Reflections on Principal Woolf’s Financial Update

Reflections on Principal Woolf’s Financial Update Statement, November 26, 2009

By John Holmes

Department of Geography
Queen’s Faculty Member since 1971
Former Head of Geography 1993-2004

The Principal’s Statement was not so much a financial update as a not too subtle attempt to create divisions and tensions both within and between campus employee groups. Unlike similar financial updates presented over the past year by Tom Williams, Principal Woolf’s address was short on numbers and long on political rhetoric. In fact, with the exception of the financial implications of the recent QUSA agreement, there was no update of any of the financial data. The numbers that were mentioned were simply a repeat of those used in May 2009 when the Board of Trustees approved the 2009-10 budget. There was no mention of how well the endowment and investment funds have fared with the strong recovery experienced by stock markets since March 2009. Similarly, there was no mention of the current projections of the impact on the Operating Budget of the financing costs associated with capital projects – even though Queen’s is now embarking on two new capital projects—the new Medical Building and the Performing Arts Campus.

The Broader Context

The Principal began his address by talking about the “external context” (incidentally, Canada’s current monthly unemployment rate of 8.6% is not, as the Principal stated, “the highest it has been in the past 50 years.” Between 1982 and 1985 and again between 1991 and 1994, it stood at over 10%).

So let us also start by examining the broader context:

– The Queen’s projected operating deficit for 2009-10 is $8.3 million. According to the Principal, this has now been reduced to $6.3 million since the University had actually budgeted for a scale increase closer to 3% for the non-unionized staff but persuaded QUSA to agree to 1.25% instead.

– Remember that as late as February 2009, Principal Williams was forecasting an operating deficit of over $6.0 million for 2008-09 but just three months later Queen’s ended the financial year with virtually no
deficit! For several previous financial years there had been year-end surpluses in the operating budget even after some funds were transferred from operating to other parts of the broader university budget. In the light of past experience and the emerging economic recovery, how much confidence can we have in the projected deficit numbers?

– How do the financial challenges currently faced by Queen’s compare to those at other Canadian universities? Many are not only running annual operating deficits but have proportionately larger deficits than Queen’s. For Queen’s the $8.3 million deficit represents just 2.4% of total operating revenue in 2009-10. The equivalent deficit figures for other universities are: Toronto 3.1%; UWO 5.4%; McMaster 5.9%; and Guelph 11.0%. McGill’s accumulated deficit stands at over $73 million, which represents 12% of its
annual operating revenues. The bond rating agencies (Standard and Poor’s, DBRS) continue to praise Queen’s financial strength. For example, in May 2009 the most recent S&P Queen’s credit rating report observed “Superior balance-sheet strength. In fiscal 2008, Queen’s unrestricted financial resources (internally restricted endowments plus unrestricted net assets) were about 409% of debt, and 202% of debt plus unfunded post employment liabilities. These credit metrics are the strongest among the university’s
rated Canadian peers, and among the strongest compared with those of other public universities that Standard & Poor’s rates globally.” As this indicates, there is room for additional borrowing before Queen’s credit ratings would be affected.

– The Principal proposed that QUFA ask its members to reduce the scale increase for 2010-11 from 3.2% to 1.2%. In the last few months, three settlements in the Ontario PSE sector (at Ottawa, Carleton and York) have included scale increases of between 2.5 and 3.0%. Quarterly data released last week by Statistics Canada show that annual wage increases negotiated in the broader public sector during the first three quarters of 2009 have been in a similar range.

Is (Faculty) Compensation to Blame for the Operating Deficit?

As reported by the Principal, the projected Queen’s deficits for 2009-10, 2010-11, and 2011-12 are now $6 million, $13 million, and $6 million, respectively. What are the factors contributing to this deficit? In his presentation, the Principal points to compensation growth. Why has the administration seemingly been taken by surprise by compensation costs? The current QUFA-University Collective Agreement was negotiated in early 2008. It expires on April 30, 2011 (not July 2011 as stated by the Principal in his address). Thus, the administration has been fully aware for some considerable time of what compensation costs would likely be for 2010-11. The total amount of additional money to be directed towards salaries and benefits for 2008-11 was never an issue during this last round of bargaining.

So how exactly, to use the Principal’s phrase, has “the world . . . changed” since we negotiated our collective agreement back in early 2008? First, it is true that the financial crisis eroded the size of endowment and investment funds and thus reduced the amount of investment income flowing to the operating budget. However, investment income is now recovering. Second, several items have needed to be added to the expenditure side of the operating fund. For example, the infamous “other expenditures” category is forecast to increase by 18.5% in 2009-10—an increase of about $6 million—having increased by 25% in the previous year. The Report on the 2009-10 budget noted that starting in 2010-11, $6 million will be charged to the operating budget for “capital projects debt financing.” $3 million a year is being charged to the operating budget for the next decade to pay for the new QUASAR administrative system. These are the true key components of the forecast deficits—not an unanticipated increase in faculty compensation.

What Are Faculty Already Contributing?

When asked in the question period how much faculty compensation costs were already being lowered by vacant full-time faculty positions remaining unfilled, Principal Woolf declined to provide an estimate. A year ago, we were told that the University planned to not refill 54 full-time faculty positions (47 in Arts and Science, five in Applied Science, and two in Law) that were expected to become vacant through retirement and resignation over the next three years. A conservative estimate suggests that “shedding” 54 full-time faculty would save a minimum of $6-7 million in salary and benefit costs. Already there were 19 fewer full-time faculty in 2008-09 as compared with 2007-08. Meanwhile student enrolments continue to increase and so the work represented by the unfilled faculty positions will not disappear but instead will be offloaded to the remaining faculty in the shape of increased class sizes and increased supervisory loads. Since faculty compensation is not a piece-rate pay system, the university saves money by decreasing faculty complement and increasing faculty workloads. These savings must also be credited as a contribution by faculty.

How Many Senior Administrative Positions Are Projected To Be Closed?

The Principal announced that he will take a 2% salary cut as of January 2010 and forego any salary increase next year. Let us put this symbolic gesture into perspective. While there are far fewer upper-level administrators than there are faculty, their salaries over the last decade have been growing at a much higher rate than those of QUFA members. For example, in just one year (from 2006 to 2007) the salary of the Vice-Principal (Operations and Finance) rose by 7.9% and the salary of the Vice-Principal (Academic) rose by 35.8%.

Furthermore, between 2000 and 2007 the salary paid to the Principal rose by 44%, the V-P (Academic) by 81%, the V-P (Finance) by 52%, the V-P (Advancement) by 148%, and the Dean of Business by 119%. Over the same period (2000-2007), the salary of a senior professor receiving an above average score of 12 merit points a year increased by 30%.Information recently obtained by OCUFA under a FIPPA request reveals that in 2008 two Queen’s V-P’s who also hold academic appointments each received 20 academic merit points and 16 administrative merit points for a total of 36!

Early Retirement Plan, Anomalies Fund and Salary Model Review

The Principal implied that “he” had “persuaded” QUFA to reopen talks on these issues. In reality, it was QUFA that urged the University to restart discussions regarding retirement plans and a review of the salary model. It was the University that pulled the plug on the retirement talks back in the summer and it is the University that has to date not produced the data that both parties agreed was needed for the joint committee on the salary model to undertake its work. The distribution of salary anomalies monies to our Members is several years behind schedule due to the apparent inability of the University to generate the necessary data in a timely fashion. The University is holding (and presumably earning interest on) hundreds of thousands of dollars in anomaly funds which rightly belong to QUFA members.

What Would Be the Consequences for Future Bargaining of Acceding to the Principal’s Proposal?

The Principal expressed disappointment that the QUFA Executive declined his request to propose to its members a 2% reduction in the negotiated salary increase for 2010-11. I am disappointed that Principal Woolf, who takes great pride in the fact that he served on the Faculty Association bargaining committee whilst at Dalhousie, ever seriously thought that the QUFA executive in the current context would counsel its members to reopen the collective agreement. There are a number of reasons why doing so would be a bad idea.

The current agreement expires in April 2011 and, if recent history is anything to go by, bargaining for a new collective agreement will commence in December 2010. Bargaining is about trade-offs, give-and-take between employer and employee. When QUFA bargained the compensation provisions in the current agreement there invariably would have been trade-offs against other items under discussion. If QUFA were to agree today to roll back scale for 2010-11 without any other issues being on the table, a mere 12 months from now our bargaining team would enter what promises to be a very difficult
round of negotiations already behind the eight-ball.

In negotiating salary agreements both the Administration and employee groups take calculated risks based on their current assessments of the state of the University’s finances, the future inflation rate, and the pattern of recent settlements at other universities and in the broader public and private sectors. Often these predictions turn out to be inaccurate (inflation turns out to be higher or lower than expected, the University may receive unexpected additional funding, other wage settlements may be higher). However, there is no point to a collective agreement if it is not binding on both parties. Implicitly, the Principal suggests that because inflation currently is low we should willingly give back the majority of our negotiated scale increase for 2010-11. Today, if inflation was running at 6% what would Principal Woolf’s response be if QUFA asked him to reopen the collective agreement to increase our scale component for the final year of our agreement?

While non-unionized staff have little if any negotiating power, QUFA’s negotiating strength benefits other employee groups on campus. Our unionized co-workers who are represented by CUPE will bargain in 2010. If we compromise on salary, employees on campus who make much less than we do will feel the pressure to do likewise. Remember that it is QUSA’s settlement that is out of step with the current pattern of public-sector wage settlements in Canada, not QUFA’s.

Likewise, voluntarily reducing our scale increase would put considerable pressure on university employee groups across the province and across the country. As I noted earlier, recent settlements at Ontario universities have come in at around 2.5 to 3.0%. Five other Ontario universities are currently bargaining, and ten others are slated to begin next year. Agreeing to reduce our scale increase in 2010-11 to 1.2% would have a significant negative impact on those negotiations. We are affiliated with provincial (OCUFA) and
national (CAUT) organizations. We must support not only our members but our colleagues across the province and country and provide leadership (one of the Principal’s favourite words!) in the struggle to preserve both the quality of university education and the working conditions of academic staff. As at Queen’s, compensation agreements for academic staff elsewhere set the tone for agreements with non-academic staff and thus affect a broad range of salaries, not just those of our academic colleagues. QUFA should not support a course of action that would jeopardize the bargaining positions of
colleagues and non-academic employees well beyond our local situation.

This entry was posted in Budget/Crisis, Queen's Spending. Bookmark the permalink.

2 Responses to Reflections on Principal Woolf’s Financial Update

  1. marc epprecht says:

    well said, John!

  2. A powerful analysis and serious critique. It is remarkable that the Principal seems to have a number of salient facts wrong.

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