At its final meeting of the academic year on May 10, Queen’s University’s Board of Trustees approved the university’s operating budget for the 2024-25 fiscal year and received a report on the latest operating fund projections for the 2023-2024 fiscal year, which ended on April 30, 2024.
2024-2025: Projecting a $35.7M operating budget deficit
In the 2024-2025 budget, the university is projecting a $35.7 million operating budget deficit. This is the estimated cost of operating the university for this fiscal year, with expenditures again outpacing revenues. As such, the university must continue with major efforts underway to return to a balanced operating budget.
Contributing factors to Queen’s continuing operating budget deficit include the ongoing tuition freeze for Ontario students for the next two years, as well as a decrease in international student enrolment. The deficit projection also incorporates the anticipated impacts of the measures already announced and implemented as part of Queen’s Balanced Budget plan, including voluntary retirement and early exit incentives, reductions in general spending, and operational improvements.
The 2024-25 operating budget includes a contingency fund of $16.8 million to address in-year needs that may arise and provides flexibility in case the $6 million in unconfirmed post-secondary education sustainability funding from the provincial government does not materialize. As part of its measures to return to structural balance, the university is planning to reduce budget allocations across the university over the next several years. As the 2024-25 fiscal year progresses, the university will continue to address its operating budget deficit by reducing our expenditures to more closely align with our revenue.
“This work will be done to return the university to a balanced operating budget while ensuring more resources will ultimately go towards delivering on our academic mission of excellence in research and teaching now and into the future” said Patrick Deane, Principal and Vice-Chancellor. “While these decisions are not easy and some of the work ahead will be difficult, it is necessary and achievable. With the support of the Queen’s community, we will emerge as a stronger and more resilient institution.”
Overall, Queen’s efforts have been well received by leading financial analysts, including S&P Global Ratings, which affirmed its 'AA+' long-term issuer credit and senior unsecured debt ratings on Queen's University, which further demonstrates we are on the right path.
2023-24: An update on the previous fiscal year
In the meeting, the final projected operating budget deficit of $28.2 million for the 2023-2024 was also reviewed. This is down from the originally projected $62.8 million deficit in May of last year. This was reduced over the course of the year by the early impacts of cost saving measures put in place by the university, notably a university-wide hiring freeze, general spending reductions in areas like travel and other non-essential spending, planned deferral of IT projects, and unanticipated one-time provincial government funding to support the costs of delivering Science, Technology, Engineering and Mathematics programs. Units projecting deficits in 2023-24 are funding their deficits with their reserves.
During the board meeting, Trustees also received an update on the University’s Pooled Investment Fund (PIF) for 2023-24. This fund saw exceptionally high returns due to strong market performance, with total projected investment income of $69.8 million. This far exceeds the $5.2 million in PIF investment income budgeted for operational budget expenditures.
Investment returns in excess of the budgeted $5.2 million are allocated to the university’s capital reserve to support capital investments such as maintaining and building the academic and research facilities that are critical to delivering on its academic mission, which receive little or no other dedicated funding. They also serve as a buffer in years of investment losses, since investment returns are highly unpredictable, based on market fluctuations, and cannot be relied on as a stable source of funding.
As investment returns are unpredictable (there have been losses in two of the last four years), they cannot meaningfully address the university's structural deficit, which requires stable and predictable revenues combined with reduced and more cautious spending. The university must address the underlying issues, or risk finding itself in a similar situation in the future.
“If you were to compare it to personal spending, you could say that we’re spending more on expenses like housing, food, and transit than our paycheque brings in each month,” says Donna Janiec, Vice-Principal of Finance and Administration. “This might tempt you to spend investment income earned by your RRSP, but that’s a short-term solution that can’t be sustained. You will have to reduce what you are spending to live within your means, so you don’t end up in an even worse position in the longer term.”
More information about the budget process and the university’s path forward will be shared, along with ongoing updates, please visit Balanced Budget Plan.
This story originally appeared in the Queen's Gazette.
