Many will have caught Alex Usher’s post on HESA dealing with
university finances in Canada during
the pandemic year which paints a surprisingly different picture of university
finances than what one might expect. Of the
34 universities with data available for the 2020-21 fiscal year, 30 of them
posted surpluses and some of them were quite staggering. For example, a 726 million-dollar surplus at
University of Toronto (a $441 million surplus the year previous) or Queen’s
with $144 million surplus (year previous was $35.7 million). This seems quite at odds with the sky is
falling scenarios that propagated the early part of the pandemic as
universities argued that they were going to lose money. So how did this happen?
According to Usher: “Well, apart from the University of
Saskatchewan (where the turnaround was mostly due to a quite amazing uptick in
the investment portfolio), the formula was pretty simple. Overall, university revenues rose slightly –
about 2.6% in nominal terms – while expenditures stayed unchanged. Essentially, the savings from keeping
campuses closed offset the usual 2-3% growth in salary costs.” Indeed, as he concludes: “universities did
not in fact lose money during the pandemic.
They cut their budgets in anticipation of a fall in revenue and then the
fall never came. They will be in good
shape to deal with the next year or two when, I suspect, we will see a bit more
labour militancy that we’ve seen for awhile.”
So of course, the interesting question is how did Lakehead
University do? Well, Lakehead has also
done surprisingly well according to its 2020-2021
financial statement that was recently released. From 2020 to 2021, revenues
did fall slightly from $200.2 million to $198.3 million – a drop of just under
one percent. However, total expenses
fell even faster going from $198.7 million in 2020 to $187.6 million in 2021 –
a drop of 5.5 percent. As a result,
there was an operating surplus of $10.691 million in 2021 which was up from a
surplus of $$1.542 million in 2020. And
this was before the unrealized gains from an interest rate swap are factored in
which brings the total surplus to $14.456 million. It turns out Lakehead, like Saskatchewan, did
very well on its investment portfolio seeing an increase in investment income
from $3.4 million the year before to $20.055 million – a staggering 488
percent. One wonders why their
management of their own investment portfolio does not translate into better
management of the university pension plan – one of the worst university pensions
in the country in terms of the benefits provided to retirees but I digress.
On the revenue side, aside from investment returns it turns
out everything else was down. Government
general grant revenue was down 3 percent while student fees were down 1.5
percent. There was a slight fall in
enrollment which accounts for this as total enrollment (full-time and part-time
students) went from 8505 to 8365 – a decline of 1.6 percent. However, the good news is that 2021-22 is
expected to see a rebound with total enrollment currently estimated at about 8668
– an increase of about 3.6 percent. So,
one can expect both tuition and grant revenue to rebound this year.
As for expenses, well salaries and benefits were down -0.3
percent, supplies for operations were -25 percent, the costs of operating
assorted sales and services were -61 percent, building and equipment maintenance
costs were -19 percent and travel was down a remarkable 93 percent – from $4.1
million the year before to $302 thousand during the pandemic year. This may prove to be one of the more important
cost savings as the constant shuttling of administrators and staff from Thunder
Bay to Orillia and Toronto obviously can be replaced by Zoom technology. As for salaries and benefits, the university
took full advantage of the provincial restraint salary guidelines thereby
keeping compensation cost growth low and that will continue this year given the
contract that was negotiated. And, it
turns out that having all the faculty and staff work from home saved several
million dollars in operations and maintenance as costs like utilities were shifted onto employee home budgets.
So, in the end the sky did not fall and when the last year
is placed in long-term context, Lakehead’s finances are indeed looking quite
robust. Figure 1 plots revenues, expenditures,
and deficits since 2000 and they show growing revenues and expenditures and
deficits in only 5 of the last 21 years. The last five years have seen a string
of operating surpluses of which 2020-21 is the largest. Indeed, Lakehead has
seen an accumulated surplus since 2020 of $83 million dollars. Where has that money gone? Likely into the
university’s long-term investment portfolio which according to the financial statement
sits at about $144 million dollars and of course this year earned a whopping
$20 million dollar return. It certainly
has not gone into paying down the debt which as Figure 2 shows went up $8.038 million
in 2020-21 from th year previous to reach $106.6 billion. This was to finance the athletic facility expansion.
When it comes to long-term major revenue performance as
depicted in Figure 3, government grants in total dollars have been flat at
about $65 million annually since 2010 and as a share of total revenue have
declined from a peak of 43 percent in 2009 to reach 32 percent at present. As for student fees (tuition), it has grown
dramatically since 2010 –nearly doubling from about $43 million in 2010 to
reach $84 million at present. Figure 4
shows that enrollment growth is only partially responsible for this because despite
the long-term upward trend, total enrollment is about where it was a decade ago
and has been recovering after a decline.
What has changed is the composition of the students as there has been a
larger share of international; students who also pay much higher tuition.
So, there you have it.
Lakehead’s finances during the pandemic were quite good and come on top
of a long-term stable and improving financial situation marked by rising
revenues, enrollment growth and an expanding university investment
portfolio. This echoes the comments made by the university during the situation at Laurentian that Lakehead is "very financially sound". That is good to know. If Alex Usher is right,
Lakehead like the rest of the university sector will see increasing calls from
its faculty and staff for a return on their investment of time and personal
resources into the operations and success of the university.
