Higher Education Strategy Associates

Category Archives: budget

March 30

What’s Next for Student Aid

A few months ago, someone asked me what I wanted to see in the budget.  I said i) investment in aboriginal PSE, ii) system changes for the benefit of mature students and iii) changes to loan repayment (specifically, a reduction of the maximum loan payment from 20%  of disposable income to 15%).  To my great pleasure, the government came through on two of those wishes.  But there is still a lot of work to do yet.

Let’s start with the Post-Secondary Student Support Program, which the Government of Canada gives to individual First Nations to support band members’ education costs.  The Budget provides a $45 million (14%) bump to this program but also said the Government would “undertake a comprehensive and collaborative review with Indigenous partners of all current federal programs that support Indigenous students who wish to pursue post-secondary education”, which I think is code for “we’d prefer a new mechanism which is somewhat more transparent than PSSSP”.

Let’s just say I have my doubts about how easy this collaborative review will be.  Indigenous peoples – young ones especially – have a lot of issues with the federal government at the moment, and it will be difficult to try to manage a focussed review of this one subject without a lot of other agenda items intruding.  I’ve written on this subject before, and there certainly are ways which the funding could be arranged to be managed more efficiently.  That said, some of these ways involve taking management away from band councils and giving it to some other aboriginal organization operating at a larger scale and not all bands are going to find that appealing.

Anyways, the takeaway is: if the feds are expecting a replacement to PSSSP to be in place by fall 2019, they’d better get to work yesterday.

Now, what about the new measures for mature students/adults returning to school?  This was a welcome budget initiative, because the policy discussion has perhaps been focussed too heavily on traditional-aged students for the past few years.  There are however, maybe two cautions I would put on the initiative and how it will roll out.

The first is the budget description of the $287M over three years for programs benefitting these students as a “pilot project’.  I am fairly certain that is PMO-speak, not ESDC-speak.  First of all, I’m moderately certain the law doesn’t allow pilots; second, the idea that provinces are willingly going to spend time and money re-jigging all their program systems to accommodate program changes that are inherently temporary in nature is kind of fanciful.  So I suspect what’s going to happen here is that over the next few months CSLP is going to come up with a bunch of different ways to help this population (change cost allowances for older students, and maybe for dependents too), re-jig how prior-year income is calculated, raise loan limits for this population, raise grant eligibility, etc etc) and then roll them out in roughly ascending order of how irritating they are for provinces to program.  It’s not going to be a big bang, which may limit how well the policy is communicated to its intended targets.

But there’s a bigger issue at play here which the government missed in its haste to get a budget out the door.  One of the biggest problems in funding re-training are the artificial breaks in funding and jurisdiction that occur at the 12-month mark.  If your program is shorter than that, you’re covered by various provincial labour market initiatives and on the whole your compensation is decent.  Longer than that, you’re on fed/prov student aid, which in general is not as generous (and more to the point is repayable).  It would be useful for the two levels of government to work together to provide a more seamless set of benefits.  Perhaps regardless of program length, learners could benefit from 8 months of the more generous treatment and then move on to a slightly less-generous mixed loan/grant system.  This wouldn’t be a quick shift: my guess is that even if you now started talking about how to achieve this, it would still take four or five years for a solid, specific solution to come into view (if you think universities are slow, try federalism).  But still, now’s as good a time as any to start, and perhaps the dollars attached to the mature students programs may be a good conversation starter.

My third wish – the one that didn’t get any traction in this budget – was for improvement in student loan repayment.  I’m not that disappointed in the sense that I’m not greedy (no budget would ever have given me 3-for-3), but I do think there I work to be done here.  Perhaps this gets enacted as part of the follow-up to the Expert Panel on Youth being chaired by Vass Bednar and due for release at some point this spring (although who knows, if the Naylor Report is anything to go by, we could be waiting into 2019).  Or perhaps not: it’s not like CSLP hasn’t already been given a huge whack of work for the next couple of years.

But if that’s the worst problem we have in student aid in Canada, I’d say we are in pretty good shape.


(As a coda here, I’d just like to pay tribute to the Canada Student Loans Program’s Director-General, Mary Pichette, who is leaving the public service shortly.  Mary’s been involved two big rounds of CSLP reform: the one in 2004/5 which first created the grants for low-income students, and second the ones around the 2016 budget (not just the increase in grants but the many smaller but still important changes to need assessment as well. 

 I won’t say –I’m sure she wouldn’t want me to – that those two reforms were down to her.  But they were down to teams that she led.  She did a lot over her two stints in the program to make the policy shop more evidence-based and her legacy is simply that she’s made life easier for literally hundreds of thousands of student across the country.  They can’t thank her, but I can.  Mary, you will be missed.)

March 13

Tea Leaves on the Rideau

Last Tuesday, federal Finance Minister Bill Morneau set the date for the federal budget for next Wednesday (March 22) and naturally people are wondering: what goodies are in store?  Without being privy to any inside information, here’s my take on where we are going.

At the press conference announcing the budget date, Minister Morneau dropped some important hints.  The biggest one is that, contrary to what had been heavily promoted for the past year, this budget will not be an “Innovation Budget”, but will represent a “downpayment” on an Innovation Budget.  From this we should probably deduce two things.  One: the feds are broke.  Well, maybe not broke, but certainly unwilling to increase borrowing in the face of a $30 billion deficit, slow growth and adverse demographic trends.  Two: the government has – THANK GOD – attained enough self-awareness to discern that does not really know what it’s doing on this file.  I noted back here that the Finance Minister’s Economic Council was flatly in opposition to the Innovation Ministry’s ideas about innovation clusters, and it probably came to the conclusion that making big budget commitments in the face of such disagreement was untenable.

To be clear: I am thrilled with this outcome.  Yes, it’s too bad the feds seem to have wasted a year on this file.  But far better to take a sober second look at the issue and make smart policy rather than to charge forward in order to meet an artificial deadline.  I also take it as a favourable sign that the government has brought Ivey Professor Mike Moffatt – co-author of a large recent piece on Innovation Policy by Canada 2020 – into the ministry on a temporary basis. For one thing, he actually understands what innovation policy means outside the tech sector, a concept which has been missing from ministry discourse since the minute Minister Bains was appointed.

(Many of you have been asking to me on twitter to explain what the hell the terms “Innovation” and “Innovation Policy” actually mean.  Sit tight: we’ll work on that one this week.)

There were also hints from the Minister that this would be a “skills” budget, a sentiment which has left many puzzled.  A year ago, the big issue for the near term was supposed to be the renegotiation of Ottawa’s Labour Market Development Agreements with the provinces, which mostly hasn’t happened. Since then there have been no major policy initiative apart from that.  There has been – via the consultations on Innovation policy – something of an understanding that skills are a big part of the innovation problem, but government thinking doesn’t appear to have progressed much beyond “more coders”! as a result.  (At a rough approximation, this government’s skills policy is more or less the same as the last ones, only if you just take out all the references to welding and insert the coding instead).

The worry here is that the “big initiative” will in fact be the implementation of the horrifically-named “FutureSkills Lab” promoted by Dominic Barton, chair of Morneau’s Economic Advisory committee (which I described back here).  If that’s the case, we may be about to view the first really big policy disaster of the Trudeau era.  First of all, no one is going to buy FutureSkills – essentially a kind of policy laboratory – as something which will help Canadians in anything other than the long term.  Second of all, the feds have yet to discuss the idea meaningfully with the provinces and without their buy-in, this initiative will be Dead on Arrival, just as the Canadian Council on Learning was.

To be clear: I don’t think this is going to be the “big initiative”.  I don’t think the Liberals are that stupid.  But I guess we’ll see.

What about Science?  Here, the news is not good.  You may recall that the Government of Canada commissioned a Fundamental Science Review, and asked by the inimitable David Naylor to run it.  Naylor, as requested, submitted the report to the Minister of Science in December.  The Government of Canada has yet to publish it and refuses to answer questions about when it might be published.  Why?  It seems transparently obvious that the government found some of the findings inconvenient, and would prefer to bury it until after the budget.  Maybe the report suggested the system needed more money (which would have been beyond the committee’s remit since it was only asked to comment on the management of the system, not the size).  Maybe the report suggested that certain science bodies which the government has already decided to fund were redundant.  Either way, the government seems to have decided the budget will be easier to spin if we haven’t all first read Naylor’s report.  I have a hard time imagining how this could a harbinger of good news.

In sum: don’t bank on anything big in this budget.  In fact, brace yourself for at least one major piece of goofiness.  Fingers crossed it doesn’t happen, but best to be prepared.

June 13

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


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$


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.

April 27

Comparing Per-Student University Expenditures by Category (2)

This is part 2 of a two-parter on how Canadian universities spend their money.  All the stuff about what data I’m using, caveats thereto, etc., are available in yesterday’s post.  If you missed yesterday, go catch up here.

First, two small mea culpas from yesterday.  First, due to a cut/paste error, part of the data on student services that went out yesterday was slightly off, but has now been corrected on the website.  Second, I neglected to mention that the student services figures included money from operating budgets for grants and bursaries, which accounts for some of the wide differences between institutions.  Sorry.

OK, onwards.  Let’s focus first on the two spending categories we didn’t take a look at yesterday; namely, “Administration” (meaning, mostly, central administration) and “External Relations” (meaning mostly government relations and fund raising).  This is shown below in table 1.

Table 1: Per-Student Expenditure, Selected Categories of Non-Academic Activity


A couple of obvious points here:

  • Compared to the spending categories we looked at yesterday, the gaps between 75th and 25th percentile are smaller (in other areas, the gap was usually 2:1; in these categories it is closer to 3:2).  This suggests that on the whole, institutional spending patterns vary less in these central admin functions that they do in areas like libraries and ICT.
  • On the other hand, the institutions at the top and bottom of the range seem to be much more outliers.  At the high-cost end, there are probably two things going on.   First, some tasks are pretty common and have to be done no matter what the size of the university, so small institutions  tend to look expensive on a per-student basis (for example: a $400,000 p.a President at a school with 40,000 students is $10/student; a $200,000 p.a President at a university with 2,000 students is $100/student).  Second, recall that the “central administration” category does vary a bit from school-to-school, and so some of this may be about oddities in reporting.
  • Most of the schools that spend small on “external relations” are part of the UQ system.   Basically, when you’re so close to being 100% government-funded and controlled, you don’t lobby or look for external money, hence your costs go down.

Figure 2 puts together all the data from the different expenditure categories.

Table 2: Per-Student Expenditure, all non-academic categories


Three major points here:

  • The per-student costs at very small universities is really stratospheric.  Universities clearly have some fixed base costs that require large student numbers in order to make them bearable.  From a public policy perspective, that either makes it important to ensure institutions are a minimum size, or that funding formulas provide a base amount for fixed costs in addition to per-student funding.
  • Keeping a rein on non-academic costs matters.  The difference in costs between an institution at the 75th percentile of overall non-academic costs and a 25th percentile institution is $2,950 or pretty close to half a year’s worth of average tuition at a Canadian university.  That’s a lot of money which could be used for other purposes (or cut in order to provide cheaper education, though that wouldn’t be my choice.
  • Actually, it’s even more than that.  If an institution could emulate the spending of the 25th percentile institution in each individual category – that is, a library cost like UQAM’s ($509/student), an ICT cost like Carleton’s ($508/student), physical plant costs like Laval’s ($1,331/student), Student Services costs like Winnipeg’s ($958/student), administration costs like St. Thomas’ ($1,604/student) and external relations’ costs like Manitoba’s ($285/student), you’d have total non-academic costs of just $5,195 – that is, $3,800 less than the 75th percentile institution and $2,200 less than the median one.

But of course, one might protest: does anyone really want to be in the 25th percentile of spending on this stuff?  Don’t great universities spend a lot of money on this stuff?  Isn’t spending more money on things like Libraries and ICTs a sign of quality?

Well, maybe.  To some extent, you get what you pay for.  But welcome to the central paradox of university management: you can’t simultaneously demand prudence and excellence if the only indicator of greatness is how much money you spend.  It’s why outcome metrics matter; and why those who oppose them, in the end, simply promote waste.

April 26

Comparing Per-Student University Expenditures by Category (1)

Just for giggles the other day, I took a look at Canadian university expenditures in 2013-14 using (as usual) the CAUBO/Statscan Financial Information of Universities and Colleges Survey.  I looked at operating expenditures by category.  Then I normalized them per FTE student.  And I got some very weird results which I thought I would share with y’all.

What I am going to do in this series is show you the results for the main categories of expenditure which are “non-academic”.  I am not going to look at the categories known as “instruction and non-sponsored research” or “non-credit instruction”, because those vary significantly according to the mix of disciplines offered at an institution.  Instead, today I am going to restrict myself just to the categories “Library”, “Computing”, “Physical plant”, and “Student Services”; tomorrow I will  look at the more complicated cases of “Administration” (meaning central administration), and “External Relations” (meaning both government/public affairs and fundraising/alumni relations).

(btw – the data is from 2011-12 because we haven’t updated our PSIS file lately.  The numbers presented here are a bit dated, but the basic picture hasn’t changed.)

The following table shows the key elements of the comparison.  The intriguing thing here is that institutions actually seem to have very different patterns of spending.  In all four categories, the difference in per-student spending between an institution at the 75th percentile is twice what it is at the 25th percentile.  I’m not sure I would go so far as to say that institutions are using different strategies of non-academic spending to meet their mission – it’s not clear that these spending variations are occurring in a conscious manner – but it is certainly true that institutions are exhibiting quite different patterns of spending.

ottsyd 20160425-W

So, a variety of thoughts here:

  • The universities with the lowest-spend in Libraries are all small-ish, new-ish (post-1992) institutions; those with the highest spending are more of a mix.
  • Athabasca and RRU near the top of the ICT spending charts is not a surprise; what is a little weird is seeing Université du Québec en Outaouais in top spot.  Also, why is U of T near the bottom?  ICT is one of those fields in the FIUC survey which is prone to bad comparisons (some institutions stick a lot of the salary costs related to ICT in their central admin numbers or occasionally in their faculty expenditures, if staff are based in the faculty – a quirk of the way the data is compiled), so it might be that.  On the other hand, expenditures on ICT might just scale a lot better.
  • The student services numbers are fascinating: 4 of the 5 top-spending institutions are in Nova Scotia; 4 of the 5 lowest-spending institutions (and 7 of the top 10) are in Quebec.
  • The physical plant numbers are the hardest to interpret because in a sense these are in some ways legacies.  NSCAD owns some historic properties with high upkeep and doesn’t have a lot of students and so has high per-student costs.  Kwantlen is a relatively new institution and therefore doesn’t need to spend a lot on upkeep (or heat – institutions in the lower mainland have a big cost advantage because of the climate)

There are a couple of ways to look at these numbers overall.  There’s the competitive-bidding aspect: some will look at these numbers and say “why isn’t our institution spending that much?  Gotta keep up with the Joneses!”  But there’s an efficiency angle, too.  Those institutions spending at the 75th quartile and above – what are they getting for their money that other institutions are not?

Maybe the most interesting case is Libraries.  A lot of big Ontario universities have very low library costs: Guelph $473/student, Waterloo $591, McMaster $688, Ottawa $723, Western $749, all of which are below the national average.  You might think the big difference is in the collections budget – and it’s true those are lower, in part because there is a lot more collections-sharing between institutions in Ontario than is possible in places like Saskatoon or St. John’s, which don’t have nearby neighbours.  But the biggest single cost in Libraries is salaries, which makes up 45-65% of any university library’s budget (higher in Quebec).  The real difference between these institutions is therefore staffing.  So do users notice the difference?  If so, which users and how is the difference felt?

More tomorrow.


April 15

Are Teaching Costs Increasing at Canadian Universities?

On Wednesday, someone took me to task in the comments section of the blog for part of my analysis on the financial situation of higher education, saying:

“The HE sector has hiked tuition up far faster than inflation citing “Increased teaching costs”. They have been unable or unwilling to provide proper costings for this.”

Is this true? Well, it depends how long a time-frame you choose to use. Let’s look at the data.

To look at “teaching costs”, we need to use data from the Statscan/Canadian Association of University Business Offices Financial Information of Universities and Colleges (FIUC) survey. FIUC divides salary costs into three categories – “academic ranks” (meaning permanent academic staff), “other instruction and research” (meaning mostly sessionals), and “other salaries and wages” (meaning non-academic staff). Unfortunately, it does not break out “benefits” costs in the same way – these are all lumped together in a single category. It also allows you to divide these up by “function” (admin, student services, libraries, etc.)

For this exercise, I will restrict the analysis to expenditures under “Instruction and non-sponsored research”, and include salaries for both permanent and sessional academics. Within this category, these two groups make up about 80% of all salaries, so I’m going to assign 80% of all benefit dollars as well (this is probably an undercount because academic staff tend to have better benefit packages). Together, I will call these “core teaching costs”. I will then going to divide total expenditures on these three areas by the number of “full-time equivalent students”, which, according to Statscan, = FT students + (PT students/3.5)

Here’s what that looks like, in $2016, back to 1979-1980.

Figure 1: Core teaching Costs per FTE Student, Canada, 1979-80 to 2013-14, in $2016


So: a major decline in per-student core instructional costs from 1979 to about 2003, of about 20%, followed by a decade of increases – mainly on the benefits side – which saw costs rebound by 17% to bring us up to our highest point since 1980. In other words, the story is pretty mediocre if you look at a really long view, but not bad if you take a lend of a decade or so.

Now, to tuition, which is much simpler to track, using the standard Statscan tuition: average undergraduate fees across all programs.

Figure 2: Average Undergraduate Tuition, Canada, 1979-80 to 2013-14, in 2016


That’s a pretty simple story: flat in real dollars through the 80s’, sharp increases in the 1990s and more moderate ones since then (if one were to include subsidies like grants and tax credits, it would be close to flat since 2000, but let’s not complicate the analysis).

Now let’s compare what’s going on here over a 10 and a 35-year horizon. Figure 3 shoes that if you confine the analysis to the last decade or so, tuition and core instructional costs are rising at similar rates.

Figure 3. Tuition vs. Core Instructional Costs, Canada, 2003-4 to 2013-14, 2003-04 = 100


However, if you extend the analysis back to say 1979, you get a completely different picture.

Figure 4. Tuition vs. Core Instructional Costs, Canada, 1979-80 to 2013-14, 1979-80 = 100


Why the difference? Well, mostly because the 1990s were a time of disinvestment, so in part higher tuition fees were replacing government spending, but also because between 1990 and 2005 or so there were some fairly major changes to the way universities spend their money. A lot more money went into IT, student services, scholarships (and, yes, administration), meaning that core instructional costs shrunk as a percentage of total expenditures. So my comments-section interlocutor is certainly right over the long term, less so over the short term.

That said, there is a real question about whether or not those “core teaching costs” are really meaningful over time given the appearance that an increasing portion of staff time is devoted to research rather than teaching. But that’s a debate for another day.

April 13

Situation Critical

So, we haven’t yet got through all the provincial budgets, but it’s crystal clear from those in Ontario, Quebec and British Columbia, plus the election promises made by the winners/likely winners in Saskatchewan and Manitoba, that there is no chance whatsoever that provincial governments, on aggregate, are going to increase government grants to institutions by an amount equal to inflation.  This will mark the fifth time in the last six years that provincial grants to institutions have lagged inflation. 

While provinces aren’t spending on post-secondary institutions, they do seem to be quite interested in post-secondary students.  In total, aggregate provincial spending on student aid is up by around $600 million in real dollars over the past six years.   Which is to say: provinces are happy to make higher education cheaper, they’re just not interested in increasing institutions’ purchasing power.

In contrast to the dire situation in the provinces, universities and (to a lesser extent) colleges are on an unprecedented winning streak in Ottawa.  There’s been a goody for postsecondary in literally every single one of the last 20 federal budgets.  No other sector can claim anything close to that.

On the face of it, this is a distinctly weird state of affairs.  Both the federal and provincial governments are catering to the same set of voters, so why does one level seem to think that post-secondary institutions are worthy of continued attention while the other does not?  It’s not an ideology thing: this situation seems to be true no matter which parties are in power (and in any case at the moment Liberals are in power both federally and in most provinces).  The answer is pretty simple, though.  And I will say it loud and clear, because it’s a message institutions themselves seem unwilling to admit.  Ready?  Here it is:

The public likes what institutions’ are offering in terms of being engines of economic growth via research and will support it through tax-funded programs.  The public does not like what institutions are offering in terms of undergraduate teaching – at least at the price currently offered – and will not countenance major increases in either funding or tuition.

There’s no other explanation here, folks.  This is the central, basic dilemma that every university and college is facing right now.  The sector used to have a value proposition that the public accepted.  That’s how universities more than doubled their income between 1999 and 2009.  But no longer.   It’s not that the public dislike universities, or think they are “broken”.  They are just no longer convinced by the value proposition on offer and would like the cost (and by cost here I mean both tuition and the cost to the treasury) to come down. 

Universities and colleges are, I think, mostly in a state of denial about this.  “We need to tell better stories”, they say.  But c’mon.  The public isn’t stupid or in some state of false consciousness.  More students are going to post-secondary education than ever before, more people have contact with post-secondary graduates than ever before.  They have some sense of what they are talking about.  They might, in short, be right about the value proposition.

So instead of assuming the proles and the pols are wrong, and that we just need improve our comms for government to go back to increasing funding at inflation plus 4% the way they were a decade ago, let me suggest that perhaps universities and colleges might actually need to change.  If they want the slow erosion of funding to stop, they will actually need to present the government with a new value proposition, a different offering in return for renewed funding.

No, it won’t be easy.  But it is necessary, and sooner rather than later.

Tomorrow: what a new value proposition might look like.

March 29

Who Won and Who Lost in the CSLP Re-Shuffle

(Warning to readers: today’s blog is a long read about student aid policy.  Skip it if this kind of wonkery isn’t to your taste.)

Last week’s historic changes to the Canada Student Loans Program – which saw the elimination of the Education and Textbook Tax Credits, and an increase of 50% in Canada Student Grants – is a very complicated piece of policy to analyze.  Remember that there is no new money in this set-up: any new money given to one set of students through grants is money taken away from another set of students in tax credits.  So it’s reasonable to ask the question: “who won and who lost?” because governments sure as heck aren’t eager to spell this stuff out.

If you want to refresh yourself on the details of the tax credit/grant switcheroo, go back to our budget analysis document and read pages 2-6.  Got it?  Good.  Then we’ll begin.

Winners and losers get divided up along three axes: by geography, by “family” income, and by full-time/part-time status.  We’ll start with geography, and move down from there.

Quebec: Every single full-time student in Quebec loses $558 from the disappearance of the tax credits.  What they will get back is uncertain. The Canada Student Grants program does not operate in Quebec, so no one will “win” by getting money from that source.  Instead, the government of Quebec will receive something in the region of $500 million from the government of Canada over the next four years in “alternative payments” (that’s a rise of about 40% on what the province currently gets).  Will the government invest all that money in student aid?  We don’t know because the government is being non-committal at the moment.  If it does, how will it do so?  Again, no clue.  So we have literally no idea who the winners and losers will be in Quebec.

The Rest of Canada, Bar Ontario: Again, every single FT student will lose $558 in tax credits.  If they are considered “low-income” (I’ll come back to this), they will – once the changes are fully phased-in for 2017 – get an extra $1,000 in grants and thus be “up” on the deal by $442.  If they are not at all eligible for grants, they will be “down” $558.  What happens to the students in between – the so-called “middle-income students” – is a little unclear.

First, who are “middle-income students”?  The definition varies by province and family size (see Tables 10A and 10B here), but if you’re a dependent student from a family of four, it means (roughly) those from families earning between $45,000 and $85,000; if you’re a single independent student, it means those earning between $23,000 and $43,000 (most independent students are low-income and eligible for maximum grants, but not all of them take advantage of the program).

Now, if all you look at is the 2016-17 changes to Canada Student Grants (+$400), and you subtract the $558 in missing credits, you might think “holy cow, these middle-income students are out $158!”  Which, to be honest, I did briefly on budget night.  But the program changes aren’t ending in 2016-17.  In 2017-18, CSLP wants to stop giving out these grants as a step function, and smooth the curve, roughly like so:

Figure 1: CSG Value by Income Level, 2015-16 vs. 2017-18















(Caveats on graph: that’s for a family of four in Ontario; mileage may vary by province and family size, and we don’t know exactly what the smoothing formula will look like.)

This is a very different kind of picture.  Those just above the low-income/middle-income cut-off become massive winners – their annual grant amount will increase by almost $2,200.  However, at the other end of the spectrum, those just below the middle-income cut off – say, families making about $80K – will see changes of less than $558, and so need to be counted among the “worse-off”.

But this still isn’t the final story, because there’s another CSG change scheduled for 2018-19, which will involve extending the middle-income cut out-off somewhat (my understanding is that for our hypothetical family it will be slightly north of $100,000/yr).  That won’t help the people just below $80k, but it will make “winners” out of a number of people in the $80-100K range.

Figure 2: CSG by Income Level, 2015-16, 2017-2018, 2018-19















(Caveats on this graph are same as previous, only this time we have even less idea what the exact formula will look like.  Think of it as an artist’s rendering of a bunch of vague statements in the Budget and the Liberal Manifesto.)

Based on this, what we can probably say is that all independent students will end up as net beneficiaries (if they bother to apply for aid), as will all dependent students coming from families with incomes below $100K (bar a few with incomes in the $75-80K range).  Above that line, there will be losers to the tune of $558/year.

Ontario: The situation in Ontario is a little more complex because in addition to the CSL changes there are the similar changes to the provincial program announced in the February provincial budget.  Because the province is killing both its own education amount tax credit and its own tuition tax credit, every student (and/or their family) is losing $1,176 in combined tax relief.

Now, who actually wins and loses is difficult to tell at the moment because we really have no idea what the provincial formula will look like.  Based on a tiny sliver of information contained in charts 1.16 and 1.17 of the Ontario Budget, my understanding is that dependent students from families making under about $80,000 are net winners – in some cases by a thousand dollars, or even a bit more.  Above $110,000 it’s all net losers – students from families above this level will keep the grants they currently have but lose all their tax credits.  In between, the best guess is that all will be net losers; however, the exact amount of the loss will depend on the nature of the CSLP 2018-19 changes.

That’s dependent students – what about independent ones?  Here, it’s *very* difficult to tell.  Unlike the federal grants, current Ontario grants are restricted to dependent students, and the language in last month’s Budget is ambiguous as to whether independent students will have access to the new grants. I think it’s telling that none of the examples given in this Ontario budget backgrounder are independent students; this implies that the province simply hasn’t yet figured out what the rules for these students will be.  So for the moment we simply show how the winners and losers will break out among independent students.

(Nota bene: if you’re wondering why the Ontario change seems to have a worse winners-to-losers ratio than the federal one, it’s because money in the system is not conserved.  If you read the text of the budget carefully, you’ll note that some of the money from the eliminated tax credits is going to universities and colleges – students themselves will, on aggregate, receive less money in total after the change than before.  Less money = fewer winners.)

Part-Time Students:  You’ll notice that I’ve been focusing on full-time students: that’s because the calculus is quite different for the country’s half-million or so part-time students.  Part-timers receive a smaller amount of education and textbook credits: only $168 federally.  They all lose this amount; part-timers in Ontario will also lose an additional $100-200 or so depending on how much tuition they are paying.  The federal system makes up for this in a tiny, tiny way by increasing bursaries for part-time students – something which currently only about 13,000 students receive.  The Ontario system does not give money to part-time students at all.  So for this demographic, it seems that nearly everyone loses from the re-shuffle.

So, what do we conclude from all this?  Two things:

1)  Part-time students everywhere, and (possibly) mature students in Ontario, don’t do very well out of these changes.

2)  In the main, among dependent students at least, there will be a growing gap in net prices by family income.  In Ontario, families with below median incomes will see their net tuition fall by $1,000 or so; those with incomes in the top quartile will see an increase of nearly $1,200.  Basically, tuition is becoming a much more progressive user fee.  And that’s altogether to the good.

March 23

HESA’s 2016 Budget Analysis

The team at HESA towers was up late last night putting together – as we do every year – a review of the Government of Canada’s Budget 2016, specifically as it relates to higher education and training. You can read our full analysis, here. Below are some of our key takeaways and conclusions from Budget 2016.

It’s very difficult to call this anything but a very good budget for the higher education sector, albeit more so for universities than for colleges and polytechnics. That said, there is clearly a lot of clean-up work still to be done. If this analysis tells us anything, it’s that the new government remains not entirely in command of all its files.

On the student financial assistance front, the government did what it said it would do: axe the education and textbook tax credits, while increasing up-front grants to low- and middle- income students.  That’s excellent news, even though it creates some winners and some losers (and possibly more losers than winners, until 2017-18 at least).  The system will provide money to students faster and more transparently, and that can only be good for accessibility.  

On the granting councils, the news is extremely positive. Where the Liberal manifesto promised no new dollars at all, this budget provides the councils with the largest single increase in over a decade. In contrast to the previous government, the Liberals seem content to let the councils themselves decide what to do with the new money. Additionally, the Budget promises that the Minister of Science will conduct a comprehensive review of federal support for fundamental science. This will please many, but the lack of any specific support for applied research is sure to make colleges and polytechnics nervous.

On innovation policy, there are a lot of fine words and a few large numbers as placeholders, but an astonishing lack of detail. From the specifics available, the sentiment of the Liberal policy largely follows from that of the previous government (though the promised funding to support “innovation networks” – whatever that may mean – could represent a different path).

On skills policy, the change in tone between this government and its predecessor is dramatic. Not only is there less money available, but the government also seems to not be terribly fluent with either the language or the issues. Again, colleges and polytechnics may react negatively to this (as indeed may employers’ groups). One announcement in particular allocates $73 million for “co-operative education,” but is so light on details that it’s not even clear if institutions or businesses will receive the money.

On infrastructure, there is plenty of money for universities and colleges, totaling nearly $2 billion over the next three years. However, as with the Budget’s innovation section, there is a serious lack of detail here about how the money will actually be administered.

If there is a false note in this budget, it is with respect to Aboriginal students, as the manifesto promise to increase funding to the Post-Secondary Student Support Program for First Nations by $50 million/year was not fulfilled in this budget.

In sum, the Liberal government has shown generally good instincts concerning PSE. On one hand, funding provisions are mostly generous to the sector. On the other hand, these provisions remain largely superficial in key areas, as the government struggles to get a hold of its own machinery and sketch in the contours of its policy framework. Details, we are told, are forthcoming. Time will tell. In the final analysis, this budget deserves a solid “A” grade for sentiment. On execution, however, the government might need to “revise and resubmit.”

March 17

A Moment of Truth

So, next Tuesday, federal Finance Minister Bill Morneau will announce the new Liberal government’s first budget.  What should the PSE community expect?

Well, it’s going to be a deficit budget, we know that much.  Underlying weakness in the economy means that tax receipts are lower than expected, and the projection for a balanced budget in 2016-2017 that the Tories presented last year has now turned into a $12 billion deficit, even before an extra dollar was spent.  They’ll inflate that by another $6 billion in “prudence factors/contingency funds” (this will make subsequent recovery look better in, say, 2019-2020).  Next, add in the $10 billion in additional spending that was promised in the election, which they seem unlikely to walk back.  Then, add a couple of extra billion because certain promises weren’t costed accurately, and you’re pretty close to $30 billion in the red.

How much of that will end up heading towards PSE?  If you simply look at the Liberal manifesto (which I dissected here and here), pretty much nothing.  There will be some big, welcome changes to student aid worth noting – less tax credits, more grants, better repayment assistance – but the reform is specifically designed to be cost-neutral.  The manifesto promised exactly $0 new dollars to the granting councils, and a bit of money on commercialization, which would go to incubators, etc., rather than universities.  Transfers to provinces will go up exactly as they would have done under the Tories (and that was baked-in several years ago, so it’s not really a “new” expenditure).  Similarly, money for some programs like the Canada First Research Excellence Fund were projected to go up over time anyway – don’t be fooled by announcements of increases from the new government.

Where universities and colleges might be able to cash in on the Liberal Manifesto is in construction.  The new government has promised new infrastructure spending, and it’s possible we could see a carve-out of some of this money for “knowledge infrastructure”, in much the same way the Tories did with the KIP program back in 2009.

The real question is whether there is anything in there for universities and colleges if the Liberals decide – in the name of stimulus spending – to ramp up the deficit beyond $30 billion.  I don’t have a good sense of how likely this is, but there have certainly been some hints that the government may go this route.  And if this happens, all bets are off.  They won’t be constrained by the manifesto, and can do what they like.  In that case, we may see some larger investments in certain areas (personally, I’d be surprised if they didn’t find money to boost granting council spending by at least inflation, but that’s just a hunch).

However, I think we are unlikely to see two things.  First, we won’t see any new programs that weren’t clearly signaled in the manifesto (like the stuff around commercialization).  The new government simply hasn’t had time to think about more than fulfilling what they promised in the fall.  Second, I think we’re unlikely to see much of what I have called the “Fourth granting council” announcements.  Under the Harper government, we regularly saw one-off funding for specific scientific projects outside the tri-council structure.  My guess is we won’t see that on Tuesday.

If it is a minimal budget, it will be interesting to see how the PSE community reacts.  I mean, the Harper government usually received pot-shots even when it *was* investing in the area (see here for a recap, if you’ve forgotten).  Will the Liberals be given similar treatment?  I wonder.

Page 1 of 612345...Last »