Laurentian was about to run out of money to pay salaries before filing for creditor protection
SUDBURY -- Days before Laurentian University filed for creditor protection, the union representing faculty issued a news release demanding LU prove it was in financial distress.
“The university administration has failed to provide evidence of the financial crisis it continues to claim is imminent,” Fabrice Colin, president of Laurentian University Faculty Association, said in the release dated Jan. 25.
"The LUFA bargaining team has been very clear that if the administration can demonstrate that the long-term viability of Laurentian is in jeopardy, they would bring this information to the membership to discuss a reasonable path forward," the statement said.
On Feb. 1, Laurentian did just that, publicly unveiling the financial crisis the school is facing when it declared the institutional version of bankruptcy.
"LU takes the position that it is insolvent and absent the relief sought in the initial order, will run out of cash to meet payroll in February," said one of several court documents released Monday.
So how did it get here? And what needs to happen for northern Ontario's largest university to get back on sound financial footing?
It turns out that Laurentian operations have run deficits in the millions of dollars for several years, shortfalls that were allowed to accumulate.
"These operational deficits have led to the accumulated deficit in the operational fund of LU of approximately $20 million at the end of 2019-20 fiscal year," one of the court documents said. "In the current 2020-21 fiscal year, LU projects a further operational deficit of $5.6 million."
The reasons Laurentian is deeply in the red related to "structural issues," the school said, ones that the school's administration has not been able to solve. According to the court documents, they include:
- The collective agreement with LUFA pays above-market salaries, an issue made more severe by a "strained" working relationship between the parties;
- The school offers many programs with low enrollment. Of its 132 undergraduate programs, 83 per cent of students are enrolled in the top 50 programs and just five per cent are enrolled in the bottom 50 programs.
- A tuition freeze in 2019, combined with a steady drop in enrollment in recent years has squeezed revenue.
- Over the last several years, LU debt-financed a number of building projects, including a campus modernization project, construction of a Faculty of Education building, certain student residences and a student recreation centre. The goal was to have them pay for themselves through increased enrollment. When enrollment dipped, those debts still had to be paid and the budget was strained further.
So how does Laurentian plan to get itself back to financial health?
In short, it wants to cut staff and programs. Under the court filings, the school wants an independent mediator appointed that would have the power to cut programs and layoff staff quickly, outside of the terms of collective agreements.
The documents reveal the depth of distrust between LUFA and the administration. There are currently about 102 unresolved grievances filed by LUFA as well as an ongoing unfair labour practice complaint.
There is also "a judicial review with respect to the Provost’s decision in 2020 to suspend enrolment in 17 academic programs with very low enrolment," the documents said.
Laurentian is also proposing to review its agreement with the federated universities on campus, and identify "opportunities for future revenue generation."
The idea of appointing a mediator with the power to make decisions on staffing and programs, and to revise the agreement with the federated universities, won't be addressed until the next court date Feb. 10, to give LUFA time to make representations.