As the Victoria University Student’s Association grapples with the reality of a large deficit, and increasing demands on a levy that in real terms is shrinking, the axe looms over many VUWSA services. SALIENT Editor James Robinson examines the financial situation and future of VUWSA.
Here is a predicament for all you business-wannabes.
Take a business with a static income that isn’t increasing with inflation or CPI, or in line with the cost du jour, petrol. Then give them an expanding field of responsibility, expanding costs, more people to pay and increased wages. What do you get?
Brownie points for anyone who put down doom, it was the answer we were looking for. But I hear the judges will also accept catastrophe, diabolical nightmare and shit-storm.
I’ll quit being smug though shall I? VUWSA, your students’ association is in trouble. The $99 you pay at the start of each year (and setting aside any arguments for Voluntary Student Unionism) is no longer providing VUWSA with an adequate income to operate. The equation, as I hinted above, is simple.
“If this continued, the effect on the 2007 executive would be massive.” Nick Kelly
The $99 that you pay, has declined in value by approximately 21 percent (this is by my own calculator, at 3 percent inflation, and is probably a conservative estimate). It’s worth approximately $78 compared to what it was when the levy was set in 1998. VUWSA’s income is static, but in real terms it is actually declining. And on top of this, new offices have had to be opened at Karori and Pipitea. Costs have increased across the board. It is impossible to increase your operations at the same time as your revenue decreases. It is not sustainable to operate at a deficit for long. In the words of our Commander-in Chief Nick Kelly, “if this continued, the effect on the 2007 executive would be massive.”
The problem stems from this combination of inflation and expansion, but it gives rise to a number of other massive issues, and puts huge question marks over the current operation of VUWSA as we know it. And despite a number of negative aspersions being cast over the competency of your 2006 representatives, it has nothing to do with them (aside from a few questionable new positions on the executive, which students voted in anyway). The problem can be traced back to Victoria’s expansion onto satellite campuses and the ensuing demand on VUWSA in 2004 to provide representation to student’s studying away from Kelburn. At the time as this extra strain on the finances was introduced, VUWSA was relieved of a yearly $175,000 a year payment to the Union. So the impact of the extra offices was hidden for a while. Now, though, with an approaching settlement of the dispute between the Union and VUWSA, that $175,000 payment is back in play. And If you include the addition of the Union payment – VUWSA is about to be going backwards to the tune of around $300,000.
Sitting down with the VUWSA budget for 2006, I couldn’t help but first question the wisdom of confirming the 2006 budget two-thirds of the way through the year. The budget itself makes for sorry reading in places, mainly because you don’t often get to see first hand what an exercise in money bleeding a Students’ Association is. Twenty-six issues of Salient will net VUWSA a loss of $157,000, Clubs, a little over $200,000; Activities another $180,000… and so on. There are a lot of expenses, and little income. I couldn’t find many red herrings, but the awarding of over $46,000 in bonuses to the exec raised an eyebrows, a few years ago, this amount was considerably less. Tightening the profitability of the organisation could help also. I couldn’t help but notice a seven thousand dollar expense under “T-Shirts for resale” in Campaigns, but not a single dollar noted down under Revenue. That’s a pretty big miscalculation of the demand for T-Shirts.
“We’ve had an increase of two hundred thousand dollars a year in salaries,” VUWSA accountant Julie Lamb tells me. “And an organization like VUWSA with a yearly turnover is by nature never going to be an extremely efficient organization. By the time they learn, they’re on the way out.” Lamb also points out that a number of the 2006 executive ran on platforms of increase, which makes it harder.
Lamb sees the setting of a budget as a simple exercise: find out what the students want, and budget for it and points to the VUWSA Spam survey as being of particular importance this year. However as 2005’s student survey showed, budgeting towards student requests is a tricky task. “In 2005 students replied resoundingly that what they most wanted from VUWSA was cheap drinks and cheap bands. But they just didn’t turn up when it was provided.”
Cuts across the board are a tricky business for VUWSA to balance, Lamb says. “In 2002, in Fleur’s [Fitzsimmons, then VUWSA President] year, she made a number of cuts. They rolled Orientation back a whole lot, and hardly spent anything. But when you cut back services, people don’t know what VUWSA is and it can disappear.”
Lamb is adamant that there is not a lot that can be changed, that despite the yearly turnover at VUWSA it is still a relatively smooth machine, with little dead weight bringing the side down. “The bottom line is simple, you either have to increase revenue, or decrease expenses, but I think is best for now is if they can figure out a way to hold services at their current level.”
This problem falls to Nick Kelly, VUWSA President to fix. Interviewing him for this story he spun a semi-predictable line for an organisation with financial woes. “Tightening the ship” and “reducing waste” were mentioned. Dealing with the guy for this story, the least you could say is that it’s been a tough week. If you’d loitered in the office at all this week you would have witnessed a few broken hearts. What VUWSA are facing is either long term across the board cuts to their services, or a rise of the levy, from $99 to around $120 (the exact amount is yet to be confirmed), with a built in adjustment for the CPI (so a one-off shock would be avoided in the future). And whether this happens is up to you, the student, at VUWSA’s AGM on September the 6th.
Kelly is prepared for the reality that students may in fact vote the motion down, though is prepared to admit that he would be “devastated” if such an event took place. “It’s a simple choice between an increased levy or reduced services. I believe students will make the right decision when faced with all the information.” But what about the potential for anger and dismay at VUWSA increasing their fees at a time when they are strongly advocating against any sort of increase in University fees? “We would understand if people were not happy. And people have the right to vote this down, it’s their call, not ours,” Kelly admits democratically. He is quick in pointing out though, that even a $120 student levy will still only put VUWSA in the middle of the rangeof association levies country wide.
But a raise in the levy for 2007 would not save everything. The deficit has had to be stemmed before the problem can be fixed long-term. Kelly, in a surprisingly authoritative and business like voice, tells me that they’ve had to “address the problem in the short-term through making hard decisions.” A snapshot of cuts to come can be seen in the cuts that have been made for the last half of 2006. Activities have been rolled back to a minimum, with a weekly quiz night and a small end of year party. The women’s week headliner Anika Moa has been cut. Campaigns have been cut. Functions have been cut. Clubs have been asked to return some money allocated to them (and will soon meet and vote on whether to return that money). In what has been a tough year for VUWSA, Kelly can look to a chance save the legacy of his exec if they can secure VUWSA’s financial future.
But what chance does the levy even have of getting it through? I talked to students about the issue, and got relatively negative responses. “Well why haven’t VUWSA managed their money better?” one student replied. Another replied emphatically, “there better be a fucking escalator in the Student Union building.” Trawling the currently maligned studentpolitico-blog scene the feedback is similarly negative. “We have to make sure that if it does come up, we have enough people there to throw it out,” was one comment made. “At the moment, the organisation is a mess, so I doubt it could pass,” was another. Again the issue seems to be a bouncing board for renewed calls for voluntary student unionism.
“[This is another] flaw with compulsory membership,” someone writes, and no one can be found to disagree with this comment.
It seems like this problem has come up quickly. The severity of it caught me by surprise. I sought out the opinion of the 2004 and 2005 VUWSA Presidents Amanda Hill and Jeremy Greenbrook-Held. Greenbrook-Held tells me that for the last few years “the situation has been made artificially better by the removal of the building payment. But it just so happens that the artificiality is wearing out.” The 2005 situation was “never great, but never as bad as it was this year. But it’s not this year’s exec’s fault, it’s just the cycle unfortunately.” Amanda Hill tells me that “VUWSA’s financial position in 2004 was very good, almost too good, because student numbers had drastically increased and we lacked the infrastructure to provide services to all those extra students. As a result, we had quite a large surplus. Much of our focus that year was on staffing, offices and capital equipment to support future projects so VUWSA could expand and meet the needs of students more effectively.” Which is where the 2006 position stems from. A good situation, but a huge increase in costs down the line, and the removal of the Union payment providing further distortion. Still, you’d rather be in Hill’s position than Kelly’s. As Hill tells me, “we were in the enviable position where we did not need to make any cuts.”
If the increase in the levy is voted in, this problem goes away. If not, a whole other kettle of fish arises. How do the finances get brought back into line? Through cutting costs, or boosting revenue? And looking into the current round of funding cuts, it is easy to see where cuts will be made in 2007 if no extra money is bought to the table. Activities and clubs will be cut the most, with more focus on the student’s association traditional tasks of providing Welfare and advocacy for students. This may only spurn more resentment as an increasing focus on Welfare will result in the mass of the students seeing less return on their levy, and in turn funding the needs of the few. It brings in the whole dichotomy of needs versus wants, a catch-22 situation where no one can really ever win. According to the results of VUWSA’s 2005 SPAM survey, clubs, activities, and orientation are used by far more people than those that need tenancy help, academic appeal assistance or food banks. Thirty-six percent of students would be affected by a cut in orientation, but who even knows that you can get free bread from VUWSA? However, on the wheaten side of the biscuit, the students who do use the welfare service couldn’t actually do without them. People can always join clubs and see concerts off campus. But if a student can’t feed themselves, the consequences are a little more dire than doing without a subsidised ticket to Shihad.
“This is particularly distressing as the VUWSA exec seemed to have targeted specific budget lines that are necessary to maintaining the mana and kaupapa of our group, while leaving other larger budget lines untouched.” Caroline Prendergast
Clubs have been asked to return a lot of the grant money. The second round of clubs bonuses has been scrapped. Clubs Officer Melissa Barnard commented that she is “concerned that because of the VUWSA deficit clubs may be adversely affected by a reduction in funding.” The first high profile victim of the funding cuts though, was Women’s Rights Officer Caroline Prendergast and her Women’s Group budget which crumbled to zero overnight, and forced the cancellation of high profile Women’s Fest headliner Anika Moa and the other main events of the week. With such a coup for the Women’s Group being taken away from her, Prendergast was understandably devastated. Funding for Snow Games and Blues Awards was left untouched, due to the high profile nature of the events, but if they had been effected it would have been at equally short notice. The decimation of the Women’s Fest events was a tough call to make, and whether you agree with it or not depends on your own preferences. Prendergast expressed her “extreme disappointment… and feeling of disbelief ” to me when asked for comment. And you can’t blame her, it’s a tough rap to be knee-capped in such a way, no matter how necessary. Even more telling was her suggestion that “this is particularly distressing as the VUWSA exec seemed to have targeted specific budget lines that are necessary to maintaining the mana and kaupapa of our group, while leaving other larger budget lines untouched.”
One of the other larger, and safer, budget lines is welfare. “If VUWSA does choose to retain the education and welfare services at the expense of clubs and activities it will do so with a heavy heart,” Welfare Vice-President Jules Van Cruysen tells me.
Van Cruysen argues that the welfare and educational advocacy that VUWSA provides can only really be provided by VUWSA. The university cannot safely provide advocacy for complaints against itself, and the welfare services that VUWSA provides would only cause even larger fee increases if outsourced to student services. And this argument is sound. Van Cruysen adds, “realistically we need to ask what is more necessary for a Students’ Association to provide: effective advocacy both on an individual and a collective level and ensuring that students have access to Welfare services such as a well stocked foodbank, without which some students would quite literally starve, or to provide heavily subsidized orientation events that only a couple of hundred students can attend but consistently loose VUWSA about $12000 a pop.” It’s a tough line, but not entirely untrue. Chris ‘Dusty’ McLoughlin, VUWSA Activities Coordinator remarks that “in terms of activities, it does need to be reviewed. We do get big crowds, but we also need to see what percentage of the student mark we are getting, and how many of the people at our shows are students.”
Aside from slashing costs, as stated above, revenue could be boosted. As Amanda Hill told me “it was accepted at that time, in quite a different climate (when Hill was President in 2004), that VUWSA needed to diversify its revenue and not be so dependent on students.”
The idea of making orientation more profitable was mentioned. According to Greenbrook-Held, “VUWSA gets screwed when it comes to concerts and Orientation. They get free venue hire, but at the same time get charged across the bar prices for riders, and don’t get a cut in the bar. The Union does pretty well out of Orientation.” McLoughlin adds that, “the agreement is not conducive to making any money. We hire security guards at $25 an hour, pay for all the promotions, pay for cleaning. And they just rake in the money off the bar.”
“Turn it into an apartment complex,” Julie Lamb remarks, and only halfjokingly, “then the bar and café would make some money!”
VUWSA’s chance at getting better revenue sharing with the Union is increased with a settling of the dispute over the Union building. But outside of Orientation they are only claiming a right to half of a loss. (Although the deal will no doubt be equitable and fair, some are pessimistic about the overall good that the shared management will do for VUWSA. “Turn it into an apartment complex,” Julie Lamb remarks, and only halfjokingly, “then the bar and café would make some money!”)
Some speculation has been made about the VUWSA Trust, and their role in diversifying the income of VUWSA. The Trust is an organisation that safeguards VUWSA assets and provides help with capital expenditure. But it is sometimes seen as a stingy hoarder of wealth, with some students believing it holds up to ten million dollars of student money.
VUWSA pays 15.14 percent of its income into a building levy that is looked after by the VUWSA trust, initially a way to shore up VUWSA’s contribution to the Union building mortgage and pay VUWSA’s contribution to future projects. And since this mortgage payment ended in 1989, and there hasn’t been a major project for quite some time, the role, and level of this payment has been debated. Lamb sees it as the most viable option to increasing revenue: “the level of the payment is quite high now that the mortgage is not applicable. And it is a surefire way to boost VUWSA’s income.”
All things considered, the wealth of the Trust is now attributed to be at about 4.7 million dollars (when the $2.5 million in collected revenue from the bookstore, the $1.4 million in accumulated building levy and the initial $715,000 contribution to the Union Building is added). They pay out about $150,000 a year in grants (In 2005 it was $124,000). Which is chump change really when you think of the size of the current wealth, but they have made contributions to the new gym at Pipitea, and will make a contribution to the Quad redevelopment project. And it’s a fairly ratified consensus that it is safe to have a reserve of assets being safeguarded. As Julie Lamb put it, “it is important to have a monetary reserve that is managed by a body outside of the political executive.” I spoke to Dan Ormond, the chairperson of the Trust. Ormond tells me that the Trust does not exist to fund a VUWSA deficit, but that it cannot exist without a strong executive. So the VUWSA Trust becomes “more or less liberal in accordance with the VUWSA situation.” The idea of private investment has been raised, Auckland University Student’s Association (AUSA) has invested in commercial real estate, easily providing themselves with financial security in spite of voluntary student union membership. Canterbury’s student association, invested in forestry in the 1970s – with similarly successful results. This idea is met with mixed responses. Kelly is open to it, but guarded: “it can easily become a disaster instead of a success”. Ormond is opposed to it: “there is a long line of student companies that have gone into liquidation”. And Lamb rubbishes it: “can you imagine a yearly executive taking care of strategic investments?” It comes down to opinion though. Greenbrook-Held is a believer: “it is entirely realistic to think that VUWSA could have similar successes to AUSA.” It is something that could go bad, but with careful management and the right decision at the right time on the right opportunity, it is something that could set VUWSA up for years to come.
But are the Trust becoming too conservative in helping students at times of need? Are they being too tight with student money at a time when VUWSA is most in need? Greenbrook- Held says that the Trust is a “very good safeguard for VUWSA. But has it almost become too safe?” He points at initial reluctance from the Trust to fund the relocation of Student Job Search as evidence of this. Others say that a cautious VUWSA Trust, no matter how frustrating at times of slight financial trouble, is always in the best interest of students. “The Trust needs to be safe and cautious to an extent because if the exec ever completely falls over, the Trust becomes responsible for the Association,” Hillnotes.
The contribution to the building levy will most likely come up for review next year once the campus development framework is better known. And at the moment we have no answers for the current quandaries. It is very much a ‘watch this space’ dilemma.
But above all of this, this crisis and these decisions occur at a crossroads in the debate over the place of student politics at this university. A rise in the levy is the best way to preserve VUWSA at its current level. The funding cuts would hurt everyone, and moves to increase revenue look a way away. But having to lump this vote in at a time when student apathy to student politicians is in line with the amount of students that DON’T vote in VUWSA elections, is a tough break for Kelly and his exec. You could hardly call the 2006 Exec a savvy, well-known, and well-regarded bunch. And going to students for money is a notoriously difficult task for even the most well-regarded. VUWSA is going to you for money at the same time as you are making VUWSA a punch line to an increasing number of jokes. You are faced with the decision of cutting off a hand, but it will only spite your face. In my heart of hearts I can’t help but implore you to vote for an increase in the levy. But in turn, each and every one of you should hold VUWSA accountable for every single one of your dollars. Pay attention, and have more of a say. Make sure this doesn’t happen again. Because at the moment, there are a whole lot of things going on, right in front of a whole load of people who just are not looking.
LATE ADDITION: The Anika Moa concert is back on, a fact that came to the attention of Salient hours before our print deadline. The exec were convinced by a late plea that the concert could break even. Whether it can sell the necessary 400 tickets remains to be seen.