UTFA’s Coming Cash Crunch

The University of Toronto Faculty Association (UTFA) has become a high-profile participant in the conflict about the Occupy for Palestine (OfP) encampment. Two days after the administration warned students against forming an encampment, UTFA went on record supporting a then-hypothetical encampment. When the encampment became a reality a few days later, some UTFA leaders began participating in it. Furthermore, UTFA will advocate for faculty and librarians whom the university may attempt to discipline for their roles in the encampment.

There is a backstory. During a controversy about a rescinded job offer at the U of T Law School, UTFA President Terezia Zoric, in an online webinar in June 2021, referred to an “entitled powerful Zionist minority.” The Ontario Human Rights Tribunal will be holding a hearing about whether this constitutes antisemitism.

Financial Implications of a Political Position

UTFA’s traditional mission involves collective bargaining on behalf of faculty and librarians for salaries, benefits, and working conditions. UTFA has gone beyond that to take one side in a heated dispute within the university. This will have several implications for UTFA’s financial position.

Again, some background. UTFA’s budget is approximately $4 million, and it has a $4 million reserve that it invests and that it uses as a buffer for budget shortfalls. (Personal disclosure: I was part of UTFA’s investment committee eighteen years ago when, under the leadership of then-President George Luste, we decided to change from holding only fixed income investments to holding a mix of fixed income and equity. Over eighteen years, the more aggressive investment policy has done better than the conservative alternative.)

In three of the last four years – Terezia Zoric’s presidency – UTFA has run operating deficits, that is its expenses have exceeded its revenues from membership fees and investment income from the reserve. I calculate that it has had to draw almost $600,000 from the reserve to cover these deficits.

The most variable, and one of the largest, components of UTFA’s expenses is legal representation. It varies so much because the faculty association leadership decides which battles to fight, and the legal fees ensue. UTFA will have large legal bills this year from its involvement in the encampment conflict up to now, from intervening in hearings later this month about whether the university should be granted an injunction to clear the encampment, and from possible disciplinary cases after that.

Because of UTFA’s one-sided position in the encampment conflict, numerous faculty members are on the verge of resigning from UFTA, which would reduce its membership fee revenue. (Membership in UTFA is voluntary for members of the bargaining unit – faculty and librarians – it represents. Members who opt out are required to donate the equivalent of UTFA’s fees of .75 percent of salary to either U of T scholarships or the United Way.)

UTFA’s investment portfolio holds both standard broad-based exchange-traded funds (ETFs) and ESG funds (that is, funds that take into account environmental, social, and governance issues in deciding which companies to include). I anticipate that UTFA will want to support the BDS (boycott, divest, and sanction) movement regarding Israel, which would mean divesting all its broad-based equity ETFs, including the ESG ones. This is because, as my former colleague at the Rotman School Ramy Elitzur has shown, many firms throughout the global economy, particularly in the technology and pharmaceutical sectors, do business in Israel and with Israeli companies. To make the portfolio Israel-proof (a word that brings to mind the vile Nazi term judenrein), UTFA will have to sell the broad-based equity funds, including the ESG ones. It would then have to replace them with individual stocks or find more narrowly directed ETFs, or perhaps completely stop investing in equities, returning to the fixed income focus of two decades ago. In any event, making its investment portfolio Israel-proof could reduce its returns.

How Will UTFA Respond?

There are several ways UTFA can respond to this financial challenge. UTFA already has a substantial barrier to exit. Currently, if a member of the bargaining unit who has resigned from UTFA wants to rejoin in order to be represented by UTFA in a grievance, they must pay three years of fees. UTFA could point this out to the membership to dissuade them from resigning because of their dissatisfaction with UTFA’s position regarding the encampment.

Second, UTFA could increase its membership fees to cover the cash crunch, perhaps describing at as an emergency levy.

Third, UTFA could propose to convert its status from a voluntary association to a union which, under the Rand formula, requires all members of the bargaining unit to pay fees to UTFA. This would require a vote within the bargaining unit, and colleagues might oppose unionization for numerous reasons, one of which would be UTFA’s position on the encampment.

In my own view, UTFA’s support for the encampment in principle and for faculty members participating in it is unwise and self-defeating. The consequences are just beginning to play out. I will have more to say about this in future posts.

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