HESA

Higher Education Strategy Associates

Category Archives: funding

January 20

Classroom Economics (Part 2)

Yesterday, I introduced the equation X = aϒ/(b+c) as a way of setting overall teaching loads. Let’s now use this to understand how funding parameters drive overall teaching loads.

Assume the following starting parameters:

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Where a credit hour = 1 student in 1 class for 1 semester.

Here’s the most obvious way it works.  Let’s say the government decides to increase funding by 10%, from $600 to $660 (which would be huge – a far larger move than is conceivable, except say in Newfoundland at the height of the oil boom).  Assuming no other changes – that is, average compensation and overhead remain constant – the 10% increase would mean:

X= 2.27($150,000)/($600+$850) = 235

X= 2.27($150,000)/($660+$850) = 225

In other words, a ten percent increase in funding and a freeze on expenditures would reduce teaching loads by about 4%.  Assuming a professor is teaching 2/2, that’s a decrease of 2.5 students per class.  Why so small?  Because in this scenario (which is pretty close to the current situation in Ontario and Nova Scotia), government funding is only about 40% of operating income.  The size of the funding increase necessary to generate a significant effect on teaching loads and class sizes is enormous.

And of course that’s assuming no changes in other costs.  What happens if we assume a more realistic scenario, one in which average salaries rise 3%, and overhead rises at the same rate?

X= 2.27($154,500)/($660+$850) = 232

In other words, as far as class size is concerned, normal (for Canada anyway) salary increases will eat up about 70% of a 10% increase in government funding.  Or, to put it another way, one would normally expect a 10% increase in government funding to reduce class sizes by a shade over 1%.

Sobering, huh?

OK, let’s now take it from the other direction – how big an income boost would it take to reduce class sizes by 10%?  Well, assuming that salary and other costs are rising by 3%, the entire right side of the equation (b+c) would need to rise by 14.5%.  That would require an increase in government funding of 35%, or an increase in revenues from students of 25% (which could either be achieved through tuition increases, or a really big shift from domestic to international enrolments), or some mix of the two; for instance, a 10% increase in government funds and a 17% increase in student funds.

That’s more than sobering.  That’s into “I really need a drink” territory.  And what makes it worse is that even if you could pull off that kind of revenue increase, ongoing 3% increases in salary and overhead would eat up the entire increase in just three years.

Now, don’t take these exact numbers as gospel.  This example works in a couple of  low-cost programs (Arts, Business, etc.) in Ontario and Nova Scotia (which, to be fair, represent half the country’s student body), but most programs in most provinces are working off a higher denominator than this, and for them it would be less grim than I’m making out here.  Go ahead and play with the formula with data from your own institution and see what happens – it’s revealing.

Nevertheless, the basic problem is the same everywhere.  As long as costs are increasing, you either have to get used to some pretty heroic revenue assumptions (likely involving significant tuition increases) or you have to get used to the idea of ever-higher teaching loads.

So what are the options on cost-cutting?  Tune in tomorrow.

January 19

Classroom Economics (Part 1)

One of the things that continually astonishes me about universities is how few people who work within them actually understand how they are funded, and what the budget drivers really are.  So this week I’m going to walk y’all through a simplified model of how the system really works.

Let’s start by stating what should be – but too often isn’t – the obvious: universities are paid to teach.  They are paid specific amounts to do specific pieces of research through granting councils and other kinds of research funding arrangements, but the core operating budget – made up of government grants and tuition fees – relates nearly entirely to teaching.  This is not in any way to suggest that teaching is all professors should do.  It is, however, to say that their funding depends on teaching.  Want a bigger budget?  Teach more students.

This link is more obvious in some provinces than others.  In places like Ontario and Quebec, which have funding formulae, the link is clear: each student is worth a particular amount of money based on their field and level of study.  In others, like Alberta and British Columbia, where government funding comes as a block, it’s not quite as clear, but the principle is basically the same.

So the issue within the institution is how to get the necessary amount of teaching done.  One way to work out how much teaching is needed is this little formula:

X = aϒ/(b+c)

Where “X” is the total number of credit hours a professor must teach each year (a credit hour here meaning a student student sitting in one course for one term – a class with 40 students is 40 credit hours), “ϒ” is average compensation per professor, “a” is the overhead required to support each professor, “b” is the government grant per student credit hour, and “c” is the tuition revenue per credit hour.

Now, let’s plug in a few numbers here.  Average professorial compensation, including benefits, is approaching $150,000 in Canada.  Faculty salaries and benefits are about 44% of total operating budgets, meaning that for every dollar spent on faculty compensation, another $1.27 is spent on other things.  For argument’s sake, let’s say the average income from government is about $6,000 per student (or $600 per credit hour) and average tuition income, including that for international students, is about $8,500 per student (or $850 per credit hour).  These last two figures will vary by field and level of study, and by province, but those numbers are about right for undergraduate Arts in Ontario.

So, what does our equation look like?

X = 2.27*150,000/($600+$850) = 235.

In this simplified world where all students are undergraduate Arts students, at current faculty salary rates and university cost structure, professors on average have to teach 235 credit hours in order to cover their salaries.  If you’re teaching 3/2, that means 5 classes of 47 students each; if you’re teaching 2/2 that means 4 classes of 59 students apiece.

Now, I know what you’re going to say: there’s not actually that many profs teaching that many students.  And that’s true mainly because I’m low-balling the per-student income figure.  Add in graduate students and the per-student income rises because of more government subsidy.  Choose another discipline (Engineering, say), and income rises for the same reason.  But at universities like, say, Wilfrid Laurier, Saint Mary’s, or Lethbridge, which are big on Arts, Science, and Business, and low on professional programs, this is pretty much the equation they are looking at.

More tomorrow.

January 06

Adult Discussions About Research Policy

Over the winter break, the Toronto Star published an editorial on research funding that deserves to be taken out to the woodshed and clobbered.

The editorial comes in two parts. The first is a reflection on whether or not the Harper government is a “caveman” or just “incompetent” when it comes to science. I suppose it’s progress that the Star gives two options, but frankly the Harper record on science isn’t hard to decode:

  1. The Conservatives like “Big Science” and have funded it reasonably well.
  2. They’re not crazy about pure inquiry-driven stuff the granting councils have traditionally done and have kept growth under inflation as a result (which isn’t great but is better than what has happened to some other areas of government funding).
  3. They really hate government regulatory science especially when it comes to the environment and have approached it the way the Visigoths approached Rome (axes out, with an intention to cause damage).
  4. By and large they’d prefer if scientists and business would work more closely together; after all, what’s state investment in research and development for if not to increase economic growth?

But that’s not the part of the article that needs a smack upside the head. Rather, it’s these statements:

Again and again, the Conservatives have diverted resources from basic research – science for no immediate purpose other than knowledge-gathering – to private-public partnerships aimed at immediate commercial gain.

And

…by abandoning basic research – science that no business would pay for – the government is scorching the very earth from which innovation grows.

OK, first of all: the idea that there is a sharp dividing line between “basic” and “applied” research is pure hornswoggle. They aren’t polar opposites; lots of research (including pretty much everything in medicine and engineering) is arguably both. Outside of astronomy/cosmology, very little modern science is for no purpose other than knowledge gathering. There is almost always some thought of use or purpose. Go read Pasteur’s Quadrant.

Second, while the government is certainly making much of its new money conditional on business participation, the government hasn’t “abandoned” basic research. The billions going into the granting councils are still there.

Third, the idea that innovation and economic growth are driven solely or even mainly by domestic basic research expenditures  is simply a fantasy. A number of economists have shown a connection between economic growth and national levels of research and development; no one (so far as I know) has ever proven it about basic research alone.

There’s a good reason for that: while basic research is the wellspring of innovation (and it’s important that someone does basic research), in open economies it’s not in the least clear that every country has to engage in it to the same degree. The Asian tigers, for instance, emphasized “development” for decades before they started putting money into what we would consider serious basic research facilities. And nearly all the technology Canadian industry relies on is American, and would be so even if we tripled our research budgets.

We know almost nothing about the “optimal” mix of R&D, but it stands to reason that the mix is going to be different in different industries based on how close to the technological frontier each industry is in a given country. The idea that there is a single optimal mix across all times and places is simply untenable.

Cartoonishly simple arguments like the Star’s, which imply that any shift away from “basic” research is inherently wrong, aren’t just a waste of time; the “basic = good, applied = bad” line of argument actively infantilizes the Canadian policy debate. It’s long past time this policy discussion grew up.

September 04

Who’s Relatively Underfunded?

As I said yesterday, there’s a quick way to check claims of relative underfunding in block-grant provinces: take each institution’s enrolment numbers by field of study from Statscan’s Post-Secondary Student Information System (PSIS), plug those numbers into the Ontario and Quebec funding formulas, and then compare each institutions’ hypothetical share of total provincial weighted student units (WSUs) under those formulas to what we know they actually receive via CAUBO’s annual Financial Information of Universities and Colleges (FIUC) Survey.

Simple, right? Well, no, not really, but I have some really talented staff who do this stuff for me (Hi Jackie!), so let’s go look at the data.

Let’s start with Manitoba, where pretty much every second day you can hear the University of Winnipeg making a case about relative underfunding (say what you will about Lloyd Axworthy: the man knows how to keep his message in the newspapers).  But is the claim true?

Figure 1: FTEs, Weighted FTEs, and Actual Funding, Manitoba Universities

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Here’s what Figure 1 says:  The University of Manitoba has 69% of the province’s students, but receives 79% of all provincial funding (this is from 2011-12); The University of Winnipeg, on the other hand, has 24% of the students, but only 13% of the total funding.  Clear cut case of underfunding, right?

Well, not entirely.  The fact is that Manitoba has a lot more students in high-cost disciplines than does Winnipeg.  If U of M were in Ontario, it would get 75% of provincial funding; if it were in Quebec (where the formula is slightly more tilted towards medical disciplines), it would get 77% of provincial funding.  So Manitoba receives slightly more funding than it would in other provinces, as does – in a relatively more significant way – Brandon University.  And Winnipeg does receive less than it would if it were in another province: $18 million less than if Manitoba used Quebec’s formula, and $25 million less than if Ontario’s were used.  That’s a big gap, but still less than it would appear just looking at FTEs alone.

Now, on to New Brunswick.  One has to be a little careful about making inter-institutional comparisons with CAUBO data in New Brunswick because of the peculiar arrangement between UNB and St. Thomas (STU).  Because the two share the former’s campus, the provincial government sends UNB a little bit extra (and STU a little bit less) in order to cover extra costs.  So, with that in mind, let’s look at the data:

Figure 2: FTEs, Weighted FTEs, and Actual Funding, New Brunswick Universities

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New Brunswick looks a bit different than Manitoba, where the biggest university is overfunded.  In New Brunswick, it’s UNB that actually seems to be doing badly, receiving 50% of all money when, in Ontario, it would receive 54%, and in Quebec it would receive 59% (and remember, that 50% is actually inflated a bit because of the money to support STU students).  The institution that really seems to be overfunded in New Brunswick is Moncton, which is receiving $13 million more than it would if New Brunswick used either the Quebec or Ontario formulae.

So, yes Virginia, relative underfunding does exist in Manitoba and New Brunswick.  This probably wouldn’t be the case if either province ever bothered to put its institutional funding on an empirical footing, via a funding formula.  But that would create winners (likely Winnipeg & UNB) and losers (likely Brandon, Moncton and, to a lesser extent, Manitoba).  And what politician likes to hear that?

September 03

“Relative” Underfunding

Institutions always claim to be underfunded.  Seriously, I’ve been at universities in maybe 25 countries – including Saudi Arabia and the Emirates – and I have yet to find an institution that thought it was overfunded.  The reason for this is simple: there’s always just a little bit more quality around the bend, if only you could buy it (the university down the street has a space-shuttle simulator? We need an actual space shuttle to stay competitive!).  So it’s easy to tune out this kind of talk.

The slightly more sophisticated argument is one of relative underfunding.  That is too say: institution A is getting less than it “should” based on what a selection of other comparable institutions get.  The trick, of course, is to get the comparator right – too often, it’s transparently a plea by institutions in poor provinces to get funded in the same way as some of their peers in wealthier provinces.

One way that governments can avoid this kind of argument is to institute funding formulas (indeed, in many cases, this is precisely the reason they were introduced).  Once a funding formula is created, and institutions are paid according to some kind of algorithm, it becomes tough to argue relative underfunding (that is, unless the formula is specifically re-jigged in such a way as to screw over one particular partner – as Quebec did with its famous “ajustement McGill”).  You can argue that the funding doesn’t weight activities the right way – small institutions tend to argue that fixed costs aren’t properly accounted for, large ones that research activities are never compensated adequately – but you can’t argue being underfunded because the criteria by which money is being distributed are objective.

In Canada, it’s really only Quebec and Ontario that have anything close to pure formula funding, based on input indicators.  Nova Scotia does have a formula, but weirdly only takes a reading of the indicators every decade or so; Saskatchewan has some weird block grant/formula hybrid, which is ludicrously complex for a province with only two institutions.  PEI and Newfoundland don’t really need formulae given that they are single-institution provinces.

That leaves Alberta, British Columbia, Manitoba, and New Brunswick.  In these provinces, money is delivered by block grant rather than on the basis of an algorithm, so there is plenty of scope for institutions to claim being “underfunded” relative to others in their province.   This means that institutions have a perennial rhetorical stick with which to beat government.

Or do they?  In fact, there is a way to check claims of relative underfunding, even in block grant provinces.  All one needs to do is to simply look at the distribution of money across an institution and see if it matches up with the distribution of funds one would see in a province that does have a funding formula (i.e. Quebec and/or Ontario).  If they don’t match, there’s probably a case for underfunding; if they do, there probably isn’t.

Tomorrow, we’ll try this out on Manitoba and New Brunswick.

March 21

Capital!

If you’re ever bored and playing around with CAUBO data (what do you mean, “no else does that”?) you may have noticed that in 2011 there was a significant (roughly 3%) decrease in university expenditures – which is weird, because no province significantly reduced funding to universities that year, and universities never voluntarily reduce their spending.  So what the heck is going on?

The quick answer is: the Knowledge Infrastructure Program (KIP) ended, and so institutions lost a nice little source of income that they could devote to making newer, nicer, and more energy-efficient buildings.  But a deeper look at some of the numbers on capital spending makes for interesting reading.

Here’s the overall story on capital expenditure at Canadian universities:

Figure 1: Capital Expenditures at Canadian Universities, 1992-2011, in $2011

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Obviously, this graph shows the enormous effect of KIP – an enormous two-year spike in spending in 2009 and 2010.  But to me, the more interesting thing is the long-term increase in capital spending.  Back in the 1990s, we basically kept capital spending at around a billion dollars/year.  Come the millennium, we changed tack.  Over the next three years, capital spending jumped by 150%, nation-wide, and stayed there.  Part of that was of course the result of Ontario going on a double-cohort-related construction spree.  But it wasn’t just Ontario – remember that enrolments went up by about half between 1997 and 2009.  And of course, from 1999 onwards, Canada Foundation for Innovation money started flowing into institutions across the country to upgrade institutions’ research infrastructure.

Here’s what happened to spending in the four big provinces which make up 90% of the country’s post-secondary expenditures:

Figure 2: Capital Expenditures at Universities in Ontario, Quebec, British Columbia and Alberta, 1992-2011, in $2011

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Figure 2 shows that although the big increases were in Ontario and Alberta; Quebec stands out for having a policy of very steady investment in capital.  It had a one-off increase in 2000 (one assumes this is mostly due to CFI), but other than that the expenditures were quite stable.  That means Quebec wasn’t a stand-out performer in 2010, but it also means that for most of the 90s, Quebec was outspending Ontario 2:1 (and thus it probably didn’t have the same kind of infrastructure deficit going into the 2000s).

But maybe the mind-blowing thing here is what happened in Alberta post-2000, which is best seen by isolating the later years in the previous graph and indexing provincial spending:

Figure 3: Capital Expenditures at Universities in Ontario, Quebec, British Columbia and Alberta, 1999-2011, indexed to 1999

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Figure 3 illustrates two extraordinary spikes in spending: BC, where capital spending quintupled between 1999 and 2005, and Alberta, where capital spending triples in just three years after 2006.

The long and the short of it is that in the 2000s, for a variety of short-term reasons (double-cohort in Ontario, having more money than God in Alberta), capital expenditures settled at a level about 2.5 times where it was in the 90s.  Can we stay at this level, or are we doomed to give in to short-termism and start diverting this money to shorter-term priorities?  Certainly, a number of faculty unions (particularly in the Atlantic) have been making the case that capital expenditures should be re-directed to higher faculty salaries.

One can’t predict the future, of course.  But these figures really do remind you that the mid/late 00s were the Golden Years for Canadian higher education financing.  Makes you wonder how many people now feel silly for not having seen it at the time.

February 25

The War on Small, Niche Public Universities

Governments love universities that make a niche for themselves.  ”How delightful“, governments say.  ”Oh, we’re so proud of you for not following the herd and trying to be just another big multi-versity.  You go, girl”.

They say all of this, of course, until it comes time to actually fund them, at which point governments effectively flip small, niche universities the bird.  In practice, governments behave as though they hate small universities with a passion.

There are two separate problems here.  The first has to do with the difficulties governments have with “small”.  Funding formulas tend to push institutions towards “average” costs.  But since most universities in Canada are big, “average” costs usually means the costs that large institutions with major economies of scale can achieve.  Small universities have to survive on the same amount, but without the economies of scale.

At one level, maybe that’s OK.  Smaller institutions probably do less research, and because of that they can pay their staff somewhat less.  And maybe there’s an argument to be made that it’s more important to run higher education systems efficiently than to have well-funded small institutions available to those students who would thrive in them.  But then why not let them charge more for their services?  But of course, no government will go that extra simple step.

The second problem has to do with niches.  These sound great, until you realize that niches, by definition, are unstable.  Change just one or two external parameters and suddenly a species can no longer exist .  So, all those institutions that bet heavily on education over the last decade, with the encouragement of lots of government funding?  Now they’re getting hammered by governments that no longer think their niche is worth funding (Law is in a similar situation, different only in that it was privately, rather than publicly, funded).

Now, imagine you’ve been trying to be both a small university and a niche university over the last few years.  The government won’t pay properly for your non-niche programs, and suddenly decides it dislikes the niche you’ve chosen (or, alternatively, the market for that niche suddenly disappears).  You’re screwed, basically.

This is why most small universities become medium or even large universities: in our system, size = more secure income streams.  Utilitarians might say “so what – what’s wrong with scale?”  But the problem for most of these institutions is that their Unique Value Proposition is being small.  Small doesn’t scale.  When you force these institutions to grow, there’s a real danger that you force them to be something they were never intended to be.  And that’s a loss of diversity to the whole system.

What’s really weird is that after all this, governments still wonder why there’s such skepticism about differentiation.  But on that, more tomorrow.

January 09

The Salaries Problem

I’ve made a few key points over the last couple of days:

1)      Canadian Universities will be lucky if they keep being able to increase their incomes by 3% per year, holding enrolments constant.

2)      The kinds of salary settlements we have seen recently at Canadian universities, if allowed to continue, will eat up easily 70-80% of that income, maybe more, leaving precious little left over for IT, infrastructure, etc.

3)      It’s not a problem of administrative bloat.  The ratio of academic salaries to non-academic ones hasn’t changed in over a decade.

To put it bluntly, this isn’t sustainable.  Things have to change.

Could the solution be on the revenue side?  Certainly, that’s part of the current problem.  Over the past two years, things have been pretty dire for higher education, with institutions only receiving about 0.45% per year in government funding increases.  That might improve a bit in some provinces over the next year or two, but my guess would be that both Ontario and Quebec will see significant cuts in the 2015 budget cycle, once they’ve both had elections.  So that’s not in the cards.

Ask students to pay more?  That would make oodles of sense in many places (especially Alberta, BC, and Quebec), but it’s a tough sell in a recession.  To the extent this is possible, it will be for professional Master’s programs, which are going to spread like mushrooms.

Admit more students?  Well, that would work in some places, but not east of the Ottawa River, where things are drying up.  International students are always a very viable alternative, though it’s not clear that every institution is equally suited to acting (as Brad DeLong recently wrote in a delightfully bitchy post about the University of California) as finishing schools for the superrich of Asia.

That leaves expenditure – the largest and fastest-rising bit of which is salaries.  And here there are only three options: cut jobs, cut salaries, or some combination of the two.  Tenure limits institutions’ ability to do the former (to academics, at least), so that suggests that restraint on the salary side is where the action is going to have to be.

It’s not even a matter of cutting salaries.  It’s about getting the rate of salary increase back down to where it historically was for most of the 70s, 80s and 90s.  The 2000s saw an historically unprecedented rise in professorial salaries, as shown by Figure 1:

Figure 1: Median Academic Salaries, Canada Real $2012

 

 

 

 

 

 

 

 

 

 

 

 

More relevant for university finances was the fact that average salaries were increasing even faster than the median during the 2000s – 18% in real dollars vs. 11% for the median.

Figure 2: Average Academic Salaries, 2001-2 and 2009-10, in Real $2012

 

 

 

 

 

 

 

 

 

 

 

 

You know the good old days everyone talks about?  Maybe they were good precisely because salaries weren’t cannibalizing the rest of the budget.  Something to think about, anyway.

January 07

How Universities Are Becoming More Labour-Intensive

Yesterday, I showed how universities in New Brunswick were – despite welcome new promises of stable funding from the provincial government – facing problems because salary increases were going to eat all the available new money.  Some of you possibly thought I was being alarmist.  But it’s easy enough to show how this can happen.  In Ontario, it already has.

For data here, I pulled the financial statements for the last five years at the “Big 8” (Toronto, Waterloo, Western, Queens, Guelph, York, Ottawa, and McMaster), which comprise about 75% of all university spending, and hence are a pretty good proxy for the university system as a whole.  It’s not as good as Stastcan data; but, on the other hand, it gives me something past 2011, which is the most recently-available Statistics Canada/CAUBO report.  And here is what it shows:

Figure 1: Total and Salaries/Benefits Expenditures, 8 Largest Ontario Universities, 2009-2013

 

 

 

 

 

 

 

 

 

 

 

 

Expenditures at these institutions rose from $7.4 billion in 2009 to $8.6 billion in 2012, before falling back to $8.45 billion in 2013.  That’s a 14% nominal increase, which is about 6% after inflation – not bad.  Meanwhile, salaries and benefits rose from being 59% of overall budgets to being 63% of overall budgets.

Now that doesn’t sound so bad, either.  But let’s look at the same data another way:

Figure 2: Increases in Total and Salaries/Benefits Expenditures, 8 Largest Ontario Universities, 2009-2013

 

 

 

 

 

 

 

 

 

 

 

 

This looks considerably less good, doesn’t it?  As new money has come in and permitted higher spending, salaries and benefits have eaten fully 92% of the increase.  This, friends, is the consequence of increasing salary mass by 5% per year, when income is only growing at 3%.

And the consequences for the rest of the budget?  After salary increases, the Ontario 8 only had $83 million to put into non-salary areas.  On a base of about $3 billion, that’s an increase of about 3%, but after inflation, that’s actually a 4% reduction, i.e., a fall of about 1% per year.  And of course much of that money is earmarked for things like research, so in terms of disposable income, it’s likely that the figure is actually much higher.

Outside Ontario, we don’t see quite the same pattern.  I pulled 7 other comparable institutions (UBC, Alberta, Calgary, Saskatchewan, Manitoba, McGill, and Dalhousie) and found that on the whole they spent a greater proportion of their money on salaries (66% in 2013, compared to 63% in Ontario), but that there was no sudden change in the way money was spent (only 67% of new expenditure went to salaries, meaning the average went unchanged).  That said, there were differences inside this group.  Most actually managed to decrease their salary-to-total expenditure ratios; the two exceptions were Alberta (where salaries took 86% of all new expenditure) and McGill (where they took an astounding 179% of new expenditures).

For a set of institutions that endlessly bang-on about how hi-tech they are, Ontario universities are apparently one of the very few industries in the provinces that are becoming more labour intensive over time.  And that won’t change until compensation increases start coming into line with increases in income.

January 06

The New Normal

Happy New Year!  Did everyone have a great vacation?

The highlight of my vacation was going to Argentina and stumbling upon the world’s most unfortunately-named university in a suburb of Buenos Aires, named “Morón”.  It’s called – wait for it – Unversidad de Morón.  Seriously, their international marketing people must have the most difficult jobs in higher ed.

Anyhow, I wanted to start the year by talking about what was a hopeful development from last fall – the Government of New Brunswick’s decision to pre-announce university funding increases for the next two years.  Instead of waiting for provincial budget-time to make an announcement (which, quite honestly, is far too late for institutions needing to do serious planning), the government pre-announced not one but two(!) years’ worth of future increases: 2% for 2014-15, and another 2% for 2015-16.  And they also told institutions they could raise domestic undergraduate tuition by 3% for each of the next two years.  Assuming no big increase in domestic or international student numbers, that means the university can count on overall budget increases of around 2.33%.

Great news, right?  Guaranteed new money!

Put the champagne down, guys.  2.33% still isn’t enough to keep pace.  Cutbacks will inevitably follow.  To understand why, let’s look at professorial pay.

UNB profs are currently without a contract – and indeed are very close to a strike on the issue.  But their previous four-year contract was a fairly generous one.  It moved the salary grid upwards by (on average) 2.4% per year, plus everyone not at the top of their pay grade got annual bumps of (on average) about $1300/year.  What percentage that works out to in total depends on where your place is in the pay grid, but for new associate professors, on average, it was about 4% per year on the nose.

So, 4% in total on academics pay.  Benefits tend to scale at the same rate, as does non-academic pay, so 4% on those, too.  At most Canadian universities, salaries and benefits are about 60% of all expenditures.  Multiply that out – 60% times 4% = 2.4%, and right there we’ve already used up slightly more than the entire announced increase in funding.

That is to say: if labour contracts continue to play out the way they have over the past four years, there is exactly no money left over for anything else.  But since inflation erodes buying power, that actually implies ongoing cutbacks of all non-salary items of about 2% per year.  And that’s the best case scenario for a university, since I think few provinces will be as generous as New Brunswick this year.

The reality, then, is this: either staff pay settlements have to start coming into line with increases in institutional income, or the new normal is going to be continuing pay hikes, combined with annual cutbacks in all non-salary items.

That’s the math, and there’s no escaping it.

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