Budget Update January 12, 2009

1. Budget Update January 12, 2009

2. Outline • Review of 4-Year Plan as approved by the Board in May 2008 • Current Status of the 4-Year Plan • Impact of Downturn in the Equity Markets • How do we “Balance the Budget” • And …meet the Board’s Operating Reserve Target of $2.5 million

3. 4-Year Plan (May 2008): Background/Context • Our current 4-Year Plan spans the period 2007-08 through 2010-11 • Based on the Province’s Reaching Higher Plan -- which spans the period 2005-06 to 2009-10 • Undergraduate Growth Funding • Unfunded Basic Income Units (BIUs) • Tuition Freeze Compensation • Medical/Clinical Funding • Graduate Expansion • Quality

4. 4-Year Plan (May 2008): Background/Context • 4-Year Provincial Government Framework on Tuition Fees • 2006-07 to 2009-10 • 4.5% / 4% for Regulated Undergrad Programs • 8.0% / 4% for Deregulated Undergrad as well as Graduate Programs

5. 4-Year Plan (May 2008): Operating Revenues • Provincial Government Grants • A large portion of the Province’s New Investment has reached Steady-State • Two Growing Components • Graduate Expansion Funding • Contingent on achieving government targets • Targets beyond 2008-09 not yet finalized • Quality Funding • Based on overall enrolment levels

6. 4-Year Plan (May 2008): Operating Revenues • Federal Government Grants • FFICR (federal funding for the indirect costs of research) -- assumed to be stable at current level • Tuition Fees • Government Framework for 2009-10 and 4% Average Increase for 2010-11 • Other Revenues • CRCs (Canada Research Chairs) almost at Steady-State • Substantial draws from Investment Income • $18.55M in 2008-09, $11.4M in 2009-10, $16.4M in 2010-11 -- for a total of $46.3M

7. 4-Year Plan (May 2008): Expenditures • UPIF (University priority investment fund) and One-Time funds to the Faculties and Support Units • ECF, GEF, GEF+ (Enrolment Contingent Funding; Graduate Expansion Funding; Augment to Graduate Expansion Funding of $4K per qualified graduate student) • Student Support -- Undergrad and Graduate

8. 4-Year Plan (May 2008): Expenditures • University-wide Expenditures • Utilities – including New Buildings • Operating Costs of New Buildings • Library Acquisitions • Transfers to Capital: MMI (maintenance and modernization of infrastructure); FFICR (federal funding for indirect costs of research); CRC (Canada Research Chairs program) • Financing of Long-Range Space Plan • $12.2M in 2008-09 and $4.5M in 2009-10 • One-time $6M to CFI (Canada Foundation for Innovation) Warchest • Negotiated Employee Salary Increases

9. Current Status of 4-Year Plan:Revenues One known and one possible impact: • 1. Downturn in Equity Markets • Impacts Endowments and Earnings from Non-Endowed Funds • 2. Possible Deferral of Government Grant Increases • i.e. Graduate Expansion and Quality

10. Endowments • The downturn in the equity markets has had a direct impact on our endowments • For the current year (ie. 08-09), the planned 4.5% payouts have already been made • As of December 31, our endowments are collectively underwater by about $11.1M • We are examining options to deal with this “underwater” situation

11. Investment Returns • As of Dec.31 in our Non-Endowed Funds: • Actual reserve at August 31/08 = $45.6M • Estimated reserve at Dec. 31/08 = -$11.5M • The $18.55M transfer to the operating budget in the current year is being recommended to be withdrawn • Current forecast: no investment draws for 09-10 (was $11.4M) and 10-11 (was $16.4M) • Total impact to the operating budget over three years: $46.3 million less

12. 4-Year Plan – Revised Forecasts (Jan 2009)Total Operating Revenues ($M) Cumulative Shortfall of $41.7M over the 3 Years

13. Impact on Operating Budget in 08-09 • How do we deal with the $18.55M shortfall in the current year and balance the budget? • Temporarily withdraw $6M from the CFI (Canadian Foundation for Innovation) Warchest (without limiting CFI initiatives) • Withdraw transfer to capital: $12.2M in 08-09. We still need to remain with the Board’s capital debt limits • Physics and Astronomy “on hold”

14. Impact on Operating Budget 09-10 and 10-11 • Recommended Actions over the Next 2 Years • Additional Budget Reductions to the Faculty and Support Unit Base Budgets -- 2.5% average in each of the Next 2 Years • Examine University-wide and one-time expenditures and reduce as possible • Withdraw $4.5M allocation to capital in 09-10 • Provide CFI (Canada Foundation for Innovation) funding as required; $3.5M will be required in 09-10

15. Looking beyond the current 4-yr plan • As indicated in recent University budget documents, our operating revenues were already reaching steady-state • At the same time, expenditures continue on an upward trend • We were already anticipating expenditure constraints • Any funding reductions arising from Ontario’s difficult fiscal circumstances will place additional constraints in our operating budget

16. What about graduate expansion? • Graduate expansion continues to be of high priority for Western • Future incremental government funding is directly linked to graduate expansion • $26,428 per incremental domestic PhD student • $13,290 per incremental domestic Masters student

17. Communications • We are providing a budget update to the Western Community the week of January 12 • We anticipate communicating decisions on the negative budget adjustments for all faculty and support units, as well as confirmations of spending levels from endowments by mid-February • We will provide ongoing budget updates at Senate, Board and in other venues as budget deliberations continue, and further written updates as circumstances warrant

18. Budget UpdateJanuary 12, 2009 Questions??

20. Full-Time 1st Year Enrolment Plan

21. Retention Rates of Cohorts in Direct-Entry Programs at Western

22. Full-Time Undergraduate Enrolment Forecast

23. Full-Time Masters Enrolment at Western Plan

24. Full-Time Doctoral Enrolment at Western Plan