HESA

Higher Education Strategy Associates

Author Archives: Alex Usher

October 16

Osgoode’s Income-Contingent Experiment

There’s an interesting experiment developing at Osgoode law school involving the creation of (what is being called) an income-contingent loan system.  Dean Lorne Sossin outlines the plan a little bit in his blog, here.  There are some fairly big details missing from this description, for the quite good reason that the Dean is leaving a number of design features open, pending discussions with the faculty’s students.  But one crucial thing about this program is being obscured by the term “loan”: namely, that no money actually changes hands.

The language of “income-contingency” can make things a bit confusing.  Canada, as I’ve argued before, already has a system of student loans that is substantially income-contingent – but they are income-contingent loans.  What Osgoode is considering is an actual Australian-style income-contingent fee.  This is quite different.

In North America, the way student aid works is that an institution charges students a fee.  A student asks the government for money via student aid.  The government gives the student money, and the student pays the institution.  Technology makes this little money circle move pretty quickly, but the basic point is the money moves through the student’s hands (legally, if not in fact) before it goes to the institution.  The fee is immutable, and the loan contract is between the student and the government.

In Australia, the Higher Education Contribution Scheme works somewhat differently.  There is a HECS “charge” – that is, an amount a student notionally owes.  But there is no loan that goes through the student’s hands.  When the student is admitted, there is simply an agreement that the student will pay that notional amount down over time through his or her earnings.  Most do so, and relatively quickly; others never do because their incomes never reach the necessary threshold to trigger payment (re-payment is not required below about $51,000).  But as the title says, it’s a contribution, not a fee.  The contribution is conditional on future income, and so there is no “loan” in the sense that we understand it.  This is effectively what Osgoode is trying out.

You can see why this idea might be attractive: for those people who are put off by the sticker price, the idea of waiving up-front tuition seems like a pretty good deal.  But there are some legal/administrative issues that might make this more complicated that it appears at first glance.  The most obvious is how to manage repayment.  In Australia, the government monitors graduates incomes and collects repayment through the tax system.  Osgoode, to state the obvious, does not.  If there’s an Achilles heel here, this is probably it.

But that’s not the only problem to solve.  The other issue is how the waived tuition will be reported to the government.  If it is reported as zero, it will reduce a students’ eligibility for loans and thousands of dollars’ worth of tax credits.  Some reduction in public loans probably makes sense since they have less immediate need for liquidity; however, if the students don’t get the tax credits *and* they repay their entire tuition, they would actually be worse off over the long-run.

Hopefully, some solutions can be found to these problems.  Because its nice to see institutions innovating in making professional education cheaper for a change.

October 15

Free Tuition in Chile

Last fall, Michelle Bachelet was once again elected as President of Chile, on a considerably more radical platform than that which propelled her to the same position eight years earlier.  One of her many campaign promises was to make higher education completely free.  This is a Big Deal.  It’s not like Germany, where tuition was only ever a derisory sum; in Chile, tuition payments are equal to 2% of GDP, a larger percentage than anywhere else in the world, outside Korea.

So, ten months on from re-election, how are they getting on with things?  The quick answer is: slowly.  But not for want of trying.

The heart of the problem is a constitutional provision, dating from the Pinochet era, which guarantees Chileans the freedom to make a living however they want.  Effectively, this prevents the government from compulsory nationalization.  In higher education, where the vast majority of institutions are private (though some of them receive public funds), this makes effectuating the Bachelet promise difficult.  So the government has gone down the route of trying to buy private institutions’ obedience by paying student fees on students’ behalf.

Now, the government isn’t stupid; it’s aware that private universities are likely to respond by raising fees.  That’s why they intend to rely on something called a “reference tuition fee”.  This is an invention of the Chilean student aid system, which is the only one in the world that takes the Bennett Hypothesis (i.e. that student aid encourages cost inflation in higher education) seriously.  Basically, Chilean loans programs don’t provide 100% of tuition – they only cover a “reference” fee, which ranges from about 80% to 100% of the actual fee.  The problem is that reference fees vary significantly: the fee for a law program at one institution may be vastly different than at another.  So the first task to make this work is to create a “standard” reference fee – but this is causing enormous problems.  Set it too high and you risk getting fleeced by the institutions; set it too low, and institutions will opt out of the system.  It’s not clear that the government will be able to find such a not-too-hot-not-to-cold fee.

Although the government claims to be able to fund the one-time cost of transferring 2% of GDP from the private to the public sector via new taxes, some independent observers question whether it will, in fact, be able to fully replace the tuition income institutions will lose.  Even if this money can be replaced, it’s not exactly clear where money will come from to fund future system growth or system quality improvement.

More generally, there’s a question about value-for-money in this policy.  Even the proponents of free fees don’t dwell on the promise that the system will become more equitable.  Access to higher education and stratification in Chile are already reasonably good: indeed, their access outcomes look a lot like Canada’s, despite significant fees in both the public and private sector, and the fact that Chile’s (mostly private) system of secondary education creates enormous inequities in outcomes, meaning room for improvement is not great.

Mostly, what proponents of free fees in the Chilean system believe is that “the market should not decide” in higher education.  Which, you know, fair enough.  Only two problems: i) historically, the state tends not to be so hot as a master, either; and ii) in a country that has as many challenges as Chile, is such a goal worth 2% of GDP?  Honestly?

October 14

Free Tuition in Germany

A few years ago, Germany’s Supreme court declared that tuition fees were constitutional, thus paving the way for some states to experiment with fees.  Seven of them (containing over half of all students) did so: Baden-Wurttemburg, Bavaria, Hamburg, Hesse, Lower Saxony, North Rhine-Westphalia, and Saarland.  The fees varied a bit from place to place, but most settled on a modest €500 (Hesse was €1000) – though in some places waiver systems meant that as many as a third of students paid nothing at all.

Gradually, the Länder have reversed their decisions, and this fall the final Länder (Lower Saxony) got rid of fees.  Hence a raft of stories in the last couple of weeks about Germany “going tuition-free”, and questions from some quarters, asking: “could Canada do the same”?  To which the answer is: of course we could.

It would be trivially easy for us to eliminate tuition.  Heck, we already pay net zero tuition, in that what we charge domestic students is more or less equal to what we spend on various forms of non-repayable aid.  If we got rid of all our student aid and scholarship programs we could have free tuition.  It would be a bit rough on low-income students, students with dependents, and college students (who for the most part would lose money on the deal); it also would be a windfall for wealthier kids who go to university, but I’ve yet to meet anyone in the free-tuition camp who seems to care about that.  Of course, that too would make us more like Germany, where direct funding for living costs is pretty meagre: only about 20% of students there qualify for student aid, and it tends to be for far less than what our students get.

At another level, of course, it would be even more trivially easy for us to “do a Germany”.  All we need to do is stop spending so much public money on higher education.  Their expenditure on higher education is about half of what ours is: per-student funding to institutions in Germany is about $10,000 (€7,000); in Canada, it’s about $15,000.  And that has impacts as well: professors there, on average, only get paid about 60% of what ours do.  When education costs are so low, it’s not difficult to keep tuition down.

German participation rates in higher education are also lower than ours, in part because they have no money to accommodate more students.  They could have kept tuition fees and directed institutions to use that money to expand access, but they preferred not to do that.  And so, as a result, the German student body is much more socio-economically selective than ours is – indeed, it is one of the most selective anywhere in Europe, and was so before fees were introduced.

So ask not if we could become like Germany, ask why we’d want to be more like Germany.  Why would we want to spend less public money on higher education?  Why, when the private returns to education are so high, would we want to exempt the beneficiaries from paying for the privileges they receive?  Why would we want to give a windfall benefit to children from wealthier families who quite clearly have the capacity and desire to pay?  Why would we spend all that money when the benefits to the poor – whose net tuition is already close to zero – would benefit barely at all?

Warum, indeed.

October 10

A Miracle in Melbourne

Today, I want to tell you about one of the most amazing stories in recent higher education history.  It happened at the University of Melbourne about eight years ago, and it involved having the country’s leading university completely up-end its entire curriculum – every single degree program – in the space of about 24 months.  Ladies and Gentlemen, I give you: the Melbourne Model.

The basic story is this: A decade ago, Melbourne – like all Australian universities – had a three-year undergraduate study degree, with law and medicine being direct-entry first degree programs (a bit like how Quebec allows direct-entry to these programs for select CEGEP grads), and with a fourth-year acting as an honours year for those wishing to pursue graduate (mainly doctoral) studies.  Then in 2005, a new President (Glyn Davis) came to office, vowing to make Melbourne a more research-intensive kind of place.  In the first draft of a widely-circulated strategic plan, Davis suggested it might be time to “examine the possibility” of moving to, what he called, a “US graduate-school model”, with a much more generalist three-year undergraduate program, followed by graduate/professional studies (it was referred to internally as a 3+2+3 system, which implied a much larger role for Master’s programs).  The proposal was seen as useful both because it might increase research-intensiveness and because a major re-design might force the Melbourne community to think harder about graduate outcomes and what it actually meant to be a “Melbourne Graduate”.

The professional model was by no means the centrepiece of the strategic plan, but it generated curiously little comment, and eventually ended up in the final version in February 2006 without having been subject to much debate.  Having got that far, Davis and his team went for broke: all faculties were told to re-design their curricula in time for implementation in January 2008.

It was at this point, of course, that people freaked.  Much of the Arts faculty thought it was going to be sold down the river – until then, many of their students took joint courses with professional programs (e.g. law/history) and many reckoned that without the professional link, they’d be sunk.  It took a while for it to sink-in that with law now inaccessible for direct entrants (a fact that enraged many parents), more students had time to take three years to study something purely for interest.  History – and most of the rest of the Faculty – in fact did just fine.

One of the most interesting decisions was to limit the number of Bachelor’s degrees being offered to just six – Arts, Science, Bioscience, Environments, Music, and Commerce, and to some extent de-link the degree from the faculties in which professors resided (there were 12 faculties).   These degrees were also designed to have common elements between them regarding program depth and what they called “knowledge transfer” (what we could probably call experiential learning).  They didn’t achieve this goal perfectly, but then, when you’re trying to re-vamp every single degree in a university with 40,000 students in the space of under 18 months, you can tolerate the odd imperfection.

There still remained the trick of selling the idea to government and students.  The former was important for financial reasons because Australia doesn’t fund non-research graduate degrees, so the switch to a “professional” model theoretically put money for all those students at risk – but since allowing the switch didn’t cost the government anything (it would spend what it had always spent on those students) it was a relatively quick sell.  A more serious issue was convincing students that this was a good idea.  After all, students bent on law or medicine would now have to go through three years of undergraduate study first, while other institutions could still offer it to them straight out of high school.  Partly through effective marketing, and partly because of the institution’s own brand power (Melbourne is essentially Australia’s U of T) this fear never materialized.  Applications from top students held up, and in some fields the institution was able to become even more selective.

Try, if you will, to imagine a Canadian institution that could re-jig all of its curricula from top to bottom in less than 24 months, not because a government told them to, but simply because it seemed like a good way to make the university a better place.  I can’t, but I wish I could.  What Melbourne achieved here is proof positive that universities can change, and at speed, if they wish to do so.  And that’s news everyone needs to hear.

October 09

How to Prepare for a Punch in the Mouth

Universities and colleges love their strategic plans.  Plans beget task lists.  Task lists beget work agendas.  Work agendas beget Targets.  Targets beget Annual Evaluations.  And all of it provides a serene sense of control: a belief that we can control the future simply by planning our future work flows.

The thing is, it’s mostly nonsense.

To see why, consider Dwight D. Eisenhower, who famously said “In preparing for battle, I have always found that plans are useless.  But planning is indispensable”.  Or boxer Mike Tyson, who once said “everybody’s got a plan… until they get punched in the mouth”.

There are a lot of punches in the mouth lurking out there.  What happens when you build your strategic plan on providing teacher training, and then the government changes the funding formula?  That’s a punch in the mouth.  Build out your law faculty just as the industry shifts and student demand tumbles?  Also a punch in the mouth.  Give out a 2% faculty raise just before the government decides to impose a 7% cut?  You’d better believe that’s a punch in the mouth.  And no strategic plan protects you from that.

But if strategic plans are bunk, strategic planning still makes a great deal of sense.  As Lawrence Freedman says in his rather excellent Strategy: A History, strategy is about employing whatever resources are available to achieve the best outcome.  As resources change, so do strategic options.  Hence Eisenhower’s comment about the importance of planning, even in the absence of plans.  As situations change, it’s important to think through new ways of getting to the desired objective or – if resources get scarce enough – to entirely redefine the objectives.  The best strategies are thus ones that are open-ended.  This is why plans – things that attempt to set the future in stone – can sometimes be the antithesis of good strategy, especially in turbulent times.

All you really need to guide an organization is: 1) a sense of where you want to go, 2) some ideas about how to get there, and 3) a set of metrics to know whether you’re getting there.  The real problem most universities have is being able to articulate where they want to go.  Partly, this is because institutions often describe goals in mindless and nebulous ways (e.g. “we will achieve excellence”).  But it’s also partly because many professors have almost no interest in the collective success of a university, seeing it merely as an administrative platform for their own research interests.  Colleges, which have a much more inclusive sense of institutional purpose, have an enormous advantage over universities in this respect, which makes their plans and their strategy much more cohesive.

In short: planning is important to keep a sense of direction.  But plans?  They take up a lot of time and are often out-of-date by the time they are implemented.  More of the former and less of the latter, please.

October 08

The War Between Universities and Disciplines

From the outside, universities look like a single united entity, with many administrative subdivisions – kind of the organizational equivalent of the United States.  However, the closer political analogy is actually early 1990s Yugoslavia: at a very basic level, universities are the sites of permanent civil wars between central authorities and the disciplines whose interests they purportedly serve.

Disciplines – which, except for law and theology, mostly started their existence outside universities – allowed themselves to be subsumed within universities over the course of the early 20th century.  They did so for administrative reasons, not intellectual ones; bref, it seemed like a good bargain because universities offered a way for disciplines to obtain much larger amounts of money than they could get on their own.  Governments (and to a lesser degree, philanthropists) found it easier to do business with universities than with, say, random groups of anthropologists or chemists.  Similarly, banding together within a university made it easier for disciplines to attract the ever-growing number of students and, with them, their tuition dollars.  The deal was that the anthropologists and chemists would lend their prestige to universities, and in return the university would take care of raising the money necessary to meet academics’ need for space, students, and steady pay cheques.  The idea that the university had any corporate interests that superseded those of the disciplines at an intellectual level was simply a non-starter: disciplinary interests would remain supreme.  As far as academics were concerned that was – and is – the deal.

Thus, there is little that drives academics crazier than the idea that a university might deign to choose between the various disciplines when it dispenses cash.  If an institution, in response to an external threat (e.g. a loss of government funding), says something like, “hey, you know what?  We should stop spending so much money on programs that lose money, and redistribute it to programs that might attract more outside money”, they are immediately pilloried by academics because who the hell gave the university the right to decide which disciplines are more valuable than others?  When you hear people bemoaning universities acting “corporately”, this is usually what they’re on about.

This attitude, which seems so normal to academics, provokes absolute bewilderment from the outside world (particularly governments and philanthropists), who believe universities are a single corporate entity.  But they’re not.  As ex-University of Chicago President Robert Hutchins said, universities are a collection of warring professional fiefdoms, connected by a common steam plant.  A more recent formulation, from the excellent New America Foundation analyst Kevin Carey, is that the modern university is just a holding company for a group of departments, which in turn are holding companies for a group of individual faculty research interests.  In other words, Yugoslavia.

But the actual point of a university, the reason for its existence beyond sheer administrative convenience, is that it serves the advancement of knowledge by getting the disciplines to act together to tackle problems in ways they would not do so independently.  And that means that the university’s raison d’etre is, in fact, to continually make choices on resource allocation across disciplines, to the areas that make the most sense, both financially and intellectually.

Yet there exists within universities a substantial and determined constituency that claims it is immoral for institutions to make such choices.  Much of the incoherence, idiocy, and sheer weenieness of university “strategy” documents come from senior managers trying to square this circle: appearing to make choices, while acting in deference to the autonomous disciplinary republics, to avoid actually making any.

In short, strong disciplines are necessary and important to insure academic quality.  But letting them run the university is madness.

October 07

Do the Poor Really Pay More?

There’s a trope out there that goes something like this: “Loans are unfair because interest on the loans means that needy students pay more in total to go to school than students who don’t need a loan“.  If it were true, this would indeed be problematic.  But the thing is, for the most part, it’s not.

Let’s follow two hypothetical students: Claudia and Eveline.  Claudia can manage to pay $25,000 for her four years of tuition, upfront; Eveline cannot, and she borrows $25K from Canada Student Loans and her provincial student aid program over four years.  Assume that inflation is a constant 2%, and that interest during the repayment period is 6.25% (over the last few years, real interest rates have floated between 400 and 450 basis points above inflation).

Student loans carry zero interest during the in-study period.  This means students actually make money while they’re borrowing because inflation eats away at the value of the loan before they’re required to pay it back.  In Eveline’s case, she effectively makes $1,125 between the September she starts and graduation day.

Then, of course, things start to work in the other direction.  Assuming Eveline takes eight years to pay off her student loan, she ends up making $4,321 in interest payments (figure is net of inflation).  Take away the $1,125 that Eveline “made” during the in-study period and the net interest cost comes to $3,196.

If that were the end of the story, the people who claim loans are “unfair” would be right; we would be discriminating against the poor.  But that’s not the end of the story because people who get loans usually also get grants.

If you’re an independent student making less than $38K per year and you apply for aid, you are nailed-on for an extra $2,000 per year – that’s $8,000 over the course of a degree.  Ditto if you’re a dependent student and your parents make less than $38K.  If you’re a dependent student and your parents make less than (roughly) $76K, you’re nailed-on for another $800/month – or exactly $3,200 over four years, which wipes out the interest cost of the loan.  Plus, of course, you get 15% of all interest paid as a tax credit – which means you actually come out ahead by a few hundred dollars.

Are there borrowers who don’t come out ahead?  Yes.  Those who borrowed but had family income high enough that they didn’t qualify for the middle-income grant likely wouldn’t receive a grant to offset the loan interest amount.  Borrowers who take more than eight years might end up with higher interest charges not covered by their grants (and possible remission).  There are enough variables here that it’s hard to say how many people this might include.  But remember – the base population that doesn’t get sufficient offsetting grants consists of dependent students with family incomes over $80K, that’s *maybe* 20% of all borrowers (and not the poorest 20% by any means).  Or to put it another way: probably something like 80% of borrowers are receiving more in subsidies than they pay in real interest over the life of their loan.

That’s a good thing – an outcome of our generous, if opaque, student aid system.  We should acknowledge it, celebrate it, and most of all get the usual suspects who adore this talking point to shut up about it.

October 06

Remembering the Axworthy Green Paper

It was 20 years ago today that then-Human Resources Minister Lloyd Axworthy presented the findings from his long-awaited “Green Paper” on social security to the House of Commons (the paper itself was released the day before, on October 5, 1994).  The back-drop:  Lucien Bouchard was leader of the opposition, Jacques Parizeau was the new Premier of Quebec, and we were on track for a referendum the following year.  Unemployment was over 10 percent; for youth, it was 20 percent.  Our basket-case status led to a run on the currency; the price of defending it was sky-high interest rates.  Interest payments on the federal debt were eating-up close to a third of the federal budget, so citizens were paying $1 for about 70 cents worth of services, and feeling pretty ornery about it. 

Basically, we were screwed.

By late summer it was clear that the Liberals were going to take an axe to pretty much everything in the next budget.  Where PSE was concerned, the day was looming when cash transfers would drop to zero and Established Programs Financing (the CHST was yet to be created) would become a tax-point-only affair.  It was at this juncture that HRDC minister Lloyd Axworthy decided there was no time like the present to start talking about re-designing Canada’s social security system, including student assistance.  This was either extraordinarily brave or face-palmingly stupid, depending on your point of view.

The upshot of the Axworthy student aid proposals – articulated in the general social security “Green Paper” of October 1994, and in a subsequent student aid “White Paper” in November – had its roots in some ideas that had been percolating 25 years earlier during Pearson’s second-term, when Tom Kent was the Liberals’ Policy guru.  Instead of sending money to the provinces to support higher education, why not give that money to students, either through scholarships or – this was the new bit, based on Ottawa’s straightened circumstances – loans.  And of course, this being the early 1990s, these were going to be income-contingent repayment (ICR) loans.

ICRs were all the rage in the early 90s.  Australia and Sweden had recently introduced them (Bill Clinton was in the midst of doing the same in the US), and in the former case, at least, they had permitted the introduction of fees that had made institutions better off, and permitted a major increase in university capacity – and all without negatively affecting access.  But of course, since it involved higher fees, the usual suspects in Canada had an aneurism, which led to an autumn of student protests.  Students and PSE institutions united, arguing that they wanted federal funding to go through institutions, not students.

The reforms died with a whimper – with little third-party support, the reforms basically died on the night of the 1995 budget, when transfers to provinces were slashed with no concomitant change in the loan programs.  But in the medium-term, the Liberals actually ended up accidentally enacting much of the Axworthy agenda.  Student Loans became substantially income-contingent through the improvement of Interest Relief (which later evolved into today’s Repayment Assistance Program), and transfers to students to pay for higher fees increased substantially through education tax credits, grants, and educations savings programs.  In fact, by the early 2000s, the feds had more or less replaced a couple of billion in transfers to provinces with an equal-sized set of transfers to individuals without anyone (including possibly themselves) really noticing.

The Green Paper was one of the great might-have-beens in Canadian social policy.  But because it’s remembered (not entirely correctly) as a failure, it’s unlikely we’ll see anything that ambitious in social policy ever again.  Shame.

October 03

Aquamarine

I went on a bit of a bender this summer reading histories of Canadian universities, and I really enjoyed them all.  Hugh Johnston’ Radical Campus, a history of Simon Fraser’s frankly batty early years was probably the most interesting, but I also quite enjoyed histories from Manitoba, Carleton, and Bishop’s.

But I wanted to tell you my absolute favourite story from my summer reading, which concerns the creation of the Atlantic Veterinary College. It comes from the pages of that institution’s official history, entitled Pets, Professors and Politicians, by Marian Bruce.

Dial back to 1973.  It’s decided that the Maritimes needs its own Veterinary School.  With inter-provincial cooperation being in vogue, all provinces agree to jointly fund one – and the feds even agreed to put up the initial capital costs.  But where to put it?  And who should decide?  Well, the short-stick went to the newly created Maritime Provinces Higher Education Council (MPHEC), who duly created an expert committee to evaluate various sites.  Eventually, they decided to award it to the recently-created University of Prince Edward Island.

At this point all hell broke loose.  UPEI faculty were aghast at the idea of – sniff! – *vocational* education at their little liberal arts college, and promptly went into a decade-long snit.  Joining them in said snit was the government of Nova Scotia, who, it turned out, only agreed to jointly-fund the project because they expected MPHEC to pick the Nova Scotia Agricultural College in Truro (recently absorbed by Dalhousie) as the site.  When that didn’t happen, it found excuses not to pay up. This in turn stalled the federal contribution for capital construction, since they wouldn’t fund unless all parties were playing nicely.

It took until 1983 for all the disputes to be settled and the signing ceremony to be held.  It was to be a big deal for the whole island.  So it was a bit disconcerting when, the night before the ceremony, the Premier’s Chief of Staff received a phone call from the Deputy Minister of Agriculture in Ottawa.  He bore news that the Minister wasn’t coming unless they changed the School’s name.

The name “Atlantic Veterinary School” was pretty straightforward, as these things go.  But the federal Minster – the unforgettable Eugene Whelan – was very intrigued with possibility that the school could contribute to aquatic farming, and aqua-culture generally.  And he had his heart set on a different name.

“What does he want us to call it?” asked the Chief of Staff.

“Atlantic Veterinary and Aquamarine College” said the Deputy.

The Chief of Staff thought about this.  “Isn’t Aquamarine a colour?”  The Deputy agreed that this was the case, but that the Minister was intransigent.

Now, Whelan did eventually relent and come to the signing – albeit about 5 hours late.  During those five hours, the Nova Scotia University Presidents seized their chance to cable their Minister (who of course was stuck in Charlottetown with the delay) with a final plea – it wasn’t too late, they said, to renege on the inter-provincial funding agreement and spend that money on Nova Scotia universities instead.

Honestly, I think this story has everything you need to understand higher education in Canada: pointless inter-provincial bickering, pointless interference from Ottawa, and pointless snobbery from humanities professors.  What is not pointless in all of this is the college itself, which has grown and thrived for more than 30 years now, and is a major scientific centre on the country’s east coast.  Mazel’tov, guys.

October 02

Too Big to Fail?

Here’s a serious question: are universities too big to fail?  And if so, what are the consequences of that?

If we had a fully public system, with tight government oversight on budgets, and no deficit spending – sort of like what much of continental Europe has – this wouldn’t be an issue.  By definition, public institutions couldn’t fail (though presumably a government would be free to close an institution should it wish to do so).   But the existence of institutional financial autonomy changes things.  Who, ultimately, bears the responsibility for an institution’s finances?  What happens if things go wrong?

One of the interesting things about the very market-driven reforms in both Australia and England is the assumption that universities are, at the end of the day, on their own.  They can have their freedom – especially to raise fees – but the flip side is that no one’s going to bail them out, either.  That might sound a little crazy to Canadians, who tend to think of campuses as next to immortal, but the fact is they’re not.  If people don’t attend universities, they go under.  It happens all the time with international campuses (think of Waterloo’s venture in the Emirates), and there’s a long history of private universities going under in the US (think Antioch College’s 2008 flame-out).  Even in Canada, we’ve had closures (or rather, closures thinly disguised as mergers – Augustana College in Alberta being the most obvious).

The Canadian view here reflects a very deep ambivalence on the part of governments about the role of markets in higher education.  By and large, governments love it – LOVE IT! – when entrepreneurial universities make money through licensing, or get foreign students to cough up cash for courses, because that means institutions are less likely to come banging on government’s door for money.  They are significantly less enthusiastic about universities getting local students to cough up money for courses, because that means parents come banging on their doors.  And they are positively allergic to the idea that a campus might lose serious money doing something entrepreneurial – or worse, try to cut services in order to make ends meet.

As a result, Canadian governments laud entrepreneurial universities in public, but stifle them in private.  And the reason for this is that governments are unwilling to risk the public opprobrium that would come from a major campus closure.  At the end of the day, governments know they would be forced to step in because universities really are too big to fail.

Only one province is actually honest about the implication of this: British Columbia.  There, precisely because the government feels ultimately responsible for institutional survival, institutions do not have the freedom either to build their own buildings (even if they raise their own cash) or to negotiate independently with staff (the province insists that settlements meet specific public-sector-wide guidelines).  My guess is that over time, most Canadian governments will converge on the BC model because institutions are, in fact, too big to fail, and as a people, we’re scared of failure. But that policy is not without cost: making universities safe can also make it more difficult for them to excel.

It would be great if one day we had a debate where we talked honestly about the pros and cons of institutional autonomy and markets in higher education, instead fumbling around addressing symptoms rather than causes, and dealing in slogans rather than empirics.  But that wouldn’t be very Canadian, would it?

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