes the savings associated with the Voluntary Retirement Program. The hiring freeze will be effective as of April 2, 2013.

The government cuts in funding result in a direct reduction to universities’ operating budgets.  Our primary objective in trying to meet these cuts is to reduce administrative costs paid from the core operating budget, of which salaries represent about 75%, in order to preserve our core academic and research mission. That said, growth in the academic sector will also be tightly managed.

Savings from this program are projected to be $7.7 million on a recurring basis.  The net savings in the first year of implementation will be much less due to required one-time incentive payments.  Of course, the actual savings realized will depend on the number of staff who opt for voluntary retirement. Eligible employees will receive a letter mailed to their home during the first week of April informing them of the program.

Our primary commitment is to focus on voluntary retirement, a salary freeze, a hiring freeze, and other non-salary related savings to try to prevent job losses. Over the next few months, we will need to assess the financial savings generated from these measures to determine whether other cost-cutting measures such as job losses must be implemented.

The government requires the University to cut spending from our operating budget, which means that staff paid out of non-operational funds will not be directly affected.  While there will not be a hiring freeze imposed on academic jobs, managing hiring in the academic sector will remain a component of managing our expenses during this difficult period.

We are currently focused on the cost saving measures announced recently.  Once we have assessed the savings resulting from those measures, we will be able to determine whether we may have to resort to layoffs for administrative and support staff which would include all employee groups.

Our primary objective is to preserve our core academic and research mission. Cuts to the University operating budget will affect administrative services across the University. That said, the University will continue to pursue initiatives such as workforce planning, more training focused on organizational effectiveness, along with other tools and programs that can enable managers and employees to manage people, processes and performance more effectively in our new financial reality.

The Organizational Development component of workforce planning will be as active as ever in supporting units in managing change and exploring opportunities for greater efficiencies and savings.

Proposed reinvestments, which will begin in FY2015 if Quebec's economic conditions allow it, will at best provide some funds to help us start repaying the additional deficits we must incur, but no more than that. The $38.3 million in cuts to our operating grant also add to the following growing financial challenges we have to face:

• increasing contributions to the pension plan (about $8 million more then predicted last year;
• new equity payments of more than $10 million;
• necessary annual-maintenance investments to our aging buildings.

Since the tuition freeze and the government cuts were announced midway through our current fiscal year, the Board of Governors has allowed us to add $25.1 million dollars to McGill’s accumulated deficit this year. We will likely need to add another $10 million for FY2014. Our projections show that if we accepted the government’s proposal, McGill’s accumulated deficit would double to more than $200 million in the short to medium term. If we make cuts now, our accumulated deficit will remain a little above what it is now, at around $100 million. On an annual basis, the government requires us to submit a plan outlining how we will return to a balanced budget situation and repay any deficits up to a seven year period which have been previously transferred to the accumulated deficit, rather than cut from the budget immediately. Considering that these cuts come on top of other financial challenges, we need to reduce our spending as soon as possible.

Every university has different challenges and different circumstances. McGill operates under a very different 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.

Other universities may decide to take other actions such as to transfer funding from their capital funds or to spread out the cuts and increase their deficit. These options are not good choices for McGill. We do not have any large building projects that we can delay, as all our capital funding is spent maintaining our aging infrastructure, the oldest of any Quebec university. And taking the option of spreading out the cuts, instead of making them now, would double our deficit.

Over the last few years we have already reduced our spending by $37 million and relocated resources to our core priorities through workforce planning and the Strategic Reframing (SRI) initiatives, which makes further cuts difficult. McGill also has funding challenges different than those of other Quebec universities. In addition to chronic underfunding of Quebec universities by $820 million annually compared to our Canadian counterparts, McGill faces some additional disadvantages:

• McGill returns more than $50 million each year to the Quebec government in tuition for out-of-province and international students;
• McGill is one of the only two Quebec universities not to receive additional funding in the form of a "special mission" grant;
• in the past, the government reduced McGill's operating grant by an additional $80 million over 8 years, in a policy known as the "McGill adjustment".

We have no way of knowing how much investment McGill will get. First, any increased funding will depend on an improvement in Quebec’s economic situation, which is far from certain, and in light of Quebec's high debt load as compared to its GDP. As well, we do not know how new investment will be divided up among individual universities, as the Government is changing the way it allocates its funding.  The government has promised to compensate universities for the cancellation of tuition increases. However, this promised funding will go into the Quebec university system as a whole, and the allocation to individual institutions is unknown. Therefore, McGill will not be compensated directly for the amount of tuition it has lost. Borrowing against uncertain investment would be imprudent.

McGill has always been in full compliance with Bill 100. The Bill aims to reduce certain administrative expenses, to control remuneration for management and senior administrative personnel, and to reduce management and administrative personnel through attrition.

McGill employees covered by the renumeration component of the Bill are management and senior administrative staff. Increases to salary rates and scales for this group have been in conformity with the provisions of Bill 100. These increases are based on a merit process and this staff group is not subject to automatic annual salary raises.

McGill employees covered by the personnel reduction through attrition portion of the Bill are MUNACA and M staff. Under Bill 100, reductions must continue until the end of fiscal year 2014.

McGill administrative expenses sit at about the Canadian average for research universities. University needs have substantially changed over the past 20 years, and so staff needs have also changed. Today, modern universities are larger and more complex organizations and the expectations of government, parents, students and the public have also changed.

Just to take a few examples, today we must provide more extensive reporting to government, a larger array of student services and substantial IT support for teaching, research and administration. As well, we have to compete internationally for students and faculty, form more complex international research partnerships and diversify our funding through donations. All of these functions require support staff to make them happen.

In addition, we are also experiencing growing stewardship requirements on behalf of government, granting agencies and other contributors of funding with annual reporting and additional disclosure requirements which are adding to the workload of an already thin level of staff in the affected areas. McGills' staffing models must therefore address this current reality for our University to remain successful and give today's students the education and the services they need. Our challenge now, particularly in this tough financial context, is to ensure that we are being as efficient as possible in meeting these new needs.

The Principal, the Provost, the Vice-Principals, and the Deans.

The percentage of total operating budget cuts for all units was calculated based on the overall needed target required for our University to achieve the needed savings. It includes each unit’s share of compensation savings related to staff reductions (from voluntary retirement program and, if necessary, further staff reductions).  The 3% cut in senior administrative salaries is in addition to the targeted cuts in administrative and academic units’ operating budgets.

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.

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.

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.

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.

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.