HESA

Higher Education Strategy Associates

Category Archives: Funding and Finances

September 19

Growth of Presidential Compensation

Let’s do another blog on this topic because everyone loves talking executive compensation.

Yesterday we looked at Presidential pay in international comparison and saw that Canadian university Presidents have fairly low pay compared to equivalents in other English-speaking countries.  But, one might argue, that’s the wrong metric.  Maybe the real problem isn’t high pay so much as a relatively quick rise in pay over the past few years.

That’s a fair argument.  But let’s see what the data says.

My data source here is the ever-handy CAUT Almanac (2005, 2010-11 and 2015-16 editions), from which we can obtain data on Presidential salaries for 2003, 2008 and 2013.  There are multiple observations for 58 institutions (44 in 2003, 54 in 2008 and 56 in 2013); any institution for which I have data for only one year is eliminated.  Now with numbers this small, one has to be careful about one or two outliers distorting averages either up or down.  With that in mind, figure 1 shows the evolution of average compensation for university Presidents in Canada.

Figure 1: Average Pay, University Presidents, Canada 2003-2013, in real 2013 dollars

Source: CAUT Almanac

What figure 1 shows is that between 2003 and 2008 average Presidential pay rose by 8% after inflation (or, about 1.6% per year).  However, between 2008 and 2013 the figure fell by a little less than 1%, meaning that for the decade as a whole the average annual increase was 0.68%.

Surprised?  Skeptical?  Well with datasets this small, it’s good to be careful.  Not all of these are observations are comparable.  In any given year, a few Presidents get hired and others leave their position.  For these people, the salaries & compensation as captured by the Almanac are not particularly helpful because their salary only covers part of the year.  In a couple of cases, you also get what look like one-off payments which inflate the salary.

To try and get around this problem, let’s look at the change between 2003 and 2008 for every institution for which we have data for both years:

Figure 2: Distribution of Real Presidential Salary Changes, 2003 to 2008

Source: CAUT Almanac

The highest value here is Acadia, and that’s clearly because the 2003 observation was for a President who was only came on board in September, thus giving her an artificially low number in the base year.  Similarly, most of the negative numbers are for people who came on board mid-way through the year in 2008, such as Alan Rock (Ottawa), Roseann Runte (Carleton) and Michael Goldbloom (Bishop’s).  But some of the negative numbers are also “resets” as universities bring compensation down when a new President is installed; for instance, Indira Samarasekara’s 2008 compensation was 28% lower than her predecessor’s in 2003.

Without a lot of fact-checking around appointment dates which I frankly have no interest in doing (free email guys: you get what you pay for) I can’t be sure exactly which Presidents fall into which category.  But assuming that the artificially high and artificially low observations more or less cancel each other out, looking at the median observations should give us a sense of what was going on at the typical institution.  As it turns out, the median here is 20%, compared to the 8% average we saw in figure 1: that’s not a “better” figure, by the way, just a different lens.  For 2008 to 2013, the median is 0% (same as the average), and for 2003 to 2013 the number is again 20%.

Just for amusement, let’s compare this for a second to what’s been going on with professorial pay. Again, the data source is the CAUT Almanac for the same years.  Guess what?  Between 2003 and 2013, the average rise in pay – after inflation – for full professors (the nearest comparator to University Presidents) was 23%.  I suspect that the rapid rise after 2008 has to do with fewer retirements and more professors staying on for more years and receiving annual pay rises.

Figure 3: Comparison of Changes in Presidential and Full Professorial Pay, 2003-2013

Source: CAUT Almanac

To sum up:  between 2003 and 2008, presidential pay was rising by somewhere between 1.5% and 3.7% per year over inflation, depending on how you look at it.  However, between 2008 and 2013 presidential pay stayed even with inflation.  Meanwhile, average pay for full professors rose steeply after 2008, and over the decade to 2003 to 2013, their average pay rises were higher than those for Presidents – substantially so if we take an average-to-average comparison.

So next time anyone complains about huge pay rises to executives, just remember that professorial pay has been rising faster.  Sauce for the goose, etc.

 

September 18

Presidential Compensation

Over the summer, the revelation that the University of Alberta paid Indira Samarasekera two full years of administrative leave at over $550,000 per year after the conclusion her ten-year (two-term) Presidency caused a series of snit-fits, the most notable one being this one from Paige MacPherson, the Alberta Director of the Canadian Taxpayers Federation.

As I’ve noted before (here and here), Canadian university Presidents are not that well paid, at least by the standards of other Anglosphere universities.  Paul Kniest, of Australia’s National Tertiary Education Union, helpfully put together a good international comparison which I reproduce below (the blog post from which it is taken is here).

Now those figures are in Australian dollars, but our currencies are close enough to par as to make no odds.  Also, yes, the Canadian number looks a little low; I think it’s because the CAUT Annual Digest – the source for the data – includes all Presidents, even if they are not serving a full year, so there are a few “partial” salaries which bring the average down.  My guess is that if you exclude those, you end up with a figure closer to New Zealand’s.  But we’re nowhere near our neighbours to the South.  For instance, the base pay of our highest-paid President (David Turpin) would place him about 250th in the US, or 118th among public university Presidents.  (Santa Ono, in case you’re wondering, took a cut in base pay of about 20% to move from Cincinnati to UBC).

I suppose one might argue that this is all a kind of “if all your friends were jumping off a bridge” argument.  There are other comparators one could use: hospital executives and senior public servants are the most obvious ones.  But even here, I’m not sure this is such a great comparison.  Neither of those are required to raise their own revenue from market and philanthropic sources to the extent a university President is.  After all, with provincial government funds now providing less than half of university funding in many cases, one could argue that fairer comparisons might be with private industry.  By this logic, some university Presidents – those say in Quebec or Newfoundland where provincial government foot well over half the bill – might be adequately or even over-paid, but equally the President of a place like U of T ($3 billion in revenue, less than a quarter of which is provincial grant) might be seen as grossly underpaid.

(I think this is probably right, btw.  I’d argue that the scandal in Presidential salaries is actually how narrowly banded they are.  The gap in executive pay between, say, UQ Abitibi-Temiscamingue and UBC should be a lot bigger because the latter is a hell of a lot of a bigger job).

The other favourite comparator is of course the Prime Minister/Premier (note that in the UK, the government is now proposing legislation to effectively prohibit university vice-chancellors from making more than the Prime Minister).  After all, he/she is in charge of the Whole Damn Country/Province, why should anyone in a public position make more?  There is some force to this (though one could apply it to the private sector too), but of course PMs and Premiers tend to make a lot of money in what amounts to deferred compensation – making speeches, sitting on corporate Boards, ambassadorships, etc.  But if there is one thing that drives people crazier about university Presidents than their salaries, it’s the idea of deferred compensation (as the Samarasekera snit-fit shows).

Presidents are mostly former academics.  Part of the academic compensation package is sabbaticals – time off from teaching every seventh year to pursue research interests.  As far as I can tell, the idea of “administrative leave” – that is, a fully-paid year off after a five-year term in administration – was originally thought of as analogous in terms compensation.  It’s not a perfect match of course – a year off after five years instead of six, full pay instead of 90% pay, etc, – but it’s close.

But some things about deferred pay weren’t analogous.  Turning the leave into lump-sum cash payments for instance.  David Johnston made off with over $1 million that way when he went to become Governor General without anyone saying “boo”, but when Amit Chakma tried the same thing at Western he got roasted.  So no one does that anymore.  In fact, a couple of contracts I’ve seen recently limit deferred compensation to a single year, even if the President serves for more than one term as President.

Are these perks similar to those seen in other countries, or are they Canadian universities’ way of surreptitiously bumping executive pay?  I can find no evidence of this kind of compensation in either the UK or Australia (which doesn’t mean it doesn’t happen; just that a couple of minutes’ googling on my part came up dry).  However, in the US, this kind of thing most definitely happens and on a much greater scale

Just to take a couple of examples found with a minimum of research: at the University of Florida, the former President got five years of deferred pay equal to his Presidential salary, though it was structured as a non-compete payment.  At the University of Michigan, the President receives one year’s deferred compensation if he stays at the institution – but he also is guaranteed a $2 million fund to start up a new laboratory.  In many cases, US universities (public and private) don’t offer salaried administrative leave, but do offer boatloads of “deferred payments” which are booked in the year they are earned, and counted separately from base salary (some examples here on p.3).  More broadly, US university Presidents also seem to benefit from a variety of other perks which may not be available to Canadian ones.

In other words, while our Presidents are well-paid, there’s no obvious reason to think they are vastly overpaid either.  And if we have a problem with the idea of deferred compensation, fine: just fold that extra compensation into their salaries during their term and be done with it.  Presidents could then save it, spend it, do what they want with it.  This arrangement would be clearer, cleaner and more transparent than what we do now.

 

September 14

Notes on the Finances of China’s Top Universities

One of my distractions over the past summer has been to learn more about Chinese universities.  And, fortunately, this is becoming a lot easier as Chinese universities are starting to put more of their data online.  Today, I just want to take you through a bit of a tour of China’s top universities (roughly the equivalent of the US Ivy League), which are known as the “C9”, most of which now put their financial data online.

So let’s start just by looking at raw annual expenditures (I prefer using expenditures to income as a guide to a university size because it tends to be more stable year-to-year) at these top universities.  Figure 1 shows this by institutions for the 2015 calendar year.  Tsinghua leads the pack by a wide margin, at a little over RMB 13 billion.  Peking, Zhejiang and Shanghai JiaoTong are next at between RMB 8-9 billion Yuan, Fudan followed by Fudan Xi’an Jiao Tong at between RMB 5-6 billion.  The bottom positions are held by the two C9 universities which do not report to the higher education ministry: the University of Science and Technology of China (Chinese Academy of Science) and the Harbin Institute of Technology (Ministry of Industry and Information Technology) at RMB 3.4 billion and RMB 2.2 billion, respectively.

Figure 1: Expenditures, in Billions of RMBTop Chinese Universities, 2015

One interesting piece of information about these institutions is how little of their annual budget actually comes from government.  Figure 2 shows government appropriations as a percentage of annual expenditures (Harbin Institute of Technology is excluded because its financials do not distinguish between public and private sources of revenue).  As it turns out, top Chinese universities actually look a lot like Ontario ones in that they tend to get less than half their money from government.  That said, at most institutions student fees only account for about 15% of total revenue.

Figure 2: Government income as a % of total expenditures, Top Chinese Universities, 2015

Now at this point you may be wondering: RMB 13billion….is that a lot?  A little?  What’s the frame of reference here?  Well, fair enough.  Let’s put all this into US dollars, just so we’re clear.  And for reference, let’s throw in data for Harvard, Berkeley, U of T and UBC for 2015-16 for comparison.  To do this, I’m converting to USD at the mid 2015 exchange rate of RMB 6.21 = CDN $1.29 = USD $1.  The results are shown in Figure 3: By this measure, only Tsinghua is really up in the North American big leagues.

Figure 3: Total Expenditures, in USD, Top Chinese Universities plus US/Canada Comparators, 2015

But hang on a second.  What if we use purchasing power-parity instead of exchange rates?  Well, actually, this changes things more than you’d think.  If you convert the data at the mid-2015 Big Mac Index rate of RMB 3.55 = CDN $1.22 = USD $1.

Figure 4: Total Expenditures, in billions of USD at PPP, Top Chinese Universities plus US/Canada Comparators, 2015

Once adjusted for PPP, Tsinghua moves closer to Harvard, and the next three are more obviously in the big leagues, having all passed UBC.  Now in fact, PPP probably overstates universities’ buying power somewhat, because for many of the goods what universities purchase (top professors, scientific equipment, etc), the price is global rather than local.  So if you want to think about relative purchase power, a fair comparison between the institutions is probably somewhere between figure 3 and figure 4.

(If we were to do this from the perspective of “how big is each institution relative to the size and development of the economy” – that is, adjusting for GDP per capita, all the Chinese institutions would rise by a factor of four relative to American ones, i.e. Tsinghua would be three times as large as Harvard.

Now, what about dollars per student?  For this, I take the student numbers the institutions report to Quacquarelli Simons (QS) for use on its “top universities” website.  You can take these with a grain of salt: I can’t get QS’ numbers to line up with the data I have directly from any of these institutions, but it’s the most consistent thing we’ve got, so we’ll just have to live with it.

Figure 5: Expenditures per Student, in USD at PPP, Top Chinese Universities plus US/Canada Comparators, 2015

Now Tsinghua is much more clearly in an Ivy-League-approaching kind of position, with expenditures of over $100,000 per student.  That’s not near Harvard, which spends about twice that, but it is a full 25% higher than Berkeley and 150% higher than UBC and Toronto.  Even the Chinese second-tier trio of Shanghai Jiao Tong, Peking and Zhejiang are spending 50% more per student than the top Canadian universities.

In short, the top Chinese universities aren’t, as it is sometimes said, “rising”.  Financially, they’re already comfortably part of the world elite.

September 13

Some Curious Data From OECD Education at a Glance 2017

The OECD put out its annual Education at a Glance  publication yesterday.  No huge surprises except for the fact that they appear to have killed one of the most-used tables in the whole book (A.1.2, which compared tertiary attainment rates for 25-34 year olds by type of tertiary program – i.e. college v. university) which is an enormous bummer.  The finance data says what it pretty much always says: Canada is the #2 spender overall on higher education at 2.6% of GDP (just behind the US at 2.7%).  If you read my analysis last year, the story is still pretty much the same this year.

But there are some interesting nuggets buried away in the report nevertheless – stuff that other media won’t pick up.  I thought I would highlight two of them in particular which pose some thorny questions about Canadian statistical data and what we think we know about higher education.

Let’s start with the data on expenditures per pupil at the tertiary level.  Figure 1 looks at costs in Short-cycle Tertiary Education (meaning career-oriented, which in Canada’s case means community colleges)

Figure 1: Total Expenditures per Student, Colleges (or equivalent), Select OECD countries

Among major countries, Canada spends the most (from both public and private sources) on college or college-equivalent student.  A couple of countries actually do outspend us (the Austrians and – totally out left field – the Czechs), but the important point here is that our expenditures are nearly 40% above the OECD average.  And if you’re wondering why the UK and the US aren’t there, it’s because the former has no college equivalent and the latter chooses to not to report on colleges on the batshit crazy spurious grounds that even if you’re studying for a (college-equivalent) associate’s degree, the fact that this can be laddered up into a full bachelor’s means everything is really degree-level.  Nonsense, I know, but there we are.

Now, let’s do the same with universities:

Figure 2: Total Expenditures per Student, Universities, Select OECD countries

There’s not much in figure 2 we didn’t already know: US and Canada in terms of total expenditure per university student at the top with us over 50% above the OECD average and Korea way down at the bottom because the Koreans do everything in higher ed on a shoestring.

Now, one new little detail that OECD has added to Education at a Glance this year is that it splits out the portion of total expenditures (that is combine short-cycle and degree-levels)  which are devoted to R&D.  And this data is a little odd.

Figure 3: Total R&D Expenditures per Tertiary Student, Selected OECD Countries

There’s nothing obviously egregiously wrong with figure 3 – except for the data on the USA, which is bananas.  Read literally, it suggests that Canadian universities on average spend twice as much on R&D as American ones do and that’s simply false.

(The explanation, I think, is that Canada and possibly some other countries claim that all professors’ time spent on research – notionally 40% of time or thereabout – counts as “R&D”.  Whereas Americans claim that their universities – which only pay staff for 9 months a year with the rest of the time notionally off for research – do not count time that way, preferring to claim that the government is buying profs’ time with research grants.  Basically, they view universities as mailboxes for cheques to pay for staff time and so all that time money gets claimed as government expenditure on R&D, not university expenditure on R&D.  GERD, not HERD, in the innovation policy lingo.  I think, anyway).

What’s actually a little crazy about figure 3 is that the denominator is all tertiary students, not just degree-level students.  And yet we know that R&D money is pretty heavily concentrated (98%+) in universities.  In a country like Germany where over 99% of tertiary students are in degree-level institutions, that’s not a big deal.  But in Canada, about a third of our students are in short-cycle programs.  Which means, if you do the math, that in fact the R&D expenditures per university student are a little ways north of $9750.  Now here’s figure 3 again, with just degree-level students in the denominator.

Figure 4: Total R&D Expenditures per University Student, Selected OECD Countries

And of course, subtracting these numbers means we can revisit figure 2 and work out total non-R&D expenditures per student in universities.  Canada still remains 40% or so ahead of the OECD average, but is now similarly that far behind the US in per-student expenditure.

Figure 5: Total non-R&D Expenditures per University Student, Selected OECD Countries

Now, to be clear: I’m not saying OECD is wrong, or Statscan is wrong or anything else like that.  What I’m saying is that there appear to be major inconsistencies in the way institutions report data for international comparative purposes on key concepts like R&D.  And that this particular inconsistency means that Canada at least (possibly others) look a lot better vis-à-vis the United States than it probably should.

Just something to keep in mind when making comparisons in future – particularly around research expenditures and performance.

September 11

The Growing Importance of Fee Income

I made a little remark last week to the effect that on present trends, student fees would pass provincial funding as a source of revenue for universities by 2020-2021 and combined fed-prov government funding by 2025.  Based on my twitter feed, that seems to have got people quite excited.  But I should have been a little clearer about what I was saying.

First of all, by “on present trends”, I literally meant do the simple/stupid thing and take the annual change from 2014-15 to 2015-16 and stretch it out indefinitely.  One could use longer-term trends but for provincial government funds, the difference is minuscule because the 1-year and 5-year trends are pretty similar.  It’s harder to do that with the federal money because it jumps around a lot on an annual basis (is there a federal infrastructure program in a given year?  Have they given a one-time bump to granting council dollars?  etc.) and so medium term trends are harder to discern.   Second, when I said it would pass government funding, I meant for the entire budget, not just the operating budget (feds don’t really contribute to operating budgets).  And third, I was speaking in terms of national averages: regional averages vary considerably and in some provinces, fees passed government grants as a source of income some time ago.

Anyways, I thought it would be fun to do some inter-provincial comparisons on this.  To make things simple, I’m going to exclude federal funds from the exercise, and just look at provincial grants and student fees.  As previously, the data source is the Statcan/CAUBO Financial Information of Universities and Colleges Survey.

Let’s start by looking at how grants and fees compare to the size of the operating budget of universities in each province.

Figure 1: Provincial grant and fee income as a percentage of operating income, by province, 2015-16

Now, remember: some provincial and fee income goes to areas other than the operating budget and operating income is not restricted to just student fees and government grants.  Thus, you shouldn’t expect the two sets of lines to add up to 100%.  In some cases they add to more than 100%, in some cases less.  But no matter, the point is here that already in 2015-16 fees represent a greater portion of the operating budget than government grants in Ontario and an equal proportion in Nova Scotia.  In BC and PEI, fee and grant income are close-ish, but in the other six provinces government grants predominate.

Now let’s look at the five-year percentage change in income, in real dollars, from fees and grants.  This one is kind of complicated, so bear with me.

Figure 2: Change in income from provincial grants and student fees, by province, 2010-11 to 2015-16

There are seven provinces which share a pattern: increasing real fee income and decreasing real provincial grant income, though the extent varies.  The biggest shifts here are in Ontario and BC.  Quebec is the only province which has seen an increase in income from both sources.  In all eight of these provinces, we can do straight-line projections of the future pretty easily.

But then there are two provinces – Newfoundland and New Brunswick – which have seen net decreases in both sources of income.  Basically, this is what happens when a demographic collapse happens at the same time as a fiscal collapse.  In per-student terms this doesn’t look quite so bad because enrolments are declining, but since staff don’t get paid on a per-student basis that doesn’t help much when it comes to paying the bills.  It’s hard to do straight-line projections with these two because it’s quite clear the fee income declines aren’t going to continue indefinitely (the demographic collapse stabilizes, eventually).  So we’re going to say good-bye to these two for the rest of this analysis, while wishing them the very best in dealing with their rather significant challenges.

Ok, for the remaining eight provinces, let’s combine the info in those last few graphs.  Let’s take the income by source data in figure one, and then apply the trend changes in figure 2 to each province.  The easiest way to show this in a graph is to show fee income as a percentage of provincial grant income.  We can show this out to 2024-25, as seen below in figure 3.

Figure 3: Projected ratio of student fee income to government grant income to 2025, by province

What figure 3 really shows is that Canada is heading towards a much more financially heterogeneous higher education system.  For the country as a whole, fee income for universities should surpass provincial government grants in 2020-21.  But this masks huge variation at the provincial level.  Ontario and Nova Scotia (by now) already exceed that level.  BC will get there in three or four years, PEI will get there by 2024-25.  But the other provinces aren’t on track to hit that level until 2030 at the earliest (and in Quebec’s case it’s about 2055).

Another way to think of this is that in about a decade’s time, the funding landscape in places like Quebec, Manitoba and Saskatchewan is going to look the way it did in Ontario ten to fifteen years ago.  At the same time, Ontario’s funding landscape is going to look a lot like big American public schools, with less than 30% of the operating budget (and probably something like 15% of total funding) coming from provincial governments.  Differing incentives facing different universities means they are probably going to be run quite differently too: expect a greater variety of institutional cultures as a result.

Now, as with any straight-line projection, you should take the foregoing with a healthy amount of salt.  Politics matter, and funding trajectories can change.  This is one possible scenario, not necessarily the most likely but simply the one most in line with current trends.

But keep in mind that the above is the probably good news scenario for Ontario.  The bad news scenario would see the percentage of funds coming from fees restricted not by increasing the government grant, but by restricting student intake, or the intake of international students (which is where the big gains in fees are really coming from).  So even if you find this scenario disturbing: be careful what you wish for.

September 06

Canadian University Finance Statistics (2015-16 Edition)

The 2015-16 version of Financial Information of Universities and Colleges Survey (which, confusingly, doesn’t include community colleges) was released over the summer.  As in previous years I’m going to do a little summary of what it tells us about how income and expenditure has change over one year and five years.  Just so we’re all clear, all figures here are in real (i.e. inflation-adjusted) dollars.  And – caveat – comparisons with 2010-11 are a little weird because Quebec universities changed their fiscal year-end that year and only reported 11 months of data, meaning that nationally, reported expenditures for that year are probably about 1.5% lower than they normally would be.  This means that 5-year averages are probably inflated slightly compared to reality.

For starters, let’s look at total income by source, which was $34,385 million.  That’s down nearly 5% from the previous year, though the a little over 75% of the drop is due to a fall in endowment income (apparently everyone got hammered in 2015).  Income from governments fell by a little under 2%, nearly all due to reductions at the provincial level.  Over the past five years, revenue from government is down by a stonking 12.6%.  However, rising fee income mostly compensates for this: it rose by nearly 5% over 2014-15 and 27% over 2010-11.  For the most part, these increases are not coming from domestic student fees, they are coming from increases in international student enrolment.

Figure 1: Change in Total Income by Source, Canadian Universities, 2015-16

What’s really interesting about the total income numbers is how small the government numbers are becoming.  Already as of 2014, the university sector as a whole took in more money from non-governmental sources (fees, donations, sale of goods and services, etc) than it did combined from the federal and provincial governments.  On current trends, income from student fees will surpass provincial government grants to universities in 2020-21, and will pass combined federal and provincial contributions in 2024-2025.  At which point it would be fair to say we will have moved from a public university system to a publicly-assisted university system.

Now, on to the changes in income by Fund, which I show below in Figure 2.  This tells a slightly different story.  Operating income actually kept pace with inflation in 2015-16 and over a five year period actually increased by 8.8%.  Endowment income fell from about $1.5 billion to about 27 million, or a fall of roughly 98%, but this is an erratic income source and like I said last year was a bad year.  Capital expenditures are down substantially, but recall that in the base year of 2010-11 the feds were sacrificing billions to the Construction Industry Gods to keep the recession at bay; in fact, current capital expenditure is close to the 30-year norm.  The interesting piece is that sponsored research income is down 6% over the past five years.

Figure 2: Change in Income by Fund, Canadian Universities, 2015-16

On to expenditures by type.  Total expenditures are roughly unchanged either over one year or five years. If you’re wondering how this is possible when income is down, recall that most of the income drop is in endowment, which has very little impact on year-to-year spending since it’s supposed to all be salted away anyway.   But while total expenditures are unchanged, some fairly big line items continue to rise, over the medium if not the short term.  Academic salaries by 7.5%, salaries to non-academic staff 8.3%, total compensation (including benefits) 8.3% and scholarships – three-quarters of which go to grad students – up by a whopping 16.4% since 2010-11.  Total scholarship expenditures are now just shy of $2 billion, which means institutions are giving back to students over 20 cents of every dollar they collect from students; from domestic students the figure is closer to 30 cents.

Figure 3: Change in Selected Types of Expenditure, Canadian Universities 2015-16

 

Now you may well ask yourself: wait a minute.  Total expenditures are flat, but salaries and scholarships are rising.  So how does this balance? Well, simple enough: non-salary, non-scholarship expenditures have fallen by 14% in the last five years in constant dollars.  Some of that is just buildings not getting built (no loss, in the eyes of some), but other things are getting squeezed, too; notably, renovations, travel and printing.

Finally, let’s look specifically at what’s going on inside the operating budget (that is, excluding ancillary, capital, research and the like) which accounts for about 60% of the total.  Figure 4 shows that overall, operating expenditures rose by 14.3% over five years.  How is this possible when operating income only rose 8.8% you ask?  Mainly, because universities have been trimming margins: universities were running surpluses five years ago and mostly aren’t any more.

 

Figure 4: Changes in Operating Budget Expenditures, Canadian Universities, 2015-16

The big expenditure increases are in ICT and student services.  In the case of student services, an awful lot of that increase is scholarships.  In ICT, interestingly, the cost of equipment purchased has actually gone down: the increases are in staff costs, consulting contracts, professional fees and equipment rentals.  Make of that what you will.  The biggest piece of the pie – Instruction and non-sponsored research (meaning basically what it costs to run core academic functions), which takes up about half the operating budget – is up 11.7 % over five years.

So there you go.  Don’t say financial reports aren’t fun.

 

September 01

McMaster > McGill?

The Shanghai Rankings (technically, the Academic Ranking of World Universities) came out a couple of weeks ago.  This is the granddaddy of all international rankings; the one that started it all, and still perceived as the most stable and reliable measure of scientific hubs; essentially it measures large concentrations of scientific talent.  And there were some very interesting results for Canada, the most intriguing of which is the fact that McGill has fallen out of Canada’s “top 3”, replaced by McMaster.

So, first of all the big picture: Toronto was up four places to 23rd in the world (and 10th among publics, if you consider Oxford, Cambridge and Cornell to be public), while UBC rose three places to 31st.  McMaster and McGill rounded out Canadian institutions in the top 100 (more on them in a second).  Below that, University of Alberta stayed steady in the 101-150 bracket, while Université de Montreal was joined by Calgary and Ottawa in the 151-200 bracket, bringing the national total in the top 200 to 8.  Overall, the country stayed steady at 19 institutions in the top 500, though Université du Québec dropped out and was replaced by Concordia; that puts the country behind the US, the UK, China, Germany, Australia and France but ahead of everyone else (including, surprisingly, Japan, which has been doing terribly in various rankings of late).

But the big story – in Canada, anyway – is that McMaster rose 17 places to 66th overall while McGill dropped four places to 67th. This is the first time in any ranking (so far as I can recall) that McGill has not ben considered one of the country’s top three institutions, and so it raises some significant questions.  Is it a matter of McGill’s reputation going down?  An echo of l’Affaire Potter?  A consequence of long-term funding decline?  What, exactly?

The answer is it’s none of those things.  Alone among the major rankings, Shanghai does not survey academics or anyone else about institutions, so it has nothing to do with image, reputation, prestige or anything else.  Nor, by the way, is funding a credible suspect.  Although we’re always hearing about how McGill is hard done by the Quebec government, the fact of the matter is that McGill has done as well or better than McMaster in terms of expenditures per student.

Figure 1-Total Expenditure per FTE Student, 2000-01 to 2015-16

Source: Statistics Canada’s Financial Information of Colleges and Universities & Post-Secondary Student Information System, various years

So what happened?  It’s pretty simple, actually.  20% of the Shanghai rank is based on what is called the “HiCi list” – the list of Highly Cited researchers put out annually by Clarivate (formerly Thompson Reuters), which you can peruse here.  But Clarivate has changed its HiCi methodology in the last couple of years, which has had a knock-on effect for the Shanghai rankings as well.  Basically, the old method rewarded old researchers whose publications had gathered lots of citations over time; the methodology only counts citations in the past ten years and therefore privileges newer, “hotter” research papers and their authors (there’s a longer explanation here if you want all the gory details).

Anyway, the effect of this appears to be significant: McGill had five highly-cited researchers in both 2015 and 2016, while McMaster went from ten to fifteen – all in the Faculty of Health Sciences, if you can believe it – putting them top in Canada.    Those extra five researchers were enough, in a ranking which is highly sensitive to the presence of really top scholars, to move McMaster above McGill.

So let’s not read anything more into this ranking: it’s not about funding, or reputation: it’s about a cluster of extraordinary research excellence which in this instance is giving a halo effect to an entire university.  C’est tout.

August 29

Fundamental Choices on Fundamental Science

The federal government has been somewhat quiet on the subject of science funding since the release of the Fundamental Science Review (see previous blogs here here and here) back in April.  Within much of the scientific community, which for the most part fell head over heels in love with the Report, this has given cause for concern; personally, I think this is pretty much par for the course, and we aren’t likely to see much in the way of hints about the size of any possible investment until October or so.

The major good piece of news is that for the first time in a long time, economic growth is going way ahead of expectations and the likelihood is there’s going to be about $10 billion more in the fiscal framework than originally expected.  Now the likelihood is they’ll blow some of that on projects designed to keep Kathleen Wynne in power, some on daycare, and maybe a bit on deficit reduction just to show they haven’t totally forgotten their pledges around fiscal restraint, but there should be enough left in the till to put a decent amount of money towards science.

But the question is: will they?  And how fundamentally will they re-shape the system in the process?

To give you the research situation in a nutshell:  Apart from a brief blip in the 2016 budget, the overall granting council budget has been falling gently in real dollars since 2010.  The overall science budget has actually stayed steady or even increased, but a lot of that extra money is going to programs like the new Canada 150 Research Chairs, the Canada First Research Excellence Fund, etc.  And within the granting council budgets, and increasing amount of money has been diverted away from fundamental research.  Some of it has gone to more graduate scholarships, but there has also been an increasing focus on making research more focussed on end-use, creating partnerships with industry (which has a similar effect), etc.  Add to the fact that some granting councils (notably CIHR, whose management decisions over the last decade appear to be the result of sustained cane toad licking) have started substantially reducing the number of awards they give out each year in order to increase the average size of their awards.

This has varied outcomes from a political point of view.  A large number of individual researchers in basic sciences, particularly biology and medicine, are livid.  A smaller number of researchers with more strength in translational and applied research are doing just fine, thank you very much.  And the universities, who are still by and larger getting the money they want, recognize that many of their employees are unhappy campers; however, since they continue to receive money either way, the status quo isn’t intolerable even if it isn’t ideal.

Now, into this steps David Naylor and his fellow commissioners with a report on how to fix it.  They ask for a whole lot of money: $1.3 billion in funding for fundamental research phased in over four years.   But – and here’s the tricky bit – how to pay for it?  Do you ask for completely 100% new money?  Because that’s a lot.  It’s something like a 30% increase, which not many programs get these days.  Or do you say: hey, let’s undo all those bad decisions of the past decade and dismantle CFREF, the Excellence Chairs and whatnot, rejig the council funding so less of their money goes to translational research, etc. (Nassif Ghoussoub outlines one possible approach along these lines here). Basically, spend the money we have better before asking for more dollars.

If it were me, I’d take option two.  But that would create winners and losers and governments hate that even if the winners in this case would be very loud and happy.  So Naylor and co. went with option one: ask for all money to be new.  Well, they actually did kind of say all that other money (CFREF, CERCs) was bunk because there were a lot of “this program should be reviewed but it’s out of our scope” comments (not sure it was actually, but leave that aside) but they very specifically avoided saying “lets repurpose some money.“  It’s a higher risk strategy, I think, because you need to ask for a larger sum of money, but on the plus side: no losers.

What will the outcome be?  If I had to guess, it’s that Naylor will mostly get his wish on funding because, fortuitously, money is available and they can probably get by without much re-purposing. But if that hadn’t been the case (and still may not be – still plenty of time for a Black Swan even between now and budget day), who knows what would have happened?  Because just as turkeys don’t vote for Christmas, you know there is literally no one in Ottawa willing to brief the politicians on the re-purposing option.

Which is too bad, because even with all the research money in the world, it’s still important to spend it properly.

June 15

School’s Out!

This is my last blog of the academic year.  I may post once or twice during the summer, if something big happens or if someone important says something titanically stupid and I need to vent, but otherwise I’ll keep your inboxes unsullied for a couple of months.  For those of you who have trouble drinking your 7AM (EST) coffee without reading this blog, my apologies, but it’s time for batteries to re-charge.

When I return on August 28th, it will be in a new format, with advertising.  I know, I know, but six years of doing this thing every day for free is probably enough.  If you have something – a conference or a service or a product – that you want to promote to a large and attentive higher education audience, do get in touch at info@higheredstrategy.com.

This was a below-par year for higher education, globally.  Brexit and Trump (and Xi, and Erdogan) called into question  some of the basic ideas underpinning internationalization.  No major government (to my knowledge, anyway) did anything particularly new or exciting in terms of investing in research and core funding, though there are some US states which seem to be upgrading their investments a bit.  We seem to be at the end of a long cycle of global higher education expansion and – Africa excepted, maybe – the focus is instead moving to efficiency and value for money.

In Canada, government support to institutions hummed along just below inflation while staff pay settlements kept growing at above inflation.  Cue more international students to fill the fiscal gap.  We’re so far into this cycle it seems impossible to ever stop.  But at some point, governments will call a stop to it and this ride is going to come to an end.  The fact that Agent May has been busted (three years ahead of schedule) in London and UK universities might once again be free to swing for the fences where international students are concerned should be a source of concern for everyone.  We’re about to have competition again, folks.   You ready?

Are things going to get better?  Well, on research the answer is probably yes.  It seems like the Government of Canada, in response to the Naylor Report, is going to spend more money on fundamental research, which is good.  The questions for next year are really: i) do the feds have the intellectual capacity to hold two thoughts in head at same time and invest both in fundamental and applied research at the same time and ii) how crazy is the super-cluster competition going to be?  But on the fundamental question of core funding for institutions, I think the answer is no.  Governments across the country and the political spectrum are wedded to the idea of starving institutions and giving more money to students.  Newfoundland is only the most egregious example.

But I’m optimistic.  I see more and more universities and colleges being increasingly strategic about their budgeting and operations.  I see money coming open internally as that long-delayed wave of retirements slowly starts to happen.  I see faculty associations (mostly – there are exceptions) moderating financial demands in light of prolonged financial difficulties.  And as always, I am constantly amazed at the dedication, brilliance and inventiveness of the tens of thousands of people who work in our post-secondary institutions.

And with those happy thoughts, I bid you all a good vacation.  And if you have any comments about the blog and how it’s been over the last year – what I should change, write more/less about – please do get in touch with me at alex at higheredstrategy dot com.  I am always eager for feedback.

Now, go play in the sun.

June 13

Who Should Benefit from Skills Training Money?

We seem to be in a period in Canada where money for “skills” is in vogue, mainly because it is seen as a panacea for lots of quite separate problems. At a really high-order level, you’ve got the Innovation ministry in Ottawa pounding the drum on skills because the tech industry says skills are a bottleneck to whatever kind of tech-powered Nirvana the Minister imagines Canada to be headed towards. And then you’ve got the Employment and Social Development Ministry and to an extent the PMO who see investing in skills as a social cohesion play – more skills means more jobs means we won’t look like the US rust belt and we can avoid a nasty bout of populism up here.

I’ll focus on the social cohesion play for the rest of this blog because no one wants to hear my views on the Innovation Minister’s views on coding again (though on the off-chance you do, see here). The mostly-unacknowledged problem we have right now is that there are three entirely separate possible foci for skills training, and very little (as far as I can tell) strategic direction about where we should be spending our dollars.

The first direction is pretty simple: providing money to train people who have lost their jobs. This is what Employment Insurance has done for over forty years. It’s not particularly good at it; but then, it’s not like any other countries are particularly good at it either. Re-training people mid-career is hard, especially if they don’t have an especially high skill level to begin with.

Then there’s the second direction, the one the Harper government tried to take us down, a bit. And that’s providing money to employers to provide more skills to their own workforce. The argument here – in part – is that we can to some extent prevent unemployment by subsidizing companies to invest more in their employees’ skills and thus make them more competitive. This is essentially what the Canada job Grant was supposed to do.

Finally, there’s a third direction, which is to help people develop their own skills, shall we say, prophylactically. That is, help workers get whatever skills they think they need in order to make themselves more flexible, and more employable. Now obviously you don’t need policy to do this – in a market economy people can invest in their own skills as they like, but repeated evidence from around the globe shows that if you do that then you tend to get a Matthew effect: those that already have tend to get more.

It’s never entirely clear why those with lower skills don’t invest on their own. Is it money?  Time? General disinclination to spending time in a classroom? But they don’t, so people are always looking for ways to try to entice them.  Not many schemes have worked well, however. One notable attempt to do this in the UK via something called “individual learning accounts” ended in dramatic failure and mass fraud.

One obvious possibility to encourage this kind of training would be to create some kind of guarantee for workers to be able to take time off for training, an idea which was contained in the 1985 MacDonald Commission (which dubbed it a “Time Bank”). Ontario could have gone this route last month when it announced its labour reform package, but instead decided to give everyone a third week of paid holiday instead. Missed opportunity.

The point I want to make here is not just that these are three different target “markets” for training, it’s that they are to some extents at cross-purposes with one another. For instance, employers really like the second type, because they get to direct where the training goes. They are somewhat less keen on the third kind, because if individuals are investing in their own skills, they are probably to some extent doing so to give themselves insurance and make themselves more mobile.

Because funds are not inexhaustible, there are trade-offs between subsidizing different types of training. At some point, if we’re going to get skills training policy right, the question of what skills, for who, and when, have to be answered openly and trade-offs have to be analyzed and debated. We’re not there yet – right now it’s mostly an inchoate “Need moar Skillz!” But we need to get there soon. Otherwise this is all a waste of time.

Page 1 of 2212345...1020...Last »