U of A leaders make budget seem more dire than it really is, for seemingly incalculable reasons
University of Alberta President David Turpin has been working very hard over the past few weeks to convince anyone who will listen—from the U of A board of governors, to the mainstream media, to students and staff—that the university is in the midst of a long-standing financial crisis. And that, because of this crisis, spending needs to be cut by four percent.
Turpin has been using colourful graphs, well-prepared powerpoint slides, and fancy expressions like “authority to spend,” “structural deficit,” and “strategic initiatives” to make his case. The problem for Turpin, however, is the degree to which his graphs and accounting doublespeak largely fail to cover up the fact that there is no structural deficit or crisis of sustainability at the university, and that the spending cuts are simply not needed. Instead, what appears to be happening is that the cuts will enable the creation of something of a slush fund that will largely be directed out of the president’s office.
Here’s what it actually looks like. The U of A has been running surpluses both in its operating and consolidated budgets for pretty much all of the last decade, with the exception of a very small deficit during the 2008-09 financial crisis. What all of these consecutive surpluses should mean is a healthy reserve of money somewhere in the university. The obvious question then, looking at these numbers, is how Turpin manages to take a series of very healthy surpluses and what must be a healthy unrestricted reserve fund and convince the board that the university has been running a structural deficit for years, and is facing a crisis of sustainability.
Well, the first thing Turpin has done is focus on authority to spend rather than actual spending. Authority to spend is a number derived from the amount of money that university is legally allowed to spend in any given year as per various government regulations and its own internal policies. The problem is that university almost never actually spends as much as it is allowed to. Authority to spend is generally significantly higher than actual spending, which gives the sense that the university is not bringing in enough money.
The second thing Turpin has done is decide that income derived from short-term investments should not be used for operating spending. His suggestion is that because these revenues can be volatile and unpredictable from year to year, they are much better suited being taken out of operating revenues and being used instead for strategic initiatives. This of course makes absolutely no sense. Investment income has actually been fairly consistent in recent years, and the fact that it can go up or down from year to year is no reason to simply stop using the money. Institutions, businesses, and organizations all over the world regularly use investment income for operations. Of course, taking even a portion of investment income out of the operating budget also gives the impression that the university is spending more than it brings in. It has the added benefit of creating a strategic initiatives fund that will presumably be spent at his discretion.
And the third step in manufacturing a fiscal crisis where there is none? Ignore the provincial government’s repeated commitment to provide back-fill funding for the tuition freeze, and their recent vow to increase the Campus Alberta grant by two percent, and draft the budget based on a zero percent increase in the grant and no tuition back-fill. Purposefully underestimating government revenues is a great way to create a crisis of sustainability.
The focus of reaction to Turpin’s manufacturing has tended to be on his own salary and ballooning administrative costs at the university. While this avenue of critique is totally justified, and serious cuts to the number of senior administrators and their overall compensation would definitely help universities direct more funds to front-line teaching and research, focusing on it in regards to Turpin’s current budget helps to distract from the fundamental issue here.
Through budget manipulation and accounting sleight of hand Turpin has taken what is a healthy budget with consistent surpluses and significant reserves, and made it look like a crisis of sustainability with a structural deficit and an accumulated debt. He has done that effectively enough to convince the board of governors to adopt his recommended budget, implement a four percent cut in discretionary spending, and prioritize short term investment income for use in strategic initiatives, rather than operating spending.
The key question in all of this is “why?” Has he done all of this simply to leverage the university’s position in upcoming bargaining with academic staff? Has he done it to have a pot of money that he directs and funds his priorities? Or has he done it as a way to distract from the proportion of the university’s budget that goes to central administration every year?
Whatever his reasons, what he has done is blatantly misrepresent the university’s budget to the university community, the government, and Albertans as a whole, and we should all insist that he come clean about his reasons and immediately reverse these cuts. The university and the province deserve better. It’s time we all demanded it.