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May 2010 budget letter

May 26, 2010

 

Dear Members of the McGill Community,

The McGill University Budget for fiscal year 2010-2011 marks a series of transitions – a new accounting methodology, a new fiscal year end, and the closing of our first multi-year allocation plan linked to clearly articulated strategic academic priorities, which include sustaining strength in core fields across the board. As in past years, this budget is designed to keep financial resources and spending aligned with support for quality and excellence in the achievement of McGill’s mission, goals, and objectives. When the Board of Governors approved the multi-year budget planning exercise in fiscal year 2005, the executive team and the entire senior administration undertook to reduce annual operating deficits in every one of the five years of the plan. That trajectory was aimed at producing a balanced budget for fiscal year 2011, an expectation shared also by the Ministère de l'Éducation, du Loisir et du Sport (MELS). Notwithstanding increasing revenues, as projected, in each of those years, fulfilling the commitment to balancing the budget for FY2011 became progressively more difficult in the face of the dramatic economic downturn beginning in the fall of 2008 and the resulting economic uncertainty. Nonetheless, we have committed that these externalities must not undermine our unwavering dedication to maintaining and enhancing not only McGill’s position among the world’s leading publicly funded universities, in service of our communities at home and abroad, but also to high standards of financial accountability, efficient administration and ongoing measurement of performance.

Although revenues have increased, they have not kept pace with increased expenditures in salaries and related compensation, in the recruitment and retention of top academic talent, and in improving our financial support for students. We have aimed to reduce increases in spending whenever possible, while investing in initiatives designed to improve McGill’s competitive position nationally and internationally. We will continue on this path. The ongoing financial uncertainties and downturn also pose challenges for the continuing success of our comprehensive campaign and have compressed our endowment and its income stream. In addition, the funding situation for Quebec universities has deteriorated, as has our funding compared to that of universities elsewhere in Canada. Other provinces have increased their grants to post-secondary educational institutions and have been operating within more realistic tuition regimes. We are optimistic that the recently announced Quebec Budget for fiscal year 2010-11 presents an opportunity for a new tuition regime starting in the Fall 2012. Nonetheless, for FY2011 we must manage within the current regulatory regime except for our deregulated and self-funded programs. At the same time, we will continue to build the case that effective tuition increases combined with financial assistance is the best path to improving student accessibility to university education for all income groups, while establishing the capacity to continue building the competiveness of our programs.

Virtually every major public university in Canada and across North America faces serious financial challenges and important program and spending trade-offs. We accomplished much last year to reduce expenses, including a three-percent cut in senior salaries and the sacrifice by all staff to postpone pay increases for 6 months. That, combined with some agreed-to reductions in contributions to benefits and a general 1.5% budget cut across the University’s non-salary spending, provided some financial relief, but we are still facing a deficit for the next fiscal year and have further to go on realizing base-budget savings. Although the figures for the current 2009-10 year are not yet finalized, we forecast that we will meet our commitment to reduce the annual deficit to $5M. We have not asked our employees to make a comparable across-the-board sacrifice for the coming year; therefore, we must implement new measures to continue decreasing base-budget allocations in appropriate areas, partly by optimizing efficiencies in key areas, such as work load, use of space, and additional revenue generation for priority areas.

Let me be clear: we cannot continue business as usual. The Provost is engaging in a disciplined exercise to align resources to priorities, while cutting expenses, exploring the delivery of programs and services, and finding business efficiencies in many areas of our operations. He, with our senior team of Deans and Vice-Principals, will continue on this path. Our Vice-Principals, Deans, Directors, and Chairs all have a role to play in optimizing the allocation of assigned resources, and in continuing to streamline processes to achieve significant cost-savings via improvements in operations and performance. We will be vigilant in protecting and growing quality, access and competitiveness whenever possible.

Facing fiscal challenges is not new for McGill. According to our five-year planning frame, the budget for FY2011, which is the final year of that cycle, is to break even, and, on an 11-month basis that results from a change in year end, we will reach this goal. However, with approval from the Board of Governors, using a conservative model, we will show operating budget deficits beginning in FY2012 in transition to the anticipated FY2013 tuition increases noted in the Quebec budget, along with other new resources. In our current budget model, we have conservatively assumed continued $100/year per student increases, but anticipate a significant increase in tuition revenue that will be used both to work down the large accumulated deficit and to support underfunded top priorities of the University. During this transition period, we aim to preserve the progress made over the past few years to support McGill’s priorities and performance, consistent with our mission.

We will continue to commit 30% of all net new tuition revenue toward student support. This, along with initiatives coming out of the Principal’s Task Force on Diversity, Excellence and Community Engagement, will aim to better foster community engagement and the diversity of our students, faculty, and administrative and support staff.

Seven years ago, in my installation speech, I noted that McGill punches above its weight, and I continue to hold that opinion. This University is performing at measures well above what might be expected given our level of resources. This was demonstrated amply in my exchanges with other university leaders at the Association of American Universities (AAU) Presidents’ meeting, which we proudly hosted at McGill last autumn. American universities, with two and three times the per-student funding we receive, were declaring something akin to a state of disaster. We, in contrast, are experienced in making tough choices and have been for much of our history. We should be proud of this remarkable achievement, which was noted by President Clinton during his speech at the special convocation in November when he was awarded a McGill honorary degree. Yet we all know that to continue to do more with less is not sustainable in the medium to long run and we will face ever diminishing returns if our funding base does not continue to grow, and to grow faster than our expenditures.

The operating budget of McGill University has undergone significant change over the last three fiscal years. While revenues from all sources have steadily increased, we must continue to diversify and increase revenue sources strategically and, with disciplined implementation of plans, to realize better support for priorities as well as important new opportunities. Even though resources, especially with respect to tuition, indirect research costs and infrastructure support, have not kept pace with those available to our peers in the rest of Canada and the United States, we have met our deficit reduction plan and have steadily narrowed the gap between revenues and expenses. As we transition to a new strategic academic plan and associated multi-year resource allocation, it is clear that McGill must have more resources if it is to retain and grow its hard-fought and well-earned place among top-tier, publicly funded universities. We will move forward or we will fall back.

In the proposed budget, we remain committed to quality in pursuing our mission in a number of key areas: we will continue to recruit and retain the best academic talent in selected priority areas; to attract the most talented undergraduate and graduate students; to remain one of Canada’s leading employers; to offer quality programs and services to our undergraduate and graduate students; to improve student life and learning; to foster diversity among our students and faculty; to promote disciplinary and interdisciplinary priorities in research and learning, including cluster hires for the latter; to provide the highest quality support services to our students and faculty; and, to promote measurable performance indicators to ensure accountability. We will undertake a new round of reviews of our academic units and programs, explore our courses and program delivery, and examine workload issues with an eye to improving student engagement and support, exposing our students more consistently to McGill’s outstanding teacher-scholars. All of these measures will help us position ourselves to meet future challenges and to succeed.

This transitional budget for FY2011 is a reflection of the work that is underway to transform our University, and it is fully consistent with our mission. The budget for FY2011 is designed to protect jobs to the best of our ability, to allow for strategic increases in enrolment, to achieve greater efficiencies in a range of areas, and to generate significant new revenues. All of this will be done while preserving McGill’s mission and values and respecting the character and history of this great University.

My enormous thanks to the Provost and his team, the senior administrative team as a whole, the Board of Governors, Senate, and the entire McGill community of colleagues, students and alumni for your superb commitment to building on the strengths, reputation and contributions of McGill and for your unwavering support in achieving our mission of excellence. Your hard work and high standards are the bedrock of McGill’s success. These times are challenging, but they are also exciting. Our collective sense of community, combined with a sustained dedication to progress, excellence, and innovation, will steer us and reward us as we further McGill’s legacy as one of the world’s premier universities.

With warm appreciation and all good wishes,

Sincerely,

Professor Heather Munroe-Blum