U of T’s annual budget report, published in February, outlined the university’s financial outlook as navigating “a much more constrained financial position next year and over the five-year planning horizon compared to the past decade.” In early March, the U of T Business Board met to discuss this report, focusing on two big-ticket items: the operating budget and the tuition fee schedule for the 2026–2027 academic year. 

At the meeting, the board approved the $3.66 billion operating budget for 2026–2027, and affirmed the university’s continued financial strength while also highlighting vulnerabilities that will require diligent budgeting and forecasting. The budget is to be approved during the next Governing Council meeting in late March. 

Current financial outlook

For the upcoming year, the budget outlined the largest sources of planned income, which include tuition, student fees, and operating grants. On the expenditure side, faculty and staff compensation will make up the majority of costs at 65 per cent of total expenses. The balanced budget — meaning the expected revenues match the expected spending — totals $3.66 billion, marking a $39 million increase from the previous year.

The anticipated annual revenue growth for the upcoming academic year is only 1.1 per cent, not accounting for inflation, well below historical levels. With inflation in 2026 expected to remain at around two per cent, revenue growth may fail to keep pace with rising costs. This is a far cry from the average 5.6 per cent growth enjoyed in the past decade. However, despite these concerns for future growth, growth projections are expected to stabilize at around three per cent over the next five years. 

U of T’s dominant strategy to mitigate slow economic growth has been major employee compensation and university-wide cost reductions. The university plans to save two per cent in staff and faculty compensation by improving efficiency through vacancy management and workplace reorganization. This includes minimizing workplace redundancies by preventing productivity losses and improving employee retention. University-wide cost reductions include a $15 million cut to the Pension Plan Risk Contingency budget, stabilizing funds at $50 million. 

What the board is navigating and how

The provincial government’s existing policies and significantly reduced grant funding to the Ontario Student Assistance Program (OSAP) present both advantages and challenges for the university. 

In terms of tuition, the Government of Ontario is now allowing up to two per cent domestic fee increases, enabling U of T to increase domestic tuition fees starting in 2026–2027. In response to worries about OSAP cuts, the university stated it would remain committed to the U of T Advanced Planning for Students (UTAPS) Program, which provided needs-based financial support to 52.7 per cent of all OSAP recipients in 2024–2025. 

The university is also navigating multiple budget priorities, such as plans to improve operational efficiency across administration, technology, and data management. This plan includes a $15 million commitment to institution-wide digital strategies and recommendations from U of T’s AI Task Force’s report from June 2025. This is on top of a projected $4.4 billion capital spend over the next five years to construct academic buildings and student housing. 

A closer look at domestic and international trends

One of the largest challenges to balancing this budget is accounting for a potential revenue decline of $43 million in international tuition fees, which is largely due to federally capped study permits. Additional provincial funding, slight tuition increases for international students, and increasing domestic enrollment are intended to offset the revenue loss. 

U of T plans to pursue multiple strategies to strengthen international enrollment. The university will continue to participate in the federal government’s global talent recruitment initiative while strengthening active pipelines attracting international students, such as by providing scholarships. 

On the other hand, domestic enrollment has been above target since 2023. For the 2025–2026 academic year, there was a surplus of 889 domestic students. Despite high demand, the university is unable to sustain this over-target enrollment without provincial funding, as increased domestic tuition will be insufficient in covering costs. The enrollment plans call for cuts of approximately 1,000 undergraduate seats in the next five years. 

Cautiously maintaining financial stability 

Despite the challenges flagged, U of T still maintains a balanced budget. During the Business Board meeting, the university affirmed its ability to fulfill long-term goals and priorities. 

These challenges in revenue growth and rising costs are not unique to U of T; they are emblematic of larger trends across Canadian post-secondary institutions. Universities must be able to adjust to changing policies and declining international student interest to remain competitive in a volatile financial environment.