USFA e-Letter: The Black Hole of Pension Solvency

In 2010-11, a University wide austerity exercise saw reductions in unit budgets in order to free up $10,000,000 of base budget money to cover off pension solvency costs and reduced investment income. The University had a financial crisis and it needed to be addressed immediately!!

Looking over the financial statements since 2010-11, investment income has recovered and nowhere near $10,000,000 has been applied to pension solvency. Further, the current financial crisis is based partly upon upcoming payments for pension purposes each year. Yet, the original $10,000,000 should have been more than enough to cover off the solvency issue for many years! Where did this base budget money go? Why was it not spent directly on pensions given that investments have recovered? Why were the base budget funds not directed back to units?

Now the University has another “financial crisis” that needs to be addressed immediately!! We note that the best predictor of future behaviour is past behaviour. Given that academic programs and faculty careers are at risk, is it unreasonable to expect a better accounting of the “financial crisis” at this time?