Listed below are a number of question leading to the establishment of principles for the 2004 - 2007 Operating Fund Budget Action Plan.
1. How do we handle the decrease, then increase, in provincial funding?
Clearly, cutting $756,008 out of our budget in year one and restoring $399,003 in year two will be extremely disruptive, and would result in significant impact on Instruction and Services. That impact can be mitigated somewhat by the use of non-recurring funds in year one to produce the effect of only having to accommodate the net reduction in on-going funding. This approach is subject to there being $399,003 available in non-recurring funds in year one and would obviously be a first call on the non-recurring budget.
2. Regarding the increases to services in the New Era funded program, do we maintain the commitment we set last year?
For the 2002/03 budget and the two years thereafter, the Board made a decision to earmark fixed amounts of additional budget for Services including Information Technology and Facilities in the knowledge that those commitments exceeded the funding available under the New Era Program. Notwithstanding the ongoing commitment to increase the budget to Services, it is recommended that the fixed amount for other Services in year one be reduced from $250,000 to $150,000.
3. How do we go about finalizing the possible increase to net returns from International and Continuing Education?
Increasing the net return to the Institution from International Education and Community Education should be one of the first considerations when looking for solutions to the operating fund budget deficit. However, both faculties operate in highly volatile markets where numbers of students served can vary significantly from year to year and the ability to create additional net returns to the Institution is consequently impaired. Therefore, any projected increase to what is already a significant commitment must be of a conservative nature.
In regard to International Programs, having considered the potential for increasing ESL tuition, university tuition, revenue due to increased number of students and the elimination of non-FTE related subsidies to certain university programs, it is projected that an increased sustainable net return of $150,000 in year one and a further $150,000 in year three is reasonable. At this stage, it looks like most of the increase in year one will be realized from an increase to university tuition, while still allowing us to maintain our market share.
It was expected that policy change in 2004/05 in Continuing Education regarding expected returns from programs formerly funded by AVED as part-time Vocational, and setting individual net revenue targets for each faculty and campus, might result in an increase in anticipated net revenue to the Institution. However, the transition from a funded and revenue generating entity to a full revenue generating entity is taking time in Continuing Education, and it is proposed that the policy change be deferred to year two, and therefore, no change in net revenue can be anticipated in year one.
4. What will be the basis of the tuition plan?
The Tuition Plan is still under consideration, and will involve separate discussions with stakeholder groups. Issues to be considered are:
- Continuing to see co-funding of post-secondary education through tuition as a revenue tool.
- Malaspina's level of tuition fees relative to other predominantly under-graduate universities in BC and in Canada.
- Any increase at Malaspina relative to changes among peer institutions in the Province.
- The ability on the part of students to pay as evidenced by any trends emerging in program utilization.
- The availability of increased student aid (funded from the reduction in institutional funding noted in the Planning Assumptions).
It is proposed that an across-the-board increase of 12% be used in the Budget Planning Assumptions. Such increase would not apply to International, noted earlier, and to CAP programs. A separate proposal for International Education will be prepared. In addition, the Tuition Plan would continue to be based on the principle of standardized tuition fees across the programs and no additional fees, except where the student requires materials or equipment, which can be retained at the end of the program.
5. Are we prepared to plug numbers in for strategic planning, and un-funded program and service growth?
The Strategic Planning Process is not yet completed, and it remains unclear as to whether additional funding will be required in year one. As noted earlier, the new Era Program provides for very focused Instructional expenditures (i.e., Nursing), and limited funding for Services. In order to meet Malaspina's regional needs for Instruction, and to continue to build up the Services infrastructure that has been a source of concerns, it is proposed that investment in both areas be part of the Planning Assumptions for year one even though no Provincial funding is available. In addition, a major multi-year commitment to replenish and develop the operating capital inventory for both Information Technology and other purposes is proposed. In this latter case, funding from AVED has remained relatively flat in the last decade while needs have increased dramatically. Commitment to increase budgets without external funding means, of course, that the wherewithal must be found from within the Institution from instruction generated revenues or expenditure reductions. The importance of such a commitment is underscored by the difficulty in attaining it.
6. Are we prepared to retain the discretionary items in our assumptions; thereby, leading to a larger deficit?
Each of the four discretionary items represent crucial investment in the quality of Instruction and Services, and in shaping the future direction of the Institution. While it might be seen as easier to acknowledge that no external funding is available and, therefore, it is not possible to consider such commitments, that would leave the Institution solely at the mercy of Provincial funding and unable to address regional needs and quality of our programs and services. Further, it is felt that the importance of these discretionary items is such that we should be prepared to find expenditure reductions in order to see them achieved.
7. Having exhausted all of the previous questions, we will be left with a requirement to cut expenditures. What should the principle(s) be for potential reductions to instruction, services, and administration?
7.1 Consider across-the-board cuts?
We do not favour the "starve all" principle because it takes no account of financial and performance standing of Programs and Services: it simply taxes all. Therefore, any expenditure reduction plan should be strategic and based on the best data available. Such reductions will be focused on non-salary costs as a first priority, and then, if necessary, on administration, faculty, and support staff costs.
7.2 Instruction:
7.2.1 How do we decide the share of the overall target?
Notwithstanding concern as to adequacy of the Services' infrastructure budget and to the many Instructional needs, we propose that the sharing of the overall expenditure reduction target be assigned to Instruction and Services on the basis of the current budget commitment to both. This approach will mean that 79% percent of the expenditure reduction target will be assigned to Instruction.
7.2.2 All major program areas involved initially - no exemptions - consistent with mission statement?
All major program areas should be considered.
7.2.3 Reductions should be data informed - discuss notion of deans identifying criteria against which programs will be judged?
7.2.3.1 Can we have the same set of criteria for all program areas?
7.2.3.2 Data/criteria should relate to educational and financial indicators.
7.2.3.3 Need to discuss criteria with Education Council.
7.2.3.4 Data should be readily obtainable and clean.
We are presently working to develop a greater amount of readily available data with the intention that the improved data bank be used to inform decisions in future around expenditure increase and reduction of Instructional budgets. However, it is unlikely that such data will be fully available for the year one process.
7.2.4 Consider possibility of giving each dean a target, and the faculty data, and let them come up with the reductions.
In year one, this is likely to be the principle adopted basing the target on relative size of the faculty and the amount of data that can be made available. Therefore, Deans will be charged with the responsibility, in consultation with faculty and staff, in coming up with expenditure reduction plans. Such plans will focus on minimizing impact on serving students and will seek to maintain our FTE delivery expectations.
7.2.5 Will we need options for the Board, not just a list of reductions equaling the target?
Deans will be given targets that in aggregate exceed the amount required in order for the Executive and ultimately the Board to consider options.
7.3 Services (Instructional, Student, and General):
7.3.1 How do we decide the share of the overall target? (See also 7.2.1)
Notwithstanding concern as to adequacy of the Services' infrastructure budget and to the many Instructional needs, we propose that the sharing of the overall expenditure reduction target be assigned to Instruction and Services on the basis of the current budget commitment to both. This approach will mean that 21% percent of the expenditure reduction target will be assigned to Services.
7.3.2 Do we include all services initially, or are there some up front exemptions such as IT and Facilities?
In view of the significant shortfall in investments in both the maintenance and development of our Information Technology infrastructure and the relative inflexibility of our Facilities costs, which tend to increase automatically as campuses and programs are developed, we propose that both Information Technology and Facilities be exempt.
7.3.3 No useful data are available to compare services?
There are no data available now or in the near future to differentiate, in advance, the impact of possible expenditure reductions between Service departments. Therefore, setting targets other than on a proportional basis is very difficult. Such impacts on the Institution only become evident once each Director has identified them.
7.3.4 Do we ask all non-exempted directors to come up with lists?
Yes, all non-exempted directors will be asked to come up with lists.
7.3.5 Does the Executive simply select from the lists, up to the amount of the target?
Again, as in the case of Instruction, proposed reductions will exceed the overall assigned target in order to allow options to be considered. The Executive will present to the Board the expenditure reduction plan along with clear consequences in each case.
7.3.6 Could the Executive make some strategic decisions up front to do without a service or to materially reduce it.
It is not apparent that any Services should be eliminated or materially reduced without review of an overall plan covering all Services.
Summary of Principles
A. Non-recurring funds will be committed to mitigate the effect of reduction in Provincial funding.
B. Revenue generating faculties' ability to contribute additional net revenue to the Institution will continue to be reviewed, but at this stage $150,000 from International Education will be a planning assumption.
C. A Tuition Plan is being developed to support an increase of 12% in all university and college programs, with the exception of CAP.
D. Investment in new programming, instructional quality, services, and operating capital will be included in the Budget Planning Assumptions, and funded from within the Institution.
E. Instructional and Services expenditure reduction plans to eliminate the projected budget deficit after other remedies have been considered will be based on the best data available, and will be spread across the major program areas and services (exceptions include Information Technology and Facilities) and will include options for consideration by the Executive and the Board.
F. Expenditure reduction plans will initially focus on non-salary expenditures and only, if necessary, will extend to administrative, faculty, and support staff costs.
November 25, 2003