Still reeling from the global financial collapse and continuing deep cuts in government funding, Dalhousie University will aim to balance its $363 million dollar budget next year with cuts to programs, increased tuition and an ongoing reliance on meager increases to provincial funding.
That’s the recommendation of Dal’s Budget Advisory Committee (BAC), which issued a report Tuesday outlining a recommended draft budget for the next fiscal year, which begins in April. The draft will be submitted to President Richard Florizone and the Dal Board of Governors in April, with the full budget approved by the Board in June.
In the wake of the 2008 recession, the educational landscape has shifted, with many universities struggling to adapt to decreases in provincial funding.
In the draft operating budget released by Dalhousie’s Budget Advisory Committee (BAC), it was obvious that the consequences of these cuts continue to reverberate through university budgetary decisions. The BAC, which is composed of administrative staff, faculty from different departments and students, is chaired by Carolyn Watters, Provost and Vice-President Academic of Dalhousie.
The report outlines a draft budget in which expenditure increases — $13.5 million in total – will outstrip revenue available from tuition fee increases and provincial funding. These two sources together make up almost 90 percent of Dalhousie’s operating funds.
Tuition makes up 37.7 percent of Dalhousie’s operating funds.
Tuition fee increases were capped at three percent a year for the last four years. That cap ends this year, but the BAC is assuming next year’s tuition increase will also be limited to three percent. The three percent increase is equivalent to $3.6 million.
The tuition increase will also apply to the “international differential fee” — the additional fee charged to students who are not Canadian citizens or permanent residents. In the proposed budget, the fee – which is paid on top of tuition – would increase from $8,448 to $8,703, bringing tuition for a full time international student in an undergraduate Arts and Social Sciences program to roughly $16,737 per year.
The projected revenue from tuition is based on assumptions about enrolment. In 2014-15, enrolment from high school students increased; the proposed budget is based on an assumed enrolment increase of one percent — 180 students.
As a result of changing demographic trends, high school and university enrolments are down across Canada; several universities in the Maritimes have already experienced a drop in enrolment and have pursued international recruitment accordingly.
In the report, the BAC says that Dalhousie has been able to maintain enrolment levels thus far through recruitment.
The three percent increase would also be applied to the “facilities renewal” fee. This is in attempt to move the University somewhat closer to the industry standard budget for facilities renewal, which is two percent of the replacement value of facilities. The replacement value of Dalhousie’s infrastructure is roughly $1.5 billion. A three percent increase in the facilities renewal fee would add another $85,000 to the budget.
Provincial Operating Grant
The budget predicts a total Provincial Operating Grant for 2015-16 of $183 million. This assumes a one percent ($1.6 million) increase in the grant, the same increase from last year. For the three consecutive years before that, the grant was reduced by a total of 10 percent, meaning a net reduction of funding of nine percent, or roughly $16.7 million.
The provincial operating grant is delivered as a block grant and is not sensitive to changes in enrolment.
The report states that when combined with the cap on tuition increases, this reduction in government funding is unsustainable. Nonetheless, a StudentsNS report notes that even before the one percent increase in funding was instituted, 2013-14 provincial funding was 23 percent higher than funding levels from 10 years earlier.
The BAC report says that between decreases in government funding and the cap on tuition increases, net revenue has decreased by 1.4 percent over four years, even as costs increased by 10.8 percent in the same period.
On the cost side, employee compensation represents the largest expense in the operating budget. Compensation amount rises every year due to cost of living and other increases.
In the proposed budget, compensation – which includes salary, pension and benefits – will make up 75.8 percent of all expenses. The Faculty collective agreement expired July 2014, and the collective bargaining process is ongoing; the draft budget proposes $9.9 million for compensation increases in 2015-16, bringing the total for employee compensation to nearly $276 million.
Expenses Exceeding Revenue
For 2015-16, there is a gap between the constrained revenue streams of tuition and provincial grants and increased expenditures.
The report recommends covering this gap – which will amount to $5.8 million — through a budget reduction of 2.5 percent to Faculties and 2 percent to services. “Faculties” here means the larger units of which departments are a part: Agriculture, Arts and Social Sciences (FASS), Graduate Studies and so on.
In considering reductions, the report outlined various considerations in deciding where the budgetary axe would fall. These included the ability of different faculties to generate income for the university — such as through short diploma and certificate programs for international students and professionals — and potential savings as senior faculty retire and are replaced with more junior members.
The University also uses a mechanism called Enrolment Based Budget Allocation (ERBA). This formula allows for the allocation of tuition revenue based on enrolment. Because budgets can be reduced to faculties with declining enrolments and augmented for those with increasing student numbers, this could offset the effects of funding reductions.
The Committee notes in the report that faculties experiencing declining enrolment have faced significant budget challenges. In faculties such as FASS, where the BAC has acknowledged the role of low-cost arts degrees in subsidizing more expensive programs, the financial squeeze from declining enrolments is nonetheless already being felt.
Reducing Dependence on Reserves
Finally, the BAC recommended in the report that the University reduces its reliance on reserve funds to balance the budget. While this won’t be implemented immediately – the report recommends that $1.8 million from the reserve fund be used to balance the 2015-16 budget – a three-year scaling back of the dependence is suggested. In 2014-15, the $3.8 million of the reserve fund was used.
In a an operating budget for 2014-15, it was said by the BAC that even though reliance on the reserve fund was projected to decrease, continued use of the reserve would result in the fund being more or less completely depleted by 2018.
While the budget bemoaned decreases in government funding, critics of this outlook have suggested that this focus on government grants deflects attention away from the ways in which it is the current university structure, and not the funding model, that is unsustainable.
By framing the debate in terms of funding levels, and therefore the need to address depleted funding, it’s a short step to shifting the financial burden onto students. In turn, tuition increases are framed as necessary and inevitable.
For Dalhousie’s faculties, historical precedent suggests that some faculties will bear more of the brunt of budget-balancing cuts than others. Having already felt the effects of declining enrolments and financial tightening, the Faculty of Arts and Sciences is a prime candidate.
The human face of the “reductions” the BAC recommends could be an increased dependence on poorly-paid contract instructors with no job security, especially to replace tenured faculty as they retire, and an increased workload for tenured faculty.
While proposed cuts to faculties and proposed tuition increases are mild compared to more egregious examples – the cuts to Alberta universities’ spending that started in 2013, for example, or the overnight increases to tuition fees in the UK – the draft budget nonetheless hints at a nearly existential malaise.
In the document, the BAC itself acknowledged that with an inherently unstable funding structure, it’s difficult to predict what future budgets will look like. Nonetheless, it seems likely that creating financially sustainable universities won’t be accomplished by incremental adjustments to revenue sources and expenses, but through significant changes to the way these institutions are funded and run.