Detailed follow-up on 2023-24 budget

Dear Concordians,

As President Graham Carr recently shared, Concordia faces a difficult financial situation that requires immediate, collective action. The purpose of this message is to give a clear picture of the current state of the university’s budget situation and outline the measures that we need to implement now and in the coming months to control our costs and limit the deficit to our initial commitment to the Board of Governors. The text will also outline the next steps we will take to make our operations financially sustainable in the years to come.

Current situation

Last spring, the Board of Governors approved Concordia posting a deficit of $19.4 million for the 2023-24 fiscal year. As part of that agreement, we introduced a mitigation plan to keep the deficit at this manageable level. Unfortunately, although we have been applying the mitigation measures since the beginning of the fiscal year, the deficit has continued to increase due to several factors, most importantly a sustained decline in enrolment. Let us explain.

Like most universities, the majority of Concordia’s operating revenue comes from student tuition and related government grants. In fact, at Concordia, the percentage of operating revenue from tuition and related grants sits at 87 per cent. Unfortunately, after approximately 10 years of strong growth, enrolment dropped by 2.4 per cent in 2021-22 and by a further 2.1 per cent in 2022-23. While the overall decline has levelled off in 2023-24, the cumulative decrease has a significant impact on our revenues.

Due to this drop in revenue, Concordia cannot meet its core operating costs, which consist mostly of salaries and the day-to-day operations that support teaching, research and student life. Inflation, which affects the cost of goods and services, as well as rising interest rates, employee benefits and salary costs, have also had a significant impact on the university’s expenses. In addition, accumulated vacation, banked credit accruals and other liabilities figure in the calculation of our deficit. All these elements have required us to revise our previous fiscal projections.

Now, when we forecast our final 2022-23 results to future years — taking into account cost and salary increases as well as our limited capacity to anticipate an increase in the number of students — we estimate that the structural challenge facing Concordia will soon be in the magnitude of $65 million to $75 million. In other words, our expenses could surpass our revenue by approximately this amount if we do not immediately implement additional cost-control measures.

How did we get here?

Members of the Concordia community are right to ask what we have known about the university’s structural deficit and how it has grown so quickly.

First, experts estimate there is an annual shortfall of at least $1.4 billion in the funding of Quebec universities relative to their counterparts in the rest of Canada. Those who have been at Concordia for a certain number of years will also remember that in 2013 the Government of Quebec reduced the university’s budget by $26.4 million. Concordia managed the cut by successfully submitting and implementing a formal recovery plan between 2015 and 2020. It also speaks to the overall fragility of the higher education system in Quebec that, despite a decade-long effort to control costs, Concordia once again finds itself in a deficit position.

In the past, the university could always rely on increased enrolment to cover rising costs. As noted above, that is no longer the case. The challenge we face now is that in all sectors most of Concordia’s spending is driven by contractual agreements like salaries, utilities, maintenance and security, and these are costs that are difficult to reduce in short order. Unfortunately, due to the continued social and economic fallout of the COVID-19 pandemic, revenues have fluctuated and declined far faster than we are able to adjust spending because of the medium-to-long-term commitments in our operating budget. It is simply not possible to cut as quickly as revenues have declined in the last three fiscal years.

Immediate measures

As we approach the halfway point of the fiscal year, we have managed to contain our current deficit to approximately $35 million. However, we clearly need to continue our efforts to comply with the Board-approved budget. In that context, we have put the following measures in place:

• Freezing the salaries of the president and his executive team;
• Continuing the hiring freeze on non-academic staff, except for mission-critical positions, until the end of the fiscal year;
• Making strategic use of several reserve funds as one-time reductions of the current-year deficit in the amount of $9.4 million;
• Applying the $4.1 million President’s Transformational Fund, approved by the Board last May, to the university’s overall deficit;
• If necessary, stopping transfers of operating funds to capital projects, limiting new IT and facilities initiatives for now and only allowing those with dedicated government funding to proceed. (This measure will be implemented only as a last resort since it is important for the university to maintain its capacity to invest in infrastructure.)

The $35-million deficit indicates progress, but it is still above the Board-approved deficit of $19.4 million, even after using $9.4 million in accumulated reserves. To reach our goal in this fiscal year, we need to try to cut the university’s overall spending by 7.8 per cent. We have therefore arrived at a step where each sector must review its current expenses and identify how it will reduce its respective budget to achieve the required savings. While the nature of those adjustments will differ depending on the sector, the overall budget reduction is shared equally.

Some of the deficit reduction measures, such as the one-time spending down of reserve funds, are not long-term solutions, but they have allowed us time to prepare the recovery plan that we must submit to the Government of Quebec following three consecutive deficit budgets. As the plan is finalized, we will continue to work with units across the university to transform our approaches to enrolment while streamlining our activities and priorities.

Throughout this massive change, our primary goal is to support the teaching and research mission of the university: to deliver excellent courses and graduate supervision, provide responsive services to our students, and continue our impactful research activities that have grown exponentially in recent years.

Looking ahead

Concordia has policies approved by the Board that require us to modify our fiscal framework if trends demonstrate a risk to our long-term financial sustainability. With that in mind, we will be developing and implementing a comprehensive budget strategy, beyond the government-mandated recovery plan, that will allow us to balance our budget in the next five years.

The budget-planning exercise we are embarking on is necessary, but also a chance for sustained thinking about how we can develop structures and operations that align with our priorities and ambitions. The process will allow us to lay the groundwork for the Concordia of the future.

Thank you for your ongoing support and understanding. In the coming weeks, we will organize budget conversations with the community to discuss the situation and next steps.