Laurentian University Situation

This article, published in the Spring 2021 edition of The Beacon, was written by StFXAUT Communications Officer Philip Girvan and CAUT Vice-President Peter McInnis.

“I think it’s fair to say we’ve become a poster child for strategic planning in Canadian university sector.” — then Laurentian University (LU) President Dominic Giroux in 2017

On February 1, 2021, Laurentian University’s Board of Governors and Administration announced that the University was taking the unprecedented step of filing for creditor protection via the Companies’ Creditors Arrangement Act (CCAA). On February 11, following the announcement of the CCAA process, Superior Court Chief Justice Geoffrey Morawetz formally declared Laurentian University insolvent and announced that Laurentian had until April 30, 2021 to present a plan designed to get its financial house in order. $25 million was made available to the University to cover salaries and other costs as it restructures.

Laurentian University’s Board of Governors and Administration annually ran deficits while announcing balanced budgets

Excuses as to why the University found itself in dire financial straits were cited by Laurentian University President Robert Haché in a February 1, 2021 open letter:

A number of developments over the past decade have put an increased strain on the operational and financial health of the university. These strains include a combination of factors, such as historical recurring deficits; declining demographics in Northern Ontario; the closure of our Barrie campus in 2019; the domestic tuition reduction (10 per cent cut) and freeze that was implemented in 2019; and most recently, various costs and revenue impacts due to the global pandemic. As we have communicated previously, we are facing unprecedented financial challenges and our financial health is currently amongst the weakest in the province compared to other universities. We intend to change that.

Unmentioned in President Haché’s laundry list is governance. Laurentian University’s Board of Governors and Administration annually ran deficits while announcing balanced budgets and the University’s auditors, KPMG, signed off on these budgets year after year.

There were whisperings of Laurentian University’s untenable financial situation long before the impacts of COVID-19 began to materialize. Laurentian University Faculty Association (LUFA) filed separate grievances in 2017 and 2020 seeking to have the University trigger the Financial Exigency provisions in the Collective Agreement. By rejecting these grievances, the University denied that a situation of financial exigency existed. Documents made public demonstrate that the University’s short-term debt is the proximate cause of its insolvency, but there were several factors that led to this situation. Had Laurentian adopted a more robust model of collegial governance, valued transparency and, in 2017, allowed its books to be scrutinized, might circumstances have been different?

There are any number of instances of Canadian Universities running into financial pinches. In recent years, the Government of Nova Scotia has provided loan forgiveness, operating grants, and other emergency funding to both Acadia and NSCAD. Provincial governments across the country have released money to help post-secondary institutions shoulder the financial burden resulting from the COVID-19 pandemic. A timely and thorough examination of the University’s finances conducted with the participation of all involved parties might well have enabled Laurentian University to get its financial house in order years ago.

It is Laurentian University faculty, staff, and students, rather than Administration and the Board of Governors, who are shouldering a disproportionate amount of the burden

Despite the missed opportunity, other options available render highly questionable the rationale and the appropriateness of applying the CCAA process to a publicly funded post-secondary institution. CCAA proceedings do provide significant cover to those whose lack of inquiry and scrutiny regarding the financial health of the University has led to the current situation. The February 11, 2021 declaration from Justice Morawetz permits Laurentian University to ignore all Freedom of Information requests until restructuring is complete. A former member of Laurentian University’s Board of Governors wonders if the CCAA might protect the Administration, Board of Governors, and Senate “by allowing them to continue to participate in a problem-correction process when they were collectively and wholly responsible for creating the problem in the first place”.

Despite attempts by LUFA to sound the alarm, it is Laurentian University faculty, staff, and students, rather than Administration and the Board of Governors, who are shouldering a disproportionate amount of the burden. On April 12, Laurentian announced cuts to 69 programs including 28 in French and 110 positions — 27 of them through non-replacement and vacancies; 83 of these were terminations of employment. These cuts do not represent the programs and positions cut as a result of the dissolved agreements with Laurentian’s three federated Universities. Even programs spared by the cuts may not be sustainable. Remaining faculty are being asked to teach additional courses in order to prop these up. The feasibility of this solution remains to be seen.

In the wake of these cuts, LUFA ratified its Collective Agreement on April 14. LUFA President Fabrice Colin argued that this was done under duress. LUFA Members were told that the University would close if the Union didn’t vote in favour of the tentative contract. Administration filed affidavits with the court that confirmed the successful “renegotiation” of the collective agreements, firings of faculty and staff (which were done, en masse, via Zoom), the program cuts, and the unilateral renouncement of the federation. This renegotiation left dismissed faculty without severance pay. Ex-employees are now considered creditors and, by the logic of the CCAA, must get in line behind the banks and other large creditors in the hopes of possibly receiving a small fraction of what they are owed.

On May 2, the court ordered that Phase 2 of the proceedings continue until August 31, 2021. This provided LU with another $10 million in working capital.

In addition to the ineptitude of Administration and the Board of Governors, federal and provincial governments share responsibility for Laurentian’s current situation. As noted in the March 2021 CAUT Bulletin President’s Message:

Canada ranks twenty-eighth out of thirty-five OECD countries in terms of public funding for post- secondary education (PSE). Public money accounts for only 54% of PSE funding in Canada. The rest is all private. … In 1992, the federal government’s contribution to PSE amounted to $3,432 per post-secondary student (in 2019$). In 2018-19, the federal government’s per student contribution was only $2,046.

The Government of Ontario maintains the lowest per-student funding levels in Canada, and its highest tuition rates. An earlier funding formula, based on enrollment, placed smaller Northern Universities like Laurentian at a disadvantage. The current funding formula prioritizes work placement of grads. This places Universities in competition with community colleges for funding and blurs the university mission. These incentives were codified in 2014 by the launch of Strategic Mandate Agreements (SMAs). Oddly enough, the most recent SMA between Laurentian University and Ontario, signed in November 2020, did not include financial analysis; the section dealing with financial sustainability, appearing in the two previous SMAs, was no longer necessary. This, despite the fact that it was clear that Laurentian was facing a financial crunch by the time the most recent SMA was signed1Laurentian had announced in October 2020 that it had contracted Ernst and Young to help deal with a $7MM deficit, as well as mounting COVID-19 costs. The university statement reads:

These have been challenging times for Laurentian University. We have worked hard as a community to address the financial challenges brought on by the global COVID-19 pandemic and our pre-existing structural deficit. We have partnered with our community, government and labour partners to find solutions for our $7-million structural deficit, as well as the additional $5-to-$10 million impact of the pandemic to date.

In December 2020 the University requested that the Province provide $100 million in emergency funding. The University noted that it could accept $30 to $40 million but would need to file for creditor protection.

Laurentian was provided a $12 million grant to cover operations until the end of March, and on January 22, 2021, Ontario appointed Alan Harrison “as a special advisor to the Government of Ontario to advise options to support Laurentian’s path to return to financial sustainability, and ultimately drive Laurentian’s long-term competitiveness and success”. A January 29, 2021 letter from Harrison to the Minister of Colleges and Universities that Laurentian’s financial woes are “long-standing”. The letter continued:

Laurentian University cannot even state precisely how long it has been in the zone of insolvency … (which) does not reflect well on the university. I have never seen anything remotely similar to, or as serious as, this state of affairs. LU was routinely taking deficit budgets to its board, without, it would appear, the board ever instructing (the university) to deal with this issue.

The Laurentian situation demonstrates a clear dereliction of duty. The incompetence and malfeasance of former Laurentian University President Dominic Giroux, who failed up to become President and CEO of Health Sciences North (Sudbury’s Regional Health Authority), is particularly stark. The manifest failure of Senior Administration and the Board of Governors, current and past, and the contracted auditors, KPMG, to perform their due diligence strains credulity. Governments’ ongoing neglect of post-secondary education is a disservice to everyone.

The Laurentian situation compels governments to return a robust and predictable public funding model to support the University’s academic mission and reconsider the people that provincial governments appoint to University Board of Governors. This abject failure necessitates increased transparency and accountability from University Administration, and the need for collegial governance.

LUFA continues to work to represent dismissed employees to help them maintain health benefits and library access. Visit the CAUT website to learn more about the Call to Action to support Laurentian University, and contact your MP and MLA to encourage them to speak out more broadly regarding issues affect post-secondary education, and to develop policy to reinvigorate the sector.