The Finances of the University: Lakehead 2026 Edition

  

Universities in Ontario have been feeling somewhat more upbeat this year in the wake of provincial government measures to bolster the sector. After years of essentially starving the sector with a tuition cut and freeze as well as a continued freeze in operating grant funding, 2026 saw the announcement of combined measures totalling nearly $6.4 billion (at least according to the government’s accounting) to make the sector more sustainable.  Not least of which was a move to finally allow universities to once again begin increasing tuition rates on domestic students by up to 2 percent a year.  While this will likely not make up the revenue drop from the decline in international students, it is also being accompanied by increases in base funding to the system.

The government finally moved on the university sector funding issue because quite frankly the sector was at the end of its rope. However, even with the new funding which has pulled the sector back from the “abyss”  it remains that in the end it is not so much a rebuild as a halt to deepening the financial pit. Even with the funding, universities remain in austerity mode and with many continuing in deficit mode, they will still be making cuts.  And all this will be in the face of what is anticipated to be rising demand and a projection that nearly one million additional university educated workers will be needed in Ontario between 2026 and 2035. This is not a surprise given that since 2018, Ontario has added nearly two million people largely through immigration and immigrants being younger on average than the general population have children who will be seeking education. On top of this, a massive retirement boom is coming meaning numerous vacancies will need to be filled.

Through all this flux and financial challenge, some universities have managed to do better than expected this year financially and while one always expects University of Toronto to do relatively well and balance its budget, Lakehead is also expecting to balance its budget for the 2026/27 fiscal year.  Lakehead appears to be holding its own quite well in attracting targeted government funding for new initiatives whether they be a STEM Campus in Barrie or a new veterinary school, on top of the coming increases in both government base finding as well as higher tuition fees on domestic students.  Lakehead indeed was fortunate in not being as dependent on international undergraduates for its international student enrolment as some other universities. 

This comes on top of a relatively strong long-term financial performance because of its gradual transformation away from being a university for northwestern Ontario to a regional multi-campus Ontario university.  Indeed, Lakehead with its three campuses of Thunder Bay, Orillia and Barrie in one university has become the holy trinity of universities.  The Barrie campus will bring special financial blessings as it is in the center of a compact CMA population of 250,000 meaning that ultimately its enrolment may even eclipse that of the Thunder Bay campus.  This will all build on a rather successful tradition of prudent long-term financial management and soundness as documented below. The data for the subsequent charts come from historical Institutional Statistics Books accumulated for the 2000 to 2011 period (eg. Institutional Statistics Book 2001/02) as well as annual university financial statements.

Figure 1 plots revenues, expenditures and deficits annually from 2000 to 2025.  From revenues and expenditures of just under $80 million annually in 2000, by 2025, Lakehead’s revenues had grown to $246 million and expenditures to $231 million. In 2025, Lakehead ran a surplus of $15.4 million which followed 2024 with a surplus of $7.6 million.  Indeed, Lakehead has usually managed to run surpluses with deficits being incurred in only 6 of the last 26 fiscal years with an accumulated surplus since 2000 of $89.7 million. 

 

 

The biggest deficit was of course pandemic induced in 2021-22 but surpluses have grown every year since. As a result, long term debt has gradually been whittled down as Figure 2 illustrates.  There was a surge in university long-term debt during the 2000 to 2006 period as the Orillia expansion was started and new buildings such as the ATAC constructed on campus.  Long-term debt peaked in 2012 at $115 million and by 2025 had declined to $94 billion.  

 

 

The major revenue drivers during this period have been the duo of government operating grants and student tuition revenue as illustrated in Figure 3.  However, government operating grants were essentially flat between 2012 and 2024 at just over $60 million but then surged from $61 million in 2024 to $69.5 million in 2025. They have nevertheless declined from a peak of 41 percent of university revenues in 2012 to 28 percent in 2025.  Meanwhile, tuition revenues, reflecting the rise in international students, have grown quite steadily both as a share of revenues as well as in total.  Indeed, in 2025, at $102 million, tuition fees accounted for 42 percent of Lakehead University total revenues.  Other revenues aside from operating grants and tuition which together account for 70 percent of university revenues include income from investments, ancillary fees and revenues (e.g., Parking) and restricted government grants and funds.

 

 

Of course, the reason we are all here at Lakehead is because of the students and no exposition of university finances would be complete without looking at the trends in enrollment. Figure 4 plots total enrollment at Lakehead (headcount of both full and part time students) from 2001 to 2025.  There was rapid growth from 2001 to 2011 that saw enrolment rise by about 40 percent.  Enrollment then levelled off for nearly a decade but has begun to grow since 2022 and now sits at a headcount of just over 9,000 spread out as it is across three campuses.  It remains that over this period there has been a decline in the share of Thunder Bay campus undergraduate enrollment which has been made up by graduate enrollment across all the campuses and undergraduate enrolment in Orillia in particular. 

 

 

In the end, the university has managed to grow its enrolment in a particularly challenging demographic environment given until recently stagnant population growth in the region. Part of its financial management has also involved restraining costs.  In this regard, Lakehead has been assisted by two factors.  First, the total full time faculty complement has remained relatively stable since 2010 while enrolment has risen reflecting more intensive human resource use.  In that year, there were just over 300 full time faculty appointments at Lakehead and in 2025, there were also just over 300 full time faculty appointments.  While the number of full-time faculty has remained essentially fixed since 2010, total headcount enrollment has grown nearly 14 percent and as a result the average student headcount to full time faculty ratio grown from approximately 25 per faculty member to 31. 

Second, there was the impact of Ontario’s Bill C-124 which was brought in in 2019 capping salary increases at 1 percent in the broader public sector and was in effect until 2024.  Low salary growth rates combined with stable faculty numbers is an effective cost management tool and the fruit is borne out by the charts provided here.  Lakehead has managed to grow its revenues faster than costs over a sustained long-term period that has seen balanced budgets or surpluses in three quarters of the fiscal years since 2000.  It has also expanded its infrastructure to encompass three campuses to recruit more students while at the same time gradually reducing its long-term debt from a pronounced peak.   In a tough and competitive environment, Lakehead has managed to thrive, and its financial state is a success story that should be celebrated.

Thunder Bay's Municipal Budget Woes

 

Well, Thunder Bay’s municipal budget opera season is now in full swing with assorted fiscal choruses and arias being played in lockstep as we move towards finalizing the 2024 budget.  Like many municipalities across Ontario, there is increasing budgetary pressure to raise taxes.  The narrative this budgetary opera season in Thunder Bay is a little more complicated because along with planning for 2024, there is also the matter of dealing with the remnants of the 2023 season.  This task has proven to be a bit more mettlesome than usual but the end result will probably be a fairly large tax increase in 2024.

 

Very often, the proposed budget generally includes a tax levy increase that is higher than what is eventually opted for as opposition mounts.  For example, the 2023 budget originally put forth 6.2 percent levy increase that went to 5.6 percent and then 5 percent but eventually passed at a 4.4 percent levy increase (after growth).  This before and after growth distinction is one that has always been a bit of a diversion because after all, a tax increase is a tax increase whether one factors in growth in the tax base or not.   One is indeed surprised that the recent increase in managerial salaries of 12 percent at the City of Thunder Bay was reported as a nominal increase rather than after growth or after inflation.

 

The last budget was a particularly vexing one mainly because the 2023 budget process was with a new council and they no doubt very much did not want to debut with one of the larger tax increases in recent history.  However, everything comes at a price and the price was taking one million dollars out of the reserve fund and the task of finding several million dollars more in terms of savings.

 

That process has not gone well, and one suspects behind the scenes municipal movers and shakers do not mind because they would be happier with a tax increase than cuts.  The initial round of cuts tended to deal with relatively high profile but small budget items such as cuts to fireworks, movie nights, and Christmas Day transit service as well as items like the sister cities program. As well, there were the controversial cuts to the Neebing Arena as well as outdoor rinks that in a hockey town like Thunder Bay generated more of a backlash.  Yet, the backlash was dealt with by delaying the cuts and taking a “survey” which is really not a survey at all. 

 

The survey site consists of a web page and link asking the question of whether you supported the proposed outdoor rink reduction and was really not a statistical survey but a consultation.  The over 80 percent opposition comes from the fact that there is a certain self-selection bias here in that the survey is voluntary and those opposed to the cut of 31 out of 39 outdoor rinks had a strong incentive to go on and register their opposition which explains the 80 percent opposition rate.  Needless to say, the odds are that after rousing public sympathy for the rinks, the next budget offering will be an orchestrated refrain about how we will have to raise taxes more if you want to keep the rinks open.

 

The reality is that the big money in the City of Thunder Bay budget is not to be found in hockey rinks or fireworks or movie nights but in two key areas: Public Safety and Public Works.  The accompanying figure has been constructed using the City of Thunder Bay’s own data and reveals that the Public Safety Category occupies nearly 40 percent of municipal spending while the Public Works Category is nearly 20 percent.  In other words, with nearly 60 percent of spending in these two categories, looking for cuts in the other 40 percent of spending is going to be difficult as a budget solution.  Even the claim that much of our spending is mandated by the “province” looks a little lame as the legislated programs category accounts for barely one percent of spending though some additional mandated spending is also internalized within some of the other categories.

 

 

 

In the end, the two largest potential sources of savings lie in Public Safety and Public Works, followed by Parks and Recreation, Contributions to Outside Boards and Agencies, Social Services and then Debt Charges. We are in a situation where without any serious attempt to sit down and examine them, the two largest categories are going to increasingly take a larger share of spending.  This will take money from quality-of-life categories such as Parks and Recreation (though oddly enough there is still interest in a new Turf facility on the part of the city administration but I guess that is the capital budget rather than the operating budget at least for now) and then contributions to associated community groups.  Cuts in these other categories will not be sufficient.

 

We are heading for a scenario where there will be higher taxes and fewer services.  It will be interesting to watch City Council and Administration sell that one.

Measuring Municipal Employment in Northern Ontario

 

It is municipal budget season in Ontario and many municipal ratepayers across the province are waking up to projections of fairly large tax increases as a result of inflationary pressure. It is interesting that when municipal finance officers talk about inflation they invariably mention the effects of the war in Ukraine.  I must admit, I would be interested in an explanation by a municipal CAO as to how the war in Ukraine has directly impacted a municipal budget in Thunder Bay or Sudbury.  Nevertheless, we should move on to the main event here.

 

When it comes to Ontario’s municipal sector, getting a handle on the numbers can be a challenging and complicated endeavor. Indeed, it has already been noted by at least one think tank that municipal budgets in Canada are not user friendly and are quite difficult for the average citizen to understand.  In the case of Ontario municipal budgetary information, there are standardized reporting templates or Financial Information Returns that are available through the Ministry of Municipal Affairs and there is annual data for each municipality but the assorted excel spreadsheets with multiple sheets and windows are not terribly user friendly. 

 

And then there is the case of trying to get a handle on employment numbers – again not a very transparent process.  There is your core municipal employment in terms of administration and staff which can then be augmented by protection services such as fire, employment and paramedics and then there are some municipalities with other services such as long-term care.  Thunder Bay is a classic example of the difficulties in getting estimates as they are presented as Full Time Equivalents or FTEs with police reported separately and the time series not terribly extensive even when you can track them down.  And of course, given the idiosyncrasies of each municipality, forget about inter municipal comparisons. 

 

In the end, trying to get data on municipal employment in any Ontario municipality is exceedingly difficult and so one is often forced to improvise.  One avenue worth pursuing  is not going directly to municipalities but the provincial government which as a result of its public sector disclosure act collects data on Ontario public sector employees making more than $100,000.  This allows one to at least get a consistent comparative handle on municipal employees across Ontario municipalities albeit only those earning over $100,000.

 

Figure 1 presents the number of municipal employees earning $100,000 or more for the five major northern Ontario cities – Thunder Bay, Timmins, Greater Sudbury, Sault Ste. Marie and North Bay – for the period 2017 to 2021.  The number of employees making over $100,000 – let’s call them Listers – grew in all five of these cities over time with a particularly noticeable bump in 2020.  For example, in Thunder Bay, there were 417 municipal Listers in 2017 and this rose to 452 by 2019 and then jumped to 558 in 2020 before declining slightly to 547 in 2021.  A similar pattern was observed for Greater Sudbury and to a lesser extent in the other three  cities.

 

 

 

Interestingly enough, in 2021, Thunder Bay had the most municipal Listers at 547 followed by Sudbury at 540, then the Sault at 246, North Bay at 187 and finally Timmins at 142.  This ranking roughly parallels population size with the exception that based on population, one would expect Sudbury to exceed Thunder Bay.  Sudbury’s population is about 60 percent more than Thunder Bay but in 2021 Thunder Bay had practically the same number of employees making over $100,000. Indeed, one can make an additional number of comparisons from the data – the total wage and salary bill in 2021 for Listers, in each municipality, the average salary per Lister and the per capita cost of Listers in each municipality (constructed by dividing the total wage and salary bill for those making more than $100,00 by the municipality’s population). These are presented in Figures 2 to 4.

 

 

 

Figure 2 ranks the total wage and salary bill for municipal listers and shows the total in 2021 was largest for Thunder Bay at $69.6 million (down slightly from $70.9 million in 2020 but up substantially from 2019 at $54.7 million) and the smallest for Timmins at $17.4 million.  Given the difference sin municipal population size, the totals needs to be supplement with adjustments for employment size or population.   

 

 

Figure 3 ranks the municipalities by the average salary per municipal lister and they range from $135,557 for North Bay (Thunder Bay is second at $127,171) to a low of $122,188 for Timmins.  Figure 4 is the most interesting however as it takes the total wage and salary bill for Listers in each municipality and divides by the population of the municipality to present a per capita cost.  The per capita cost of Listers was highest in Thunder Bay at $628 per capita and lowest in Greater Sudbury at $403 per capita. 

 

 

 

The Thunder Bay numbers are worth drilling down into further given that adjusted for population, they definitely standout from the other municipalities.  That will be a future post.

 

What Drives Ontario University Deficits?

 

In the wake of the Laurentian insolvency, there is growing interest in the state of university finance in Ontario – at least amongst universities.  For the most part, for the Ontario government Laurentian and its plight  might as well be on the moon.  They would undoubtedly be much more preoccupied had the insolvency happened to the University of Toronto or Ryerson and then maybe not given at least one pundit has suggested that the current government really knows nothing about universities.

 

In any event, the final report on what happened at Laurentian that might shed a definitive story of what has happened there  is still to come though one media account summarizes it as too many programs, too many instructors, too many managers, too few students and not enough money.  And the previously mentioned pundit would add that tenured professors are overpaid while part-timers are underpaid, though relative to who or what is never elaborated upon.  That is essentially the level of financial debate regarding universities in Ontario.

 

So, what can we learn from  the information available on the recent state of university finances?  Well, an examination of university financial reports for 2020 is one way to start by comparing the deficits (-) or surpluses (+) of 20 Ontario universities.  It turns out that in 2020 a surprising number of universities did run a deficit – seven to be precise – but the majority ran surpluses.  The range runs from a deficit of -$21.5 million for Ryerson to a surplus of +$441 million for University of Toronto.  The interesting thing is how could both the largest and the smallest university deficit both be in downtown Toronto institutions given the similarity of the operating environment but there it is.

 

Comparing deficits for Ontario universities really needs to be adjusted for the scale of institutions in terms of enrollment given that total enrolment in 2020 (as taken from the AUCC web site) ranged from a low of 1,370 for Algoma University to a high of 93,081 at University of Toronto.  Using absolute deficit numbers is not going to tell you much.  Figure 1 thus presents the deficit (-)/surplus (+) per student.  The largest deficit per student is actually Wilfrid Laurier at -$527 per student in 2020 followed by Ryerson at -$455 and then Nipissing and Laurentian at -$374 and -$339 respectively.  Deficits are not a specific northern Ontario problem given the list includes Wilfrid Laurier, Guelph, Ryerson, Windsor and Ontario Tech. 

 

 

 

Are there any characteristics that might explain why these institutions  had deficits in 2020 while the others had surpluses – the largest at Algoma and University of Toronto respectively, now there is an interesting juxtaposition – at $5364 and $4,738 respectively.  The first and the last in terms of total enrollment both have the largest surpluses per enrolled student.   Who would have thought?  Algoma and U of T as the Alpha and Omega of Ontario universities.

 

Why not address the elephant in the room.  Do deficits or surpluses have anything to do with how generous faculty salaries are?  Figure 2 provides a ranking of average faculty salaries (all ranks) for these 20 universities taken from Statistics Canada with the exception of Algoma, which for some reason is not in the salary statistics for universities from Statistics Canada.  However, I took an average of the salaries provided in the latest Ontario salary disclosure (which I would imagine actually biases the number upwards a bit).

 

 

 

The results here are also interesting.  Unlike the steepness of the deficit/surplus profile, this profile is rather gentle going from a low of $111,000 at OCAD to a high of $176,550.  University of Toronto not only manages to generate the largest surpluses in both absolute and per student across all of Ontario universities, but it has managed to do it with the highest average faculty salaries. Laurentian, is decidedly middle of the pack when it comes to faculty salaries along with Wildfrid Laurier and Western.  Indeed, if you plot the deficit/surplus against the average faculty salary for these 20 universities, you get Figure 3 which gives the counterintuitive result (especially if you are an Ontario cabinet minister) that higher faculty salaries are correlated with bigger university surpluses.

 

 

 

Of course, Figure 3 is only an association.  What you really want to see is if there indeed is a statistically significant relationship between the two variables after controlling for some confounding factors.  Figure 4 presents the results of a very simple linear regression of the surplus per student on average faculty salary (avgfacsal), per student tuition revenue (perstudenttuition), whether or not the university has a medical school (medschool)  (which can be an expensive proposition), and the ratio of government grant revenue to tuition revenue (granttuitionratio) for the university.  Moreover, to account for the scale of institutions it is a weighted regression with the weighting factor being total student enrolment. 

 

 

 

The results show that arguing that higher faculty salaries will give you a better financial position is indeed not the right call.  On the other hand, the coefficient is also not negative nor significant for that matter.  In the general scheme of things, universities are not so dopey as to go around paying more than they should for the help nor are they captives of fiscal terrorist faculty associations when it comes to compensation.  Guess what? Having a medical school is not significant to a deficit/surplus position.  More interesting,  neither is the ratio of grant revenue to tuition revenue.  That is to say, government support of universities has stagnated so much that it really was not a statistically significant determinant of a university’s financial health in 2020. That is not to say it could not be or never was but in 2020 it is not.

 

What is the most significant determinant in this albeit limited set of variables?  Tuition revenue per student.  The regression coefficient is positive and quite significant.  Figures 5 shows that there is indeed a nice positive slope to the relationship between surpluses per student and total tuition revenues per student.  And who are those two high-flyers at the far northeast corner of the chart? Why the Alpha and Omega of Ontario universities - you can decide which should be which.  Figure 6 shows it is little Algoma U – obviously the little university that could - and big U of Toronto – which is really not a surprise.  They appear to have boosted their enrolment as well as got the right mix of students (i.e. higher paying international students) to ensure their financial survival – at least for 2020.  Who knows what the future will bring?

 

 

 

 

 

Large Municipal Operating Surpluses Do Not Always Mean You Are Good at Budgeting

The City of Thunder Bay’s final 2017 budget surplus is apparently now double what was originally projected. Whereas a $2.8 million year-end surplus had been forecast in January, it has now apparently grown to $5.6 million dollars.  Note that when the budget was approved last year, there would not have been a projected surplus as at the municipal level projected revenues need to match projected expenditures. 

Moreover, it should be noted that this is not an overall operating surplus but a “tax-supported” surplus meaning that there is a surplus on the tax supported side of municipal expenditures.  This is an important distinction because while it is a “tax reported” surplus, the variance is being reported as a percentage of the total net operating budget (2.3% of $240.1 million) and the total gross operating budget (1.6% of $358.7 million).  Given that municipal tax revenues in 2017 were $183.987 million, the variance can also be reported as a percent share of that which comes out to 3 .04 percent – a much larger number.  Indeed, I would argue that this is the correct variance number.