HESA

Higher Education Strategy Associates

Category Archives: Politics

Elections, political parties and platforms, other political issues and processes

November 09

A Second Thought About Half-Way Through A Pretty Awful Day

Forgive the intrusion.  But our neighbour to the South electing a quasi-fascist narcissist isn’t an every day occasion.  There are some significant short-term consequences for Canadian higher education, and I thought I would just quickly enumerate them so that debate and preparation can begin.

First, the chances of a recession in the next couple of years just shot up quite a bit.  Tearing up NAFTA also means tearing up the FTA: there will be a pause in business investment while everyone works out what on earth the new rules are going to be.  Other forms of protectionist legislation, even if not aimed at us, has the potential to wreak serious havoc as well.  Unlike previous recessions, interest rate cuts cannot be part of our policy arsenal as they are already near-zero.  To some people’s minds, that calls for massive Keynesian borrowing-and-spending.  But as we’ve already seen with the first round of Trudeau spending, it’s not at all clear that the intended multiplier effects work very well in a small open economy.  Long story short: provincial governments were never likely to be flush enough to grants serious relief to universities and colleges any time soon, but yesterday’s vote made such prospects even more remote.

Second, the forecast demand for Canada as an international education destination just went Through. The. Roof.  Already earlier this week, the annual i-barometer global survey of education agents named Canada the #1 “hot” destination for students.  But now, with a President-elect who degrades women, despises Hispanic and Muslims and openly consorts with anti-semites, there’s going to be a huge diversion of interest away from the United States and (since the UK has already hung out a huge “Sod Off” sign on its window), this diversion is be headed towards exactly three places: New Zealand, Australia, and Canada.  One recent study suggested fully 65% of international students would be less likely to study in the US if Trump were elected.  Even if that over-states the case by a factor of two, we’re talking about a couple of hundred thousand internationally mobile students up for grabs.  Not to mention the almost-certain increase in the number of Americans heading North.

That has a couple of implications.  The main one is that Canadian universities are about to get more pricing power:  No more being the discount end of North American higher education.  But we have to up our game significantly.  We have to have real presence – not just agents – in major export markets.  And we have to up the student experience international students receive as well.   There are significant opportunities here: but also some potential significant costs.  There’s no time like now to have a really thorough debate about internationalization on our campuses.

Third, while I have been impressed by how by some prominent Americans (Jonathan Chait, Lin-Manuel Miranda) are coming out strongly this AM saying (correctly) “Screw moving to Canada, we need to stay and fight”, the fact of the matter is there are going to be a lot of faculty wanting to head north and a lot fewer of our own professors wanting to head south.  Universities will have a much better set of potential hires in front of them for the next couple of years.  This is great news: but we should try not to squander this opportunity the way we squandered the post-2008 rush north.  We can and should use the opportunity to poach selectively; but perhaps not break the bank on salaries while doing so.

(Also: I’m pretty sure we’re not going to be hearing about brain drain and the loss of talent to the US for awhile, so it’s an opportunity as well to re-calibrate some of our arguments about education and the labour market).

So the net effect here for Canadian institutions over the medium-term: less government money, more opportunities in international education, and thicker academic labour markets.  On balance, it’s probably more good news than bad, provided we act deliberately and rapidly while ensuring that these moves have wide buy-ins on our campuses.

But beyond the simple dollars and cents of it all, there are deeper issues.  A monster has become President of the United States.  Misery is going to fall upon the American people for the next two years if not four: on Blacks, immigrants, women, LGBTQs.  We all know people down there, know what they must be feeling today, and our hearts ache for them.  We need to show solidarity with them whenever we can.  But we also need to be vigilant here in Canada.  We are not immune to nativism and intolerance.

Last night around 11 PM Dalhousie President Richard Florizone tweeted “When voices of intolerance are loudest don’t be despondent – be emboldened, and even more committed to values of diversity & inclusion.” And that’s exactly right.   We have to work – and work hard – at these things and for fairness, every day.  In the end, that kind hard work is all that ever makes a difference.

October 28

Priorities

Next week, everyone’s favourite Federation of Students is going to have a “Day of Action” to demand “Free Education for All”.  A few months ago I explained why some student groups think it’s a good idea to be protesting right now even while governments are quite sympathetic to them  (tl:dr: it’s because Sticking It To The Man is more important that achieving practical results).

Now to anyone who’s read this blog for more than once, it’s probably clear that I take a pretty dim view on the Free Education for All line.  I do believe there’s an argument for free education at the college level; however, beyond that, the case is pretty weak.  Low-income students already have net zero tuition in most of the country.  For students from families making $40,000, subsidies (that is, grants, loan remission and tax credits) are already larger than college fees in eight provinces – all ten if we include Manitoba’s and Saskatchewan’s graduate rebate programs.  They’re also larger than university fees in five provinces: Newfoundland, New Brunswick, Quebec, Ontario and Manitoba.  Put that altogether and it’s clear that over 90% of all low-income students are already paying net zero tuition and will gain little from eliminating tuition.  The big wins, therefore, are for richer students.

Free tuition does not reduce intergenerational disparities.  It cannot produce greater equity in enrolments without a massive and seriously unlikely displacement of upper-income students from universities.   And even Karl Marx understood that it was regressive.

But let’s put all that aside.  Let’s assume for a moment that we all agree that any regressivity which occurs in completely subsidizing education for students from wealthier backgrounds is offset by the inherent benefits of universal programs.  Or, let’s assume we agree with American scholar/author and free-tuition advocate Sara Goldrick-Rab (whose new book Paying the Price is very good by the way) that the only way to really ensure that the poor get the money they need is to subsidise the rich, too.  Programs for the poor are poor programs, she says, so only universality can save the poor. (I don’t think this is true in Canada – the Trudeau government has just shown how to do targeting with its changing tax credits into grants – but I grant the possibility it may be the case in the US, so let’s go with it for now).

But even if we assume all that, we still need to assume that there is money available.  And in one sense there clearly is:  governments can make anything happen if they want to.   They just have to decide to do it.  It is a political question more than a financial one.  But politics, as they say, is about choices.  And the issue is: what would we choose not to pay for in order to ensure that kids from above-median income families don’t have to pay tuition?

Peace-keeping?  Should we say no to a mission to Mali to keep wealthier kids from paying tuition?  Childcare?  Do we choose to invest less in childcare to make university free for those who can clearly afford it?  Or what about clean drinking water on First Nations’ territories?  More investments in mental health?

Because of entrenched interests and programs, it’s very difficult for democratic governments to move money from program to program.  When incremental money arrives, they have to assign it to whatever priorities they think most important.  It could go back to taxpayers via a tax cut, or it could go to pay down debt, or it could go into a priority spending area.  When someone says “government should eliminate post-secondary fees”, in practical terms what they are implicitly arguing is that “students from wealthier backgrounds (because those are the primary beneficiaries) deserve this money more than families with childcare needs, or First Nations families living in communities with boil water advisories.  I know they would explicitly deny this, but from the perspective of the government, which has to choose between competing priorities, this is exactly what is being advocated.  That’s how lobbying works.

To recap:  Free fees would help the rich most, would not reduce intergenerational inequality, will not work to reduce inequality of access, and to boot would take money away from other important policy priorities, many of which (e.g. First Nations’ health and sanitation) are transparently of higher importance.

Remember all that on November 2nd.

October 11

Hillary’s Higher Education Plans

Barring some sort of catastrophe, it now seems pretty clear that Hillary Clinton will be the 45th President of the United States.  There is a reasonable chance (51.6% in Monday’s FiveThirtyEight forecast) that the Democrats could regain the Senate and an outside chance that they could also regain the House.   Those odds probably change a bit in the Democrats’ favour once some post-grope polls come out later this week, but the basic outline of a post-November 7 world – Hillary in charge, with a split Congress – is now pretty clear.  What does it mean for higher education?

Well, you wouldn’t know it from any of the debates – we’ve now gone 270 minutes without a single second being spent on education – but higher education is a major plank in Hillary’s platform.  But her policies on higher education have evolved somewhat over the course of the campaign, mostly because her primary opponent Bernie Sanders’ success with millennials convinced her she needed a big, expensive, youth-oriented policy, and higher education (apparently) is it.

Hillary’s plan, release just prior to the July convention and known as “The New College Compact” consists of two pillars.  The first involves creating a system of “free tuition” at public universities for students from families with under $125,000 by 2021 (it would start at $85,000 in 2017 and rise by $10K each year thereafter) .  On the fact of it, this is a bit like what the Ontario Liberals and the Chilean socialists have developed, only more generous (i.e., using a higher cut-off point).  But the costing on this plan is – to put it mildly – hazy.  Her costing documents speak of spending $450 billion over ten years, but the tuition take from 4-year public alone is north of $55 billion, and that’s not including either the cost of 2-year colleges or the extra costs that would accrue if free tuition induced hundreds of thousands of students from private colleges to switch into the public system (the New America Foundation has correctly warned that not including funding for system growth could well result in a reduction of access for lower-income and minority students as middle-class students switching from privates could push out less-prepared lower-income kids from a fixed number of spaces).

The problem here is that the US (like Canada) is a federal system, with education a responsibility of the states.  The federal government can promising anything it likes about tuition, but at the end of the day it is states who have the final say.  The best the feds can do is work out a system of carrots and sticks to entice the states into a program.  The wording of the plan seems to imply that states who want to get reduce tuition will sign up for grants from Washington in return for meeting certain conditions – one of them being pouring more money of their own into their systems.  But the progress of Obamacare, which required considerably less from states but has only brough two-third of states on board so far, should give everyone pause.  On top of that, of course, the President alone can’t appropriate funds unilaterally.  Congress would need to be on-side as well, and the Democrats are still a long way from being able to make that happen.  Which is why most higher education analysts in the US seem to assume that the plan is more talk than action: a rhetorical statement which can attract voters rather than a plan likely to be implemented.

The second part of the Clinton plan involves a three-month moratorium on student loan repayment allowing all borrowers – including those in repayment – to re-finance their loans at a lower rate.  There is a fair amount of scepticism about how effective this measure might be.  As Robert Kelchen of Seton Hall University (possibly the shrewdest US student loans pundit out there), wrote in The Conversation a couple of months ago, the most-indebted graduates tend not to be the ones with the high default rates because default is most commonly associated with dropouts and hence lower levels of debt, and also because over 40% of borrowers in the US are now in income-based plans and so changing the level of interest will have minimal effects on repayments.  In other words, it will be a big income transfer to younger Americans, but not necessarily one that will do much to increase access or reduce defaults.

So after the election, what we can probably expect is a situation quite similar to what we had prior to 2014: a President and a Senate with a desire to make college more affordable (though not necessarily in particularly efficient ways), with a House implacably opposed and states offering indifferent support.  But a catastrophic Republican result in the House – which remains a possibility following this weekend’s stampede of defections – might result in some very rapid and drastic policy changes from the new administration.

Stay tuned for November 8th. 

September 29

The Ontario NDP’s Bad Student Loan Math

The Ontario NDP have started down the road to madness on student aid.  Someone needs to stop them.

Here’s the issue: the NDP have decided to promise to make all Ontario student loans interest-free.  As a policy, this is pretty meh.  It’s not the kind of policy that increases participation because students don’t really pay attention to loan interest, and it’s not going to make loans a whole lot more affordable because Ontario forgives most loans anyway (as a consequence something like 90% of all loans in repayment in Ontario are federal loans which wouldn’t be subject to this policy).   My back-of-the-envelope calculation is that this policy might save a typical borrower in repayment something like $5/month, which isn’t a big deal as far as affordability is concerned.  One could argue that affordability of loan repayments shouldn’t be a big priority since loan payments as a fraction of average graduate income has gone down by about a third in the past fifteen years, but on the other hand, this isn’t likely to cost very much either, so really, who cares?

No, the problem isn’t so much the proposed program as it is the tagline that’s gone along with it. To wit: “The government shouldn’t be making a profit from student debt”.

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I mean, where to begin with this stonking bit of nonsense?

The worst-case interpretation of this is that the NDP actually believes that “interest” equals “profit”, or, to put it another way, that money has no time-value.  Read literally, it suggests that all interest is usury.  The NDP is sometimes accused of being stuck in the 70s as far as economic policy is concerned; this particular slogan suggests it might be more 1370s than 1970s.

More likely, though, this is the NDP aping Massachusetts Senator Elizabeth Warren, who has been saying these kinds of things about US student loans for a few years now.  The essence of the critique is this: governments borrow money cheaply and lend to students at a higher rate (in the US, the rate on Stafford undergraduate subsidized loans is the 10-year Treasury rate plus 250 basis points, and somewhat higher for other types of public loans).  The gap between the two rates is needed because of course the government loses money on loans through loan defaults (it also loses money by assuming the loan interest while a student is in school, but that’s a separate issue).  For reasons beyond comprehension, the US government does not base its financial calculations for student loans on actuarial reports which are linked to actual student behaviour, but rather according to “standard conventions”, one of which essentially assumes no loan losses at all.  It is by using this convention – i.e. basically ignoring all actual costs – that Warren came to the conclusion that student loans “make money”. For a more complete description of why this is total nonsense, check out Jason Delisle’s work on the subject here as well as articles from the Atlantic, the Washington Post and the Brookings Institute.

But even to the limited extent the Warren critique makes sense in the US, it doesn’t work in Ontario.  OSAP loses money.  A lot of it.  It doesn’t publish numbers directly on this, but it’s easy enough to work it out.  Ontario 10-year bonds go for about 2.5% these days, and OSAP lends to students at prime + 1%, or about 3.7%.  So Ontario’s spread is only 120 basis points, or half the American spread (CSLP loans, are different: the feds borrow at 1% and lend at prime plus 250 basis points, for a total spread of 420 basis points).  120 basis points per year is not much when you consider that simply covering the cost of borrowing while students are in school is twice that.  Basically, it means that for someone who borrows for four years, the government loses money every time they pay back the loan in less than eight years.  And that’s not counting the cost of defaults, which are in the tens of millions of dollars each year.

Put simply: Ontario students get to borrow at zero interest while in school, and positive-but-below-market rates after graduation despite default rates which are astronomical by the standards of any other personal loan product.  That costs the government money.  If it defrays some of that cost through an interest rate spread, so be it – that does not constitute “making a profit”.  It is simply stupid of any political party which wishes to be entrusted with public finances to suggest otherwise.

August 03

A tipping point for internationalization?

Over the last few years, my position about internationalization has been pretty consistent: the international student market is going to grow and grow.  Talk about a China bubble – one of the education press’s favourite “what-if?” doom and gloom scenarios – is almost invariably overstated.  Yes, political instability in a place might China might occur, but Chinese parents think of having students overseas as an insurance policy, a way to get out if need be – so frankly if anything political instability there is likely to increase study abroad, not decrease it.  Fears about an economic contraction affecting internationalization?  We just had a Great Recession and international student numbers climbed right around the world.

The only thing that I think really stands in the way of continued growth in international student numbers is a major disruption in the international economic/political order, something on the scale of a major war, say.  And until now I’ve been pretty confident that this isn’t in the offing.  But after the summer of 2016, I’m not so sure anymore: turns out there are ways to effectively poison the prevailing economic/political order short of war.

To me, there are six big things going on right now which individually might not matter much but taken together signal real change: Brexit, the Syrian refugee crisis, the Turkish coup, Trumpism, the French election and the creeping cult of Xi Jinping.  None of these phenomenon do much to change outbound student-mobility at a global level in the short term.  Brexit might reduce foreign demand for UK education, but those people have options elsewhere; the Turkish coup, if anything, gives a boost to internationalization because there are going to be a *lot* of secular-minded students looking for an exit.  But in the medium term, it’s possible these changes herald a very different kind of world than the one we have grown used to.

Internationalization in higher education depends in large part on the notion that mobility – and not just study mobility but life mobility – is desirable.  If you’re a kid from an aspiring middle-class family in Buenos Aires or Beirut or Beijing, you want the foreign degree partly because the institution you might attend is better/more prestigious than the education might get at home, and partly because you think your degree will make you more valuable to a wider set of employers.  But if laws emerge which constrain businesses from hiring across national borders, that poses a serious challenge to the logic behind internationalization.

Trumpism and Brexit are both expressions of ugly nativism and herald exactly such a challenge.  Though they may not play out completely (Brexit may not happen, Trump likely won’t win the general election) they certainly suggest that the twin anglo-saxon motors of globalization are much less keen on immigration than they were.  The French election, which Marine LePen is now given a reasonable chance of winning, could see this momentum carried through to another major G-7 country.  The Schengen agreement is still wobbly thanks to the refugee crisis and Europe’s mostly short-sighted reaction to it and mobility within Europe may will be curtailed at some point.  In the developed world, where we used to see immigration in terms of doors and bridges between nations, increasingly we see only walls.  This is not good.

And that’s just what’s going on in developed countries.  The aftermath of the Turkish coup attempt has freed President Erdogan’s most authoritarian tendencies, resulting in a wholesale attack on universities and academics.  In China, universities are being purged of “western influences.”  In themselves, neither of these are going to reduce student flows; but in both cases you see major countries adopting more nationalist positions, and being more restrictive of press freedoms and freedoms of speech.  These spaces are becoming less open to the world, not more.  These are not conditions in which it seems likely that employers  will enthusiastically welcome students who have gone abroad for their education.

Put all that together, we could be going back to a pre-1989 world where the nation-state is much more powerful and paternalist and where individual mobility – at least, beyond simple tourism – is much more restricted than it is today.  Some people, I am sure, would welcome such a world.  Personally, I think it would be a disaster and a huge step backwards for progress and freedom.  Where universities are concerned it would be a disaster because it would erode the foundations of internationalization and student mobility.

I’m not saying this will all happen; a slow-down in the move towards globalization still seems more likely than an out-right reversal of it.  But this summer’s events make me much less confident about this than I have been at any time in the last thirty years.  Institutions with major stakes in internationalization would be wise to do some contingency planning.

July 14

Brexit

Morning, all.

Everyone’s writing a Brexit thinkpiece these days.  Literally, everyone.  I’m feeling left out.  So here’s mine.

1) Brexit isn’t a foregone conclusion.  Yes, Leave won 52% of a non-binding referendum based on a pack of lies about the results of future negotiations that would make the PQ blush.  But the UK government has yet to invoke Article 50, the clause in the EU constitution that signals a 2-year countdown to departure, and will certainly not do so until a new PM is chosen.They may not do so until after the French and German elections next year, and as the realities of negotiating a divorce sink in they may never do so (and – irony of ironies, there are not enough trade lawyers in the UK to negotiate such deals, so they are having to import them ) .  Even if they do start negotiations, the final settlement may be so far from the Leave fairytale that there would almost certainly be a huge demand for a second referendum before ratification.  So all this handwringing may be for naught.

2) Even if Brexit doesn’t happen, this episode can cause a lot of damage.  The UK hasn’t been booted out of the Erasmus student mobility program yet, but with racist incidents up 500% since the vote, you can bet there will fewer European students thinking London is a place they’ll feel secure.  The UK hasn’t been booted out of the Horizon 2020 European research scheme yet, but multi-national scientific teams have been pulling UK researchers’ names from their proposals in anticipation of Brexit.  And the idea that the UK will make up for the drop in funding?  Good luck with that.  Paradoxically, the longer the uncertainty about Brexit, the less likely the UK will actually pull the trigger; but conversely, the longer they wait, the greater the damage will be.

3) What will happen to International student flows?  Now this is where it gets tricky.  A lot of the focus right now is on EU students, and the fear that they won’t come to the UK because they will have to pay international student fees instead of domestic ones.  But domestic fees are already pretty high (and in humanities and social sciences are set well above the cost of delivery). If universities want to keep those students they could always grant concessionary fees to EU students and keep them paying exactly what they’re paying right now.  No, I think the real issue with EU students has to do with whether students still think the UK is a place they want to spend a part of their lives.  Lots of them now go assuming they can stay and work there: no more.  But it’s not clear that countries like Canada or Australia would be able to pick up on this loss.  If the point of going to London was because it was a “destination” rather than simply a chance to learn English, it’s not obvious that Melbourne or Toronto would be a satisfactory second choice.

It’s the same with non-EU students: you might think that there would be a lot of non-EU students who might be dissuaded from going either because of increasing incidence of racism or because London was no longer a way into the EU.  Since the Tories took power it’s been increasingly difficult for graduating students to immigrate anyway, so it’s unlikely to be the latter: Teresa May’s immigration saw that lot off years ago.  But the racism/intolerance thing?  That’s a vulnerability.

4) Can Canadian universities and colleges cash in on this?  Yes. Advertise a lot in Asian markets where UK currently does well.  Emphasize security and multiculturalism.  Talk about possibilities for immigration.  And do it fast, because odds are the Aussies are already there doing it.

Hope you’re all having a good summer.

June 10

A National Day of Action

Earlier this week  Canadian Federation of Students (CFS) decided to hold a “National Day of Action”, its first since 2012.  Many may find this a bit puzzling: after all, this is a year in which the federal government increased student grants and doubled the number of summer student jobs (also, increased granting council funding and put aside gazillions for infrastructure, though that may matter less to students than to other post-secondary stakeholders).  So what, exactly, is CFS thinking?

Well, I don’t have an inside line to CFS or anything, but what’s important to remember is that the organization really, really does not think of itself as an interest group, and that therefore one shouldn’t try to analyze its decisions using the standard framework that lobbyists use to evaluate decisions.  Interest groups like to have access to decision-makers (ministers, MPs/MLAs, senior public servants).  Indeed, they gauge their success in terms of their ability to get decision-makers to think of their specific issues in their terms – to “capture” the decision-makers, so to speak.  There are a lot of student organizations in the country that think this way: in Ottawa, you have the Canadian Alliance of Student Associations or CASA (disclosure: I was National Director of CASA 20 years ago), but there’s also the Ontario Undergraduate Student Alliance and College Student Alliance here in Toronto, Students Nova Scotia in Halifax, and the Council of Alberta University Students out in Edmonton.

But CFS does not think of itself this way.  Instead, it thinks of itself as a “movement”.  And movements behave very differently from interest groups. 

For interest groups, getting close to decision-makers is THE way to promote change.  For movements, getting close to decisions-makers is cause for suspicion (i.e. “Talking to The Man?  What if we get corrupted by the Man?”).  Movements care less for concrete results in terms of obtaining things for “members” (itself a term which is understood fundamentally differently by movements and interest groups); rather, what matters for movements is changing people’s “consciousness”. 

Pretty clearly, that’s what at work here with CFS.  A National Day of Action is certainly a good way of getting individual student unions to engage with their members about the real and imagined plights of students, and getting them out on the street.  And after the day of action, if you ask them “was this a success”, they will answer not in terms of policies changed but simply in terms of the number of students who out in the street because for a movement, that is an end in and of itself.

That there are opportunity costs in taking this approach is literally incomprehensible to CFS (which, judging by its policy manual, isn’t especially conversant with the subject in any other context, either).  The idea that raising consciousness with students might actively piss off a government which spent a fair bit of political capital in providing new money for students, and hence make further co-operation and progress less likely, simply doesn’t compute.  This is not surprising, since they spend a lot more time thinking about how to persuade their own members to engage than they do thinking about how to engage policymakers.

Historically, Canada’s students have probably been reasonably well served by having one national student organization work as an interest group and the other as a movement.  They have to some extent acted as a good cop/bad cop duo, even if they actively despise one another.  But even so, it’s incredibly hard to see what good can come of this Day of Action.  Politicians respond favourably to people who say thank you when they’ve gone to bat for you.  They respond less well when you put thousands of people on the street to yell about how much they suck. 

I hope CFS gets all the consciousness-raising it needs out of this.  It’d be a shame to sacrifice actual progress on issues if they didn’t.

April 20

The Politics of Unfreezing Tuition

Freezing tuition is a terrible policy.  Free tuition is actually a better idea.  At least it’s based on a particular theory of access and public expenditure.  A tuition freeze is just a decision not to take any more decisions.  It’s a recipe for drift.

And what’s worse, the longer you let policy drift, the harder it is to stop drifting.  Case in point: Newfoundland.

To recap: In 2000, the province of Newfoundland decided to reduce tuition by 5% a year over four years and then freeze tuition thereafter.  And it’s been frozen ever since, with the agreement of all political parties.  The ostensible rationale for this is that it improves access to post-secondary (though in truth participation rates remain well below those in Ontario, where tuition is 3 times as expensive); in practice, what it’s done is reversed the flow of student from Newfoundland to Nova Scotia, bringing home their own students and attracting a few hundred new ones.  

As long as some of those new students were staying in province and helping reverse the long-term population loss, that was probably a good deal for the province.  Of course, no one actually tracked this to see if it was true and the policy was working, but that’s cool – this is Canadian postsecondary policy and we’re used to never evaluating the success of a program.  But now that oil revenues have plummeted and unemployment seems headed back towards 20%, it’s harder to maintain that this is happening, and so the cost of the tuition pledge seems to outweigh the benefit.  And given the government is currently spending roughly 33% more than it is taking in tax revenue, time for a change of policy, right?

Wrong.  In last week’s budget, the government raised all sorts of fees related to apprenticeship, which tends to heart lower-income learners.  It cut student aid, turning part of its vaunted grants programs into loans, which also hurt lower-income learners.  And it cut $14 million from Memorial’s budget.  But God forbid it touch tuition.  Upper middle-class people pay that stuff. Nuh-uh, no way, not touching.

Actually it’s somewhat worse than that.  The government didn’t touch tuition, but instead started making noises about how Memorial has always had the ability to set it’s own tuition (nudge, nudge) and of course the government expected to do what was right for students (wink wink).  I mean, first of all this is nonsense – the tuition freeze promise has been formally written into every provincial budget since 2000 – and second of all it’s unbelievably cowardly.  Unable to muster the political courage to get rid of tuition on its own, the government is reduced to pleading for the university to do something (but maybe not too much) to help it out of a jam.  I suspect if Memorial weren’t so broke ($54 million in cuts over two years, if you include cuts to the pension plan) it would tell the province to grab a chair and then rotate at an ever-increasing speed around that idea.  I know I would.

But the point is this: even a new government, with a massive majority in the legislature, facing the biggest fiscal emergency in twenty years, and having the courage to cut all sorts of programs still doesn’t have the courage to touch tuition.  It will touch all sorts of things which hurt the less-fortunate, but not tuition.  The upper middle-class defends its privileges to the last.  Which is precisely why those privileges shouldn’t be given out in the first place.

April 05

Manitoba Election Manifesto Analysis

So, with Saskatchewan’s election out of the way (results unknown at time of writing but I assume it was a Sask Party blowout), it’s time to focus now on the election in next-door Manitoba.  This is somewhat difficult because neither the governing NDP nor the opposition Progressive Conservatives have chosen to do anything so mundane as issue platforms, preferring instead to simply issues a bunch of “priorities” or “announcements”.  The reason for this is straightforward: the Tories are up 20 points and provided no one catches Brian Pallister drinking blood in public, they will win the province’s biggest majority in over a century.  But it can lead to some confusion over what is actually being promised.  Like when Greg Selinger pledged to double the number of yurts in the province.  He said it, but there’s no corresponding pledge on the party website – so is it a promise, or not?

(Obviously the duty of any social democratic government to rectify the market failure in yurts should be clear; the real question is why it’s taken this government 16.5 years to act on this imperative.  I digress).

Enough grumbles: here’s the lowdown.

Over the past sixteen years, the NDP have treated higher education tolerably well.  They’ve put a reasonable amount of money into need-based student assistance (introducing a loan remission program in their first year in office).  Money to institutions has gone up slightly more than the Canadian average, but much of it was to compensate for a decade-long tuition freeze, so in fact the institutions’ net financial position ended up lagging the rest of the country somewhat.

But in the last few years, Manitoba has been arguably the best government in the country – the only one which has consistently given institutions increases ahead of inflation.  That’s pretty good.  On the other hand, it has also introduced one of those god-awful graduate tax rebates, with the result that – provided you graduate on time and stay in the province – you’re likely to receive more in grants and tax credits/rebates than you pay in tuition.  That’s inane. 

The NDP’s initial instinct in PSE always seems to be “how can we hand money to students”?  Its election promise to convert the provincial student loan program into a fully grant-based program, as well as spend $4.5 million doubling the funding for the Manitoba Scholarship and Bursary Initiative (MSBI), which is a 1-to-1 top-up for private donations made to institutions for the purpose of establishing scholarships. 

The Liberals appear to have made only one pledge in post-secondary education: that is, to match the NDP on converting loans to grants.  The Tories also appear to have only one promise, and that is to make two changes to the MSBI – increase it by 50% (that is, 50% more than now, but still $2.25M short of what NDP are promising), but changing the rules so it is not a 1-1 leverage but a 1-2 leverage (i.e. $2 in donations triggers $1 in matching funding).  This, apparently, will “leverage more money from the private sector”, which is a stretch if you ask me.  None of the parties seems inclined to touch the demonstrably wasteful and ineffective graduate tax rebate.

The NDP have also made two specific commitments to institutions: to fund a $12 million expansion of student family housing at the University of Brandon (I know little about this project but I assume it would be focused specifically on helping aboriginal students) and a $150 million commitment to the University of Manitoba’s “Front and Center” capital campaign, 80% of which is dedicated to infrastructure.  And if you find it strange that the government is contributing to a capital campaign, well, that’s Manitoba for you.

What’s distressing here is that – as in Saskatchewan – none of the parties have made any pledges at all with respect to core funding of institutions.  Now that might not be disastrous since not one of the parties are looking to implement swingeing cuts (although the left take it for granted that the Tories are lying about only wanting to restrain the rate of growth in government spending), but it does suggest that no one thinks core funding is a priority.  And that’s a problem for the whole sector.

Bottom line: if you’re voting on PSE alone, you vote NDP based both on past record and present promises.  They spend a lot of money on PSE, even if too much of it is wasteful and ineffective.  But the opposition parties don’t appear to put a lot of thought into anything other than how to hand more money to students.  And we probably shouldn’t reward parties with such one-dimensional views of higher education.

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

Fig.1

 

 

 

 

 

 

 

 

 

 

 

 

 

(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

Fig.2

 

 

 

 

 

 

 

 

 

 

 

 

 

(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.

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