financial

AU in Good Financial Shape

On September 3, the Blue Ribbon Panel on Alberta’s Finances released its final report. This report moots reducing public grants to post-secondary institutions and reviewing whether all of Alberta’s 26 post-secondary institutions are financially viable. The panel, chaired by Janice MacKinnon, also suggests reducing public-sector compensation via bargaining mandates enforced by back-to-work legislation.

Some commentators have suggested that Athabasca University would be one of the post-secondary institutions targeted for review and potential closure. It’s fairly easy to see why outside observers would think this to be the case:

  • In 2012, poor fiscal management resulted in the institution declaring financial stringency and laying off (or otherwise eliminating) dozens of staff positions.

  • In 2015, Acting President Peter MacKinnon publicly declared that AU faced likely insolvency by 2017/18.

  • Over the past year, the current administration has fought with its employees at the bargaining table and profoundly damaged institutional morale and trust.

Yet, a review of AU documents suggests that, despite forecasts of doom, the institution is in a strong financial position.

AU Financial Statements

In the spring, Athabasca University very quietly posted its financial statements online for the year ending on March 31, 2019. The bottom line is that AU recorded an annual operating surplus of $14.199 million on overall expenditures of $134.253 million. This was a surprise since AU had projected no surplus in its 2019 budget.

Overall, AU’s accumulated surplus (i.e., reserves) is now $31.697 million. This reflects that AU has run a series of surpluses over time, as set out in Table 1.

Table 1. AU Operating Surpluses Over Time (000s).

Source: AU Financial Statements

The 2019 surplus of $14.199 million was driven by two main factors. First, revenue was up slightly (nearly $3 million), driven mostly by increased tuition revenue caused, in turn, by significant enrollment growth. Second, expenses were dramatically lower than projected (more than $11 million), driven by lower salary ($4 million) and employee benefit ($5.6 million) expenditures.

 While AU’s executive and Board often frame annual operating surpluses as being caused by “one-time savings that cannot be relied upon in the future”, Table 2 demonstrates that over-estimating expenses is a recurring pattern and the degree of over-estimation is increasing over time. A cynical reading of this would be that AU is over-estimating expenses to manage expectations—just like crying “insolvency” is a way to try to break worker resistance to objectionable restructuring.

Table 2. AU Budgeted and Actual Expenses by Year (000s)

Source: AU Financial Statements

Government Grants

These tables suggest AU is in good financial shape. There is the possibly of a reduction in government grants in the upcoming budget. Government grants (both operating and other grants) comprise only 35% of AU’s revenue. Tuition accounts for 50% of revenue with sales of services (~12%) being the only other big source of revenue.

The relatively small portion of AU’s revenue that comes from government grants means both that AU is already significantly “entrepreneurial” (the government’s terminology for non-grant dependent) and that AU’s vulnerability to funding cuts is significantly attenuated. For example, a 10% reduction in operating grants would only reduce overall revenue by about $4.5 million—a hit well within AU’s capacity to absorb.

The Road Ahead

The 2019 MacKinnon report suggests reducing expenditures on public-sector compensation in Alberta. This could mean reducing the number of employees or reducing their wages and benefit costs. We will likely have to wait until the provincial budget (in mid October) to see how the government plans to proceed and how Alberta’s broader labour movement (of which AUFA is a small part) responds.

It is important to be mindful that the situation of any one institution will differ from the overall picture. For example, the former New Democrat government imposed a bargaining mandate of two zeros on the public sector. Yet, AU’s 2018/19 financial statements suggest that AU could have easily afforded to provide its staff with a modest cost-of-living adjustment (COLA). As an example, a 2% COLA for all AU staff (AUFA, AUPE, CUPE and excluded) would have cost only about $1.6 million.

What We Can Do

Like the 2015 AU MacKinnon report, the 2019 provincial MacKinnon report is distressing to read. It seems to foreshadow further post-secondary cuts. For those who lived through the Klein cuts (1994-1997), the MacKinnon report may bring back difficult memories of wage rollbacks, layoffs and hiring freezes, and fears about the future of the institution.

It is important that we not panic. Despite a history of terrible administration, AU is in good financial shape and offers a relatively low-cost way to deliver post-secondary education.

And despite the government rhetoric, its desire to impose change is limited by its willingness to accept the political costs of those changes. Alberta’s labour movement has successfully resisted attacks on our pensions (Bill 10 in 2012) and on our bargaining rights (Bills 45 and 46 in 2014/15). We will doubtlessly also resist attacks on our jobs and income.

Further, the legal landscape has changed significantly since the Klein years, with the Supreme Court ruling that workers are entitled to a meaningful process of collective bargaining. If the government seeks to drive austerity via a bargaining mandate enforced with back-to-work legislation, it will almost certainly face a Charter challenge (just as it has with Bill 9).

In the meantime, we have jobs to do. Those jobs include enforcing our existing collective agreement and preparing for the next round of bargaining in 2020. We expect an AUFA bargaining team will be appointed by late September and AUFA will be hosting a CAUT collective bargaining training session in Athabasca on October 2-3.

Jolene Armstrong, President