HESA

Higher Education Strategy Associates

Category Archives: Uncategorized

June 04

University Endowments in a Global Context

Every once in awhile, when politicians of a certain mindset get going on the subject of how much money is being wasted in higher education, they fall back on a line about “why can’t universities be more self-sufficient”, or better yet, “why can’t they just fundraise more, like American universities do”?

Easier said than done. Here are the top ten Canadian universities, by endowment.

Top ten Canadian Universities by Endowment (in C$ Billion)


So you’ve got Toronto at about $2 billion in total endowments, McGill and UBC hovering at about $1.5 billion and Alberta just scraping $1 billion. After that it starts to fall off quickly. Queen’s clocks in at three-quarters of a billion while Calgary, McMaster and Western at just over half a billion (which, for comparative purposes, is somewhat less than U of T’s medical faculties alone) and then on down from there. Only twenty universities in Canada have endowments as large as $100 million. To put that another way, given the way endowments work, that means there are only 20 institutions in the country which receive as much as $4 million annually from endowment returns. Spread $4 million over, say 20,000 students and you’re looking at a grand total of about $200 per student in endowment income, which at most universities is basically a rounding error.

Now, let’s look at the top ten in the United States.

Top ten US Universities by Endowment (in C$ Billion)

6.4.2

Clearly, the US is a whole different ballgame here. All of the top six institutions in the US have larger endowments than all Canadian institutions combined: Harvard’s endowment alone is over three times Canada’s. (In fact, this week Harvard got its largest ever single donation, worth $400M US – which is almost exactly equal to Dalhousie’s endowment. One Donation. Seriously.)

Though the US list is mostly made up of private institutions, two publics make the top ten: Michigan and Texas-Austin. The Texas endowment story is frankly insane and too long to recount here: suffice to say that technically UT Austin doesn’t specifically have a $11.5 billion in endowments; however, the UT system as a whole has about $26 billion (not counting another $13 billion or so for Texas A&M) thanks to various funds setup by the state, and Austin seems to end up getting about 45% of that, the $11.5 figure seems like a decent estimate of Austin’s implicit claim on funds.

In some ways, it’s not even the big-endowment schools that are the craziest. The US has five Liberal Arts colleges (Pomona, Swarthmore, Amherst, Grinnell and Williams) with 2,000 students or less which have per-student endowments of over $1 million. That means these schools have per student endowment income of over $40,000 – or, about twice what a school like Bishop’s has per student from all income sources. These schools actually don’t need to charge tuition – they do so only because to do otherwise would make their programs look cheap and common.

What about the rest of the world? Well, once you get outside North America, the data on endowments gets pretty thin. Wikipedia claims to list endowment values of major universities in Europe, Asia and Australia, but for reasons that are quite baffling, on closer inspection these figures often turn out represent the institution’s annual budgets. Plus the meaning of terms like “university foundation” and “endowments” seem to mean slightly different things in different places. Top three Australian universities have Foundations which manage $1 billion or more in “long-term funds”, but not all of these funds appear to be externally endowed in the way we think of the term (the balance would appear to be funds invested by the universities themselves). Similarly, Tokyo University Foundation lists $24.8 billion yen ($250 million) in cash “and pledges” which could mean just about anything.

European universities seem not to advertise or explain their endowments, possibly because they haven’t got many of them. ETH Zurich is described on a number of websites as have a billion euros in endowments, but the most recent ETH Foundation annual report puts the figure at closer to 400 million euros. The only other continental university with a major endowment is the Central European University in Budapest, which apparently has an endowment of roughly $1 billion thanks mostly to its principal benefactor, George Soros. The UK, of course, is a different story. Oxford and Cambridge are handsomely funded but the gap between these two and everyone else is enormous – the third-best endowed school has less than a tenth of what the second-best school has.

The only two Asian universities where we have definite evidence of serious wealth are The King Abdullah University of Science and Technology (KAUST) and the National University of Singapore (NUS). The former, of course, was famously endowed to the tune of USD $20 Billion by its founder; the latter seems to have built up its formidable $2.3 Billion (Cdn) endowment in a more traditional (from a North American perspective) way, though gifts of many individual benefactors.

Major University Endowments, Selected non-North American Institutions (in C$ Billion)

6.4.3

Not shown: KAUST and its $20 Billion US endowment because that would make the graph look ridiculous.

All of which is to say that Canada actually does well compared to most of the world in terms of private funding raising. Our top three schools are probably in the top ten in the world outside the US in terms of total endowment size, and in terms of total university endowments, we probably come fourth in the world after the US, the UK and Saudi Arabia. The problem is simply that due to proximity we compare ourselves to the US, which is sui generis in so many ways. KAUST aside, there simply isn’t a university in the world which can support itself through donations the way American schools can. We need to stop using them as a yardstick.

April 29

The Minimum Wage Shtick

One little rhetorical trick you sometimes see anti-tuition types using is a comparison between tuition and minimum wage.  Last year for instance, the Canadian Centre for Policy Alternative put out a piece saying that working at minimum wage (which is in fact relatively rare for students, who typically earn about 25% more than minimum wage), students today have to work more than twice as much as students thirty years ago in order to pay tuition.  What should we make of this?

The most obvious thing to note, of course, is that any analysis of affordability that doesn’t take account of the $7 billion in non-repayable aid, which Canadian governments spend every year probably isn’t worth very much.  But that’s not a complete response: even without data going back to the mid-70s, we can be reasonably confident that there is something to the underlying point: higher education is more expensive, relative to minimum wage than it was 40 years ago.

No, the better response is simply to say: yes, and that’s exactly why so many more people are attending post-secondary education these days.

If you go back forty years, the participation rate in higher education was about a quarter of what it is now, maybe slightly less.  One of the reasons participation was so low was because the rate of return wasn’t very high.  There were lots of opportunities to be had with just secondary education (or less).  Indeed, the fact that you could live quite comfortably as a student after a summer in forestry or working on highway construction in the north was indicative of the fact that anyone could live pretty well working such jobs full-time.

What’s happened over the past 40 years is that the combined effects of technology and globalization have wiped out a large number of low-to-middle skill jobs – and (a few tech whizzes apart) summer students are nothing if not low-skilled.  That’s put downward pressure on wages in those areas.  Meanwhile, returns to skills have increased.  That creates a demand for higher education that simply wasn’t there in the 1970s.  One of the ways this shows up is rising real wages for professors; they’ve increased 35% in real terms since the 1970s, or about 1% per year over the long term.  And that naturally affects the cost of higher education.

To sum up: the minimum wage comparisons do show a real change over time, even if it is exaggerated due to not taking student aid into account.  But more importantly, this is a feature, not a bug.  If the gap between the minimum wage and the cost of labour-intensive, knowledge-intensive goods weren’t increasing, we’d still have a 1970s size post-secondary sector.

Or, to put it another way: maybe that tuition fees as a percentage of minimum wage statistic doesn’t quite mean what some people think it does.

February 24

Offices

Here’s a stat I’d really like to see: how much time do professors spend in their offices?

There’s been an enormous shift in the way people work over the past thirty years.  Digitization of documents and the availability of remote access computing, the growth of email, the explosion of doctoral students available to do the research grunt work, the decreasing importance of collaborating with local colleagues, and increasing importance of collaborating with people around the world – it’s all given professors a lot more flexibility in deciding where to undertake their work.

Now, this flexibility likely hasn’t had an equal effect across disciplines.  In sciences – especially the wet ones – many professors have offices tied to their laboratories, and I don’t have the sense that they are spending any less time in their laboratories than they used to.  In social sciences and law, on the other hand, where outside consulting work is more common, and the means of academic communication is more journal-based than monograph-based, there’s a lot less reason to be tied to your office.

Other factors are at work, of course.  There are personal preferences.  Some people like working at home, and take advantage of flexibility to do so; others prefer keeping their home and work spaces quite separate.  Junior faculty probably have a greater interest in being seen at work than senior faculty.  And of course – this being Canada, and academic life being subject to collective agreements to a degree pretty much unknown anywhere else – some collective agreements will stipulate minimum office hours.

All of this is to say that it’s difficult to make generalizations about use of office space/time.  And I admit that I have no data on this at all, but I would guess that outside the sciences, there is a very significant portion of the faculty whose time in the office is fifteen hours per week or less.  And this makes me wonder: to the extent that this is true, why the hell do universities spend so much on office space?  If you think about a typical non-science faculty – Arts, Business, Education, etc. – and you divide up their total usable space (excluding things like washrooms, and hallways, and the like), offices probably take up about two-thirds of it.  And while many profs make copious use of their offices, in many cases these offices get used less than half the time.  Why?

It’s difficult to know what to do about this: taking away office space – even the little-unused type – would set off riots.  But if I were designing a university from scratch, I think I’d do everything I could to minimize the use of dedicated offices.  Provide as much shared office space as possible.  Have dedicated shared spaces for meetings with students.  Use modular walls to reconfigure spaces as necessary, and offer bonuses to those who use less space.  Pretty much anything to reduce the use of space and the associated utilities costs that go with them.

Profs are becoming more mobile, and there’s nothing wrong with that.  But the legacy costs of the days when most work was done in offices are quite significant.  Finding a way to reduce them over time – sans riots, of course – is worth a try.

January 07

Student Aid in Canada: Tectonic Shifts Ahead

The details of the Canada Apprentice Loan, announced in last year’s federal budget, are now public. It’s a straight $4000 that any apprentice can get, once per technical training period for up to five technical training periods for a total of $20,000 per apprentice. And as we predicted in our 2014 Budget Commentary, the loan is in fact going to be completely means-test free. An apprentice could be making $18/hour all year, plus about $1800/month on EI for the duration of the training period – that is, about $35,000 per year – and the government is still prepared to hand you a $20,000 loan, interest free for the duration of the apprenticeship, repayable on the same basis as an ordinary student loan. Because skilled trades.

At this point you’re probably asking yourself: why give loans to apprentices earning $35,000/year but deny them to community college students earning $15,000/year (which is more or less where loan eligibility runs out) via part-time jobs? If a learner’s income or current standard of living is no longer a barrier to receiving financial assistance, why not make student aid universal, the way it is in Australia or the UK or Sweden? Why not just open student loans up to anyone?

Student leaders will hesitate before taking up the cudgels on this one, since many are pretty heavily invested in the “loans = Satan” narrative. But on the other hand, eliminating the means-test will certainly benefit at least some of their members. So it seems likely that at some point this will become one of their demands.

Given that it’s an election year, this might come about fairly quickly. Easier loan terms could be on any party’s manifesto. My personal bet is the Liberals will pick this one up first because they seem to find it so hard to resist gimmicky education platforms that benefit the upper middle-class, but there’s no ideological bar for any party to take up this idea. And precisely because you could see almost any party picking up this idea, it’s a dead certainty that at some point one of them will. It’s inevitable. And once that happens, big changes will be afoot.

The problem is that the costs associated with a move like this could be high. Alberta moved to eliminate parental contributions a couple of years ago and their loan portfolio has increased by something on the order of 50%. That’s OK in an essentially loans-only system like Alberta’s, but try that in a system with more substantial grant or remission amounts and money starts going out the door pretty fast. Most provinces wouldn’t be able to match that kind of generosity, and we could see student loans become yet more complicated with different federal and provincial need assessment mechanisms in each province. Even the feds might find it too rich eventually, and the worry would be that other programs for the needy would be cut in order to maintain this upper middle-class benefit.

There is a way to square this circle, however. And that is to apply a very simple principle: if a loan is universal, it should not come with interest subsidies. Subsidized loans to poorer students? No problem. But subsidized loans to all comers? That way madness lies.

If that simple principle is adopted, we could still preserve a decent system: means-tested subsidized loans for those who need them, and universal non-subsidized loans for those who want (but probably don’t need) them. That way, we would solve the problem of how to help the occasional student whose parents have high income (and hence disqualify a student from receiving student loans) but who won’t contribute to their kids’ education.

It’s probably not the best way to spend new aid dollars – you would probably get more bang for your buck spending that money on aid to First Nations students, for instance. But it’s also not a terrible idea, provided that the loans are unsubsidized.

December 12

End of Term

Hi all.  Today’s blog will be the last for 2014.  Normal service will resume on Monday January 5th.

End of term is always a time for stick-taking.  And so I’d like to offer a few thoughts on what’s happened in 2014.

First, the positive stuff.  I think we should note an enormous and fairly positive shift in the tone of the discussion regarding education and the labour market.  The fact that I was not able to offer a “worst back-to-school” article this year is in large measure a reflection of the decline in people talking absolute crap.

In 2013, it was all sociologists vs. welders, why weren’t universities producing the “right” kind of graduate, and why couldn’t we all be more like Germany?  British Columbia, unfortunately, is still largely in the grip of this nonsense, but in the rest of the country this kind of talk has diminished substantially.

Jason Kenney himself seems to have understood that while Germany’s interesting, you can’t get there from here; moreover, the main reason you can’t get there from here isn’t because of recalcitrant institutions, it’s because Canadian employers are genuinely retrograde when it comes to training.  That’s progress.

Second, I’m starting to see real evidence that institutions are getting serious about reining-in costs.  More institutions, for instance, are introducing Responsibility-Centred Budgeting, which will gradually align incentives within the university towards fiscal balance.  And at Windsor, we’ve seen the first example of a university really taking a hard line with extravagant salary demands.  So there is some hope.

But there’s still more to be done.  I don’t see much sign yet that most institutions are even trying come to grips with the Arts problem(s); on the contrary, in many places the strategy seems to consist of heroically ignoring the problem.  That’s bad.  So, too, is the continued impoverished state of our discussion on costs & affordability, and their relationship with access. This discourse remains in the knuckle-dragging, mouth-breathing stage largely because “progressive” groups like the Canadian Centre for Policy Alternatives and the usual suspects in the student movement insist on pretending subsidies either don’t exist or have no effect.

We’re doing well recruiting international students, but I don’t think we’re doing all that well by them once they’re here.  I’m convinced one institution somewhere is going to sleepwalk into some kind of reputation-shredding catastrophe soon for precisely that reason.  And finally, there is still disappointingly few signs of a sustained, useful dialogue between higher education and employers.

Closer to home at HESA Towers, we’ve had an excellent year, and I’d like to thank my whole team here who have all worked incredibly hard.  My particular thanks go to Jacqueline Lambert, who does an awful lot of the data work for this blog (what, you thought I did all the crunching myself?).  It’s a privilege to work with a team this good, just as it’s a pleasure to be writing about a sector filled with so many hardworking, dedicated people.

But I’ll leave the last word to you, readers.  How has the blog been this past year?  Better than before? Worse?  Anything I haven’t been writing about, but should?  Anything I have been writing about, but shouldn’t?  Please let me know in the comments below, or email me directly.

Happy holidays.  Rest well, and come back strong in January.  Na’zhdravie!

October 24

Scenario Planning Outside Ontario and Quebec

After a one day hiatus, we’re back to the topic of scenario planning.  You’ll recall that on Wednesday, I showed some pretty pessimistic projections for what could happen to university financing in Quebec and Ontario.  Today, I have some better news for people in seven of the eight other provinces: your futures aren’t nearly so disastrous.

When scenario-planning at the provincial level, four things matter:

1)      The forecast for nominal GDP.  Over the long-run, government budgets tend to remain pretty stable with respect to the size of the economy.  And within the budget, the share to any given field of expenditure – with the signal exception of health – stays pretty constant, too.  So, a rough rule of thumb for what’s going to happen to government income is: it’s going to stay in-line with projected nominal GDP growth.  For this reason, it’s much better to be a university in a province like Alberta, where average nominal GDP growth over the period 2014-2016 is expected to be about 5.5%, than it is to be Memorial in Newfoundland, where the projected figure is just 2%.  In most provinces, though, the outlook is between 3 and 4%.

2)      Deficits. The only reason growth might not be equal to nominal GDP growth is if there’s a deficit to get rid of.  Here, there’s good news: BC, Alberta, Saskatchewan, and Newfoundland are essentially deficit-free.  Universities in other provinces are going to find the going somewhat tougher.

3)      The percentage of total income coming from fees.  In all provinces, nominal increases in fee income is outstripping increases in GDP; in other words: fees are becoming more important everywhere.  Obviously, this is better news for provinces that are already relatively fee-dependent than for those that are not; a 5% increase in fee income means a lot more in Nova Scotia (where fees make up almost half of all income) than in Newfoundland (where they make up about 15% of income).  In this sense, the Maritime provinces and BC are in better shape than the rest of the country.

4)      Whether salary mass is rising faster than total income.  If so, you’re in deep trouble.  It’s not true in most provinces; but it’s clearly been the case both in Alberta and Newfoundland over the past few years.

If we simply multiply out expected increases in nominal GDP, and assume that current trends for tuition revenue growth remain stable, we get the following projections for income:

Figure 1: Projected Real Annual Operating Income Increases, Based on Stable Increases in Tuition Revenue and Government Revenue Increases Based on Nominal GDP

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(*indicates a province with a significant budget deficit, meaning institutional income will likely be lower than indicated)

Alberta looks set for a good few years, with real income increases of 4.5% or more, while Saskatchewan and BC look set for annual increases of 3%, or so.  Manitoba and the Maritimes are, in theory, set for increases of 2-3%, but given that all four provinces are carrying deficits the strong likelihood is that their governments will not increase their budgets at the same pace as nominal GDP, and so actual results will be somewhat smaller.  Newfoundland, where projected economic growth is shaky, and the university has little in the way of tuition income to fall back on, looks in deep trouble.

Figure 2 shows what happens if current rates of salary growth are subtracted from growth rates in income.  Provinces with positive numbers can – assuming their income numbers hold up – afford current rates of salary growth, while provinces with negative numbers cannot.  Nova Scotia and New Brunswick appear to have the most sustainable numbers, but recall that both their governments have deficits to eliminate, so in fact their position is likely not nearly as good as this graph makes it seem.  Prince Edward Island and Manitoba are headed for trouble, and Newfoundland’s prospects resemble the Titanic.

Figure 2: Difference Between Annual Projected Percentage Rate of Operating Budget Growth and Current Annual Percentage Rates of Salary Mass Growth

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(*indicates a province with a significant budget deficit, meaning institutional income will likely be lower than indicated)

To sum up:

i)        Generally it’s better to be in the west than the east

ii)       Memorial University in Newfoundland is in for one heck of a shock pretty soon.

iii)     Most provinces appear to have relatively stable finances if you assume continued growth in tuition revenue, which implies continued international student numbers.  It’s not at all clear how stable an assumption that is.

We’ll wrap-up this topic on Monday, so stay tuned.

June 12

Arigato, Sayonara

With election night, the World Cup getting under way, and tomorrow being Friday the 13th, it seems like as good a time as any to shut down the blog for the summer – I apologize to those of you who were hoping for one last rant on election results (though you can probably catch my thoughts over on twitter, where my handle is @AlexUsherHESA).  Starting Monday, this blog will be on a once-a-week schedule until August 25th,  when normal daily service will resume.

We’ve got an interesting program of research going on at HESA Towers over the summer, and we’ll have some very interesting material for you come the Fall, especially around internationalization.  I’ll be spending a  bit of time Down Under to get the skinny on some of the big changes currently happening there in higher education, and will report the findings back to you.  And we’ll have some new work on affordability that I think you’ll rather enjoy (or, at least those of you who don’t hate-follow me will enjoy it).

But before I sign off, two very quick requests:

1)      My summer reading project is to read as many institutional histories as possible (thrill a minute at HESA Towers, never a dull moment).  If you know the name and author of your university or college’s history, could you send them my way so I can find a used copy online?

2)      You guys read my stuff every day (well, most days, anyway).  Are there subjects you want to hear more about?  Less?  If you can take a couple of minutes to let me know, I’d really appreciate any feedback you can take the time to provide.

Have a great summer, everyone.

April 23

The Implications of Net Zero Tuition

Over the past two days, I’ve been explaining how Canada spends as much on non-repayable aid as its PSE institutions collect in tuition fees for domestic students – meaning, in net terms, that Canadian students pay zero tuition.  Today I want to explore the implications of this.

Let’s start with what it doesn’t mean: it doesn’t mean that many people are going to school for free.  All this funding is pretty lumpy. Many Quebecers and Newfoundlanders are receiving significantly more money than they are paying – ditto First Nations and students in Quebec CEGEPs.  On the other hand, education is pretty expensive in Alberta because of the way the provincial government chose to slash student aid funding at the outset of the recession.

Another group also making out pretty well is graduate students in non-professional fields.  They make up about 10% of the post-secondary student body, yet with their hold over the bulk of government and institutional merit scholarships, and their being nearly all independent students (and hence receiving more generous student aid packages), they are likely taking home something like 25-30% of the entire non-repayable available aid (of course, one could make the case that money for graduate students shouldn’t really be thought about in the same way as student aid, since it’s really support for research.  There’s no hard-and-fast line here, but it’s worth a debate).

But here’s what it does mean: at over $7 billion in aid, 90-95% of it going to full-time students, we are spending something on the order of $5,500 per full-time student in non-repayable aid – and that includes those full-time CEGEP students who are paying $0 in tuition.  Pure and simple, it makes a mockery of the idea that there is some sort of generalized affordability crisis.   Nobody – absolutely nobody – is paying sticker price for tuition, and a substantial proportion of students are paying nothing at all (or very close to it).  The next time someone (say, the Canadian Centre on Policy Alternatives, for instance) tries to peddle an “affordability crisis”, they need to be refuted vigorously.  Insufficient student aid money is not the problem.

What is a problem is that not enough of this money gets to the right students.  Sometimes, this is because the money is geographically restricted (e.g. too much aid in Quebec, not enough in Alberta), but the main reason is that our tax credit system, which puts $2.5 billion in the hands of students and their parents each year, is a colossal waste of potential.  Re-distributing that money more according to need (as Quebec, in the one decent thing to come out of the Red Square movement, did back here) is long overdue as a policy measure.

That some students need extra funds is not in doubt, as all serious observers of Canadian higher education know.  What separates the serious people from the cranks and the dilettantes, however, is precisely the ability to believe this without concluding that the problem is a generalized one, or that the only solution is to freeze or reduce tuition.  Net zero tuition makes that position completely untenable.

April 09

A *Tiny* Statscan Mistake on the National Graduates Survey (NGS)

OK, everyone. Gather ’round for a kind of mind-bending story, which totally invalidates much of what I was saying earlier this week about the NGS.

So, NGS is a two-year follow up of graduates, done every five years. So, the 2002 survey looked at the class of 2000, 2007 surveys looked at the class of 2005.  Now, as I noted yesterday, for reasons unknown, Statistics Canada chose to wait until 2013 to do its follow-up of 2010 graduates.  My strong suspicion is that it was because Employment and Skills Development Canada (ESDC) was yanking their chain on funding for so long that they missed their 2012 window, but I don’t know for sure (NGS, like many surveys, isn’t actually funded by Statscan – it’s paid for by an Ottawa line department.  Yes, it’s ridiculous, but that’s the way Ottawa works.)

Now, waiting a year creates a problem because it screws with the time-series.  If the 2010 class is interviewed  three years out, it’s basically useless because you can’t legitimately compare it with the 2005 or data.  But of course Statscan’s not stupid, I thought to myself: they’ll just ask the questions with respect to a period twelve months earlier and get comparable data that way.  Because who in their right mind would deliberately screw with a time-series that goes back 30 years?

And when I asked someone about this a few months ago, that was more or less the answer I got – the survey would be changed to adjust for the difference in timing.  So when the first NGS release tables appeared late last week from Statscan, and they were labelled “2012 labour force activity of 2010 graduates”, I naturally assumed – hey, Statscan’s done the right thing.  And so I published it.

Then, yesterday AM, we received an email from Statscan.  It contained a new set of tables, with a note saying that while the data they published April 4th was correct, some “mislabeling” had occurred, and that I should destroy the earlier data.

Turns out that what Statscan actually published was data from 2013 data – that is, three years after graduation, not two.  This made me review the 2013 NGS instrument and realize that their re-adjustment of the instrument to account for the gap in surveys was half-assed at best. With a little bit of fooling around with the data, it might be possible to get numbers on employment and income two years out – but since Statscan has declared that it’s not going to put out a Public Use Microdata File (PUMF) for NGS, that’s essentially impossible for anyone to do independently.  Meanwhile, the only data Statscan’s giving out for free is data that is completely non-comparable with any other data in the survey’s 30-year history.

Bra. Vo.

The upshot is: ignore anything you read about comparative-over-time graduate labour market outcomes from NGS from me or anyone else.  Thanks to Statscan (and possibly ESDC), it’s all worthless.

If there were ever a time to just cut funding to NGS and replace the whole thing with administrative data linkages, it’s now.  The argument for keeping it on the grounds of it being a great time-series just disappeared.

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.

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