January 2009
Ontario universities face
$185-million in lost revenue next year after millions evaporated from endowment
funds, says the president of the Council of Ontario Universities.
The money would have been
generated by investments and interest on the hundreds of millions of dollars in
the endowment funds of the province’s 19 universities.
But in recent weeks, it has not
been unusual for universities to report losing a quarter of the value of those
funds. Operating grants for universities have flatlined, while costs increased
by $270-million.
Between that shortfall and the
endowment crash, universities are in a $455-million “hole.”
“We are facing grave
pressures,” said Paul Genest, who addressed the province’s finance committee
yesterday in Ottawa asking for $270-million in one-time relief to protect jobs
at universities, as well as a $500-million quick infusion of cash for
infrastructure renewal as part of the province’s economic stimulus package, and
another $2-billion over the next two years for new construction to generate
sustained stimulus and protect the growth of innovation at universities.
He also points out that Ontario
universities have a backlog of deferred maintenance adding up to $1.6-billion,
and almost two-thirds of useable space on campuses is more than 30 years old.
Mr. Genest declined to give the
total amount of losses on the province’s university endowment funds, but said
the Council of Ontario Universities has been crunching the numbers for the past
four weeks.
Meanwhile, the struggles of the
endowments pale in comparison to the issue of paying for the universities’
pension obligations after pension funds also took a beating. The council is
asking the province for regulatory relief.
“The situation is so grave that
several of our institutions would literally become insolvent if they are
required to obey the letter of the law under the Ontario Pension Benefits Act,”
said Mr. Genest. “They would close their doors.”
As of Oct. 31, if an actuarial
assessment has been performed for all of the province’s universities, annual
pension obligations would add up to $564-million a year.
The annual provincial operating
grants for all of the universities adds up to $3-billion a year.
It would mean diverting money
from classrooms and cutting jobs, said Mr. Genest, who added that Quebec and
Alberta have already had regulatory relief from their province governments.
“We’re asking for a holiday on
special payments, waiting for the markets to stabilize. We also feel that
universities are being treated like businesses. They’re being treated like
entities that could go out of existence.”
Reports of heavy losses to
endowment funds have trickled out from Ontario’s 19 universities. Queen’s
University has lost about $100-million.
Earlier this month, faculty and
staff at the University of Toronto were warned the “protective cushion” on an
endowment fund expected to generate $62-million next year had disappeared.
In Toronto, the president of
York University circulated a statement indicating the value of its endowment
fund had dropped by 19% or $55-million, which would put the squeeze on new
hiring and make it difficult to meet operating expenses and demand for student
aid.
In the beginning of this fiscal
year in May 2007, the University of Ottawa’s endowment funds were worth about
$142-million. They are currently worth about $137-million, but the university
doesn’t plan to take similar measures, said Victor Simon, the vice-president of
resources.
Duncan Watt, Carleton
University’s vice-president of finance and administration, said endowment funds
at Carleton have dropped by about a quarter from October 2007 to October 2008,
from $230-million to $176-million.
Despite the pressures, the
university sector acknowledges the investments made by both the provincial and
federal governments in recent years, said Mr. Genest.
“There has been
tremendous momentum to making universities internationally competitive,” he
said. “This is the wrong time to lose that momentum.
National Post, December 20, 2008.
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