Dear members of the McGill community,
In September, the Quebec government imposed funding cuts on Quebec universities for this fiscal year (2014-2015 or FY2015). In its efforts to reach a zero deficit by next fiscal year, the Quebec government also informed us earlier this month that universities should anticipate further cuts this year, and that next year will be even more challenging for universities.
The efforts our community made last year have put us in a stronger position. However, with more cuts coming, the scale of which is not yet known to us, we must be responsible and look at our options so that we make every effort to preserve our core academic and research missions.
On 27 October 2014, Vice-Principal (Administration and Finance) Michael Di Grappa and I will hold two Open Forums on our financial situation. The objective of these meetings will be to answer questions and collect feedback and suggestions from you about actions we can take in light of continued reductions in McGill’s operating grant from Quebec.
Let me also remind the McGill community that in previous cycles of cuts, the advice and counsel received in such Forums, as well as from Senate, provided valuable source materials that we used in designing McGill’s budgets.
The Open Forums will take place on Monday, 27 October, at the following times and locations (they will also be live streamed, links are included below):
- 10:30 – 12:30, Thomson Ballroom, Thomson House – 3650 McTavish Street
- 15:00 – 17:00, Leacock Building, Room 232 – 855 Sherbrooke Street West
I hope that many of you will be able to attend these meetings. I also commit to keeping you up to date on the situation as it evolves. Let me also thank you for your efforts and your support as we attempt to deal with this latest round of funding cuts to our operating grant from the Ministry of Higher Education.
For an update on McGill’s financial situation, please refer to the section below.
Further information on last year’s financial results and this year’s funding can be found in a Q&A in the McGill Reporter.
Professor Anthony C. Masi
Provost
Update on McGill’s Financial Situation
McGill’s fiscal year starts on 1 May. Consequently, a budget must be tabled and approved by the Board of Governors in April. In preparing the University’s budget, we are guided by preliminary numbers provided by the Ministry of Higher Education (Quebec) and by estimates of other revenues and expenditures. This year, FY2015, the Ministry provided us with its budget rules on 3 September, that is, into the second quarter of the fiscal year. Unfortunately, the budget rules did not confirm the preliminary figures. Rather, we were informed that our total envelope of grants from Quebec for this fiscal year would be cut.
In addition, in separate presentations, the Minister, the Deputy Minister, and the Assistant Deputy Minister indicated that the cuts for FY2015 are not over yet, and FY2016 will bring even more cuts to the grant for universities. Of course, we still do not have a definitive picture on either count and the precise indications of the cuts from the Quebec government continue to shift.
Nonetheless, I am aware that members of the McGill community are eager to know how the cuts may affect McGill, so I take this opportunity to share with you what we know at the present time.
The Budget Book FY2015, as approved by the Board of Governors, projected that McGill’s government operating grant would be approximately $360 million. The budget rules provided to us in September, however, indicate that our grant will be reduced to about $345 million, i.e., by almost $15 million.
We do not yet have details on the scale of the additional cuts for FY2015 announced by the Ministry over the last two weeks, but have been told that they could arrive any time between now and February 2015.
Finally, the budget rules expect that each university receiving a subsidy from Quebec will show that its revenues and expenses balance at the end of the fiscal year. For McGill this will be difficult because our approved budget, and its subsequent allocations to units, already projected a deficit of $7 million, and we are now faced with cuts of some $15 million and more to come.
It is important to remind the members of the McGill community that, in addition to our total operating budget, we are also required to present the University’s long-term financial picture (assets and liabilities) according to generally accepted accounting principles (GAAP). This policy has been in place since FY2010. During the fourth quarter of FY2014, the Ministry recalculated amounts owed to McGill (and other universities) and made an additional contribution. Combined with substantial efforts to reduce spending, we actually closed last year with a slight surplus ($3.2 million), allowing us to reduce our financed accumulated deficit to below $100 million. Combined with a reduction in pension liabilities of $12.5 million, our GAAP deficit as of 30 April 2014 stands at $271.8 million (down from $287.5 million at the end of FY2013).
Overall, McGill is in a much stronger position to face this new round of government budget cuts. However, if we are going to be forced to balance FY2015, despite the cuts already announced and those yet to come, additional efforts will have to be made. In particular, we will have to keep our headcount of administrative and support staff at the levels achieved thanks to the success of the Voluntary Retirement Program. Along these lines, the announced cuts include a provision for cuts in salary mass and other expenses not directly related to the educational mission of institutions. In our case, these amounts have been calculated to be $2.2 million.
The Ministry’s pre-announcement of its intention to cut grants to universities in FY2016 has made it clear that we will have to reduce our operating budget allocations for next year, but we may also have to reduce expenditures in the current fiscal year as well.
In making choices and decisions about where to cut, we must be guided by our own strategic priorities. The high quality of McGill’s teaching and research missions remains paramount. I know we have all been engaged in finding efficiencies and reducing expenditures, but we can only go so far along that path. While remaining true to our missions and values, we must, where possible, seek alternate sources of operating revenue. In order to do this, we will be lobbying Quebec for greater flexibility and fewer constraints.
At this time, we plan to keep allocations to Faculties and Administrative Units stable until December, unless the news from the Ministry is significantly worse than anticipated. We will continue to ask for clarifications from the government. Over the next month, working closely with VP Di Grappa, the other VPs, and the Deans, I will draft a set of recommendations for the Principal and the Board of Governors about how to deal with FY2015. At the same time, we have already begun preparing proposals for the FY2016 budget.
Please rest assured that the immediate goal is to find ways to reduce the impact of this year’s cuts on our FY2015 allocations as much as possible. In presenting the Budget Book FY2015, as was the case for FY2014, we have some leeway to modify or postpone certain allocations. We must, however, protect the funding for core priorities as outlined in Budget Book FY2015.
Provost