On Feb. 1, Natalie Tan, a first-year Laurentian University zoology student, received an email stating her university was declaring insolvency.
“We assure you that your studies will not be impacted, and you will be able to complete your Laurentian University credentials as planned,” the email read, detailing the court proceedings that have begun under the Companies’ Creditors Arrangement Act (CCAA) and linking its media release.
CCAA is a federal act designed to help larger corporations that are struggling financially resolve their bankruptcy. Eligibility for CCAA entails a corporation owing their creditors over $5 million.
“I have literally never heard about Laurentian’s debt until now,” Tan said. “Our campus is pretty small so I didn’t think there’d be that much going out of it.”
In December, the university reported $10.6 million in debt for 2020-2021. Despite facing potential insolvency, Laurentian insists students’ education will not be affected.
Students and faculty said they felt blindsided by the announcement and severity of the university’s financial problems.
“The first reaction was shock because we never expected that this could happen in a public institution,” said Jean-Charles Cachon, faculty of management professor and secretary-treasurer for the Laurentian University Faculty Association (LUFA).
According to Cachon, Laurentian’s administration is not communicating with the faculty about its cash flow issues nor its current proceedings, despite faculty concerns about transparency. .
“We had raised concerns over the past years regarding the operations of the administration, especially the fact that they were not transparent in particular about the way cash was managed,” Cachon said.
Cachon added the university has spent money on expensive renovations it could not afford.
Of its $100 million in debt, $85 million is mortgages on construction projects undertaken in the past 10 years, according to Higher Education Strategy Associates. Cachon attributes the financial issues to the administration’s mismanagement and the Ontario government’s 10 per cent tuition fee reduction in January 2019.
Laurentian is protected from its creditors by the CCAA and is able to restructure financially in court under third-party supervision.
Licensed insolvency trustee Nathan Sugeng with Fontaine and Associates Inc. described insolvency (also called restructuring) as a mechanism that allows a company to reorganize or change their financial position and still continue to operate.
The CCAA, a federal act that helps financially-struggling organizations resolve their bankruptcy, is primarily used by corporations.
“We challenge the fact that this process is not really proper to public institutions. It’s more proper to private companies,” Cachon said.
But Sugeng argues that “the university is still a business organization, they still have creditors, generate revenue, and generate debt.”
“One of the big problems is that enrollment is down, and there are many programs with a lack of students,” Sugeng said. “Unfortunately, it means that some faculty members may be laid off.”
LUFA, Laurentian’s faculty association, is now calling for university administration to press the provincial government to refund the debts to an operational level.
“I think that governments both at the provincial and federal level have a responsibility to fund universities properly,” Cachon said.
In a Feb. 1 statement, the Ontario government’s Ministry of Colleges and Education announced it had appointed Alan Harrison as a special advisor to advise minister Ross Romano on Laurentian’s “return to financial sustainability.”
Ciara Nardelli from the ministry’s communications branch said in an email to the Charlatan that “base funding grants to Laurentian University have been consistently around $78M over the last five years.”
Nardelli said the government will consider strategies such as greater provincial responsibility for university finances and greater protection of student and provincial taxpayer interest to address the issue.
“The government wants to ensure this issue does not repeat itself in other institutions in the post-secondary educational sector,” Nardelli said.
LUFA has started a petition asking Ontarians to demand secure public funding for post-secondary institutions.
Despite the situation, some students are staying positive.
“Even if they don’t fully get out of debt—because a lot of universities are in debt in some way—I hope they’ll find a way to bounce back,” Tan said. “I don’t think a whole university would shut down.”
Laurentian University declined to comment on this story.
Featured image provided via Laurentian University website.
