posted on July 10: 2001-02 operating budget: Revenue up by $13 million


The University's 2001-02 operating budget reflects an investment in institutional priorities that fit with McMaster's academic mission. The University is expecting to receive $13 million more in revenue this year and almost half of this new funding will go to support scholarships for both graduate and undergraduate students and Faculty priorities and recruitment needs. The funds will also be used to prepare the campus facilities for an expected growth in enrolment.

At its June 15 meeting, the Board of Governors approved an
operating budget of nearly $200 million for 2001-02. The University anticipates income from research overhead, grants and tuition will total $196,796 million for the operating year, enabling McMaster to meet its expenses with a projected surplus of $88,000. (Click here to view the 2001-02 budget framework.)

The budget also reflects the increased costs of doing business — the University expects its utility bill to increase by $2.3 million this year. That's due in part to the costs of heating, lighting and cooling a campus that is growing both demographically and geographically and, like businesses and institutions everywhere today, is facing rising utility costs.

Expenses totalling $196,708 million are outlined in the Budget Committee document presented to the Board for approval. In a letter to President Peter George, committee chair Brian McCarry discusses the challenges for the committee in determining budget priorities and allocations, and explains the increases in expenditures as follows:

  • graduate and undergraduate scholarships (up by about $2 million over last year);
  • increases to Faculty envelopes (up almost $4 million);
  • facilities maintenance (an increase of $2.3 million); and
  • establishment of a Capital Reserve Fund ($2.4 million)for campus expansion projects to meet the University's commitment to programs such as Superbuild and the Canada Research Chairs.

The committee is continuing its commitment to other already-established funds such as the Academic Priorities Fund ($1.3 million) and the matching fund for the students' ancillary fees protocol ($258,000). An Administrative Priorities Fund, set at $200,000, has also been established this year.

About $5.9 million was allocated to various projects and priorities this year under the Reallocation envelope; more than $15 million in reallocation requests were received. Roughly one-third of the $5.9 million available — $2.2 million — was designated as an ongoing allocation to support higher utilities prices. “A significant increase was needed to meet the University's increasing costs for utilities,” writes McCarry. For a list of projects funded this year, click here.

The projected increase in University revenue (income) for 2001-02 is expected to come from several sources — namely research overhead, tuition, grants and other sources.

Notably, new revenue to the University this budget year is $3.25 million (approximately) from the Research Performance Fund, allocated by the Ministry of Energy, Science and Technology. The funding reflects McMaster's continued success in securing research grants and is provided to cover the indirect costs of research. (The University will receive about 11 per cent of the total funding (about $36.5 million) available to universities through the Research Performance Fund and the Research Overhead Fund (administered by the Ministry of Training, Colleges and Universities; McMaster receives about $3.32 million annually from this fund). The percentage is significant since it is almost double what McMaster receives as its nominal share (6 per cent) of the total funding allocated by the province to Ontario universities for operating funds.

Revenue from tuition, estimated at $57.6 million, will also be up from last year due to a two per cent increase in domestic tuition fees and a rise in income from visa and summer school fees. The chart titled Percentage Change in Income Items indicates where the $13 million in increased revenue is coming from.

The chart titled Percentage Change in Expense Items indicates how the $13 million in additional revenue is being allocated. Costs affiliated with academic activities of the University represent the largest portion (49 per cent). This category includes funding to the Faculties, academic programs, scholarships and Academic Priorities Fund. Overhead supplies (19 per cent), utilities (16 per cent) and research (14 per cent) account for the remainder.

“The University Budget Committee has worked hard during the year to develop a budget that supports the University's academic mission and meets the Board of Governors' financial objectives,” commented University President Peter George in recommending the 2001-2002 operating budget to the Board. He noted that there remains some areas of major concern (most notably the Library) and some areas which will incur structural deficits (social sciences) which will take some time to work out. (The Faculty of Social Sciences' debt will extend beyond three years.) To view the
financial positions of the budget envelopes, click here.

University vice-president administration Karen Belaire told Board members that the budget was balanced and focused. “It's a balanced budget but it doesn't mean we've been able to accomplish all that we would like to accomplish.” A number of departments and Faculties will be struggling over the next year, she added. No across-the-board allocation was made to the Faculties, she added, because the University will not be getting across-the-board increases from government. “Every new dollar we receive will be attached to specific outcomes.”

It is expected that new accountability legislation that will be brought in by the provincial government will require the University to present balanced budgets and, in the absence of such budgets, a plan for recovery. As a result, Belaire says next year every department will be asked to report on outcomes that have been achieved, with a view to measuring performance and achievement of specific goals.

Barb Campbell, a staff representative on the Board asked how the budget would affect staff positions (and departments which have been operating with a deficit), particularly in the event that salary increases to staff, as a result of an arbitrator's award expected by July 31, are larger than was predicted during the budget planning process.

Provost and vice-president academic Harvey Weingarten replied that there has been no keeping up with the costs of inflationary pressures. “We have effectively been cutting services each year,” he said, adding the University has this for the last several years. In fact, remarked Weingarten, it is the Faculty salaries lines that have incurred the most significant reductions in funding over the last several years. “As a result we can't replace faculty at the rate at which we would like.”

Senior administrators acknowledged that the University may well end up with an operating deficit rather than an operating surplus at the end of the year.

Responding to the question about staff salary increases, Belaire said (that under McMaster's decentralized and three-year budget planning process), departments would make their own decisions as to how to fund these positions. Some departments would likely choose not to replace vacant positions and some might have positive appropriations from previous years that they can draw upon.

Belaire admitted seeing “a lot of red ink” from departments in the preparation of their three-year plans. In an interview later, Belaire said that departments reporting negative variances will be asked to prepare recovery strategies.

The largest expenditure for the University is $146,616 million for faculty and staff salaries, wages and benefits (up from $142,878 million last year). Increases in these areas are funded through the budget envelopes.