Complaints, comments, and conjecture about U of T are often predicated upon the assumption that the university has unlimited money to play with. It is assumed that imaginary massive budget endowments can solve all ills and create new policies.
The reality is that the university is tightly constrained by its position as a public institution, whose revenue and policies are partially controlled by the provincial government. It is important to note, however, that this does not mean the university is in bad shape; U of T receives consistently high credit ratings, indicating it is in a stable and sustainable financial situation. This system is ultimately for the better good — namely, easy access to education for those that qualify — but means that other projects need to be sacrificed as a result.
The operational financing of the university is largely contingent on student enrollment. Student enrollment results in revenues from their fees and from government grants and salaries. Student fees and government grants for education make up 64.3 per cent of U of T’s revenue stream; student fees garner more revenue than government grants by about a third. The rest of the revenue comes from grants for restricted purposes, like research and projects; donations, investment income; and other sales.
Student enrollment also increases the operating costs of the university. The largest expenses are salaries, which make up 60.4 per cent of expenditures and are primarily funded by student fees and grants. Other expenses are the operation and maintenance of the university campus, as well as scholarships and grants.
The province has provided substantial aid to universities since the 2005 budget, which allocated $6.2 billion for universities and colleges. This funding is necessary for the continued operation of the university, but it also constrains the university’s ability to significantly alter its financial situation because other revenues are constrained as a result.
The province’s grants for student enrollment require U of T to cap tuition fee increases for domestic students to an average of three per cent per year. This is excellent for Ontario students at U of T — students from the GTA alone make up 59 per cent of enrollment — but it applies considerable pressure on the university’s financing options. This is not to say that the university would like to make significantly more money — it is not a private company — but it does mean that financial aspirations are necessarily more modest.
Without tuition fee caps and government grants, the average Ontarion U of T student would be paying at least $21,000 in tuition each year. These fees would likely increase in order to solve budget constraints and financial aspirations.
Since the university’s tuition fees are capped, the main opportunity for revenue growth is by increasing enrollment, which has a ceiling due to physical constraints. The result is that funding for post-secondary education will likely not receive any increases, and, at worse, will decrease.
It is interesting to note that this position means that U of T is significantly below its US peers in both revenue and endowment per full-time student. The discrepancy is most obviously the result of comparing two very different post-secondary financing systems, but it shows that U of T is not financially on the same competitive footing as comparable American institutions.
International students are experiencing the effects of this. There has been a significant push back against planned increases for international student fees this year. In this context, these policies from the university are not greedy or surprising — they’re the result of an inability to increase revenue from other sources.
Paradoxically, these revenue constraints and their side effects are often the problems students complain about and hope spending will resolve. The university cannot realistically reduce enrollment or shrink class sizes in a meaningful way, and it cannot cap tuition, especially not for international students.
University expenditures are another difficult matter. Deferred maintenance at U of T is now running north of half a billion dollars with the average condition of facilities being 14.1 per cent according to the Facility Condition Index (FCI) — an FCI above 10 per cent indicating poor condition.
According to U of T’s financial statements, repairs and maintenance have increased by about 80 per cent from their 2005 levels, while capital assets have been amortized at the same rate. The situation is not as dire as it may seem, but is still problematic.
The university seems to have the situation under control, and the large deferrals are likely just prudent financing. The buildings on campus cannot reasonably be sold, so keeping them in pristine condition is not financially necessary. Additionally, the government has funded capital renewal projects for Ontario universities. What the deferred maintenance saga shows is not a crumbling campus, although conditions are probably less than ideal, but that the university needs to use a frugal method to cut ever-increasing costs.
This dilemma makes more sense in the context of university salaries and benefits that make up 60.4 per cent of operating fund expenses, which have increased by 54 per cent from their 2005 levels. This is the result of increasing faculty to meet expanding enrollment, as well as collective bargaining agreement from all sectors of U of T staff.
The salaries of U of T professors and staff are large and growing expenses that are obviously vital for maintaining the university’s existing services and for facilitating revenue growth from increased enrollment. Benefits are another large problem for U of T due to prior mismanagement and the financial crisis. Pension obligations and the like are another serious constraint on university finances.
What all this shows is that U of T is not boundless like the posters around campus claim. More importantly, perhaps, it displays that our demands should not be boundless, either. U of T is financially stable and sound, but it cannot meet the needs of all — complaints by international students and the strike by graduate students are the result of this system. In order to provide affordable post-secondary education to masses of Ontarian undergraduates, others need to bear the costs.
Christian Medeiros is a third-year student at Trinity College specializing in international relations.
