HESA

Higher Education Strategy Associates

Category Archives: Quebec

May 01

Social Movements and Universities

I was giving a speech recently looking at long-term trends in higher education, when a young fellow called me out.  Why, he asked, was I projecting long term trends that remained stable or declining?  Why couldn’t I see that if we just got a major social movement together– you know, like the Red Square movement – we could change all that, and see a glorious new age of post-secondary funding!

It’s a nice idea.  Problem is it’s really hard to see how it ever comes true.

Take the Red Square movement, for instance – clearly one of the strongest social movements in Canada in the last couple of years.  Here’s what’s happened to the budget for post-secondary education over the last four years, in real dollars:

Figure 1: Quebec Government Transfers to Universities, 2011-2015, in Billions of Real $2015 (Source: Quebec Expenditure Estimates, 2011-15)

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See that?  Despite massive protests, no change in expenditures to universities.  (I know, it looks like there was a one-time bump in 2014-15, but that was the budgeted amount before announcing mid-year cuts, which effectively wiped out the increase.)

Here’s the thing: social movements can be quite effective at getting governments not to do things.  They can prevent cuts to certain programs.  They can persuade governments not to charge for things they were going to charge for – like tuition fees.  But other than the UBC Great Trek of 1922 – which, you know, was 94 YEARS AGO – I can’t recall a single time in Canadian history where a major social movement actually got a government to spend significant sums of extra money on higher education.

(Quick aside to all you UBC folk out there: who was it that decided a 12 km walk across the lower mainland constituted a “Trek”?  It’s not like West 4th street is the frickin’ Transvaal.  Yeesh.)

To sum up: social movements – in higher education, at least – are most effective as agents of conservatism, keeping things as they are. Social movements do not wrest new resources out of government.  But they can force changes like a tuition freeze or maybe even tuition reductions, because that doesn’t cost a thing, and so frankly it’s no skin off government’s nose.  In other words, social movements – at best – can be a vehicle for taking money out of universities and handing it to students.  But there is simply no precedent in Canada for them making institutions any better off.

October 22

Scenario Planning for Ontario and Quebec

Yesterday, we looked at data from 2004 to 2012 to examine income and expenditure trends for Canadian universities, and found that salary and operating budgets were both moving up at a pace of around 4.4% per year in real dollars.  Today, I want to do a bit of scenario planning for the country’s two largest provinces using the same technique of focussing just on operating grants, tuition, and salaries. 

Ontario

Ontario sits in between two divergent trends – real public funding has been stable or declining for many years, while tuition revenue has been increasing by about 8% per year, thanks mainly to the influx of international students.  As a result, since 2009, operating budgets have been increasing by 3.8% per year, which has been enough to deal with salary mass rises of 3.9% per year.

But can Ontario keep up that pace?  We’re already at the start of a phase where domestic enrolments are declining, and at best government income is going to decrease by about 1% per year in real terms (according to the government’s own budget papers, future increases will be 1%, less than the recent norm of 2%).  So a best guess at what’s going to happen is that government income trajectory will remain negative, and the 8% per year budget increases will start to trail off somewhat.  If this happens – and of course this still depends on ever-increasing international student numbers, which is by no means assured – then current levels of salary mass increases can be tolerated.

But what if things don’t go as planned?  What if international student numbers don’t offset losses from declining domestic student numbers?  What if the Wynne government decides to make one significant cut (say, 5%) in budgets this year to finally get the deficit under control, now that they have a majority government?  In this case, assuming no change in salary mass trajectory, salaries would rise to 82% of combined operating grant and tuition, from 76% today.  That may not sound like much, but let me turn those words around and phrase it another way: in order to accommodate current levels of growth in the salary budget, in a pessimistic scenario, the non-salary portion of the operating budget – light, heat, scholarships, lab supplies, etc. – would need to be cut by 25%.

Figure 1: Budget Scenarios for Ontario, 2012-13 to 2017-18

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So the quick summary here is: If you want salary mass increases to continue, find ways to bring those foreign students in.  Otherwise, you either have to accept massive cuts to non-salary areas or a cut in salary growth.

Quebec

The situation in Quebec is both more straightforward and more problematic than in Ontario.  There, the government has already signalled it will cut funds in nominal terms next year in order to balance the budget.  The only question is what happens afterwards – and I have assumed here that spending will rise again at the rate of projected GDP growth.  Tuition revenue growth was never as high in Quebec (5% per year in real terms) as it was in Ontario, as Quebec doesn’t attract as many international students – there is no obvious reason to think this will change.  On the other side of the ledger, salaries as a percentage of total income is 87% of combined government grants and tuition, compared to 76% in Ontario (if you’re wondering why Quebec universities feel poorer than Ontario ones, there’s your answer right there).  You can come up with other scenarios, of course, but most plausible ones look worse than this.

Put these factors together and you get a pretty ugly picture.  Operating budgets are simply not likely to grow much in the short term, so even a continuation of current salary trends – a 2% real increase per year, or about half what it is in Ontario – would mean salaries rising from 87% of income to 91.4% of income.  Meaning, in short, that without a change in salary policy, Quebec universities would have to cut a third of their non-salary budget in order to make ends meet.

Figure 2: Budget Scenario for Quebec, 2012-13 to 2017-18

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Whichever way you look at it, the numbers are ugly.  Compression of salary mass seems almost inevitable in Quebec; for Ontario to avoid the same requires institutions to continue a not-necessarily-sustainable trend of enrolling ever-increasing proportions of international students.

Tomorrow, we’ll get out of central Canada and see how things stack up elsewhere.

May 23

A Rare Piece of Good Policy in Quebec

So, although it wasn’t widely noticed at the time, one really excellent piece of policy came out of the crap-fest that was the Quebec Education Summit, a couple of weeks ago; it’s a policy that deserves a great deal of wider study and emulation.  For the first time in Canadian history, a government managed to get rid of a crappy tax credit, and use it to improve targeted, needs-based subsidies.

Here’s what happened. The PQ, during its naked bid to win the affections of students in the run-up to the 2012 election, promised students that not only would they rescind the tuition hike imposed by the Liberal government, but they would also uphold the generous new student aid package the Liberals offered as a sweetener.  But of course, that meant spending double – so they needed a new form of revenue, at a time when the provincial budget was under pressure.

Enter the tax credits.

Now, if you’ve at all been following student aid over the last decade, you’ll know that Canada went tax-credit crazy around about 1998.  Mostly, it was a federal thing – a way for the feds to get money to parents for education, without the tedious mucking about of negotiating deals with provinces.  But some provinces went along for the ride, too. In any case, the value of education tax credits rapidly surpassed the combined value of grants and loan remission.

Total Value of Education Tax Credits vs. Grants & Remission, Canada, 1990-91 to 2009-10, in Billions of 2010 Dollars

 

 

 

 

 

 

 

 

 

 

 

 

Why does this matter?  Because tax credits are given out without regard to income or need.  And since kids from better-off backgrounds are more likely to go to PSE, tax credit expenditure, on aggregate, mostly ends up in the hands of people from the top 2 income quartiles.  Grants, on the other hand, are more likely to end up in the hands of people from the bottom 2 quartiles (the reason they don’t end up there entirely is because a lot kids from richer backgrounds get quite a lot of aid once they turn 22, and become “independent” students).

Distribution of Benefits by Income Quartile, for Selected Student Assistance Measures

 

 

 

 

 

 

 

 

 

 

 

 

Source: Usher, A (2004) Who Gets What? The Distribution of Government Subsidies for Postsecondary Education in Canada. Toronto: Educational Policy Institute.   

Now, over the past decade, a number of groups have recommended replacing tax credits with grants of some kind – even the CFS, who bizarrely denounce tax credits as regressive, even though they have EXACTLY the same re-distributive consequences as the tuition cuts which the CFS backs so fervently (consistency is not their strong suit).  Almost everyone – bar Michael Ignatieff – ignored these calls, essentially on the grounds that  Canadians wouldn’t stand for what would amount to a tax hike.

Well, now the PQ has proved them wrong.  A government has converted a regressive universal program into a targeted progressive one, to no opposition whatsoever, even in a highly-taxed province.  Policy-makers in the rest of the country should take note.

April 19

A Two-Tier Tuition Regime in Quebec?

Things are getting interesting in Quebec.  First Laval and now l’Université de Montreal are publicly threatening to leave the Conseil des Receteurs et Principaux des Universites du Quebec (CREPUQ).  In the discreet and diplomatic world of Canadian University politics, this is like blowing a vuvuzela during a piano recital.

At one level, this is a delayed reaction to CREPUQ’s limp performance during last year’s tuition fee debate.  At the outset, all institutions agreed to take a common position and speak through CREPUQ, a strategy fatally undermined by CREPUQ’s subsequent decision to spend the crisis hiding under a blanket.  I don’t have any inside information, but reading between the lines, it seems that there was a split between the independent universities (McGill, Concordia, Bishop’s, Laval, Montreal, Sherbrooke) and the UQs, with the former mostly thinking the Charest government didn’t go far enough, and the latter – possibly with an eye on an incoming PQ government – being more ambivalent.  The result was a deafening and damaging silence from the reform’s key beneficiaries.

The lesson Laval and Montreal seem to have taken from this is that CREPUQ and their UQ colleagues are no longer to be trusted.  And so they are now out actively lobbying for a two-tier solution, which would promote their interests over those of the UQ system’s.  Specifically, they are arguing for a two-tier tuition structure which would allow research-intensive institutions to charge a higher fee, while allowing the government to claim it is preserving access by giving students a low-fee option through the UQs.

I think there is some merit in a two-tiered solution.  Clearly, a lot of (mainly francophone) students have made it known that they value cheap universities over good universities.  So, fine, let those be the UQs.  For everyone else, there’s a better-resourced solution, funded by fees rather than government.

But the specific details of the plan are a bit sketchy.  First of all, the link between tuition and research is a bit ridiculous.  What’s the value proposition: “pay us more, so we can pay less attention to you”?  Even if it weren’t ridiculous, the idea that it would apply to just Laval, Montreal, McGill, and Sherbrooke is nuts.  On any research measure other than, “do you have a medical school”, Concordia kicks Sherbrooke’s behind; for it not to be on that list is a transparent piece of linguistic politics and institutional snobbery.

If you’re going down the two-tiered road, it seems to me that there’s a logically solid case for restricting it to just two universities (McGill and Montreal, genuinely world-class and special) or expanding it to six by including all the “independent” universities (i.e. including Concordia and Bishop’s).   Anything else seems arbitrary.

December 06

The Other Shoe Drops

So, the victorious Parti Québécois, who believe so much in education, who spent all spring and summer hand-wringing and moaning about how that mean, mean Jean Charest was just so… so mean because he wouldn’t invest in Quebec’s youth, and whose election was a massive and historic victory because they cancelled those terrible, evil, neo-liberal tuition fee hikes, has just cut subsidies to all universities’ and colleges’ by five percent.

Oh, and the cuts aren’t coming next year, they’re coming this year.  The one that’s already more than half over.  So, in fact, based on what actually remains of the budget year, the cut’s add up to something closer to 12%.

Of course, I’m sure that the province’s teaching staff, many of whom supported the students publicly – yes, I’m looking at you, Anarchopanda – and joined in their brave resistance to “The Man” will view this development with good cheer.  I forsee them gladly – no, gleefully – agreeing to have their salaries cut so they can show that they’re ready to do their part, and make sure that under no circumstances are students forced to pay another penny towards their education.  Because that’s what solidarity means, isn’t it?

And of course student leaders will be asking universities to publicize the fact that those shortened library hours, those cancelled course sections – that they’re all thanks to the Red Square movement.  In fact, I’m sure that at this very minute, they’re planning a massive new wave of demonstrations in which students will bang pots and pans through the east end of Montreal, in a huge percussive show of support for the Parti Québécois and its cutbacks.

No?  You don’t think so? Wait, you don’t think that students feel shocked and betrayed right now, do you?

Surely not.  Surely everyone understood at the outset that the province was broke and that the alternative to tuition hikes was precisely this kind of cutback.  Surely everyone understood that government spending is limited by the size of the taxbase, and that in a province as highly taxed as Quebec, when you promise something as expensive and unnecessary as a continuation of a misguided tuition freeze, that somehow, someway, it has to be paid for.

No?  You don’t think they understood all of that?  Well, they must be feeling pretty silly today, mustn’t they?

October 12

When Should McGill Go Private? (Part 3)

Over the last couple of days, we’ve seen how McGill could at least theoretically survive leaving the public higher education system and cope with a loss of its $272 million teaching grant. About 85% of the resulting funding gap could be closed on the revenue side; the rest would need to come from internal re-allocations (basically, shifting away from graduate studies and losing a faculty or two).

Probably the biggest implication of abandoning public funding is that the numbers don’t work unless McGill focuses more on undergraduates and less on graduate students, at least in the medium term. That’s a potential turn-off to a lot of the faculty members upon whose shoulders McGill’s reputation rests, and could tilt the balance in any discussion about the merits of going private.

The short-term equilibrium needed to make the plan work involved setting tuition at Ontario levels plus about $3000 and increasing enrolment slightly. But that’s a very short-term solution: McGill’s reputation for quality can withstand higher prices and larger classrooms for awhile, but over time that won’t be sustainable. Quite apart from the need for eventual capital improvements, the school will eventually have to develop a value proposition different from that of public institutions, and that almost certainly means smaller class sizes. The ineluctable logic over time is a significantly smaller school charging prices that are at least in the $20,000 – $30,000 range. But that’s really uncharted territory as far as student price-response goes. That people would pay a premium to go to McGill is almost unarguable. But what kind of premium? Fifty percent more than (say) Queen’s? Probably. One hundred percent? Now the issue of the value proposition becomes pretty acute.

With more money coming through students and their parents, student aid would also start to become a major issue. The province of Quebec wouldn’t be able to cut McGill off, but it would almost certainly find a way to limit the amount of tuition that would be counted as “need” (much as Ontario has done for the past decade). This may not matter much – one implication of this plan is almost certainly a shift in the student body to accommodate more out-of-province students. Most likely, McGill would need to start pumping increasing proportions of new tuition income into its own student aid programs, in exactly the same way U.S. private schools do. But head down that route and every extra dollar returns ever less net revenue; pretty soon you’re chasing your own tail.

Going private would involve some very serious trade-offs for McGill; it’s by no means a panacea. But at least McGill has the luxury of such a debate. For other Quebec institutions, the remainder of the decade looks bleak indeed.

October 11

When Should McGill Go Private (Part 2)?

Yesterday, we saw how simply by adopting an Ontario pricing system, McGill could get almost two-thirds of the way to financial independence from the Quebec government. Today, we consider if/how it could get the rest of the way and close the remaining $111 million gap.

One advantage that McGill has over pretty much every other university in the country is the national nature of its brand. It is absolutely astonishing how many top students from every part of the country want to study there. As a result, McGill has something pretty much no other institution in the country has – an inelastic demand curve. Not only could it easily charge more than it currently does, it could easily charge substantially more than any other institution in the country and still keep its enrolments essentially unchanged or even increase them.

Let’s say it keeps enrolments unchanged. My guess – and it’s no more than that – is that McGill could fairly easily charge another $3,000 or so above tuition at equivalent Ontario schools and not see any drop in demand. Even assuming the institutions takes 20% off the top for student aid, that’s an extra $2,400 per student, or nearly $50 million – which brings the cost gap down to about $60 million. Increase overall enrolments by another ten percent and the gap falls to just $40 million.

That’s close, but no cigar. Getting those last few million would require some potentially painful choices, mostly on the cost side. The least radical would involve shifting the enrolment mix towards undergraduate arts and business and away from graduate students. This may sound counterintuitive (aren’t prestigious universities grad-student-heavy?) until you realize that once you’re out of the public system and its funding formulae, the imperative is to push enrolment into programs with higher margins. Doing this doesn’t increase revenue, but it does reduce the cost of instruction somewhat.

More radically, McGill would probably need to think about ditching a couple of faculties – preferably ones which cost a lot of money but don’t do much for prestige. The two obvious candidates at McGill would be education and dentistry (the school of social work could probably go, too). Music would be on the cusp (it loses a ton of money and generally isn’t a prestige discipline, but McGill’sreally good at it).

Even all that probably doesn’t quite make it to break-even, but we’re definitely down to the last $10 million or so. That’s close enough that even the smallest cut to their operating grant would make leaving the public sector a serious option.

When should McGill go private? Maybe sooner than you think.

October 10

When Should McGill Go Private?

With the election of a PQ government which is unwilling to sanction tuition fee increases and too broke to actually spend any more money on PSE, there’s one debate which is sure to arise soon: when and under what conditions should McGill leave the public sector and go it alone as a private university?

In a sense, of course, McGill has always been private. It was not founded by an act of the legislature, but rather as a charitable enterprise (technically, it’s the Royal Society for the Advancement of Learning). Its governing body is totally autonomous of government and it is only considered “public” because it accepts government rules in exchange for public funds.

For the past fifty years, those rules have proved a bargain for McGill (and similar institutions such as Laval, Bishop’s, etc), but they may not remain so indefinitely. One of the primary purposes of the public funding rules is precisely to limit total institutional income, by limiting the amount of tuition fees any institution can get. At the moment, the government hands over about $329 million per year; $272 million of which comes from formula funding, with the rest mostly coming in the form of research funding of various type (which in theory at least might continue even if McGill were private).

So let’s look at that $272 million for a moment, because that’s the key figure: could McGill ditch it and replace the revenue with tuition dollars?

Well, first, by going private McGill would immediately recoup $85 million in various forms of income which the government currently skims. At the moment, McGill is not allowed to keep all the extra revenue it collects from “out of province” students, nor is it allowed to keep all its revenue from its international students. So, right away, the amount that needs recouping is not $272 million but $187 million.

Now, let’s take all those Canadian students and boost their tuition to the Ontario average of tuition and fees (which is currently sitting a little under $8,000). For its roughly 10,000 Quebec undergraduates, that would mean a jump per year of about $4,200; for its 7,000 non-Quebec students it’s about $500. In total, that’s $46 million. Do the same for grad students and you’re looking at another $10 million. Take the professional programs such as law, medicine and dentistry, and line their tuitions up with those at U of T and you get another $20 million.

Add all that up and what you find is that simply by adopting an Ontario tuition structure, McGill can recoup $161 million of the $272 million it gets for teaching from the Quebec government. Where could it get the rest? Tune in tomorrow.

September 07

Back to (Red) Square One

Alex Usher and Joseph Berger

The Parti Québécois’ Tuesday night victory will have major effects on higher education in Quebec, but there are implications right across the country, too. Here are a few of them.

Inside Quebec, things are back to square one. The PQ has already told student leaders it’s cancelling the increases to tuition; recent improvements to student aid are unlikely to stick, since they were largely going to be funded via tuition revenue – but the PQ hasn’t made any proclamations yet. Students who have paid their bills will get refunds. Pauline Marois will hold a summit on university financing before proceeding with any policy decisions, though her preference is to index fees at 2011-12 levels. Just when the summit will occur – and how it could possibly enrich a public debate that has gone on for years – is unclear.

In the meantime, university students will pay less than they expected. But since 2012-13 budgets were based on increased tuition revenue, universities will be finding themselves with short- and medium-term budget gaps to fill. Perhaps Quebec university presidents who bemoan the inevitable cutbacks over the next few months will use the opportunity to reflect on whether laying low during last spring’s strikes was such a smart idea after all. One can only hope.

Additionally, Law 12 (née Bill 78) is effectively dead. Whether Marois has enough political capital to renew Bill 101 to keep Francophones and Allophones out of English CEGEPs remains to be seen.

There will likely be effects in Ottawa, too. The mere presence of Marois in office is likely to strengthen the hands of people in the Privy Council Office who prefer to bazooka anything with even a whiff of Section 92 about it. We go can thus more or less say sayonara to any initiatives in education and training. Research may be superficially unaffected, but even here, there’s going to be a lot more bean-counting going on in future. My guess is that significant efforts will henceforth be made to make sure that 24% of all money spent by CFI, the granting councils, and all the one-off PMO-earmarked research projects actually goes to Quebec.

(A tip for Government Relations-types: if you’re an ROC university looking for some PMO love for a pet piece of research infrastructure, why not start by finding an institution from La Belle Province with similar aspirations and make the pitch jointly? Saving the PMO the hassle of finding their own offsetting project might get yours to the top of the pile…)

It’s our decennial trip to the constitutional dentist, people. Get used to it.

June 19

Europe’s Latent Strengths

I spent part of last week at the European University Association’s Funding Forum in Salzburg. Though it’s getting harder to see how you keep a European-wide conversation going when different countries are heading off in such different directions (small increases in funding in Germany and some Nordic countries, versus cuts of 35-45% in Ukraine and Greece), it was nevertheless a pleasant and productive event.

My job there was to give delegates a bit of a pep talk about European higher education, and why it may see better days soon. Sure, they have very big demographic and fiscal challenges, but these days, who doesn’t?

European universities have two big latent advantages over North American ones. The first is their cost structure. As we’ve seen before, European universities have done well to keep their labour costs relatively low. They also have room to squeeze a bit more productivity out of the teaching function by reducing the number of contact hours per degree. Though the numbers differ a bit from country to country, it seems that German and Austrian students, at least, have about 15% more contact hours on the way to a degree than do North American students. Close that gap, and that’s a lot of labour costs potentially saved.

Can this be done without reducing standards? Well, unlike universities here, European universities actually have some objective standards to uphold, thanks the widespread adoption of learning outcomes statements. As a result, I’d back their universities over ours every day of the week to engineer those kinds of efficiencies in a sensible way.

Public and Private Expenditures on Tertiary Education as a % of GDP, 2009

Then there’s the issue of income. European universities have an enormous untapped asset; namely, students. Even if EU members could close half the tuition revenue gap with non-EU OECD members, they would suddenly have enormous new pots of income which they can use to revitalize themselves. Almost instantly, they could go from having systems that are poor (if efficient), to having systems that are genuinely well-funded. The back half of this decade could be an exciting time in Europe, if governments and institutions have the will to grasp this nettle.

Of course, introducing tuition fees is a delicate thing, especially in countries where high unemployment is reducing the obvious payoff to higher education. Not surprisingly, I spent a lot of time there explaining what was going on in Quebec (most were shocked to find out how generous the Quebec government’s package really was). The lesson seems to be that introducing big changes in fee policy requires careful timing and – more importantly – governments with a lot of popular credibility. We might be waiting a while for that in Europe – and in Quebec, too, for that matter.

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