March 6, 2007      
The Economics of Bishop's

We are in the midst of challenging discussions about the future of our University. Of utmost importance are the negotiations of collective agreements with various tables of the APBU, as well as our need to find a partnership model that will ensure the long term viability of our defined benefits pension plan. These are difficult issues that have caused debate on campus. Nonetheless, we must collectively explore a broad and critical issue: How do we maintain the quality of the Bishop’s Experience while being fiscally responsible?

A glance at our budget projections raises serious concern. To illustrate:

• according to our draft audited statements, the University realized a deficit in 2005-06 of $222,000 exclusive of pension deficit funding of $1,568,000 which, when added, resulted in a net loss of $1,790,000, bringing our accumulated deficit at June 30, 2006 to $2,375,000;
• this deficit of 2005-06 has led the Ministry of Education (MELS) to put a hold on the payment of a $2,300,000 conditional grant until Bishop’s prepares a balanced-budget plan for the government that meets its approval to release the funds. We face a similar situation in 2006-07 with an expected loss of $2,700,000 and a possible second holdback by the MELS of $2,400,000. By June 30, 2007, the accumulated deficit is projected to be just over $5,000,000;
• our financial picture does not improve in 2007-08. Our net loss is projected to be $2,740,000, leading to an accumulated deficit of $7.8 million. The spiral downwards continues in ensuing years. It is conceivable that by June 30th 2009, a mere two years from now, our accumulated deficit will be close to $12 million.

It’s imperative to note that the assumptions underlying the current budget projections in fact now appear to reflect a rather optimistic view of revenues These assumptions are as follows:
• student enrolment has been projected to stabilize at 1900 - although in this semester we have already dropped to 1955 full-time students. Given a large graduating class of over 700 this spring, retention and recent recruitment numbers for September 2007 now indicate a further decline, possibly to 1800. This drop has not been reflected in the forecasts;
• relatively consistent occupancy rates in residence and stable revenue from ancillary fees;
• no pension-deficit expenses paid out of the University operating budget;
• allowances for salary step increases, but no salary scale increases.

While enrollment is of serious concern, we must not downplay the state of our defined benefit pension plan – one many organizations face due to concerns about the level and volatility of pension plan investments and expenses, as well as solvency and long-term affordability.

A number of Quebec university principals and rectors, including me, have implored the government to lift the freeze on Quebec tuition and to provide greater incentive for donations by individuals and corporations. For over four years this same group has promoted the fact that the Quebec university system is under funded by $375 million per year. In the upcoming election higher education is certain to be on the political agenda, but whether politicians will have the courage to make hard decisions on these topics remains to be seen, especially with one provincial party talking about free tuition. The new promise by the Quebec Liberal party to raise tuition by $100 per year is a step in the right direction, but still insufficient as it will only increase our revenue by $190,000.

Bishop’s University must be master of its own destiny. A decline in enrolment and an increase in bank borrowing spell nothing but a tenuous financial future. There is mounting pressure to achieve a balanced budget through cuts – something I refuse to do because a cut in the quality of our programs is not what is needed. We must collaborate – all campus constituents – to build a better Bishop’s. To attract more students, new donors and new partners, we need to explore new ways of defining and offering the Bishop’s experience. That might entail innovative or redesigned academic programs, new sources of revenue, different funding models, a change in our delivery methods.

To this end the Senate recently passed a unanimous motion outlining short, medium and long term actions aimed at improving program attractiveness, student recruitment and retention. This motion stressed the necessity of linking all efforts to the strategic planning process.

The Strategic Planning Committee is hard at work. The first short term objective is to unlock last year’s $2,300,000 and this year’s $2,400,000 MELS conditional grants. Its next objective will be, of course, to address the issue of strategic planning in a more comprehensive manner. The strategic plan will be the cornerstone of our next capital campaign. Donors will want to know where Bishop’s is going and how it plans to address not only its financial issues but also, more importantly, the many challenges facing higher education.

The time is now to work together to engage our imaginations and resources in conceiving how to secure our financial future and further the Bishop’s mission. I look forward to discussing these issues and taking your questions at a Bishop’s Town Hall Meeting scheduled for Friday, March 9 at 2:00 pm in Centennial Theatre.
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