Laurentian Blues (3) – Hillary Redux

OK, before I get to the actual blog here, some updates on Laurentian:

1)      On Friday, Laurentian published its list of creditors.  It listed $184 million in potential debts, plus a couple of hundred small suppliers with amounts listed as “TBD”.  This is presumably the origin of the comment last Monday from an un-named source indicating they opened the books and instead of $100 m in debt it’s closer to $200 m.  But this is somewhat misleading: about $52m is for various legal challenges (mainly this one), which I don’t think have much chance of success, and another mysterious $13 million to Bondfield Construction (a nearly-bankrupt company with significant ethical issues that did a bunch of work for Laurentian a few years back), which looks a lot like a lien or something else.  So put all that together and you’ve got about $65m in pretty speculative creditor claims.  The really dangerous-looking stuff, politically, is the amounts owing to various Ottawa research funds: $5.3M to CFREF, $4.6M to NSERC, $1.6M to SSHRC, $900K to CIHR, $650K to the Canada Research Continuity Fund and $635K to CFI.   These are mostly research funds owed to individual researchers which Laurentian diverted to the operating account, which is now more or less bare.  Also, a couple of million each is owed to the retiree health care plan and the supplementary pension plan.  Not pretty.

2)      Also on Friday, Laurentian put up an FAQ for faculty, staff, community, etc.  It has all the emotional range of a hood ornament, but it is at least vaguely informative (and among other things makes it clear that job losses are definitely in the works).  You can find it here.

3)      It has come to my attention that one of the reasons this whole affair has caused so much confusion at Laurentian is because a lot of people were genuinely in the dark about the fact that the university was in persistent deficit as I showed back here.  This confusion came in part because for several years, the university would issue press releases like this one claiming the university had balanced the budget for the past seven years.   And this was correct in the sense that the Board adopted balanced budgets every year.  But issuing those kinds of press releases when in fact the institutions was running deficits worth a couple of million dollars a year seems intentionally deceptive.  Like, I get that institutions always want to spin a good story, but this seems to have been over the line.

Now, on to the actual blog:

If you cast your mind back to the last few weeks of 2016, you may remember a lot of finger-pointing about who was to blame from Trump making unexpected breakthroughs in Pennsylvania, Michigan and Wisconsin and thus taking the White House.

“It was the Green Party siphoning off votes to the left.”

“It was white college women, who shifted.”

“It was Blacks in key urban areas who didn’t come out to vote.”

Etc, etc.  Forget the relative merits of claims about which groups objectively should/should not have voted for Clinton, the point was that everyone wanted to find a scapegoat for which group was to blame for the catastrophic loss on November 8, 2016.  When defeat was that narrow (x thousand votes in the right states would have flipped the election), almost anything could be declared the “decisive factor”.  Did the Greens swing 70,000 votes away from Clinton despite the fact that Trump was evidently going to be the worst thing to happen to the environment?  Yep.  Did white women vote 52% for Trump, despite evidence that he was a sexual predator?  Yep.  Did Black turnout fall by seven percentage points over 2012 despite the fact that Trump was clearly the most racist Presidential candidate since Eisenhower or possibly even Woodrow Wilson?  Yep.

When the margin is small, almost any single factor can be accused of being “the decisive thing”, the one thing that is the difference between winning and losing.  They’re all equally right.  And all equally wrong.  The point is, the Clinton campaign failed to get the job done.  Arguing which piece of the coalition should have “put them over the line” is ultimately an irrelevance.

It’s kind of the same thing at Laurentian.  People keep asking me “what was it” that pushed them over the line, the one silver bullet that would have changed everything.  But there isn’t any one thing.  What you have is year after year of the institution not facing up to the real problems.  High faculty salaries?  Yep, if faculty salaries had stayed closer to where those of Nipissing or Lakehead are, Laurentian would be $5-7 million better off and there’d be no problem.  Poor international student strategy?  Yep, if Laurentian had gone after international students the way other universities in the province had, that would be worth another $5-7 million a year and there’d be no problem.  COVID?  Yeah, COVID was a part of the story, with losses in the $5 million range, which made a big difference to how things turned out over the past twelve months.  Less construction over the last decade?  Well, this is a tough one because the construction was rational and cheap, but there seems to have been some significant mistakes involving interest rate swaps, executed as a hedge against rate hikes, which ultimately seem to have cost the university between $1-3 million year, so the construction might not have been a mistake but without those interest swaps, yeah, they’d have avoided deficits in many of the past eight years.

Which is to say, Laurentian’s problems were a lot like Clinton’s.  Things went sideways on several different fronts.  Had any one of them, individually, gone right, then the university would probably have avoided the present catastrophe (though the COVID thing probably only accelerated things by 18 months or so).  But they didn’t.  And what that means is that you can’t actually point fingers easily here.  The fault is systemic, and the failure has many parents, from administrators to faculty. 

But what’s interesting here is that campus politics prevented anyone from publicly acknowledging the severity of the problem.  I should perhaps re-iterate my call of a few years ago for institutions to create the equivalent of a Parliamentary Budget Office to take the politics out of informing the community about real challenges.  I think in Laurentian’s case, a body like this might have made a decisive difference.

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5 responses to “Laurentian Blues (3) – Hillary Redux

  1. Every year, the independent auditors are supposed to go through the books and, even if things appear balanced, comment on potential risks if something goes pear shaped. Just because an institution is “too big to fail” and has a deep pocketed (albeit debt based) Big Daddy in the Provincial Ministry of Colleges and Universities, shouldn’t mean the auditors just get to wave off accumulating risk. Indeed, quite the opposite as the consequences and costs are shifted. Will the Laurentian U auditors pay back their fees over the past 5 years?

  2. Bondfield Construction amount: most likely a completion holdback that LU hasn’t paid yet, plus the $6 million in liens and probably a few other costs related to the construction of the School of Architecture for a total of $13.5 million.

  3. There is a glaring unanswered question from that FAQ: what have you done with the research grant money, and what does this mean for grant-funded faculty?

    I wonder if future grant applications from Laurentian faculty will be doomed–I can’t see funders feeling good about the possibility that the money they give will just vanish.

    As a long-term soft money faculty member (until last year when my luck finally ran out), I’d be terrified.

  4. the one thing not mentioned in any of this, that I can see is the failure of the Barrie campus at Georgian College.

    When it closed, Laurentian was forced to keep all the professors from the failed venture. Which caused quite a bit of duplication in departments

    The professor pay is top heavy. a lot of Professors make on par with their counterparts at other universities. a big issue are professors clinging onto their positions because they’re making 200K, or so but not teaching the course load they are supposed to.

  5. No doubt you’re right, and perhaps it’s early to make broader judgements, but saying that Laurentian went quasi-bankrupt because it ran out of money for various reasons is a little like saying that Clinton lost the election because she had too few votes. The wider question of why the world’s oldest democracy took a lurch into populism is still worth considering, and so is the wider question of why a Canadian university with reasonably good enrolments and a convincing reason to be nevertheless finds itself in creditor protection.

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