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2004 - 05 Operating Fund Budget

Further Report to the Board

"Moving Toward A Balanced Budget II"

Background:

The original "Moving Toward A Balanced Budget" (See Attachment A), representing progressive strategies to achieve the approved objectives of the 2004 - 05 Budget, was shared with the Board for discussion at its March 25, 2004 meeting.  During that meeting, the Board, in view of the AVED funding announcement, moved a request to the Executive to review the proposal for a 12% tuition increase with a view to reducing the percentage increase.

Discussion:

Although characterized in four elements - unavoidable inflation and projected loss of revenue; tuition plan; reinvestment plan; and savings plan - by far the most important feature of the 2004 - 05 Budget has been the reinvestment plan.  Faculty, staff, and students have expressed commitment to a concerted effort to improve quality of education in the fields of instruction, service, and operating capital and the plan, supported unanimously by the Management Committee and Executive, was approved in principle (as a budget planning assumption) by the Board at its meeting held December 4, 2003.

$1,495,000 was identified in the planning assumptions to cover the different elements of the reinvestment plan.  It was stressed then and now, however, that the amount was simply a bookmark, in part related to what could be raised through expenditure reductions throughout the institution.  In no way did the amount identified reflect the aggregate of needs (unquantified at that time) or was it to be seen as a fixed amount if more funding became available.

Exhaustive assessment of needs has since revealed a higher degree of reinvestment required.  The first round of assessment by deans, directors, and campus principals pared total needs down to $3,303,103.  The second round by the Executive brought the total down to $2,062,714 using quite ruthless methods in consultation with deans, directors, and campus principals, and a special technical committee, the latter in regard to prioritizing IT needs.  The total of $2,062,714 exceeds the $1,495,000 bookmarked, but is now considered by the Executive to be the absolute minimum necessary to begin to address issues of quality.  The vast majority of reinvestment items will directly benefit students, for example, Advising in the BA area, Counseling, Disability Services, First Nations Support, Admission Assessments for Trades and Academic Students, to name but a few.  Further, resourcing of the Centre for Teaching and Learning will provide assistance in dealing with teaching challenges.  Lastly, the addition of seats to Criminology and other programs to increase our FTE delivery will directly benefit student access.  The Executive is of the view that, if additional funding is not available to cover the $2,062,714 required, it will recommend identification of further real cuts in existing expenditures, likely leading to employee lay offs, in order to minimize further paring down of the reinvestment plan.

Turning now to the tuition plan, the Executive has considered very carefully the Board's desire to explore a reduction to the proposed increase in fees.  The tuition plan, as has been the case over the past three years, is principle-based and not to be seen as a blunt instrument of revenue generation.  The proposed 12% increase and the resultant level of fees are viewed as realistic in comparison to peer institutions in British Columbia.  The principles of remaining comparable to the university colleges and below the research universities have been upheld as illustrated in Appendix B.  Furthermore, the principle of confining the cost of education to tuition fees and not burying it in ancillary fees of various guises has also been maintained at Malaspina and is demonstrated in Appendix B.  "Moving Toward A Balanced Budget" (Appendix A) also identified the proposed delay to implementation of the fee increase to August 1, 2004 with an attendant loss of revenue of $100,000.  That proposal, while intended to also provide stimulus to our summer offerings, is a general concessionary relief to students, which may not have been fully recognized by the board.

Attachment C, "Initial Reactions To The AVED Budget Letter," reveals that provincial funding for students will drop over the next four years from $6,752 per FTE to $6,465 per FTE, a reduction of 4.3%.  This will occur in a period when pure inflation alone will add at least 8% to our operating costs before a single additional student is admitted.  Such a financial outlook suggests the inevitability of tuition continuing to be viewed as a compensatory source of co-funding the institution unless the alternative of materially reducing access is favored.  Attachment C also demonstrates that the recently announced multi-year increase in FTEs may not lead to concomitant increases in access due to the funding values of those FTEs.  Lastly, with a provincial election next year it is not beyond the realms of possibility that a tuition freeze or limitation may become public policy in the near future.

Therefore, the Executive would seek to address the Board's motion by suggesting temporary relief to the proposed increase in fees, thereby achieving the desire to help students while maintaining the revenue generation necessary to meet fiscal challenges in future years even if a freeze were to be introduced.  Such relief could be funded as a first charge against the non-recurring budget for 2004 - 05, which has not yet been finalized.

The 2004 - 05 budget process has been one of the most complex in many years due to many factors in conflict with one another.  Cutting expenditures to reinvest in crucial issues of quality is a bold move by a Board and is a long way from being its easiest option.  However, demonstration of such leadership, and with it the resolve to support a defensible increase in tuition fees, will result in a better institution, and if we are to maintain our reputation as an institution to which students wish to come we must provide what they need.  And, that is not a bad claim to be able to make in a time of upheaval and uncertainty around our province.

Summary of Recommendations:

  1. The tuition plan and associated bylaw should be adopted as originally proposed.  However, for 2004 - 05 the increase will be reduced to 9.8% and the loss of revenue will be covered from the non-recurring budget.
  2. The strategic directions identified in "Moving Toward A Balanced Budget" (Attachment A) should be incorporated into the finalized budget. 
    1. Cover off the loss in revenue due to delay in implementing the tuition plan - $100,000.
    2. Cover off the shortfall in expenditure savings - $183,177 (while acknowledging that the not inconsequential sum of $815,000 in savings has been achieved).
    3. Commit $567,714 to enable the reinvestment plan (as proposed after much refinement) to be fully implemented at a cost of $2,062,714.
  3. In the event that Recommendation #1 is not acceptable, any ongoing reduction to the proposed tuition increase will have to be funded from further expenditure cuts.  Such cuts may involve employee lay-offs and should only be discussed by the Board in an in-camera meeting

Prepared by Edwin Deas

Vice-President Administration & Bursar

April 15, 2004