HESA

Higher Education Strategy Associates

A Marginally Less Mediocre Set of Provincial Budgets

So, it’s that time of year when I bring you the round-up of what’s happened in provincial budgets over the past few months. Usually, when I do this, I look both at student financial aid and transfers to institutions; this time, I’m going to skip the student financial aid stuff because there’s essentially no change (rock steady since 2013 at around $2.35 billion in constant dollar terms).

One thing that happens a lot when you look closely at budget estimates is that it’s surprising how often what’s actually in the budgets doesn’t actually match how they are described in news reports. For instance, this year it was widely reported that post-secondary institutions in Newfoundland got the chop – but according to budget papers their operating budgets are essentially unchanged from last year (though capital budgets have been cut by $5 million). On the other end, the Alberta NDP was widely applauded for major new investments in higher education but as near as I can tell, this year’s operating transfers are only 3% (in real dollars) ahead of where they were two years ago (though capital funding is way up). That doesn’t mean that the alternative narratives are wrong; I’m looking at big-picture all-inclusive province-wide transfer data; there are other ways of slicing the data which get you quite different results. But its’ worth keeping in mind that the pictures that governments and institutions see are not always the same.

Anyways, here are the year-on-year changes in provincial PSE budgets, in constant dollars:

Figure 1: Year-on-year change in inflation-adjusted transfers to post-secondary institutions, 2015-16 to 2016-17, by province

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Four provinces saw a decline in both real and nominal dollars: Newfoundland, PEI, New Brunswick and Saskatchewan. Of these, two (NL, SK) saw cuts land disproportionately on the capital side. In New Brunswick, a couple of weeks after the budget, the government announced a one-off increase in funding from some weird new innovation/growth slush-fund-y kind of thing which generally has me a bit perplexed; however, because these comparisons are for reasons of comparability budget-to-budget, I have not included this here (they will presumably show up in higher baselines in next year’s comparison. British Columbia and Nova Scotia both increased expenditures, but by slightly less than inflation.

Quebec’s budget increase was slightly (0.18%) larger than inflation. Ontario’s increase was 0.8% but this was entirely due to a bump in capital spending – if we focused on operating dollars alone Ontario would show a slight decline. Manitoba’s new Progressive Conservative government increased spending on higher education of 1.75%; that’s slightly less than what the departing New Democrats had promised but still second-best in the country (don’t get comfortable; the budget cuts are coming next year). Alberta saw a stonking increase of nearly 11% in real dollars but roughly two-thirds of the growth in spending there comes from higher capital expenditures; like the federal government, Alberta has gone big on campus construction as a recession-antidote. With respect to the rest of the increase, some of it actually seems to stem from measures adopted in the previous fiscal year but only actually spent in this fiscal (Alberta, recall, had a weird budget cycle last year which saw the budget only adopted in October).

So the good news is that there was an increase in government expenditures nationally, but how big an increase is a matter of interpretation. If you include capital spending (as I do here), then nationally we had an increase of $375 million, or a just under 1.6%. However, very little of that is going into capital expenditures; take out the changes as one can discern in capital funding (not all provinces break it out clearly in their estimates) then the increase falls to less than $100 million, or less than half of a percentage point.

Over the last five years, what we see is a 3.1% decline in total transfers to institutions, as shown below:

Figure 2: Total Provincial Transfers to Post-secondary Institutions, 2011-12 to 2016-17, in constant 2016$

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Now, it’s important to keep these numbers in perspective. There are a lot of countries where institutions have got hit a lot worse. And of course, our institutions are able to offset losses in public funding by raising tuition (a bit), adding students and taking in more full-fee paying international student – paths not always open to institutions elsewhere.

But on the other hand, bear in mind that system-wide our costs are rising by 3% a year after inflation. Something, eventually, is going to have to give.

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