A statement to the York community on financial restraint

President & Vice-Chancellor Mamdouh Shoukri has issued this statement to the community:

Fellow members of the York community,

At the Senate meeting in November, I outlined my concerns about the difficult and uncertain economic climate we find ourselves in, and how it will affect us going forward. Universities are not immune to effects of the global financial crisis and we will be directly affected in a number of ways.

In common with other universities across North America, our endowment funds have dropped substantially as a result of the overall decline in financial markets around the world. By the end of November, the decline in our endowment funds was 19 per cent, or about $55 million. The investment income earned every year on our endowment funds contributes significantly to supporting our operating budget, including funding of scholarships and bursaries for graduate and undergraduate students, and paying salary and benefit costs for faculty positions that have been created through endowed gifts. Given the significant drop in the value of our endowment funds so far this year, it is very likely we will see significant reductions to the amount of endowment income we will be able to distribute to Faculties and other areas of the University next year. Other universities are facing a similar situation and several have already announced that they will be limiting or suspending disbursements from their endowment funds.

The likely reduction or suspension of disbursements from our endowment funds next year will present a significant challenge for the areas affected by this loss of funding, especially given that the multi-year budget plan approved in June 2008 already required a base budget cut of two per cent for this year and further two per cent cuts each year for the next two years.

Our pension fund has also suffered a significant decline in value as financial markets have fallen. As of the end of November, our pension fund had dropped 19 per cent, or about $250 million. Although this will not have a direct impact on the current year’s operating budget, we must be mindful of the statutory obligations that we have to current and future retirees, and pension funding requirements that must be fulfilled.

Without a significant recovery in financial markets over the next two to three years, we face huge increases in annual pension contribution payments in order to address the projected pension fund deficit. These pension contribution payments are made from operating budget funds. Our pension fund is currently projected to have a deficit in excess of $250 million, and under current pension regulations, the additional payments required would be in excess of $50 million per year for five years. We understand that federal and provincial governments are reviewing pension funding requirements in view of the difficult situation facing pension funds across the country and we will closely monitor this situation going forward.  

In the context of these financial realities, the worsening fiscal situation of the province makes it very unlikely that we will see increased financial support from the Ontario government to help us meet the financial challenges ahead. There is also little likelihood that we can look forward to the same year-end funding allocations from the province for universities that we have seen in recent years. The amount of government funding we will receive for the next fiscal year and for the foreseeable future is uncertain.

All of this makes our forward planning extremely difficult. At York, we have been cautious in our budget planning in the past and this has allowed us to avoid having to implement the much more immediate and drastic measures that have started to emerge at other universities. However, even prior to the recent crisis in financial markets, our budget situation was a challenging one. Many Faculties are wrestling with emerging structural deficits and our ability to maintain our faculty complement is of particular concern. 

As we begin to develop an updated budget plan over the next few months we must prepare ourselves for budget reductions greater than the two per cent cut already announced for the coming 2009-2010 fiscal year.

Therefore I have asked all the senior academic and non-academic leadership of the University to exercise tight financial restraint until further notice, particularly with regard to discretionary spending.

All managers must plan to bring their budgets in on target this year, and look for flexibility that would help cope with reduced endowment disbursements next year and even larger budget reductions that will likely be required. 

I am asking that all areas across the University adopt a very cautious and prudent approach to hiring – for both academic and administrative positions. While some other universities have already implemented formal hiring freezes, we have not done that at York since it is recognized that certain key positions must be filled. However, any new hires will be reviewed very carefully and approved at the vice-presidential level, with particular regard for the projected budget situation of the hiring unit.

The University is now facing a very difficult time and we do not know for how long this will last. However, if we take prudent measures now and use this time to prepare our institution for the recovery that will eventually come, we will be better placed to take advantage of that recovery when it occurs.

York is a very resilient community. I know we will get through this period of restraint, as we have done in the past, and emerge even stronger than before.