Otago’s 2023 finances are being pored over at a university’s finance committee meeting tomorrow.
The end of year figures show a dismal operating deficit of $21.6 million — nearly twice the forecast from its university council approved budget at the end of 2022.
There was also extensive borrowing of $105m, up from $30m the year before and no borrowing before that in living memory.
The borrowing position is set to worsen further next year and is due to poor operating performance combined with extensive capital expenditure on new buildings and refurbishments, costing $144.8m in 2023.
The total cost of the university’s Christchurch campus redevelopment — the biggest mid-build project — has crept up from $241m to $251m, $179m of which has yet to be spent.
A note in the financial report says the project, due to be finished in 2026, is facing "significant ongoing cost pressures".
Despite the university’s financial crisis, operating expenditure stretched away from income. Expenditure was up 7% in 2023 compared with 2022 — from $778.5m to $833.5m — and only $1m lower than budgeted. Meanwhile, income lagged behind at $811.9m.
Staff costs — more than half the university’s operating expenditure — rose by more than 6%. Salaries shot up by 7% for non-academic roles and by 3% for academic roles.
Next year’s council-approved operating budget aims to end the year again in the red — with a bigger deficit of $28.9m.
The hole between 2024’s operating income and larger expenditure is even bigger. Achieving the $28.9m deficit is predicated on making $34.67m savings, comprising $17.47m asset sales and a $17.2m "savings target".
A further $178m capital expenditure is planned in 2024 contributing to a further worsening end-of-year debt position, slated in the 2024 budget to be above $200m.
A similar amount of capital expenditure is expected in 2025.
It was revealed yesterday that a report to the government from the Tertiary Education Commission raised the issue of universities with rising debt risking liquidity crises — having no money left because debt ceilings have been reached.
The University of Otago has a borrowing limit of $400m and an agreement with the Tertiary Education Commission not to go over $330m unless there is a crisis requiring it to.
