HESA

Higher Education Strategy Associates

September 04

Costing an Inuit University

There is an interesting initiative afoot to create something called the Inuit Nunangat University.  A workshop report on the concept is here.  Today, I thought I would contribute to the debate by looking at what such an initiative might cost.

Some background: the idea of an Arctic university is not new.  Many people have noted that Canada is the only member of the Arctic Council that does not have a university north of the Arctic Circle.  This largely has to do with a lack of major population centres, but no matter.  The Gordon Foundation wrote about this problem a few years ago.  At the time, my take on it was that the Arctic could probably support a small university on the model of the University of Greenland – roughly a dozen faculty working mainly in language and culture, with a bit of professional programming (i.e. BEds) thrown in.

Now, this new proposed university is somewhat hazy regarding scope (not surprising given that, at the moment, it’s just a workshop report).  It’s clear given that the proposal is for an Inuit university, rather than a University of Nunavut, that culture and language are going to be at the centre of the institutional mission: this proposal is less a University of the Arctic than it is an Inuit version of First Nations University.  Clearly, the authors have some big hopes for the future – programs in Science, Medicine, and Engineering are proposed – but equally clearly, any northern university is going to be fairly small for a long time.  The Inuit population of Canada is about 72,000; the population of Nunavut is about 35,000.  The territory only churns out about 240 high school graduates each year, and the local college (Nunavut Arctic College) already enrols about 1,300 students per year.  And some university-bound students will choose a southern university regardless of local options.  Put all that together and you’re very unlikely to see enrolments at such a university reach 1,000 for a long time, and 500 is probably a more realistic upper band.

In Canada, there are a number of similarly-sized stand-alone universities.  For instance, there is Université Ste. Anne (370 FT students), Canadian Mennonite University (480 FT) and The King’s University, Alberta  (670 FT students).  And while these universities are usually pretty tight  for money, they are all viable.  But they don’t have research programs to speak of, and they definitely don’t have Engineering or Medical schools attached to them.  These sorts of professional schools simply aren’t feasible without much larger student numbers.

For argument’s sake, let’s say a future Inuit Nunagat University ends up at about 600 students.  That’s close to the size of King’s University in Alberta, which somehow (honestly not sure how they do it) manages to staff faculties of Arts, Social Science, Science, and Business with about 45 full-time professors, on an annual operating budget (in 2013-14) that was just shy of $14 million.  That’s about $21,500 per student – but it doesn’t include any programs that might be considered “high-cost”.  It also assumes you can do all your programming in a single spot, rather than via distance education and community delivery; but that’s anathema in a territory that spans 2 million square miles and three time zones.  And there’s also the fact that staff costs are higher in the north.

To get a sense of what kind of adjustment factor you’d need to make to translate the $21,500 into a Nunavut context, consider the case of Nunavut Arctic College.  It provides programming in something like 25 locations across the territory, and does so at a cost of about $41,000 per student (excluding free services provided to the college by the Government of Nunavut, which would add another $7,700 or so).  That’s roughly two and a half times the per-student cost of college in the rest of the country.  So it seems fair to assume that a King’s-like institution would cost about $21,500 x 2.5 = $53,500 per student.  And that’s just for low-cost programs: no medicine, or engineering, or anything like that.  Total annual cost?  About $32 million.  And that’s before you get to any capital expenditures, or any of the other things on the workshop wish-list, like low tuition, grants, student housing, etc.

Now $32 million is a mind-bogglingly huge amount in the context of Nunavut own-source tax revenues, which are only about $180 million per year.  But since close to 90% of the Nunavut budget comes from Ottawa, it is actually only equal to a little under 2% of the entire territorial budget.  That’s still not a small ask, but it is in the realm of the financially possible, provided ambitions around program offerings remain modest.

September 03

One Lens for Viewing “Administrative Bloat”

The Globe’s Gary Mason wrote an interesting article yesterday about the Gupta resignation.  Actually, let me qualify: he wrote a very odd article, which ignored basically everything his Globe colleagues Simona Chiose and Frances Bula had reported the previous week, in order to peddle a tale in which the UBC Board fired Gupta for wanting to reduce administrative costs. This, frankly, sounds insane.  But Mason’s article did include some very eye-opening statistics on the increase of administrative staff at UBC over the past few years – such as the fact that, between 2009-10 and 2014-15, professional administrative staff numbers increased by 737, while academic staff numbers increased by only 28.  Eye-opening stuff.

And so, this seems as good a time as any to start sharing some of the institution-by-institution statistics on administrative & support (A&S) staff I’ve been putting together, which I think you will find kind of interesting.  But before I do that, I want to show you some national-level data that is of interest.  Not on actual staff numbers, mind you – that data doesn’t exist nationally.  However, through the annual CAUBO/Statscan Financial Information of Universities and Colleges (FIUC) survey, we can track how much we pay staff in various university functions.  And that gives us a way to look at where, within the university, administrative growth is occurring.

FIUC tracks both “academic” salaries and “other” (i.e. A&S) salaries across seven categories: “Instruction & Non-Sponsored Research” (i.e. at the faculty level); “Non-Credit Instruction” (i.e. cont. ed); “Library, Computing, and Communications”; “Physical Plant”; “Student Services”; “External Relations” (i.e. Government Relations plus Advancement); and, “Administration” (i.e. central administration).  Figure 1 shows the distribution of A&S salary expenditures across these different categories for 2013-14.  A little over 32% of total money is spent on faculty, while another 23% is spent in central administration.  Physical plant and student services account for about 11% apiece, while the remaining three areas account for 18% combined.

Figure 1: Distribution of A&S Salaries by Function, in 000s of Dollars, Canada, 2013-14

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A zoom-in on the figures for central administration is warranted, as there has been some definitional change over time, which makes time-series analyses a bit tricky.  Back in 1998, the reporting rules were changed in a way that increased reported costs by about 30%.  Then, in 2003, about 15% of this category was hacked-off to create a new category: “external relations” – presumably because institutions wanted to draw a distinction between bits of central administration that increased revenues, and those that consumed them.  Figure 2 shows how that looks, over time.

Figure 2: Expenditure on Administrative & Support Salaries in Central Administration, in 000s of 2014 Real Dollars, Canada

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Long story short: from the 80s through to the mid-90s, administrative & support salaries in central administration rose by a little over 3% per year in real terms.  Then, briefly, they fell for a couple of years, before resuming an upward trend.  Ignoring the one-time upward re-adjustment, aggregate A&S salaries in these two areas combined have been rising at 5.3%, after inflation, since 1999.  Which is, you know, a lot.

Now, let’s look at what’s been going on across the university as a whole.  Figure 3 shows changes in total A&S salary paid over time, relative to a 1979 base.  For this graph, I dropped the “non-credit” category (because it’s trivial); for central admin, I’ve both combined it with “external relations”, and corrected for the 1998 definitional change.  Also, for reference, I’ve included two dotted lines, which represent change in student numbers (in red), and change in total academic salary mass (in yellow).

Figure 3: Change in Real Total Academic & Support Salary Spending (1979-80 = 100) by Function, Canada

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Since 1979, student FTEs rose 120%, while academic salary mass doubled, after inflation.  A&S spending in libraries and physical plant rose by considerably less than this, by 27% and 57%, respectively.  A&S spending on “instruction” (that is, faculty & departmental offices) rose almost exactly in tandem with student numbers.  Spending on A&S salaries in central admin and in ICT rose about twice as fast as that, ending the 35-year period at three-and-a-half times their original rate.  But the really huge increases occurred in student services, where expenditures on A&S salaries are now six times as high as they were in 1979.

Over the next couple of weeks, I’ll be able to supplement this picture with institutional data, but the key take-aways for now are as follows: i) “central administration” salaries are growing substantially faster than enrolment and academic salary mass, but they represent less than a quarter of total A&S spending; ii) the largest component of A&S spending – that is, those reporting to academic Deans – is actually growing exactly on pace with enrolment; and, iii) the fastest-growing component of A&S spending is student services.  So, there has been a shift in A&S spending, but it’s not entirely to the bad, unless you’ve got a thing against student services.

More next week.

September 02

Some Basically Awful Graduate Outcomes Data

Yesterday, the Council of Ontario Universities released the results of the Ontario Graduates’ Survey for the class of 2012.  This document is a major source of information regarding employment and income for the province’s university graduates.  And despite the chipperness of the news release (“the best path to a job is still a university degree”), it actually tells a pretty awful story when you do things like, you know, place it in historical context, and adjust the results to account for inflation.

On the employment side, there’s very little to tell here.  Graduates got hit with a baseball bat at the start of the recession, and despite modest improvements in the overall economy, their employment rates have yet to resume anything like their former heights.

Figure 1: Employment Rates at 6-Months and 2-Years After Graduation, by Year of Graduating Class, Ontario

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Now those numbers aren’t good, but they basically still say that the overwhelming majority of graduates get some kind of job after graduation.  The numbers vary by program, of course: in health professions, employment rates at both 6-months and 2-years out are close to 100%; in most other fields (Engineering, Humanities, Computer Science), it’s in the high 80s after six months – it’s lowest in the Physical Sciences (85%) and Agriculture/Biological Sciences (82%).

But changes in employment rates are mild compared to what’s been happening with income.  Six months after graduation, the graduating class of 2012 had average income 7% below the class of 2005 (the last class to have been entirely surveyed before the 2008 recession).  Two years after graduation, it had incomes 14% below the 2005 class.

Figure 2: Average Income of Graduates at 6-Months and 2-Years Out, by Graduating Class, in Real 2013/4* Dollars, Ontario

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*For comparability, the 6-month figures are converted into real Jan 2013 dollars in order to match the timing of the survey; similarly, the 2-year figures are converted into June 2014 dollars.

This is not simply the case of incomes stagnating after the recession: incomes have continued to deteriorate long after a return to economic growth.  And it’s not restricted to just a few fields of study, either.  Of the 25 fields of study this survey tracks, only one (Computer Science) has seen recent graduates’ incomes rise in real terms since 2005.  Elsewhere, it’s absolute carnage: education graduates’ incomes are down 20%; Humanities and Physical Sciences down 19%; Agriculture/Biology down 18% (proving once again that, in Canada, the “S” in “STEM” doesn’t really belong, labour market-wise).  Even Engineers have seen a real pay cut (albeit by only a modest 3%).

Figure 3: Change in Real Income of Graduates, Class of 2012 vs. Class of 2005, by Time Graduation for Selected Fields of Study

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Now, we need to be careful about interpreting this.  Certainly, part of this is about the recession having hit Ontario particularly harshly – other provinces may not see the same pattern.  And in some fields of study – Education for instance – there are demographic factors at work, too (fewer kids, less need of teachers, etc.).  And it’s worth remembering that there has been a huge increase in the number of graduates since 2005, as the double cohort – and later, larger cohorts – moved through the system.  This, as I noted back here, was always likely to affect graduate incomes, because it increased competition for graduate jobs (conceivably, it’s also a product of the new, wider intake, which resulted in a small drop in average academic ability).

But whatever the explanation, this is the story universities need to care about.  Forget tuition or student debt, neither of which is rising in any significant way.  Worry about employment rates.  Worry about income.  The number one reason students go to university, and the number one reason governments fund universities to the extent they do, is because, traditionally, universities have been the best path to career success.  Staying silent about long-term trends, as COU did in yesterday’s release, isn’t helpful, especially if it contributes to a persistent head-in-the-sand unwillingness to proactively tackle the problem.  If the positive career narrative disappears, the whole sector is in deep, deep trouble.

September 01

The Tennessee Promise

So, yesterday I talked about a big increase in access in the UK, which seems to have little to do with tuition fees.  Today, let’s talk about a developing story in the United States, where a lowering of net prices seems to have had a big impact on access.

You may recall that in the US over the last couple of years, there has been a growing movement for free community college, something that President Obama picked up on earlier this year.  But before Obama picked up this baton, free community college had already been introduced in Republican Tennessee, where governor Bill Haslam had turned something called “the Tennessee Promise into law in 2014.

Technically, the Tennessee Promise is not “free tuition”.  It’s only available to students entering straight from high school (which is a bit weird in terms of design, but whatever).  Students have to be full-time, maintain a 2.0 average, meet regularly with a mentor, and perform eight hours of community service per term.  And technically, what it does is reduce your tuition to zero after all other forms of aid and scholarship are taken care of (this is what is known in the business as a “last dollar” scholarship).  If you apply for the award and meet the terms, government will cover your tuition to the point where your net price is zero.  For a good number of people, this means free tuition with minimal strings attached, so let’s just call it free tuition.

Now, you might expect that with this kind of incentive, enrolment might rise a bit.  And you’d be right.  According to very early results, the number of freshmen is up 29.6% over last year.  Obviously this is a pretty impressive result, but before we get too excited, we should probably find out a little more about where these new students are coming from.  Are they “new” students, or are they mostly students who would have gone to a 4-year college, but have chosen 2-year instead?  And what about students’ financial background?  If you’re poor enough to be anywhere near maximum Pell grant ($5,775), the Tennessee Promise provides no additional aid, because tuition at Tennessee Community Colleges is about $4,000.  So it may well be that what the Tennessee Promise is doing is providing aid to people higher up the income ladder.  This is a little inefficient, but since (as I noted back here) community college students tend to come from poorer backgrounds anyway, this is not as regressive as it would be if it were implemented at 4-year colleges.

We should be able to answer these questions in a few weeks (yes, Canadians, in some places data is available in weeks, rather than years).  Even though Tennessee does not track applicants by income the way the UK does, the state’s excellent annual Higher Education Fact Book does contain two pieces of data that will help us track this.  The first is college-going rates by county, which will help us understand whether the jump in participation is concentrated in higher- or lower-income counties, and the second is the percentage of students who are Pell-eligible.  I’ll keep you up-to-date on this when the data is out.

The most intriguing possibility here is that rates of attendance for Pell-eligible students might be rising, even though the Tennessee Promise provides no actual added benefit for many of them.  It may well be that simply re-packing the way we frame higher education costs (“it’s free!”) matters more than the way we actually fund it (“your tuition is $4,000, and you also have a grant for $4,500”).

This would have significant policy ramifications for us in Canada.  As we noted last year in our publication, The Many Prices of Knowledge, many students at Canadian community colleges face an all-inclusive net price that is negative, or very close to it.  Similarly, poor first-year university students in both Ontario and Quebec have negative net prices.   No one knows it, because we package aid in such a ludicrously opaque fashion, but it’s true.  And if the Tennessee data provides evidence that the packaging of aid matters as much as the content, then it will be time for Canadian governments to re-evaluate that packaging, tout de suite.

August 31

An Interesting Story about Access in the U.K.

Remember how, in 2012, tuition in England rose by about $10,000-$12,000 (depending on the currency exchange rate you care to use) for everyone, all at once?  Remember how the increase was only offset by an increase in loans, with no increase in means-tested grants?  Remember how everyone said how awful this was going to be for access?

Well, let me show you some interesting data.  The following comes from UCAS, which, at this time of year, does daily (yes, daily!) reports on “accepted applicants” (that is, applicants who have been offered a place at universities for the term commencing in a couple of weeks).  Figure 1 shows what’s happened to student numbers from families in the lowest income quintile since 2011, which was the year before the tuition increase.

Figure 1: Number of Accepted Applicants from the Lowest Income Quintile, England, 2011-15

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Big increase, right?  Over three years, it amounts to 19.8%.

“Oh well”, say the zero-tuition true believers, “this doesn’t prove anything.  What really matters is what happened to students from higher income backgrounds.  Surely, being less bound by financial constraints, their numbers grew even more”.

In a word: nope.  The rate of accepted applicants increased by more than three times faster for students from the bottom quintile (quintile 1) than it did for those from the top (quintile 5).  Of course that’s partly because they have a lot more room to grow: there are still about three times as many accepted applicants from the top quintile as the bottom quintile.  But the point is: contrary to expectations, the gap is closing.

Figure 2: Change in Number of Accepted Applicants by Income Quintile, England, 2011-2015, Indexed to 2011

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“Ok”, say the skeptics; “let’s look at counterfactuals: what’s going on in neighbouring countries, where policy didn’t involve a massive tuition fee increase?  What about Wales, where tuition stayed at a little over £3,000, or Scotland where tuition is free (for Scots: English kids still have to pay the £9,000)?”

Fair question.  Figure 3 shows what happened to students from the lowest income quintile in all three countries: in Scotland, rates of accepted applicants are up by 28%, in Wales by 21%, and in England by 17%.

Figure 3: Change in Rate of Accepted Applicants, England, Scotland, and Wales, 2011-15, Indexed to 2011

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“A-HA!”  Say the usual suspects.  “Clear evidence that free is better!”  Well, maybe.  But before declaring victory, why not look at rates of accepted applicants for low-income students across these three countries?   That is: what percentage of all youth from the bottom income quintile actually reach the stage of being “accepted applicants”?

Figure 4: Accepted Applicants from Bottom Quintile Families as a Percentage of all Bottom Quartile Youth, England Scotland, And Wales, 2011-2015

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Quite a different story, isn’t it?  Turns out that in horrible, vicious, neo-liberal, £9,000 tuition England, 18% of lowest-income quintile youth apply, and are admitted to university.  In idyllic, equality-loving, £0 tuition Scotland, the figure is not much more than half that, at 10%.  So let’s just say that the evidence claiming fees explain participation rates, and changes thereof, is pretty limited.

But getting beyond the issue of fees, I think there’s a bigger story here.  Right across the UK, regardless of tuition fee regime, there is a massive uptick in participation from low-income students over the last couple of years.  Clearly, something is going right there with respect to low-income students.  Is it a change in aspirations?  Expectations?  Academic preparation?  As far as I know, no one has published on this – I have a feeling everyone was so keyed on explaining expected declines in participation that no one was set up to explain the opposite.  But whatever is going on, it’s a success, and other countries would do well to learn from it.

August 28

Boards, Senates, and Myths of University Exceptionalism

If there is one thing that the departure of Arvind Gupta has demonstrated, it’s that there are a large number of faculty (and others) who either misunderstand or dispute the role of Boards of Governors at universities.

Here’s the deal.  Regardless of whether an organization is for-profit or not-for-profit, there is some kind of committee at the top, which usually has the word “Board” in its title – Board of Trustees, Board of Governors, whatever.  The job of this board is threefold: first, make sure the organization meets its strategic goals. Second, make sure it meets its financial goals (in for-profits, these two are pretty much identical, but in non-profits they’re different).  Third, hire and hold accountable a chief executive for getting those things done.

At this point, I hear the objections: “universities aren’t corporations, how dare you compare us to a for-profit company, etc.”  The first of these is wrong: universities most definitely are corporations.  Corporate status is key to providing the legal framework for pretty much everything universities do.  True, they aren’t for-profit entities (in our country, anyway) but for-profit/not-for-profit is irrelevant with respect to governance: you still need a body at the top of the organizational hierarchy performing those three functions.

What makes universities unique is the degree to which staff are involved in developing  strategic goals.  Both for statutory and practical reasons, this job is more or less left to Senates (or their equivalents), and their committees.  Boards formally ratify these strategy documents, and thus “own” them, but compared to other types of organizations, they are very hands-off about this part of the job.  Senates, in effect, are the source of university exceptionalism.  But there is nothing – literally nothing – that makes universities exceptional with respect to the jobs of maintaining healthy finances, and selection/oversight of the chief executive.  The Board of a university executes those functions exactly the way the board of any other organization does.

When it comes to hiring, people kind of get this.  When new Presidents are hired, no one questions the prerogative of the Board to make the decision.  And while there is sometimes grumbling about who got chosen or who didn’t get chosen, no one parades around demanding “transparency” about why candidate X got picked instead of candidate Y.  But apparently when a President leaves, many people think that the Board owes the faculty all the gory details.  Because transparency.  Because “universities are different”.

Transparency is usually to the good, of course.  But sometimes, if you’re dealing with a personnel matter, the correct way to deal with it is to say goodbye as quickly and as amicably as possible.  By and large, you don’t do that by broadcasting the circumstances of the departure to the world.  Transparency sometimes comes second to expediency, tact, and judgement.  Yet, what a lot of people at UBC seem to be saying is that Boards owe them explanations.  Because “universities are different”.

To keep this short: universities are different – but not in that way.  Regardless of the organization they serve, boards don’t owe anybody explanations about personnel decisions.  They have a responsibility to make sure the organization is fulfilling its mandate (in managerial terms: making sure it has a strategic plan, and is fulfilling it), and providing a public good.  That’s it.   What they have to make clear in a university context is whether or not a dismissal/resignation affects the strategic plan, or (especially) if there was a dispute between Board and CEO regarding the nature or direction of the strategic plan.  And the reason they have an obligation in this scenario is because of Senate’s role in creating the strategy in the first place.

Sure, faculty might want to know details.  They’re curious.  They’d like to know (or impute) the politics of the whole thing.  But there is no right to know, and saying “universities are different” – when in this respect they clearly are not – doesn’t change anything.

August 27

Theories of Change

One of the easiest things to do in policy is to advocate for policy X, so as to change effect Y.  One of the hardest things to do is to get people to explain clearly their theory of change.  That is, what are the steps by which changing X actually affects Y?

Take performance-based funding.  It’s easy to get hot for the idea that organizations can be steered by offering incentives: if you pay schools for students, they’ll raise enrolment.  If you pay them for graduates, they might spend a bit more effort and money on academic support service.  And so on.  By this theory, all you need to do to get universities to change their behaviour is to offer the right financial incentives.

But here’s the problem: that theory works a lot better for individuals than for organizations.  If what you are trying to do is force a change in organizational culture (e.g. get them to shift to a more student-centred focus), you have to remember that individuals inside an organization aren’t necessarily going to face the same incentives as the institution.  Just because an organization is incentivized doesn’t mean everyone in it is incentivized.

In extremely hierarchical organizations, it’s possible for management to pass incentives on to staff in various ways.  But universities are not particularly hierarchical institutions.  Outside of terrorist cells, universities are about the most loosely-coupled organizations on earth.  Some of the larger among them, to quote Kevin Carey, are more like holding companies for a group of departments, which are themselves holding companies for professors’ research interests.

So let’s get back to the example of a government that hopes to get universities to pay more attention to student success.  Say the government comes up with a funding formula that potentially allows an institution to access a couple million dollars more if it increases its graduation rate.  What happens?

Well, it’s certain that university leadership will try to grab the money.  That’s their job.  Then they’ll think about how to achieve the goal.  Pretty much every authority on retention will tell you that it is a institution-wide exercise.  The key is identifying students that are having trouble, and then making sure they get appropriate assistance, either from instructor(s), or from some kind of centralized suite of academic services.  But while it’s easy enough to invest money in new centralized services, the key to such an approach still rests on professors (some more than others) altering the way they behave in class, so as to spend more time/effort identifying strugglers early, and then doing something about it (talking to the students themselves, sending their name to a counsellor who can then contact the student and offer assistance, etc.)

The question is: how do you get the professor to make those changes?  The promise of more money to the institution is a pretty weak one.  First, while many people’s behaviour will need to change in order to get the money, not everyone’s does, so there’s a rational reason to try to free ride on the process.  Second, even if the institution does get the money, it doesn’t follow that the money will be distributed in such a way that all individual profs  benefit.  A prof’s behaviour is not incentivized in the same way as the institution’s.  And if that’s so, why would we expect the prof to alter his or her behaviour?

I’m not saying it’s impossible steer universities by using money as an incentive; I’m saying that success in doing so requires the incentives to be aligned in such a way that everyone’s behaviour down the chain is incentivized.  And in a university, where every professor is, to an extent, a free agent, that’s really hard to do.  It works where the incentive aligns with career goals or professional norms (e.g. do more research).  But when it pushes against professional norms, it’s a lot more difficult.

Fundamentally, people trying to steer system reforms need to ask themselves: how will this incentive alter what individuals on the ground actually do on a day-to-day basis?  If there’s no good answer to that question, chances are the incentive isn’t likely to work.

August 26

October 20th

Policy-making in Ottawa is like a huge river, moving in a slow stately procession, and only occasionally providing excitement if you hit some rapids.  It’s not like Washington, which – for all its vaunted “gridlock” – is actually more like an ice jam: there is a lot of pressure in the system, and things can move pretty quickly if the jam breaks somewhere.  Partly it’s because of our Westminster system, and our tradition of party discipline: there are not many independent policy actors on the hill, and hence, not many points where interest groups can exert leverage.  Add to that a relative lack of genuinely independent intellectual life in Ottawa (government and interest groups are dominated by policy analysts – Canada has no real equivalent to the Brookings Institute, or even the New America Foundation), and what you’ve got is a shop that doesn’t absorb new ideas easily.

All of which is to say that changes of government represent one of the very few times where new ideas get a hearing.  And while it’s far from assured, there’s a significant chance that there will be a new government on, or shortly after, October 19th – the Tories haven’t seen a poll putting them in majority territory in years, and it seems unlikely that either opposition party will keep them in power, either with votes or abstentions.  So October 20th is going to be the crucial date for policy entrepreneurs.

A new government comes to power with only a limited idea of what it’s going to do.  Party platforms don’t come close to covering all areas of government activity, so new ministers are winging it on most files.  Most post-secondary files come under the “winging it” category: apart from a Tory promise on tax breaks for apprenticeships, and a Liberal promise for more money for Aboriginal students, there’s been nada in the platforms so far, and as I said back here, that’s probably not going to change. Also, if there is a change of government, the new cabinet will be pretty raw: apart from Mulcair, there’s no one on the NDP front bench who’s ever held a cabinet seat at either a federal or provincial level; among Liberals, there are a dozen or so who have the “Honorable” prefix, but only Ralph Goodale, Stephane Dion, and John McCallum had substantial portfolios for any period of time.  Whether a new cabinet is red or orange, or a combination of the two, it’s actually going to be pretty green (but not Green).

Now, if you’re in the business of selling policy ideas, green cabinets are the best kind.  They have little allegiance to the status quo, are interested in new ideas, and cynicism hasn’t yet set in: they will never be more open to new ideas than they are at the start of a new government.  But – and this is the important bit – they have to be new ideas.  New governments may want to replace old policies, but they won’t do it by re-adopting even older ones.  There has to be an element of progress involved.

In higher education, there aren’t a whole lot of areas where the Harper government agenda needs to be re-wound.  On student aid and transfers, frankly, they’ve done little that opposition parties wouldn’t have done themselves.  Internationalization has been a disappointment, but it’s small ball from a government perspective.  Where a big re-think is needed is on research.  Dollars are getting scarcer, and while a greater focus on applied research has had some successes (particularly the bits involving polytechnics), the degree of de-emphasis on basic research, and the obsession with knowledge translation, is becoming alarming.

Unfortunately, there doesn’t seem to be anyone out there proposing solutions that go beyond: “bring back the status quo ante”.  That’s a problem, because no matter how much everyone liked the status quo ante, that approach doesn’t excite new ministers.  If the sector wants a new approach that will attract big interest and big dollars, it has to come up with something genuinely new.

October 20th is fast approaching.  And this kind of window rarely opens twice.  Time to get cracking on some new approaches.

(corrected from the original and the version that went out via email to reflect the fact that the election is on the 19th, not the 18th.  That was a bad goof on my part – sorry)

August 25

Oil and Universities

As the price of oil continues to plummet, just a few thoughts on the financial implications for universities.

In provinces that are oil importers, the effect is likely net positive, slightly.  Economic growth should be a little bit above trend, inflation will fall a bit, and those factors will make it easier for provincial governments to balance budgets this year, without turning to cuts.

In provinces that are exporters, an oil price drop will likely affect the budget in two ways.  The first is through reductions in royalty payments, and the second is through a decline in general tax receipts, as a result of a generalized economic slowdown.  On the flip side, as oil price decreases, so too does the Canadian dollar – which means that the price of oil in Canadian dollars actually isn’t decreasing as fast.  How these play out in Canada’s three major oil-producing provinces all depends somewhat on a variety of economic factors, so here’s a quick look at various the provincial budgets’ sensitivity to oil prices, and how current prices play out.

Effect of Current Oil Prices on Current (2015-6) Year Budgets, Major Canadian Oil-Producing Provinces

1

 

 

 

 

 

 

 

So, the takeaway from the table: if oil prices remain as-is for the fiscal year as a whole, the effect is equivalent to a loss of 1.6% of total expenses in Saskatchewan, 4.4% in Alberta, and 5.4% in Newfoundland.  Now that’s a very rough estimate – it’s not taking account of the fact that falling oil prices are, to some degree, offset by a falling Canadian dollar (which would make the effect less severe), but it’s also not taking account of the fact that “total budget expenses” includes – in Newfoundland – quite a bit of debt payments as well, so the effect relative to program spending is understated.  And in any case, what happens this year is peanuts compared to what will happen next year.  This year’s provincial budgets assumed that oil would rebound to about the $80 range in 2016; at the moment, 12-month futures prices are running in the $50-55 range, so the impact of oil prices next year will be about double what you see in Table 1.

Even in Alberta, $4 billion is a lot of money.  At the moment, the betting seems to be that the new NDP government is willing to do a lot of borrowing to cover the shortfall, so in the short-term this may not matter much.  In Newfoundland, where the deficit is already over $1 billion, and net debt is over $10 billion, the ability to borrow may be more limited.  That almost certainly means program cuts in Newfoundland; in Alberta, it will make even existing promises from the incoming government hard to meet.

What about overseas?  Well, it’s worth a ponder how the drop in oil prices is going to affect higher education in the Gulf States.  All of them have big social welfare bills (the price for maintaining the monarchy), but they have varying abilities to maintain this spending in the face of low oil revenues.  Bahrain and Oman are already pretty close to the financial breaking-point, while the Kuwaitis and Saudis have big enough financial cushions to ride out a two-or-three year slump, but after that it gets harder to see how they will avoid significant cutbacks.  Qatar looks pretty safe, come what may; within the UAE, Abu Dhabi’s cushion is much better than those of the other Emirates, including Dubai.  The real worry for Canadian institutions is that there’s no guarantee that the King Abdullah Scholarship Program – which funds a large number of Saudi students in Canada – will continue to be funded at anything like current levels.

Bottom line: in this country, higher education is to no small degree dependent on the price of oil.  A long-term drop in prices will affect institutions negatively.  Planning and Government Relations offices take note.

August 24

Welcome Back

Morning, all.  August 24th.  Back, as promised.

School starts shortly.  The new crop of frosh were born in 1997, if you can believe that – to them, Princess Diana has never been alive, and Kyoto has always been a synonym for climate change politics (check out the Beloit Mindset List for more of these ).  Stormclouds line the economic horizon.  It’s going to be an interesting year.

In the US, progress on any of the big issues in higher education are likely to be in suspension as the two parties spend months figuring out who their candidates are going to be.  On the Democratic side, the presumptive candidate, Hilary Clinton, has put forward an ambitious plan for higher education, which, barring an absolute sweep at the polls, has almost no chance of passing Congress.  On the Republican side, no one apart from Marco Rubio seems to care much about higher education, except for Scott Walker who seems to want to use higher education as a punching bag, much as his idol Ronald Reagan did fifty years ago.

Overseas, the most consequential potential development is in the UK where – if the government is to be taken at face value – for the first time anywhere, measured quality of teaching might meaningfully affect institutional resources. In the rest of Europe, the ongoing economic slump looks set to create new problems in many countries: in Finland, where GDP contracted for the third year in a row, government funding will be down roughly 8% from where it was last year.  And that’s in one of the countries that thinks of itself as being particularly pro-education.  Germany, Sweden, and (maybe) Poland look like the only countries that might resist the tide.

Here in Canada, the outlook remains that post-secondary education will continue to see below-inflation increases in government funding for the foreseeable future, except in Alberta where the new provincial government intends on giving institutions a big one-time boost, which may or may not be sustainable, depending on how oil and gas prices fare.  This means resources will be scarce, and in-fighting for the spoils will be fierce.  And this, in turn, means a lot of governance, a lot of wailing about “corporatization” (always a good epithet when funding decisions aren’t going your way), and – inevitably, given the recent events at UBC – a lot of arguments about resource allocations, dressed up as arguments about governance.

(In case you’re wondering: I have no idea what happened there, exactly.  I do, however, believe three things: i) in a corporate context, the statements by the Board of Governors and interim President on Gupta’s departure are actually quite easily interpretable, and don’t leave a whole lot to the imagination; ii) if/when the truth comes out, it’ll be a hot mess of grey zones, and some of the wilder conspiracy rhetoric about the departure will seem ludicrous; and, iii) any theory positing that Gupta was fired for a lack of “masculinity” by a Board Chair who not only spent millions of his own dollars to create a dedicated Chair on Diversity in Leadership, but also that replaced said “unmacho” President with Martha Piper of all people, has more than one prima facie credibility problem.)

But behind all this, there’s a broader truth that I think the higher education community is being very slow to acknowledge.  The era of growth is over.  Higher education is not a declining industry, but it is a mature one, and this changes the nature of the game.  In the aughts, Canadian university income increased faster as a proportion of GDP than pretty much any country in the world (Netherlands and Russia aside).  It was a rising tide that raised all boats.   And I mean that literally: as a share of the economy, universities grew by half a percentage point (from 1.4% to 1.9% according to the OECD, which I think is a bit of an underestimate), which is like adding more than the value of the entire fishing industry.

But those boats stopped rising a couple of years ago.  Institutions with smug strategic plans about increasing excellence need to face reality that there’s no new money with which to achieve those goals: funds for new projects are, for the most part, going to have to come out of increased efficiencies, not new money.  It’s tougher sailing from here on out – permanently.  Institutions are going to need to be leaner, better managed, and more focused.  However, the meaning of those terms are hardly uncontested in academia.

This should make for a fun year.  Looking forward to it.

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