The Operating Fund finances the University鈥檚 teaching and administrative services; it represents about 70% of the University鈥檚 total revenues and expenses. The remaining 30% is spread out among different funds that are reserved for specific, designated purposes, namely for ancillary services, as well as the Restricted Fund 鈥 Research, the Restricted Fund 鈥 Other, the Capital Fund and the Sinking Fund.
The University鈥檚 2023-2024 budget projects that the Operating Fund deficit will be around $10.5M. This deficit calculation includes some $28.9M in investment revenue, which shows the extent to which our current teaching and administrative operations depend on circumstances beyond our control.
In light of new information received since the initial budget was submitted, we project that Operating Fund deficits for the next three years will continue to grow. These recurring annual deficits are draining the accumulated reserves at an unsustainable rate. This situation is not unique to the University of Ottawa, but we are charged with seeking out and designing solutions that allow us to return to a balanced budget.
Figure 3 shows how the University鈥檚 viability ratio has deteriorated over the past ten years.
The viability ratio is an indicator of an institution鈥檚 financial health: it provides an indication of the funds on hand that could be used should the institution need to settle its long-term debts. As of April 30, 2023, the funds available to the University corresponded to 74.24% of its long-term debt.
The Ministry of Colleges and Universities has set the viability ratio thresholds for moderate risk and high risk at 60% and 30%, respectively.
The University is currently above the risk thresholds. That said, the deficits projected in the coming years will have an adverse effect on this ratio.
The pressures on the Operating Fund budget have intensified over the past few years. For a start, in 2019-2020, the Ontario government imposed a 10% reduction, and then a freeze, on tuition fees for Canadian students. By 2023, the cumulative financial impact of this new tuition fee framework was estimated at $203M, compared to the former framework. Figure 4 illustrates how the University鈥檚 financial position has deteriorated since the adoption of the new tuition fee framework.
Shortly afterwards, we were confronted with the Covid-19 pandemic, which resulted in a reduction in activities on campus, and consequently, a significant loss of revenues, especially in terms of residences and food services. As of April 30, 2022, the total of these losses was estimated at over $62.2M, while the funding from the Ontario government to offset these losses was only $391.2K.
Moreover, recent geopolitical upheavals have also had a negative impact on the University of Ottawa: in 2022-2023, our international students were unable to attend courses due to delays in the issuing of study permits. More recently, we have had to face unprecedented levels of inflation.
During all this time, operating grants from the government of Ontario have remained the same and the losses due to the underfunding of our Francophone mission, estimated at $50M annually, continue to accrue. The methodology used to calculate losses due to the underfunding of our Francophone mission was approved in 1989.
Figure 5 illustrates how the University鈥檚 financial position has deteriorated since the adoption of the new tuition fee framework.
Revenues from operating grants and tuition fees have increased by $168M over the past five years, but expenses have increased by $335M over the same period. Salaries and employee benefits alone account for 55% of this increase.
It goes without saying that the current situation is worrisome and is unsustainable in the long term. The University is actively working to find solutions to return to a balanced budget.