UNIVERSITY COUNCIL PLANNING AND PRIORITIES COMMITTEE FOR INFORMATION ONLY PRESENTED BY: John Rigby, Chair, Planning and Priorities Committee DATE OF MEETING: May 15, 2008 SUBJECT: Multi-Year Operating Budget Framework 2008/09 2011/12 COUNCIL ACTION: For information only CONTEXT AND BACKGROUND: The Multi-Year Operating Budget Framework 2008/09 2011/12 is integral to the Second Integrated Plan, linking resources to planning initiatives throughout the second planning cycle. The Planning and Priorities Committee has a responsibility to advise the President on the main elements of the Operating Budget and the Capital Budget and report to Council. Consideration of the Multi-Year Operating Budget Framework has been a focus of the Planning and Priorities Committee in its advisory role regarding operating and capital budgetary matters since January 9, 2008. The Planning and Priorities Committee reviewed the final version of the Multi-Year Operating Budget Framework at its April 23, 2008, meeting and subsequently provided its advice on the framework to the President prior to Board of Governors approval of the framework on May 2, 2008. DISCUSSION SUMMARY: The Multi-Year Operating Budget Framework for the 2008/09 2011/12 planning cycle is a projection of the rate of growth of the University s operating revenues and expenditures. In its consideration, the Planning and Priorities Committee has focused on potential financial risks to the University and the financial relationships between the key budgetary assumptions, including tuition revenue, investment income, salaries and benefits, and research activity, among other variables, upon which the framework is based. The Committee also considered the importance of flexibility within the framework for strategic academic renewal and support for non-academic priorities. The Planning and Priorities Committee supports the Multi-Year Operating Budget Framework for the 2008/09 2011/12 planning cycle as a means to achieve the objectives and academic priorities of the University s Second Integrated Plan.
ATTACHMENTS: Memorandum to President MacKinnon on the Multi-Year Operating Budget Framework 2008/09 2011/12
MEMORANDUM TO: FROM: Peter MacKinnon, President John Rigby, Chair, Planning and Priorities Committee of Council DATE: April 23, 2008 RE: Consideration Regarding the Multi-Year Operating Budget Framework 2008/09 2011/12 On behalf of the Planning and Priorities Committee, I am pleased to provide the committee s thoughts regarding the Multi-Year Operating Budget Framework 2008/09-2011/12. The Planning and Priorities Committee has engaged in ongoing discussion of the Multi- Year Operating Budget Framework through its development in conjunction with the University s Second Integrated Plan, seeking insight into the complexities of Universitylevel budgeting and the risk factors which apply. In its review of the Multi-Year Operating Budget Framework, the Planning and Priorities Committee was reminded the framework applies to the University s Operating Budget and that the University generates $340 million in additional revenues, with up to $200 million consisting of targeted research funding. The desired growth of the University s research enterprise has significant implications for the Operating Budget, relative to the capital and human resources supporting the necessary research infrastructure. Assumptions We note that Multi-Year Operating Budget Framework makes several key assumptions, particularly around expected annual increases to the provincial operating grant, tuition revenues, enrolment levels, investment income, and salaries and benefits costs. The assumptions stated in the document seem reasonable but by definition are subject to uncertainty. If the assumptions turn out to not hold the Multi-Year Operating Budget Framework will, of course, need to be revisited. In this sense, the Budget Framework is a rolling framework, requiring updating each year. Financial risks
There are financial risks implied in the Multi-Year Operating Budget Framework both on the forecasted revenue and forecasted expenditures side. These risks primarily flow from the possibility that the underlying assumptions of the Framework may not hold, as discussed above. As the Operating budget is quite large, relatively small percentage changes in forecast amounts can have large impacts in dollar amounts. The Framework provides examples of the dollar impacts of changing assumptions even marginally (p.6). Given that, as is normal with all universities, such a large proportion of the University of Saskatchewan s expenditures are fixed, the Planning and Priorities Committee would encourage senior administration, and the Board, to monitor the forecasts quite closely over the entire four year planning period encompassed by the Multi-Year Operating Budget Framework. The difficulty that we see is that much of the strategic flexibility of the University lies in these percentage points of revenue and expenditures at the margin. In the view of the Planning and Priorities Committee, even a small percentage negative imbalance between revenues and expenditures would have a disproportional dampening effect on the significant strides the University of Saskatchewan has made in the last decade. Flexibility The Planning and Priorities Committee notes with approval that, notwithstanding the possible financial risks implied, the Multi-Year Operating Budget Framework includes explicit budget lines intended to create strategic flexibility. For academic strategic initiatives the Academic Priorities Fund has been replenished with the addition of $4.5 million, for the second planning cycle, and the Framework provides for the building of the Fund for the third planning cycle. The Fund will provide the possibility of significant one-time funding as well as permanent funding for academic initiatives as they are identified throughout this second planning cycle. In addition, the Framework includes a total of $5.486 million in permanent funding to fund non-academic priorities such as ongoing support for Huskie Athletics and a permanent allocation to support fundraising initiatives, among other priorities. The Planning and Priorities supports this allocation noting that it addresses some longstanding funding difficulties related to renewal for the initiatives involved. Of the budget moneys set aside for non-academic purposes we note from conversations with the Director of Budget Planning that approximately 75% has been committed in the Framework with approximately 25% to be allocated during the time period. In considering financial flexibility, the Planning and Priorities Committee also notes the policy of the Board of Governors that a general operating reserve of between 1% and 4% be maintained. The Multi-Year Operating Budget Framework ends the period with that reserve set to 2% or approximately $6.7 million dollars. This is a prudent policy and will allow the University to withstand mild one-time financial shocks. It is not, of course, sufficient to deal with major one-time shocks or with significant permanent changes to necessary expenditures or permanent declines in revenues. Nonetheless, the Planning and Priorities Committee supports this policy, believing that budgeting for all possible eventualities would involve setting aside such a great proportion of our resources that current strategic goals would be compromised. Specific issues There are three specific issues that we would draw to your attention. The University of Saskatchewan was following a National Norms Tuition policy prior to the University
cooperating with the provincial government through the tuition management program. It seems likely that with the recent change in government, the tuition management program will be revised or discontinued. The Planning and Priorities Committee looks forward to engaging in discussion relating to the University s tuition policy. The second is the Library Acquisitions Budget. It is extremely important that our Library has sufficient resources to continue to maintain and improve our collections. We note, though, that over the second planning cycle the Library will be allocated additional acquisition resources that approach what is being set aside for the Academic Priorities Fund for the third planning cycle. The Planning and Priorities Committee recommends that as a matter of policy the Library s acquisition budget be considered from the perspective of its buying power rather than simply a flat percentage increase. Our impression is that most of the Library s purchases are denominated in U.S. dollars. We are concerned that at times when the Canadian dollar is falling against the U.S. dollar the acquisition budget might be under-resourced. Alternatively, when the Canadian dollar is rising, an automatic percentage increase in the acquisitions budget may overstate the resources necessary to maintain our collections. The Library, of course, is just one among a number of possible examples. More generally, the Planning and Priorities Committee looks forward to continued discussion around the broad issue of resource allocation. Thirdly, we note that $500,000 has been allocated to student recruitment and retention as part of the budget line, Other investments which we understand will be directed to Student Enrolment Services Division. The Planning and Priorities Committee applauds this commitment but would encourage that future expenditures, through partnerships between SESD and colleges, also consider and support student recruitment and retention at the college level. In summary, the Planning and Priorities Committee supports the Multi-Year Operating Budget Framework for the 2008/09 2011/12 planning cycle as providing a prudent and responsible framework within which to achieve the objectives and academic priorities of the University s Second Integrated Plan. John Rigby, Chair Planning and Priorities Committee of Council c E. Barber, Acting Provost and Vice-President Academic