On February 22, the University of Toronto officially released its 2021–2022 Budget Report, which includes long-range financial guidelines that will last until the 2025–2026 academic year. Despite lower-than-expected domestic enrolment in 2020–2021, the university’s financial outlook remains optimistic in light of higher-than-expected international enrolment.
However, robust enrolment must also compensate for the significant losses of ancillary income caused by COVID-19 related campus closures over the past year. Uncertainty over Ontario’s plans for university funding also means that future budget projections are forced to remain conservative.
Reading the report
Recent U of T budget reports have been divided into five core sections. “The Changing Financial Landscape” details elements of the budget’s financial context that are outside of the university’s control, such as the Ontario government’s plans or the economic impact of COVID-19. This is followed by a section titled “Budget Overview,” which includes the quantitative facts and figures related to income and expenditure.
“Students: Affordability, Access & Outcomes” is dedicated to explaining tuition fees, student support, and scholarships. “Priority Investments” details the capital projects and other investments planned for the coming year. The report closes with a section on “Risk,” which expounds how the budget could be affected by changing circumstances over the financial year.
U of T’s finances are split into four fund groups. The ‘operating fund’ — which encompasses administrative costs and the main teaching activities of the university — is regularly the largest of the four by a significant margin and is predominantly funded by tuition, other “student fees,” and provincial grants.
‘Restricted funds’ generally comprise the next largest portion and refers to money that has been entrusted to the university for a specific purpose. Restricted funds are further subdivided into “research grants and contracts,” endowed student awards, and trusts — that is, miscellaneous, specially earmarked funds.
The ‘ancillary’ and ‘capital’ funds have uniformly been the smallest of the four funds. The former includes the revenues and expenditures of U of T services and businesses, such as residences, food services, parking, and the University of Toronto Press. The latter is money set aside by the Planning and Budget Office for capital projects such as new buildings or equipment.
Surprisingly stable revenue
The budgeted operating revenue for 2021–2022 is $3.12 billion — a 4.4 per cent increase from the $2.99 billion of the previous year. Tuition and other student fees account for 67 per cent of the operating revenue, while provincial operating grants account for 21 per cent. Both variables are tied to student enrolment.
Domestic enrolment witnessed a slump this year, but its effect was offset by the surge in international student enrolment allowed by remote study during the 2020–2021 academic year and the summer of 2020.
International students accounted for 28 per cent of the 2020–2021 full-time, undergraduate enrolment — up from 27 per cent the previous year — and that number is only expected to increase in the future. While Ontario sustained its domestic tuition freeze from 2019 this year, international tuition underwent a 2.3 per cent increase and is projected to increase in the future.
The budget noted that “tuition fees for international students are set at a level that takes into consideration the full cost of providing a program and with reference to fees at peer Canadian and US universities.”
Although it still comprises 21 per cent of the operating budget, provincial operating grant funding decreased since last year. Accordingly, U of T now receives the lowest amount of government funding per student of any institution in the U15 — the group of the 15 universities that are among the most productive research universities in Canada. The proportion of U of T’s budget that is supported by the government is now lower than any other university in Canada.
In light of the pandemic, the Ontario government has noted that its performance based funding system will not be implemented until at least 2022–2023. However, the government’s implementation of Bill 124 will also restrict U of T’s ability to increase employee compensation for the next three years.
Special sources of funding
The remaining 12 per cent of the operating budget comes from federal Canada Research Chair grants, federal funding for indirect research costs, investment income, and sources such as application fee revenue or service charges on unpaid fees.
As of April 2020, U of T’s total endowment assets were $2.51 billion, with the majority “directed to student aid.” Income on these assets represents two per cent of the operating budget.
The restricted fund, the ancillary fund and the capital fund sit at $518 million, $184 million and $171 million respectively. This brings U of T’s total revenue to roughly $3.93 billion dollars.
The restricted fund has been supported in the last few years by external donations that are intended to enhance academic initiatives through matching programs and other endowments. The $250 million Temerty donation from September 2020 — predominantly meant for medical research — included a portion that contributed to the restricted fund.
Despite the stable operating budget, the ancillary fund was diminished severely this year in the face of campus closures and an overall decrease in business activity on campus. Future financial projections indicate that the university will have to resort to deficit spending for the ancillary fund over the next several years.
In the short term, at least, the university plans to orient the budget toward student assistance. The student aid budget is set to increase to $291 million, meaning that the university will provide 58 per cent more financial aid per student than the average Ontario university.
Other planned investments in the sphere of “student experience” include “expanded mental health services, increased opportunities for experiential, work-integrated learning, and research experiences, improvements to both physical and IT infrastructure, and improving service delivery in the areas of academic advising and student success.”