Three days after U of T welcomed students back from the winter holidays, Vice-President and Provost Cheryl Regehr presented her assessor’s report to Governing Council’s Planning and Budget Committee (PBC). Within her 17-odd minute report, Regehr cited an excerpt of the provincial government’s ominous 2018 Ontario Economic Outlook and Fiscal Review: “The fiscal hole is deep. The road ahead is not an easy one, and it will require difficult decisions. Everyone in Ontario will be required to make sacrifices, without exception.”

This was the extent of the information available to the university at the time, and Regehr would proceed to speculate on the ramifications of the then-unknown — yet still expected — string of provincial government changes to postsecondary education finances. In response to a question from a committee member, Regehr cited the 2008 financial crisis as an example of how the university had responded to large-scale revenue losses in the past. During that period, the university lost $62 million — $73 million today when accounting for inflation. Could the government’s changes really be as impactful on the university as a global financial crisis?

With uncertainty in the air, Regehr summarized what the committee needed to know: “We anticipate that this will be difficult for us and we still need to find out how difficult.”

A week afterward, the provincial government announced its sweeping changes, including a 10 per cent cut to domestic tuition, Ontario Student Assistance Program (OSAP) reforms, and the option for students to opt out of “non-essential” incidental fees. U of T’s recently released budget and long-range budget guideline proposals highlight the effects of these changes: a $65 million reduction compared to this year, and an $88 million reduction in revenue from original 2019–2020 projections.

The budget is an annual report that determines how operating revenue and expenditure is broadly managed across the university, while the accompanying long-range budget guidelines are the university’s projections for each of the next five academic years. The budget is balanced, meaning that revenue and expenditures are equal.

By the time the PBC convened again on February 27 to discuss and recommend the proposed 2019–2020 budget, much had changed.

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Tuition

With the tuition changes taken into account, the university’s budgeted 2019–2020 operating revenue is $2.77 billion, approximately 3.5 per cent more than this year’s $2.68 billion operating revenue, but 1.7 per cent less than the previously projected $2.81 billion. Tuition and student fees constitute 62.7 per cent, or over $1.7 billion, of the budgeted revenue.

While the provincial government noted that everyone was required “to make sacrifices,” the university’s divisions are facing vastly different levels of sacrifice due to government changes. According to Vice-President Operations Scott Mabury, some divisions are facing a nine per cent decrease in operating revenues, while other divisions will see an 18 per cent increase. Divisions facing greater decreases to tuition revenue are, as expected, ones that are predominantly populated by domestic students. The second entry programs of medicine and dentistry, for example, will be more significantly impacted by the tuition cuts, as 98.7 and 99.3 per cent of their respective undergraduate intake this year pay domestic tuition rates.

According to the budget, academic divisions’ management of revenue losses will include “some combination of changes to faculty and staff hiring plans, deferral of capital projects, service reductions, and operating cost efficiencies.” The university will also allocate portions of its University Fund to support divisions most affected by the changes. Ten per cent of each division’s revenues are allocated to the fund, which then redistributes resources based on need. For example, in 2019–2020, the Arts & Science division will see an approximate net loss of $12.9 million from the fund, while the Dentistry division will receive approximately net $9.5 million.

While domestic tuition in 2020–2021 will be frozen at 2019–2020 levels, the long-range budget plan assumes a return to the three per cent year-on-year domestic tuition increase cap after this period.

Residence costs do not fall under the university’s tuition group and are instead considered cost-recovery ancillary fees, meaning that they are unaffected by the government’s changes.

Operating grants

The bulk of U of T’s remaining revenue comes from provincial operating grants, which will constitute 24.1 per cent of the overall 2019–2020 revenue. The provincial government has indicated that there will be no cuts to operating grants, although it has not formally committed to this position. The university’s core operating grant is $578.2 million per year. It also receives a graduate expansion grant, which is expected to increase from $11 million to $14.3 million in 2019–2020. Operating grant revenue is expected to rise by more than $10 million over five years, although the province has yet to approve these plans. The timeline for approval is unclear.

U of T’s dependence on operating grants has decreased over the years. When the current budget model was established in 2006–2007, 45 per cent of the operating revenue came from operating grants. The university estimates that this will continue to decrease to 21 per cent of its operating revenue in 2023–2024. Mabury said that this is “almost perfectly matched” by the increased dependence on international student tuition, from seven per cent in 2006–2007 to 34 per cent in 2019–2020 and 38 per cent in 2023–2024.

As part of its existing Strategic Mandate Agreement (SMA) with the previous Liberal provincial government, the university must decrease domestic undergraduate seats by 1,800 students through 2020. Due to the terms of the SMA, the core operating grant is not expected to decrease despite decreases to domestic enrolment.

Expenditures

Fifty-nine per cent of the university’s 2019–2020 expenditures are set to cover academic faculty and staff compensation. This equates to $1.6 billion, of which $905 million goes to academic compensation and $720 million to staff compensation. Academic compensation refers to faculty, instructors, librarians, and teaching assistants, while staff compensation goes to administrative staff. U of T is planning to hire 51 additional faculty next year, although the budget notes that some of these hires may be delayed due to the revenue loss.

Overall student aid expenditure in 2019–2020 is set to $247.1 million, compared to the planned $233.6 million, which is also up from this year’s $224 million expenditure. The bulk of this increase comes from academic divisions, which have increased student aid expenditure to $119.2 million, $19.4 million more than originally planned. Due to the government easing domestic tuition costs, demand for the university’s program for needs-based aid to OSAP-eligible undergraduate students, the University of Toronto Advance Planning for Students, is set to decrease. U of T has accordingly decreased its funding to $39.9 million, a $6.9 million cut from its original 2019–2020 plans.

The Budget Report 2019-20 and Long Range Budget Guidelines 2019-20 to 2023-24 were unanimously recommended by the PBC on February 27. The budget still needs to be recommended by the Academic Board, Business Board, and Executive Committee before Governing Council votes to approve it on April 4.