Hundreds of staff members and students turned out for a town hall meeting at the University of Manitoba on Thursday to learn about the dire financial situation facing the institution.

University president David Barnard told the crowd it cannot maintain the status quo in its operations and that everything is going under the microscope for potential cuts to avoid a $36-million budget shortfall in 2010.

Costs are climbing, driven in large part by former staff on pension living longer than expected. At the same time, government funding is on the decline, Barnard said.

"We've got pressure on the cost side and we know we'll have pressures on the revenue side," he said.

Barnard would not say which programs or services might be facing the axe, just that outside agencies are being brought in to help guide the university through cost-cutting. He said the university must be proactive about the situation.

"If we wait, other decisions will take away our degree of flexibility. So we're trying to get engaged with this project in order to make our own efforts to improve our university and protect those who work here," he said.

Barnard told the students that the administration has halted hiring new staff for the time being but he won't know if layoffs are forthcoming until after the next budget has been completed.

Students have demanded a say in the cuts and the university has promised they will.

Brad MacKenzie, president of the U of M faculty association, told CBC News that two committees have been struck to look at where "efficiencies" can be achieved.

"But there are risks that certain efficiencies may be proposed that would result in reduction in program quality or lack of services," he said.

Barnard did not say when any decisions will be made, or when reports on the review will be released.