Last week, the Laurentian University Senate met in a bizarre closed-door session to approve a package of cuts, the details of which are still mostly unknown. On the basis of this, quite a number of people received termination notices at Laurentian University yesterday. I have not seen any definitive numbers on losses (the university, typical of its entire approach through this crisis, is being crap at communicating actual information), but I have seen estimates of anywhere between 80 and 110 faculty positions cut (out of about 350) and 60 programs being cut (out of 175). It’s a brutal cut, quite unprecedented anywhere in Canadian history as far as I know, and terribly sad for everyone at a university that deserved a lot better than this.
In any case, there are not enough details to do justice in analyzing the cuts in detail today. But what I can do is consider the rather bewildering process. The process used, under the Companies’ Creditor Arrangement Act (CCAA), is almost certainly unhelpful for Laurentian over the long-term but it was apparently the most attractive immediate option available to the administration.
The CCAA is a form of bankruptcy protection – very broadly speaking, it’s Canada’s version of what the Americans call “Chapter 11” (though there are differences). It is a form of temporary relief from creditors, during which time the insolvent party can come up with a plan to satisfy creditors. There’s nothing automatic about it: a plan must be approved by creditors in a 2/3 vote, with votes weighted according to the size of the debt to each creditor. So, whatever you come up with must convince your creditors, which tends to mean that your solutions must be heavy on the cost side and light on the revenue-side. Promises that your income will increase in future because you’re definitely going to do better on, say, international student recruitment, are going to be heavily discounted if not ignored entirely.
Now the argument that the Laurentian Faculty Association has put forward is that all of this was unnecessary because the collective agreement has provisions which allow for significant restructuring, including layoffs, under a process known as “financial exigency”. But the terms under which financial exigency can be used are so heavily hedged as to make them useless in an acute short-term crisis. Financial exigency provisions exist in all CAs, but their terms vary significantly from one institution to another; Laurentian’s are, in general, on the more onerous side. Before exigency can be invoked, an Arbitration Board must agree that exigency exists, a process that itself can (by my count) take up to 102 days. It requires the commission to consider a great number of things such as whether “the university made every effort to secure further assistance from the provincial government” and “all reasonable means of improving the university’s revenue system have been exhausted.” Abstractly, these are perfectly reasonable considerations; unfortunately, in an immediate cash crunch, they are totally beside the point.
Then, if the commission agrees that exigency is warranted, it is the Arbitration Board, not the Senate or the Board of Governors, which gets to decide how much money will be reduced from salaries and compensation. This apportion of reduction in salaries “will be divided in a proportionate amount among the Faculties and Library within the University unless there is a clear and substantial reason for doing otherwise” (a process which can take another 20 days, followed by another 30 days in which the Faculties apportion salary cuts to departments, again on a proportional basis).
But then cuts can begin, so that the ship can be righted, yes? Well, sort of. There are various limits which make it extraordinarily hard to garner any actual savings. Non-tenured faculty must be dismissed before tenured faculty (natch). Individuals whose years of tenure plus age equals 55 or more are exempt until every other individual without such a combination are first affected. Basically: seniority means that all the people with the largest salaries are effectively insulated in the process. And we’re not done. The university is required to try to find non-academic positions for anyone laid off, thus further reducing the possibility that exigency might save significant money. Any individual let go still has a right to grieve. And any tenured faculty actually let go is obliged to give a minimum of 12 months severance plus 12 months notice (or severance in lieu).
Now you can make a case for all these measures: the importance of reasonable notice, the difficulty older staff will have getting jobs elsewhere in academia, etc. It’s all true, and at the same time hugely impractical for the situation: the exigency provisions in the Laurentian collective agreement are designed to make it impossible to use outside an emergency, and then are as useless as possible under actual emergency conditions.
So that may have pushed Laurentian administration to another solution: that is, the CCAA. It’s not a magical solution: it does not absolve the institution of getting stakeholder buy-in – and faculty and staff unions still need to sign off (my understanding is that these votes will take place today). You’d think this would not be an easy sell given how many people are being laid off: there must be a sizeable chunk of the bargaining unit that is prepared to vote against. Those who didn’t get fired would need to be absolutely convinced that disaster awaits when CCAA protection ends on April 30th in order to accept this solution.
And here’s the thing – based on what is publicly known, these cuts are massively disproportionate to the problem at hand. What we know about is a problem in the $25-40 million range. In a world where the institution has a little bit of time, and the borrowing power that should come with a guaranteed income of $180-$200 million/year, this is a problem that should be fixable with adjustments to the annual budget of around $10 million/year. But the kinds of layoffs and program closures we’re hearing about suggest cuts in the $20 million range at least, maybe more. Which suggests either that the problem is much worse than even the court documents suggest, or that the CCAA process itself is exacerbating the problem.
How might it exacerbate things? Here’s a start: before going into CCAA, the two largest real creditors (ignoring two probably spurious litigants, whose creditor status hinges on winning future lawsuits) were the Royal Bank ($71.6M) and Toronto-Dominion ($13.5M). Alone they probably account for over 60% of the outstanding unsecured debt. But wait – aren’t these loans secured via mortgages? Well, apparently not, and it’s not clear to me whether that’s because university buildings are inherently difficult to repossess (what would RBC do with the new Indigenous Sharing and Learning Centre, for instance), or if it’s because the bank thought Laurentian, as a public institution, was too big to fail because it was implicitly backed by the provincial government. (Side note: if this is the case, it’s possible every bank’s risk management office is looking at this case and raising the cost of borrowing for every educational institution and municipality in the province, and I must wonder if the Ford government thought this through when declining to backstop Laurentian). Anyways, the point is that if Laurentian tries to get away with offering all creditors less than 100 cents on the dollar, then I expect those nice, long, cheap mortgages are at risk. Which is to say that going into the CCAA may increase institutional flexibility, it may also raise the costs of existing debt. Or accelerate the need for repayment.
The real problem here, of course, is that Laurentian’s leadership waited until it was much too late to confront its financial problems. It did not really admit a serious problem until it was far too late and the actual options on the table were so terrible that CCAA seemed like the only option. Because of the ridiculous secrecy involved in the CCAA process, there is no way to know for sure why Laurentian got backed into this kind of corner. Was it because well-meaning people kept losing small amounts of money every year, and, like a poor gambler, kept hoping they could turn it around until COVID hit? Or was there actually some kind of malfeasance involved that was kept under wraps? We should know, but we simply don’t.
There is a lesson to take from Laurentian; in a context where university incomes are more market-driven and more volatile, institutions need a different way to discuss finances. If we’re going to be in a world where universities either want or need more flexibility to reduce overhead, we’re also going to need to be in a world where institutions are a hell of a lot more transparent about finances than they currently are. Stress tests are going to need to be stricter and more public; risks will need to be more quantified and discussed.
The alternatives are grim.
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From the affidavit of LUFA’s president Fabrice Colin:
“In response to claims by the University of financial difficulty, LUFA took the unusual step of filing two separate grievances (in 2017 and 2020) seeking to have the University trigger the Financial Exigency provisions in the Collective Agreement. The University rejected those grievances and thus denied that a situation of financial exigency existed. These were among the outstanding grievances as of February 1, 2021.”
Declaring financial exigency in 2017 would have given LU plenty of time…
This is a good talking point for the union, I agree. But think about it: if the university had instigated a financial exigency process, do you think the union would have used that opportunity to accept cuts? The whole point of the exigency process up to the point of determination of exigency is to give the union an opportunity to show that management is overreacting, that routes to salvation short of cuts are possible etc. And would an examination of the books in 2017 have shown unequivocally that no other option was available? We can’t know for sure, but I doubt it. In fact, I suspect that the line the union would have suggested is the same one the university ended up pursuing: “give it a couple of more years, revenues will turn it all around, we can convince the government to give us more money, etc”. Seems to me that both labour and management have a common interest in prioritizing revenue-increasing solutions over cost-reduction solutions, right up to the moment when the crash comes.
(A more interesting question maybe is whether triggering an exigency process in 2017 would have brought to light stuff like whether or not the university was digging in to restricted funds. Hard to know but boy that would have been a valuable service)
Among faculty, financial exigency itself was—until yesterday, at least—the ultimate nightmare scenario. So, LUFA’s 2017 grievance to get LU to declare financial exigency would have been anything but collective bargaining brinkmanship.
In any event, it’s cause for bitter regret that the financial boil wasn’t lanced in a timely fashion. Financial exigency within the transparent framework of the collective agreement is wholly preferable to this wanton carnage devoid of transparency or accountability.
I think that Simplicissimus’s claim is an implicit answer to your question in the penultimate paragraph, of “*why* Laurentian got backed into this kind of corner”: Laurentian simply didn’t have to. It could have declared exigency as early as 2017, as the union wisely suggested. That would have given plenty of time to avoid the train-wreck you so eloquently describe.
One suspects that this is a planned disaster, that the administration wanted it to justify the CCAA, so they could sink, burn and destroy the traditional arts and sciences, with only a terrorized senate in their way. This would also explain why the cuts proposed go well beyond what the situation requires. It has provided the administration with an excuse to abandon the ideal of a university pursuing education as an end in itself, into a collection of programs with obvious economic or social utility, easy to sell to students and the government.
The senior administration is a collection of people hired in recent years (post 2017). They have names, careers, families, you can look them up. What is the name of the person you are suspecting to have plotted to burn and destroy traditional arts and sciences at Laurentian? Or perhaps they are all part of some sort of evil secret society (Illuminati?) who have spent decades conspiring to be hired by Laurentian all at the same time just so they can burn it down… for reasons?
Please, lets be brutally honest. Unless you believe the administration is evil (and if you do please name names and why), these people are making brutally difficult decisions under extreme stress. This is serious, people are losing jobs and livelihoods. This is devastating to the University and the community.
Barring some sort of massive criminal fraud, the most likely explanation here is the simplest. The administration (changing collection of transient career minded people) simply did not have the required support and desire at any specific point of time to make the hard but necessary decisions. As a result the situation accumulated over many years into a disaster, a crisis (maybe COVID was the tipping point), and the current group is stuck with the hot potato. I suspect, if they had the choice, they’d avoid making the hard decisions also and simply pass the buck to the future if they could. As Alex has pointed out, making hard decisions as a University administrator (declaring financial exigency) is not easy. It essentially results in a battle with faculty that even if you win you lose.
The easier road for any senior administrator is to simply do the best they can while making as few waves as possible while they are there until they move on. I seriously doubt any of them want their legacy at Laurentian to be they were the ones that abandoned the ideal of a university, that of massive layoffs, that they destroyed the traditional arts and sciences, that they harmed a community. I suspect these people will be treated as piranhas, or maybe I am wrong and they will be considered phenoms of organizational change. Based on their inept communication strategy I somehow doubt that future cases will be written on the successful transformative organizational change they orchestrated.
People may find this timeline of Laurentian finances over the past 10 years interesting:
https://cdn.knightlab.com/libs/timeline3/latest/embed/index.html?source=1i7P57g7wMuCoxtUKUDnmhh2i4cYQe8v8G0AaRxeJaRA&font=Default&lang=en&initial_zoom=2
The current cohort of senior administrators at Laurentian obviously aren’t cartoon villains; they surely believe that they are doing the best they can to put out the financial dumpster fire that they have inherited for the sake of Laurentian’s institutional survival. But they seem to have gone straight for the nuclear option without the tiniest shred of transparency or accountability to students, faculty, and staff.
Perhaps even worse, you now have the grim spectacle of severe punishment for certain catastrophic failures of fiduciary duty and leadership being meted out to literally everyone except those actually responsible. Obviously, the CCAA process isn’t literally punishment, and neither the mediator nor the current senior administration is in much of a position right now to hold anyone accountable for any relevant past failures. However, you can clearly run a university into the ground over the course of a decade and get off scot free—how’s that for moral hazard?
May I begin by observing that expecting me to open myself to charges of libel is pretty rich, coming from someone who himself refuses to post his name? Secondly, I think you meant “pariahs,” not “piranhas.”
Maybe we should feel sorry for those left in charge, as we would for an army officer parachuted into a beleaguered garrison in order to surrender it. Still, they volunteered and, at least assuming they were promoted internally, they knew what they were getting into. (And if they didn’t, then it’s the board which is to blame). Moreover, an administration, like a corporation or the crown, has a continuous existence. A new administration is certainly expected to discharge obligations undertaken by a previous administration; it ought also to assume responsibility for its decisions.
And it remains the case that whoever was in charge a decade or so ago was happy to undertake expenses and commit to mortgages for new programs. This might not constitute an elaborated plan to destroy the arts and sciences in favour of professions, but it certainly shows a willingness to risk them in order to become more of a collection of professional schools and less of a university. Certainly, those who chose not to declare financial exigency in 2017 were choosing the risk of a CCAA process — and the opportunity to become more like the sort of place that many administrators would like “universities” to be — rather than responsibly choosing to avoiding it. Unless Laurentian had no system of internal accounting at all, those in charge a few months ago ought to have known that they were drawing down restricted funds, and immediately declared financial exigency. It seems that several generations of administrators were to blame and, to be fair, probably the last one least, though they are left taking the blame.
All these actions strike me as typical of the sorts of people who are “making as few waves as possible while they are there until they move on.” Cowardice, we must recall, is a vice, and they seem to have suffered under this evil. So is ambition, witnessed by stuffing one’s CV with new buildings and hip new programs (to be paid for by successors). The administrators may not have been cartoon villains, but they certainly suffered under certain weaknesses of character, “evils” in an Aristotelean sense.
In his original posting, Alex suggests that some of Laurentian’s weaknesses are widespread, that “university incomes are more market-driven and more volatile.” We also find ourselves in a widespread situation where many of those running universities don’t see themselves as having a mission of empowering the life of the mind and duteously preserving in being what is already there, but of growing, or being entrepreneurial, or empowering change, or (more generally) of stuffing their own CVs. The administrators of Laurentian may not have undergone initiation into the Illuminati, but they certainly drank the Kool-aid.
Sad story and I doubt the casual observer will ever know the full story. The crisis nature of the situation does highlight the cyclical issues facing institutions – concentrated powers, rigidities, manipulations by competing stakeholders, poor decisions that accumulate, a lot of empty rhetoric.
Alex, hope you enjoy producing your blog as much as I enjoy reading it.
I hope that the persons who mismanaged the university’s finances are subject to salary reductions and layoffs as well. I would imagine that they were (among) the highest paid members of the university administration- if they get to keep their jobs, that would be an absolute tragedy, when “rank and file” employees are shown the door…
If only they still worked there.
I wonder if they could be fired by their current employers, on the grounds that they obtained their positions on false pretenses. The situation of Laurentian wasn’t known publicly when they were hired, after all.