Directive to SCUP re 1998-99 Budget

Senate Agenda - EXHIBIT VI - March 20, 1998


At the February 20, 1998, meeting of Senate, Mr. K. Shapiro gave notice of the following motion to be debated at the next Senate meeting (March 20, 1998):

That the Senate direct the Senate Committee on University Planning to bring forward an operating budget for 1998-99 that is based on a maximum 5% average increase in tuition rates.

The motion was developed by the Student Caucus on Governance (student members of Senate and the Board of Governors), and the following rationale has been provided by them.

The motion applies to every type of tuition fee at UWO including full-time, part-time, Canadian, International, undergraduate, graduate, and professional. Since the motion specifies a maximum average fee increase, the University would still have the flexibility to consider tuition fees on a differential basis so long as the average increase does not exceed 5%.

An average 5% increase in tuition revenue accounts for the effect of inflation (1.6%,as of December 1997) for UWO's entire operating budget.

This prediction is based on the same budget model used in 1997-98, including the $1.5 million in one-time allocations. A 5% tuition increase is enough to offset the effect of inflation on government grants and other University revenues. On a practical basis, tuition is the only revenue that the University can increase by the amounts needed in order to maintain operation; however, it is an open question whether students should bear the entire brunt of rising costs.

Western students cannot afford any more substantial increases in tuition. However, they also cannot afford any diminished quality for their already expensive education. Therefore, although students would prefer that there be no increase in tuition for the upcoming year, in an effort to compromise, the proposers of this motion are recommending that the University pursue an increase in tuition of 5% or less.

          		1997-98		1998-99		% Change
Government Grant	$130,977,000	$130,977,000	0%
Tuition			$78,638,000	$82,569,900	5%
Other Revenue & 
Contributions		$38,265,000	$38,265,000	0%
Total Operating Budget	$247,880,000	$251,811,900	1.6%

Western students have been the main source of income to make up for the government cuts to Western's operating grants.

Since 1993-94, government grants have decreased by $45.7 million or 26%. In the same period, tuition has increased $29.0 million, or 58.3%, while the University's other revenues have increased $11.8 million. In Looking Forward, those other revenues are projected to remain fixed, leaving tuition as the sole source of revenue increases for the University.

As a result, tuition is predicted to rise exponentially, with each increase larger in dollar amounts than the last. In the absence of a strong student aid program, students will not be able to keep up, and academic quality may be compromised.

Looking Forward's increasing tuition models assumed that the student loan system would grow in step with tuition increases; however, despite recent federal and provincial announcements, student aid continues to be cut and a strong new student loan system has not been established.

In Looking Forward, the University made plans based on projections about the future levels of government grants and student tuition fees. Most of these projections (those regarding government grants, tuition increases, inflation, and additional university revenues) have proved to be relatively accurate, but there has been one exception. In modelling for increasing tuition rates and fee deregulation, the University assumed that "a strong government loan system, ideally with an income contingent repayment mechanism, will grow in step with the tuition increases to ensure access for needy students." Although the most recent federal budget was educationally focussed, there were only minor improvements to the current federal student loan program. The Millennium Fund will not be accessible to students for another 2 years. Provincially, the Ontario government still lacks bank and student support for its suggested student loan reforms.

The rationale for UWO's policy on increasing tuition as outlined in Looking Forward was based on a strong government-funded student loan system that has not yet been developed. The University must not pursue the further tuition increases recommended in Looking Forward until such a student loan system is implements. While any increase in tuition will be difficult for students, a modest increase will compensate for the freeze in government grants to the University and for inflationary growth of the University Operating Budget. Minimizing an increase in tuition will moderate the problem of rapidly increasing student debt load. This measure will provide significant benefit to UWO's recruitment efforts, thereby continuing growth in academic excellence.

Attached is a statement from the Provost and from the Vice-President (Administration) that describes the context and consequences of constraining the 1998-99 budget plan to a 5% tuition increase.


The University of Western Ontario


We believe that the proposed instruction to the Senate Committee on University Planning to produce a budget with an average tuition increase of 5% is seriously misguided -- flawed in process and wrong in policy. We urge Senate to defeat this proposal, and to consider tuition in the context of the entire budget when it is presented later this spring by the Chair of the Senate Committee on University Planning.

  1. The 1998-99 Budget in Context

    Western's budget planning for 1998-99 must be seen in broad context. Per capita government grants in Ontario are lower than in any other Canadian province. In the period 1992-93 through 1997-98, the Ontario government's grant to the University has declined by $44 million. Although tuition fees have risen substantially in the same period, the increase in total tuition revenue of $24 million still leaves a revenue shortfall of $20 million. That shortfall is compounded by annual increases in expenses that, although slowed by a lower rate of inflation, have continued throughout this period. The gap between changes in tuition and government grant revenues is illustrated in an Figure 1.

    The impact of this reduction in resources across the University has been substantial as the following employment figures demonstrate:

    			1992-93		1997-98	% 	change
    Full-time Faculty	1,421	   	1,238		-12.9%
    Full-time Staff		2,230	   	1,793		-19.6%
    Totals			3,651	   	3,031		-17.0%
    The construction of balanced budgets in recent years has required that Western's Faculties and support units be subjected to unprecedented resource reductions. These reductions have not entirely absorbed the impact of government funding reductions and necessary expenditure increases. The 1997-98 budget included revenue lines that can not be sustained in future years. First among these was the $8.5 million allocated to the operating budget from undistributed investment income. Current projections suggest that the sustainable level of allocations is only $4 million; the $4.5 million discrepancy represents a budget deficit in the absence of increased revenues. Moreover, although the Ontario government has announced what appears to be a stable government grant to universities in 1998-99, the creation of a grants envelope that includes OSAP and increased pay equity costs elsewhere in the public sector represent the possibility of further reductions in 1998-99, perhaps amounting to as much as $1 million.

    The immediate budgetary future is further clouded by a number of unavoidable increases in expenditures beyond those associated with the level of inflation. These include a commitment to increase the operating allocation to deferred maintenance annually by $750,000, and rising library acquisitions and utilities costs. Further additional expenses in support of Enrolment Contingent Funding and the Special Faculty Renewal Initiative are related to institutional priorities arising from the University's Strategic Plan. The implementation costs of the PeopleSoft administrative system will exceed substantially the $1 million allocated in 1997-98.

    In addition, virtually all of Western's employees will be negotiating new contracts for 1998-99, and will bring to these discussions legitimate expectations of increases in remuneration. In addition to these basic expense issues, all of Western's Faculties were substantially damaged by the hiring freeze and early retirement programs associated with the budget reductions of recent years and increased faculty renewal is essential to the health of the teaching and research functions of the University. Support units across the University have taken an even larger hit than Faculties and many are in need of additional funds simply to meet essential functions; further significant operating fund reductions would have substantial impact on services in many areas. Taken together, the most pressing requirement of the 1998-99 budget planning cycle at Western is for a substantial increase in revenue, so we can avoid further reductions in employment at the University, reductions which inevitably reduce the quality of the educational experience which we can offer our students.

    There remains significant uncertainty over our revenue picture, because we do not yet know the Province's intentions with regard to the regulation of fees. The Province announced last December that fees in "professional" programs would now be the responsibility of Boards of Governors. The Province, however, has not yet announced the definition of "professional" programs, and, until they do, Western is unable to offer specific fee proposals and make precise calculations of fee revenue. We hope that fee increases will allow for an increase in tuition fee revenue of around $8.5 million. This figure was used in modelling the recently released Faculty allocations. Should the proposed 5% constraint on tuition fees for the coming year be applied, additional fee revenues would be reduced to about $3.5 million. This would create an immediate shortfall of about $5 million that could only be accommodated by reductions in expenditure and employment.

  2. The Stage of the Annual Planning Cycle

    Western's budget planning process for 1998-99 is well advanced. Following our normal practice, tentative recommendations of allocations to the Faculties were released in late February and have been widely discussed across campus. Deans have begun to implement expenditure plans for the coming year, including appointments of full-time and part-time faculty, and undergraduate program offerings for 1998-99 on the basis of these recommendations. Support unit budget recommendations will be released within the next two weeks. The entire budget model must be subjected to the Senate and Board review process beginning with the Senate Committee on University Planning on April 6 and to the Property and Finance Committee on April 13. We note that the presentations to SCUP and P&F may be delayed if the Province's decision on the professional fees issue is not soon available.

    The final budget model will be the result of extensive deliberation and planning at the Departmental, Faculty, and University levels. Following Western's normal practice, this process has been carried out under the assumption that tuition levels would be recommended on the basis of an informed consideration of revenue availability and expense needs, in addition to factors specific to tuition fee levels. Since the time of the government's Financial Statement in December, 1997, the University's senior administration has been engaged in consultation regarding fees with all sectors of the University community but has been shaping the budget under the assumption that recommendations regarding the level and distribution of tuition fees were necessarily an integral part of the total budget model and should not be constrained independently of other elements of that model.

  3. Impact of a 5% Constraint on Tuition Fee Increases for 1998-99

    As noted above, in modelling the recently released Faculty allocations, we included an increase in tuition fee revenue of around $8.5 million. Should the proposed 5% constraint on tuition fees for the coming year be applied, additional fee revenues would be reduced to about $3.5 million. The revenue shortfall of about $5 million is about 3% of the University "cuttable base" -- the sum of all the unit budgets to which we can apply across-the-board cuts.

    In the face of such a massive decline in revenue, the University would almost certainly be constrained to limit its increase in student aid to the minimum increase required by the Provincial government. The Province requires that the University set aside 30% of increases in tuition fee revenue (calculated with a fixed enrolment), so that our set-aside for student aid would be reduced by about 30% of $5 million, or $1.5 million. Although individual student tuition fees would be marginally lower, the substantial reduction in total student aid funds would directly affect financially needy students, those whose access and continued studies are most threatened by the total cost of university education, including living expenses. For most of our students in the Arts and Sciences, tuition fees would be considerably less than a half of the total cost of attending University.

    Removing the $1.5 million in reduced student aid, would leave a net revenue shortfall of $3.5 million, which is about 2% of the cuttable base. Thus, one approach to the revenue shortfall would be an additional 2% cut in all Faculty and support unit budgets. Table A shows the impact of an additional 1% cut to the Faculties, beyond that already contained in the preliminary Faculty allocations. An additional reduction in University expenditure of $3.5 million, however distributed, would immediately have several effects on employment:

    Following our strategic plan, Leadership in Learning, Western has taken a differential approach to budget allocations, and we would seek to do so in allocating the additional $3.5 million in budget cuts. The non-salary lines in most unit budgets have been cut to the breaking point, so that budget reductions inevitably fall on people and positions. While all in our community might have a favourite target for budget cuts, at the end of the day those cuts reduce employment, hurt quality, and stifle innovation and renewal. To pretend otherwise is to do serious disservice to the hardworking faculty and staff struggling to fulfil our mission after so many years of revenue declines. We sincerely believe that any reasonable distribution of an additional $3.5 million in budget cuts will have the following consequences on the quality of our teaching and research:

    Students, faculty, and staff right across the University will feel the severe negative impact of these reductions in the quality of our learning environment. There is no magic bullet; there is no way to cut someone else and keep one's own unit unaffected by the magnitude of additional cuts of $3.5 million.

  4. Faculty Renewal

    Budget reductions in recent years have resulted in a decline in the number of full-time faculty. An aggressive early retirement program and a hiring freeze have produced an urgent need for faculty renewal through the appointment of new members of faculty, including some appointments above the most junior level. Plans were approved in many Faculties for appointments that would represent a modest move in this direction. The proposed 5% limit on tuition increases would severely curtail this process. For example, an additional 1% cut (a $250,000 budget reduction) in the Faculty of Social Science could involve the cancellation of four of the current faculty search processes.

  5. The Need for Increased Government Support

    Tuition increases have been a divisive issue on most Ontario university campuses for many years. We hope, however, that all in our academic community can unite behind an effort to increase the public resources available to us. We noted above that Ontario's per capita grants are the lowest in the country. The level of grants in Ontario prior to the unprecedented reduction of $260 million in 1996-97 was substantially less than that in the province of Alberta after the severe funding cutbacks of the Conservative government in that province. If the per capita grant level of Ontario universities were raised to the average of other provinces, as recommended by the Smith Commission in December, 1996, Western's annual operating budget would increase by some $50 million, an increase of 20%. This should be a top priority for all groups on campus.

    A second priority must be to increase public support for student aid. The student aid portion of Western's budget has grown at a truly extraordinary rate over the last three years (see Figure 2) and will continue to grow in the future. The federal government has just announced billions of dollars in additional funding for post-secondary students in our country. We need a similar commitment by our Province to help students finance their studies and pay back their debts. In balancing the issues of cost for students and quality of education, however, we simply can not support a self-imposed limit of 5% on fees, which would have a devastating impact on the learning environment of both undergraduates and graduate students.

  6. The Budget Planning Process

    Western has a tradition of annual budget planning where the senior administration is assigned the responsibility of developing a comprehensive annual budget based on a 6-7 month planning process with the Faculties and support units. This plan includes detailed expense and revenue projections constrained only by the academic priorities of the University and the requirement to avoid a budgetary deficit. Recommendations regarding tuition fee levels are an integral part of this process. The budget planning process is coordinated with consultations and briefings with SCUP and P&F, and regular updates to the full Senate and Board in preparation for the formal consideration of the budget by the Senate, its recommendation to the Board, and final deliberations by the Board itself. The Board of Governors retains full and final authority in this domain.

    The proposal before Senate to constrain tuition fees beyond that imposed by the Ontario government conflicts fundamentally with this established budgeting process. It puts the overall finances of the budget before Senate without a formal recommendation from SCUP. The proposal could only stand as a recommendation for action to the Board of Governors, a recommendation which -- for all the reasons set out above -- we must strenuously oppose.

Signed by:

Dr. Greg Moran

Dr. Peter Mercer