HESA

Higher Education Strategy Associates

Go West

The key to understanding what post-secondary education is going to look like a few years down the road – say, 2017 – is to look at what is likely to happen to government funding.   We can’t know exactly what governments will spend on PSE, but we can know  how much money they are going to have available to spend simply by working out how much money each will likely have once health expenditures (which make up just 40% of the budget in most provinces) are accounted for.  Today, I’ll be doing this for the country’s 4 largest provinces, which make up 88% of the country’s population

With the exception of Ontario, most provinces’ governments move more or less in step with GDP growth.  Quebec and British Columbia keep their expenditures steady at around 20% and 15 of the economy, respectively.  Alberta’s fluctuate somewhat, usually in line with changes in hydrocarbon prices.  Since the Liberals took office in 2003, Ontario has been increasing the size of its government quite steadily from 13 to 18% of GDP.

 Figure 1 – Provincial Budgets as a Percentage of GDP, 2000-2013

 

Given this, it seems unrealistic to expect any of these governments to increase overall expenditures much faster than GDP growth.  Alberta and BC could conceivably inch up a bit after 2014 since their spending is currently slightly below the long term average.  For simplicity’s sake, though, let’s assume that growth in those two provinces will be restricted to growth in nominal GDP, which in both provinces is expected to average 4.5-5% for the foreseeable future.

Quebec and Ontario, meanwhile, can’t grow expenditures anywhere near that much because of their abysmal finances.  Quebec’s budget currently projects spending growth to be around GDP growth minus 1% out to 2017; in Ontario, program spending is frozen in nominal dollars through to 2017.

Now, the amount of money available for PSE (and other types of government spending) is limited by what happens to the health budget.  With the overall size of government more or less steady as a percentage of the economy, every time the health budget increases more quickly than GDP, the pool of money available for every other piece of spending – including PSE – must decline. In Quebec and British Columbia, the health budget has been growing at 5-6% annually for the past decade.  In Ontario, the figure is 7% and in Alberta it is a (frankly) ludicrous 9%. 

So, let’s assume that everyone can keep health care increases to just fractionally above expected GDP growth levels (say, 5% per year). Here’s what will happen to the pool of non-health dollars available in each province: 

 Figure 2 – Nominal Non-Health Dollars Available by Province, indexed to 2013.

 

Your eyes do not deceive you: that is indeed a 41% funding gap opening up between Alberta and Ontario over the next four years.  Given the assumptions above, non-health spending in Alberta can grow by 20% by 2017 and BC looks set for an increase as well.  Quebec should hold just about steady; Ontario, thanks to its need to get rid of its deficit without raising revenues, is going to see a fall of a little over 15%.

To be clear: I am not saying that PSE budgets will increase or decrease by these amounts.  What I am saying is that this is a good approximation of how the amount of funds available to PSE will evolve in each province over the next four years and that if historical funding patterns hold up, these kinds of changes in nominal funding are about what we can expect.  But politics still matter, and universities and colleges could still see increases to their budgets relative to the amount of available funding if they are smart in their lobbying (or cuts if they are not).  

A couple of years ago I said that differential patterns of higher education investment meant that the country’s intellectual centre of gravity was moving west rather quickly.  Notwithstanding recent cuts in Alberta and British Columbia, it seems to me that this trend can only pick up steam in the next few years.  

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One Response to Go West

  1. Pingback: Looking Forward to 2017-18 | HESA

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