Happy New Year!  Did everyone have a great vacation?

The highlight of my vacation was going to Argentina and stumbling upon the world’s most unfortunately-named university in a suburb of Buenos Aires, named “Morón”.  It’s called – wait for it – Unversidad de Morón.  Seriously, their international marketing people must have the most difficult jobs in higher ed.

Anyhow, I wanted to start the year by talking about what was a hopeful development from last fall – the Government of New Brunswick’s decision to pre-announce university funding increases for the next two years.  Instead of waiting for provincial budget-time to make an announcement (which, quite honestly, is far too late for institutions needing to do serious planning), the government pre-announced not one but two(!) years’ worth of future increases: 2% for 2014-15, and another 2% for 2015-16.  And they also told institutions they could raise domestic undergraduate tuition by 3% for each of the next two years.  Assuming no big increase in domestic or international student numbers, that means the university can count on overall budget increases of around 2.33%.

Great news, right?  Guaranteed new money!

Put the champagne down, guys.  2.33% still isn’t enough to keep pace.  Cutbacks will inevitably follow.  To understand why, let’s look at professorial pay.

UNB profs are currently without a contract – and indeed are very close to a strike on the issue.  But their previous four-year contract was a fairly generous one.  It moved the salary grid upwards by (on average) 2.4% per year, plus everyone not at the top of their pay grade got annual bumps of (on average) about $1300/year.  What percentage that works out to in total depends on where your place is in the pay grid, but for new associate professors, on average, it was about 4% per year on the nose.

So, 4% in total on academics pay.  Benefits tend to scale at the same rate, as does non-academic pay, so 4% on those, too.  At most Canadian universities, salaries and benefits are about 60% of all expenditures.  Multiply that out – 60% times 4% = 2.4%, and right there we’ve already used up slightly more than the entire announced increase in funding.

That is to say: if labour contracts continue to play out the way they have over the past four years, there is exactly no money left over for anything else.  But since inflation erodes buying power, that actually implies ongoing cutbacks of all non-salary items of about 2% per year.  And that’s the best case scenario for a university, since I think few provinces will be as generous as New Brunswick this year.

The reality, then, is this: either staff pay settlements have to start coming into line with increases in institutional income, or the new normal is going to be continuing pay hikes, combined with annual cutbacks in all non-salary items.

That’s the math, and there’s no escaping it.