When people think of AV俱乐部's budget they may think of it as something like a photograph鈥攁 snapshot of any given year. But the problem with this view is that it distorts the reality of how we actually manage the university. Case in point: most budget decisions are multi-year in nature. Take, for example, the decision to hire a tenure-track faculty member. This is quite possibly a 30-year decision, and yet we make the decision in the context of a single budget year.
听
Rather than looking at the budget process as a photograph of one year, I like to think of the budget as a movie spanning many years.听Looking at the budget process in this fashion, we can begin to better understand the impact that budget decisions have from year to year.
听
If we continue with this metaphor, it becomes easier to understand and manage the budget through time.
Last year鈥檚 operating budget may well have been called The Perfect Storm. In the 2000 movie, you may recall, George Clooney and the crew of the Andrea Gail found themselves caught between three low-pressure weather cells; the ensuing havoc guaranteed there would be no sequel.
听
Our perfect storm last year was not weather-related but generated over the uncertainty caused by three significant budget variables:
- The expiry of the Memorandum of Understanding (MOU) with the provincial government;
- The university operating costs relating to fund the pension solvency shortfall in the event that solvency relief from the government was not forthcoming;
- The uncertainty surrounding enrolment growth.
Each variable individually had the potential to exert significant financial pressure that would be harmful to university operations and together would be disastrous.听We weren鈥檛 sure if and when these concerns would be a factor for the university鈥檚 budget, but everyone agreed they represented a significant risk to the university.
听
So how did the Budget Advisory Committee (BAC) manage these risks?
- Enrolment increases were predicted conservatively. We thought it was better听鈥渘ot to count our chickens until the eggs hatched.鈥澨� And, as it turned out, enrolment growth was much more encouraging than anyone could have projected. The additional students in 2010 will contribute much needed new revenue on an ongoing basis beginning in 2011-12, and keeping the 2011-12 projected shortfall at $14.6 million rather than the $21 million it would have been otherwise.
- The BAC did not recommend reducing energy budgets in 2010 for energy savings related to the boiler-plant conversion to natural gas in the latter half of 2010.听 鈥�
- Pension costs were estimated based on the little information that had been provided at the time. In the final analysis, these estimates turned out to be high which helped reduce the cost pressures in 2011 and beyond.
While all of this is good, where does it leave us in 2011?
- Government funding, while reduced by four per cent in 2011-12, is still uncertain in 2012 and beyond.
- We still do not have an agreement to fix the pension with our employees. As well, we are still awaiting government pension reform and temporary solvency relief in the short-term.
- Enrolment is uncertain but we are approaching our intake capacity based on targets identified in the strategic vision for AV俱乐部 and current student residence accommodations on campus.
And so it turns out The Perfect Storm does merit a sequel. Without solvency relief, the university needs to balance a $14.6 million shortfall as identified in the 2011-12 BAC Report XLV.听 As we move into the eye of the storm, we are working diligently to find our way out.
Ken Burt is AV俱乐部's Vice-President (Finance and Administration).