Budget equilibrium and institutional success: a short- and longer-term view

As the saying goes, sometimes you need to take one step back before leaping two steps ahead. That’s the approach we believe is required for Concordia to return to a balanced budget in the future while keeping our eye on the ultimate goal of maintaining our impressive academic and research momentum. Despite two difficult years caused by the pandemic plus challenging demographic and competing labour-market circumstances for universities in Quebec, Concordia has the core fundamentals and the determination to continue advancing as a progressive, next-generation university.

For all organizations, including Concordia, this is a transitional moment. We must continue to explore, implement and adapt to new ways of teaching, working, learning and conducting research. That said, the university achieved several impressive highlights in the past year, including:

• We graduated 8,183 students in 2021-22, the second straight year we had more than 8,000 graduating students.
• We continued to — and will continue to — provide mental health, financial and other forms of support to our community members, who were called upon to constantly adapt.
• We pushed ahead with major initiatives to promote equity, diversity and inclusion (EDI), including the implementation of recommendations from the President’s Task Force on Anti-Black Racism’s final report.
• We exceeded our original goal to raise $250 million toward the Campaign for Concordia and set a new, ambitious $350-million target to culminate in 2024-25 for our 50th anniversary.
• We had a record year of Research Income of $75.7 million in fiscal year 2021
• We recently learned that we received the largest individual and the largest institutional research grants in the university’s history

It’s also worth noting that we continue to accumulate outstanding ranking results, including:

• #1 in North America under 50 years, QS World University Rankings
• #1 in Canada under 50 years, THE Young University Rankings
• #5 in the world, Sustainable Cities and Communities, THE Impact Rankings
• #20 in the world, Climate Action, THE Impact Rankings
• Top 100 in the world, support of the SDGs, THE Impact Rankings
• #3 Canada, EMBA, CEO Magazine
• #2 Canada, top 100 in world, Art & Design, QS World University Rankings by Subject

A challenging period replaced by new challenges

During the COVID-19 period, we invested $37.5 million to meet the demands of change and adjustment​. For the period 2019-20 to 2021-22, we experienced a cumulative loss of $35.4 million in the operating fund, based on audited financial statements.

Concordia has experienced continuous growth over the last two decades. We saw an average rise in our student population of 1.6% between 2013 and 2021. This continuous growth supported our development and our investments, giving us the capacity to present a balanced budget for the 2019-20 fiscal year.

However, 2021-22 and 2022-23 altered this trend as the total student population across Canada failed to grow for the first time in years and the entire Quebec university network experienced a decline in students. At Concordia, that decline was 2.4% in 2021-22 and 2.1% in 2022-23.​

As a result of these demographic realities, Concordia’s student-population has been re-distributed. While out-of-province students increased in number by 9.1% and international students by 8.9%, a combined uptick of 929 students, the number of Quebec students dropped by 1,576 in 2022-23, a 7.4% decline. Quebec students represent 69% of the university’s student population in 2022-23, while international students make up 22% and students from the rest of Canada total 9%.

Taking stock of the major trends and factors that affect the higher education sector, we forecast a reduction of our student population in the years to come. Three important factors will influence the student population evolution:

a) Demographic: Between now and 2036, the number of students at the high school level in Quebec will increase by only 3.2%, from 365,095 to 376,899 students, or 11,804 students. Over 14 years, this represents an average of 843 students per year. Considering that not all these students will go to university, the additional number of Quebec students attending universities over the next 14 years will be modest. If we consider that Concordia represents about 10% of the Quebec university network and that about 35% of the population between the ages of 18 to 24 attend universities, we anticipate that the potential number of new Quebec students coming to Concordia over and above our current recruitment numbers will be less than 100 students per year for the next 14 years.

b) Labour market: With a very low unemployment rate of 4.2% in March 2023, the labour market is a big competitor, attracting young adults and motivating them to work instead of studying. Should these labour market conditions persist, it means that fewer young adults will continue their studies, or in greater proportion do so on a part-time basis.

c) Post COVID-19 / confinement impacts: Many students, faculty and staff are experiencing lingering difficulties as a result of the pandemic. Time to completion of CEGEP programs is delayed and non-completion rates at CEGEP are increasing. Despite robust graduation rates in the last three years, we are experiencing some similar situations at Concordia. We need to monitor the potential consequences for enrolment and also recognize that more funding will have to be allocated to support mental health, tutoring and mentoring.

Considering all these factors, we propose a budget based on a reduction from 2022-23 of 600 FTEs. This is the first time in Concordia’s history that we are budgeting for a drop in FTEs. This includes:

• A reduction of 1,000 (5.1%) FTEs for Quebec students
• An increase of 100 (3.7%) FTEs for ROC students
• An increase of 300 (4.1%) for international students

What do these structural changes mean for Concordia?

Because 87% of our revenues come from grants and tuition fees, the anticipated decline in our student population will have consequences in terms of our revenue stream. Our revenues will increase by $21 million, from $592.2 million to $613.2 million. This increase of 3.5% contrasts to the period from 2018-19 to 2022-23, when our average revenue increase was 6%. Effectively, we are facing a revenue shortfall of close to $20 million for 2023-24.

Meanwhile, our expenses continue to grow at a rapid pace with additional pressure from inflation on salaries and other expenses that will need to be managed in a sustainable fashion.

2023-24: a challenging financial year

To be clear, 2023-24 will be a very challenging year financially. Our fixed and structural costs are high: more than 93% of the $302 million allocated to our faculties’ budgets for 2022-23 is composed of salaries and benefits. Making structural changes in such a framework needs time and effort. There is no magic recipe, and we have to prepare more than one potential solution.

Our proposed plan for 2023-24

Concordia’s 2023-24 financial situation is as follows ($M):

Given this situation, we propose taking an approach to deficit reduction that we believe will pay off for the university in the long run. As per the April 30, 2022, audited financial statements, we have $76.5 million of internally restricted net assets. As an immediate first step to tackle our deficit, we propose to use $9.4 million (12.5%) of our internally restricted net assets to reduce the 2023-24 deficit.

Considering the expected deficit for 2023-24 and the $25.5 million forecast deficit for 2022-23, it is possible that we will be asked to present a long-term recovery plan to the Ministère de l’Enseignement supérieur (MES) by December 2023 if we don’t comply with the Subvention conditionnelle framework. Concordia was in that situation between 2015 and 2020 and we were always able to comply with the recovery plan presented to the Government of Quebec.

Operational activities

In addition to deploying restricted assets to draw down the deficit, we will implement other initiatives intended to mitigate our situation. These include:

• Reviewing the pace of deficit recovery to return to a balanced budget, from 2025-26 to 2027-28; we want to address the necessity to go back to a balanced budget while maintaining capacity to deliver our strategic initiatives
• Implementing masse salariale position review oversight and controls, e.g., vacant positions, freezing positions, reduction of hiring, closing positions by attrition, etc.​
• Aggressively pursue special funding envelopes to offset operating costs, as per the Règles budgétaires framework
• Using accumulated reserves to support specific initiatives​
• Increasing revenues where possible

President’s Transformational Fund

While considering these options, it will be necessary for us to conduct a structural review of activities and programs to identify recurrent additional revenues and the reduction of expenses. To support such a review, we need to create capacity to modify how we do things, while simultaneously protecting our capacity to support critical initiatives. The creation of a $4.1 million President’s Transformational Fund will allow us this flexibility.

Diversification of revenues has always been a challenge for universities. For all Quebec universities in 2021-22, revenues from sources other than students and grants made up 9% of the $5.7 billion operating-fund revenues. Over the last 20 years, Concordia’s revenues from non-student sources have been roughly 13%. We will continue to diversify our revenue sources, including through the creation of new academic programs, but we need to be realistic about our capacity to offset the decline caused by a reduction in student population.

That’s why our current strategic framework includes continuing to enforce a structural review of our activities and programs, to identify recurrent reductions of expenses and additional revenues. We will perform this exercise while keeping a fundamental question in mind: How do we maintain a long-term sustainable financial framework while supporting the numerous transformational projects? ​This is certainly not an easy task. We need to strike a balance between addressing in a focused way the immediate issue of our financial situation, without taking aggressive actions that could cause unnecessary damage or compromise our future development.

A critical external factor that speaks to the need for such a balanced approach is that the MES has started a major review of the provincial funding formula, which happens every decade or so. This review will undoubtedly have a significant impact on the structure and prioritization of university funding in the years ahead for the Quebec network as a whole. We must therefore be prudent with any changes we implement to address our budget situation so as not to compromise our ability to respond positively to the parameters of a new provincial funding formula.

Our future

We have learned to expect the unexpected. More than ever, faced with these important challenges, we need to demonstrate creativity, resilience, teamwork, resourcefulness and agility. Fortunately, being ambitious and resilient is part of Concordia’s DNA — and, going forward, we must stay confident in our ability to position Concordia as a great university.

Denis Cossette
Chief Financial Officer