‘Unsustainable trajectory’: McGill expects $91M in losses due to Quebec funding overhaul

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If it doesn’t cut costs or raise revenue, McGill University could face at least $91 million in cumulative losses and an annual deficit of $89 million by 2028 due to Quebec’s tuition and funding overhaul.

And the situation will deteriorate further if new French proficiency rules cause a drop in enrolment when they take effect next year, as both McGill and Concordia have warned may happen.

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The stark outlook was presented in a report to McGill’s senate this month.

“Major revenue-generating and expense-reduction initiatives, as well as critical transformational changes, need to be planned and implemented immediately to correct this unsustainable trajectory,” provost Christopher Manfredi said in the report.

McGill could sell real estate, suspend major infrastructure projects and reduce its workforce, according to the document.

On the revenue front, it may consider “strategic enrolment growth” both in Montreal and at international locations. It could also develop new self-funded programs, and increase tuition for certain disciplines for out-of-province and international students.

Citing “the high degree of uncertainty,” Manfredi said the university’s objectives are “to reduce budget allocations and tightly control expenses where possible while actively working on strategic revenue growth and expense reduction initiatives.”

The Coalition Avenir Québec government’s revamp has also hurt Concordia. President Graham Carr has said his university must cut $36 million from its budget this year, even as it subsidizes French universities.

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Quebec’s university policy changes are part of Higher Education Minister Pascale Déry’s drive to increase funding for French universities and reduce the number of non-French speakers in Montreal’s post-secondary institutions.

The government has complained too much English is being spoken on Montreal streets, with non-French-speaking students partly to blame.

McGill and Concordia are asking the courts to cancel Quebec’s tuition changes, arguing they contravene the Canadian and Quebec charters of rights.

Here are the key points from McGill’s report:

Enrolment

Enrolment-driven grants and tuition fees account for 80 per cent of McGill’s operating revenue.

The university assumes 2024-25 enrolment will be comparable to last year’s level, which will only be confirmed in late October.

There was speculation enrolment levels would drop due to Quebec’s decision to impose a 33 per cent tuition hike on most out-of-province students attending English universities, starting this fall.

But for the 2024-25 cohort, McGill is offsetting the tuition increase with an annual grant. That initiative will cost McGill $13 million over four years. The university has not decided whether to extend the grant to students who start in fall 2025.

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The university is bracing for new French proficiency rules.

As of fall 2025, McGill and Concordia will be required to have 80 per cent of their undergraduate students from outside Quebec reach an intermediate level of French by graduation. Failure to meet the target will result in financial penalties for the universities.

McGill and Concordia have warned the French-fluency rules could drive away many students from other provinces and countries. McGill has previously said students would be required to take an extra semester to improve their French.

“Ultimately, the full financial impact of the government changes will increase with each entering cohort and will only become clear once we see the effect of the new requirements for French proficiency and its impact on enrolment,” the university said in the report.

Revenue

The Higher Education Ministry recently informed McGill that the tuition overhaul and recent major changes in funding policies will result in a $9-million reduction in operating expenses in 2024-25.

That reduction is expected to grow over the next four years, with a $91-million cumulative loss by 2027-28.

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And “if there is a decrease in enrolment levels, the financial impact will be more severe,” McGill said.

Even without a drop in enrolment, the changes would lead to an $89-million annual operating deficit as of 2027-28, the university said.

Annual budget

In 2023-24, McGill posted a $422,000 surplus.

But it expects a deficit of $12 million in 2024-25, according to a budget approved by its board of governors.

Because of “uncertainty and risk,” the budget is provisional, with a final version expected in the fall, along with a “recovery plan.”

The provisional budget calls for $1.119 billion in revenue and $1.131 billion in spending.

The university says it has cut $35 million in planned spending for the year.

Of that, $25 million will be saved by reducing “compressible expenses.” Attrition will also help: McGill said it will reduce spending by $10 million by only replacing half of administrative and support staff workers when they leave their jobs.

Future

McGill says it wants to cut spending and raise revenue in “strategic and recurrent” ways.

“This will require leadership and tough choices from leaders across the university.”

The university said “enrolment-driven revenue models will need to be rebuilt and past budget allocation decisions will need to be revisited.”

ariga@postmedia.com

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