HESA

Higher Education Strategy Associates

Tag Archives: Budget Cuts

October 02

Atlantic Blues

One big story from out east that didn’t get a lot of play in the rest of the country was the news that the Nova Scotia government had, over the period 2013-2017, quietly bailed out Acadia University to the tune of $24 million.  This is of course the second time a Nova Scotia government has bailed out this decade: the Nova Scotia College of Art and Design (NSCAD) received about $10 million.

This isn’t really a partisan thing: it was an NDP government that bailed out NSCAD and a Liberal one which offered extra help to Acadia.  It’s a structural problem: Nova Scotia is not a very rich province, and it has a lot of universities, only one of which is large enough to have real economies of scale.  This problem was laid out in great detail seven years ago by economist Tim O’Neill in a special report on the system prepared for the Provincial Government but the Dexter government passed on making the difficult decisions.  Now, the new Liberal government has put some extra money in and has allowed institutions to raise a bit more money through tuition, but it doesn’t change the really basic structural challenge the province’s institutions face.  Come next recession, at least one university will be back in the same situation.

From the Acadia story we can glean two things.  First, former President Ray Ivany is clearly a very persuasive guy (but we kind of knew that).  Second, we now have some greater insight into the drafting of the controversial Bill 100, which provided for the possibility of universities to ignore collective agreements if they were in financial exigency and needed to restructure.  Turns out it wasn’t out of the blue: it was in reaction to Acadia telling them they needed a bail-out.  Bill 100 was the Government signalling to everyone in the province’s higher education community: bailouts aren’t the only possible outcome.  Radical restructuring is a possibility too.

How radical?  Well, two neighbouring provinces can give a sense of how bad things can get.  We’ve seen what kind of time Memorial University of Newfoundland is having dealing with cuts of 20% or more to income with little to no ability to recoup money from tuition fees.  In New Brunswick, cuts to provincial operating grants have if anything been as severe, if spread out a little more – a 22% drop in real terms from 2010-11 to 2015-2016 (see back here for more on provincial changes).  Student numbers have fallen as well, by nearly 15%.  That’s a double-edged sword, because while it means the per-student cut in the operating grant is not as severe, that’s also a lot less fee income coming in as well.

Figure 1: Change in university enrolments, Atlantic Provinces, 2010-11 = 100


Source: Association of Atlantic Universities

In fact, the only province in the region where things remain reasonably quiet is Prince Edward Island, where the UPEI is holding its ground both in terms of government grants and student numbers.  Compared to the rest of the region, that’s a reasonably good place to be.

The fundamental challenge of most of the region’s universities is size.  Small is a great selling point – if you can charge for it.  If you can’t, small just means fragile.  And fragility describes too many Atlantic universities right now.  Acadia won’t be the last university in the region to approach the brink; there’s almost certainly more drama to come in the years ahead.

 

 

February 03

The Economics of Interdisciplinary Programs at Small Universities

A minor kerfuffle blew up yesterday in Sackville when the coordinator of Mount Allison University’s Women’s and Gender Studies announced that, due to budget cuts, she had been informed that the university would no longer be offering classes in this program, as of next fall.  Cue petitions, angry students, a buzzfeed listicle, etc.

What follows here is a little explainer with respect to the economics of this situation:

Mount Allison is a small school.  Enrolment last year was 2,369, which was down 8.5% from four years earlier.  Not good.  Total projected operating revenue for the university this year and net money from the feds, like Canada Research chairs, is a shade over $44 million, of which very slightly under 50% comes from tuition fees, with domestic students paying $746.50/course.  A similar amount comes from the provincial government in a lump sum, which is not formula-driven.

The Women’s and Gender Study Program is one of those typical interdisciplinary programs you see at Canadian universities.  It does not offer a major, only a minor.  In practice, it consists of four courses (one each at the 100, 200, 300, and 400 levels), plus some fourth-year independent study and “special topic courses”, which in practice don’t get taught much.  In order to obtain the minor, one must take each of the three lower-year courses, plus at least one of the fourth-year courses, and then another 12 credits from a selection of about forty related courses spread across a dozen or so disciplines (see program description here).

For quite a long time, the program seems to have only had a single dedicated academic staff person, who sadly died late last year.  The coordinator role has since passed to a faculty member in the Psychology Department, and all of the teaching responsibilities have passed to an Instructor (i.e. sessional/adjunct) who – if you think RateMyProfessor.com is of any value – gets rave reviews from her students.

Enrolment is reasonably healthy.  There appears to be roughly 190 course-enrolments across all four of the courses – or about 19 FTE students.  Now, how you turn that student count into revenue is a bit tricky.  In a formula-funded system you could just add per-credit tuition, plus per-student grant, and voila!  In a block-funded system it’s trickier.  One could argue that this money simply doesn’t belong to any particular unit because even if one program disappeared, those students (and that money) would still be in the institution.  So, if you only count tuition as revenue, this program earns $145,255; if you choose to count government grant money as being associated with specific enrolments, then you get double that, about $290,510.

Now, I don’t have access to financial expense data at Mount Allison but it’s not hard to do a back-of-the-envelope estimation of program costs.  A sessional with a little bit of experience costs $10,000 per course at Mount Allison, give or take $1K (that’s cost to the institution, including payroll taxes, benefits, etc.); so a 4-course program like this would likely cost $40K a year, or so.  Coordinators usually also get some course-release, which implies another $10K to hire a sessional to cover this.  The program also shares an administrative assistant with two other departments.  I have no idea what the actual cost-sharing arrangement is, but let’s say it’s another $10,000, or so.  Throw in some other direct costs – phone, mail-outs, maybe a wine-and-cheese once a year, plus a guest speaker flown in – and you get to $70,000, give or take.

But that’s without overhead.  Now, how you count overhead on an academic department is a bit tricky.  It’s easy enough to simply take all costs like utilities, IT, student services, registrar, physical plant, and admin, and then divide it across all students: according to CAUBO finance statistics, that would give you a number not far off $7,700 per student (or $146,300 total).  But on the other hand, there’s also the argument that this is money the university would pay anyways, even if the unit didn’t exist (i.e. the same argument why you shouldn’t count the government block grant money, only in reverse).

For simplicity’s sake then, let’s not count either the government grant or the overhead costs.  We’ve got a program that appears to cost $65,000, and brings in $145,255.  So, what’s the problem?

The problem is that this fantastic situation only works as long as a sessional is the one doing all the teaching.  If the teaching is done by an Associate Professor (as indeed it was until quite recently), the economics change completely.  The minimum salary this year for associate professors at Mount Allison is $85,568.  Add in the costs of benefits, pension, etc., and you’re looking at something in the range of $110,000 at the absolute minimum for compensation.  Then throw in any costs associated with hiring replacement faculty for research leave, sabbaticals, etc., and of course admin costs on top of that, and you’re very quickly back to about $130,000.  But that’s minimum, assuming the lowest pay rung for an associate professor.  With annual pay rises, top-salary associate professors make almost $50,000 per year more than newbies.  In other words, it might break-even for a couple of years with a full-time prof, but would be unlikely to do so over the long-term.

Let that sink in for a second: at Mount Allison – and many other universities – it takes more than 19 FTEs (or 190 course enrolments) to support a mid-career Associate Professor.   That’s what our combination of faculty salaries and tuition policies have brought us to.

Now, I haven’t spoken to anyone in the Mount Allison administration about this issue: but it seems to me the logic would go something like this:

i)  As an institution we’re on seriously thin ice, financially: our per-student operating income is about $5,000 per head below what it is at U15 universities, and about $3,000 per head lower than Acadia;

ii)  We cannot sensibly run an entire program with nothing but sessional instructors;

iii)  This program will have difficulty breaking-even over the long-run unless it is taught by sessionals;

iv)  Maybe we shouldn’t offer this program anymore.

One could of course make the case that Women’s and Gender Studies is so important that it deserves cross-subsidies from elsewhere in the university.  And at larger and wealthier universities, this would be the case.  But at an institution as small and as cash-strapped as Mount Allison, it’s a tougher argument to make.  Most other departments are only just getting by, too.

Unpalatable choice, to be sure.  But that’s what running a university is all about these days.

January 11

Why Class Size Matters (Up to a Point)

At the outset of the MOOC debate about four years ago, there was a line of argument that went something like this:

MOOC Enthusiast:  These MOOCs are great.  Now the classroom is not a barrier.  Now we can teach hundreds of thousands of students at a time!  Quel efficiency!

Not MOOC Enthusiast:  They’re just videos.  They can’t give you the same human touch as an in-class experience with a professor.

MOOC Enthusiast: How’s that human touch going for you in the 1,000-person intro class?

To which there was never really a particularly good reply, just a lot of sputtering about underfunding, etc. The fact is, from a student’s point of view, there probably isn’t a lot of difference between a 1,000 person classroom and an online course, at least as far as personal touch from a professor is concerned.  There are some other differences, of course, mainly in terms of the kinds of study supports available, but if your argument is that direct exposure to tenured faculty is what matters, then this is kind of beside the point.

There was a period of time during which it was fashionable to say that class size didn’t matter, and that it was what happened in the class, not how big it was, etc., etc.  I am ever less convinced by some of these arguments.  Small classes matter for two reasons.  One is the ability – in science, health ,and engineering disciplines in any case – to be in contact with advanced equipment.  If classes are too large, students don’t get enough time with the top equipment and hence aren’t as prepared for careers in their fields as they might be.  Obviously this matters more in places like Africa than in North America, but you’d be surprised at how often this issue pops up here.  I know of at least one “world-class” university in Canada that, faced with budget cuts in the late 1990s, instituted a policy of not offering lab courses to science majors until third year (yes, really).

The second reason is perhaps more universal: the larger the class, the less interaction there is, not just between professors and students but also between students.  And this interaction matters because it is the key to developing many of the soft skills required for employability.  Work that is presented in class and argued among colleagues – whether assigned to teams or individuals – is pretty much the only place where students actually come to understand in real time how arguments are made and broken, how to interact with colleagues and experts, how to deal with (hopefully constructive) criticism, among other skills. When I go to developing countries (where I am currently doing a lot of work) and I hear about how students don’t have labour force skills, this is exactly what employers are talking about, and there’s simply no way to provide them those skills at the scale of classes currently being offered.  So, small classes are good, but not primarily for disciplinary reasons (though those may benefit as well).  It’s mostly about employability.

Canadian polytechnics actually worked this out awhile ago.  One of the most notable differences between degree programs at polytechnics and universities is that class sizes are relatively constant over four years in polytechnics, whereas universities (apart from the smallest of liberal arts colleges) employ a pyramid model, with huge classes in first year and many more smaller ones in upper years (CUDO data – flawed as it is – suggests that there are more classes with 30 students or less for 4th year students than there are classes of all sizes for first year students).  Students at polytechnics are getting the benefits of smaller classes all the way through, while for most university students, these benefits aren’t seen until third year at the earliest.

By this, I don’t mean to suggest that class size is destiny.  The point that what happens in a class is a function of more than its size is a relevant one (although a slightly trickier one to make today than in pre-MOOC times).  But interaction matters.  If institutions are going to increase class sizes (as they have done repeatedly over the past two decades, both through admitting more students and reducing professors’ undergraduate course loads), there needs to be a strategy to work out how interaction can be maintained or improved.  Otherwise, it’s very hard to say that quality isn’t being impaired.

September 28

Are Japanese Humanities Faculties Really Being Shut Down?

You may have noticed stories in the press recently about the government of Japan asking national universities to shut down their humanities faculties.  Such stories have appeared in the Times Higher Ed, Time, and Bloomberg.  Most of these stories have been accompanied by commentary about how shortsighted this is: don’t the Japanese know that life is complex, and that we need humanities for synthesis, etc.?  A lot of these stories are also tinged with a hint of early-1990s “these uncultured Asians only think about business and money” Japanophobia.

The problem is, the story is only partly accurate.  A lot of background is needed to understand what’s going on here.

Some facts about higher education in Japan: First, “national universities” – that is, big public research universities – only account for about 20% of student enrolment in Japan; the remainder of students are enrolled in private universities.  Second, the number of 18 year-olds has fallen from 2 million in 1990 to about 1.2 million; meanwhile the annual intake of students has stayed relatively constant at around 600,000.  The problem is that the 18 year-old cohort is set to continue shrinking, and few think that a system with 86 national universities, about as many regional/municipal universities, and 600-odd private universities can make it through this demographic shift.  Re-structuring is the name of the game these days.

Now, while national universities are theoretically autonomous, they still take “advice” from the Ministry of Education, which is sometimes transmitted via circulars that explains the Ministry’s perspective on national academic priorities.  The current brouhaha centres around one such circular, distributed this past June, which contained the following statement: “With regard to the programs of teacher training, and humanities and social sciences in particular, it is encouraged to stipulate a reform plan, taking into consideration the reduction of 18-year-old population, human resource demands, expected level of education and research, the roles of national universities and etc., and dismantle and restructure organisations based on social needs”.

There’s some clunky language in there, and since I don’t speak Japanese I’m unclear as to how much of this is lost in translation.  A lot of this story comes down to the meaning of the phrase “dismantle and restructure organizations”.  Nearly all the coverage assumes that “organization” means “faculty”.  But if it means “program” (which is effectively what this commentary from a former education bureaucrat suggests) then basically the government is saying “students numbers are down, maybe you should do some program reviews”.  If this is the case, the whole thing is a lot less controversial.

There’s another aspect here, too. The original English language stories in the Japan Times and the Times Higher Education relied heavily on a Yomiuri Shinbun story – which no longer appears to be on the internet – in which 26 of the 60 national universities with humanities programs said they were closing programs, or curtailing enrolment, without ever specifying the proportions.  Twenty-six universities where enrolment in certain humanities programs is being curtailed is a very different story from shuttering 26 humanities faculties altogether.

A final niggle is that since this circular only applied to national universities, humanities in the country’s 600-odd private institutions would have been unaffected anyway.  So even in a worst case scenario sense, this is would be the fate of humanities in about 5% of the country’s universities, not the entire system.

So if the story is only partly true, why did it blow up the way it did?  A couple of reasons, I think.  First, obviously, is that there aren’t a lot of English-language journalists specializing in Japanese higher education, so there is considerable potential for misunderstanding and nuance-missing.  Second, there’s a big market for stories about humanities programs being shut down, mainly from humanities professors themselves who seem to have an endless capacity to imagine what fresh horrors the barbarians in control of the system will do next (for an example see this from the Guardian).

The third reason, though, is that there really are some big disputes between Japanese academics and the ruling Liberal Democratic Party (LDP).  Academics are generally on the left, and have opposed the LDP’s recent legislation allowing the Japanese military to participate in overseas combat missions.  They also aren’t too happy about new government legislation that strengthens central administrations at the expense of faculty councils.  In a sense, the humanities row is a proxy fight: there are some in the LDP who really would like to stick it to the academy this way, and there are some in the academy who have reasons to make the government look buffoonish.

But for western readers, there’s a different lesson here: be not overly credulous in dealing with stories from countries whose languages you don’t understand.  Especially if they play to your existing prejudices.

April 14

Students Won’t Save Us This Time

 I do a fair bit of barnstorming around Canada giving talks on higher education finance.  My audiences, by and large, split into two groups: those that remember the cuts of the late 90s and those that don’t.  The ones who don’t remember them are mostly OHMYGODOHMYGODOHMYGOD about future funding challenges (especially when I show them that – contrary to their belief – that operating income has actually been going up sharply recently).  The ones who do remember are more perplexed: we (eventually) got through the budget cuts of the 90s, and those were much bigger than the kinds of cuts we can expect in the next couple of years – what’s the fuss?

What people seem to have forgotten about the cuts of the mid-90s is that in most parts of the country (Quebec was an exception), total revenue only fell in two years – mostly in 1995 and 1996 – and was quickly restored in 1997 and thereafter.  In fact, by 2000, universities’ income was nearly a third higher than it had been in 1996.  Yes, governments cut – sometimes savagely – but universities and colleges were bailed out by students.

The bail-out occurred in three ways.  The first was simply showing up in greater numbers.  This was a bit of a surprise at the time, especially to universities.  Total enrolment had been flat at around 600,000 since the mid-80s.  But then just as the cuts started to hit in 95 and 96, the leading edge “baby boom echo” generation turned 19 (Remember David Foot?  Remember how we all had to nod to the demography-is-destiny stuff for a few years?  Good times).  A couple of years later, the participation rate started to grow, too.  Brilliant for post-secondary institutions: their core demographic was growing, and the portion of that demographic that wanted post-secondary education was growing, too.  In a word: more customers.

But it wasn’t just that universities and colleges got more customers – they got more money per customer as well.  Tuition increases?  Governments were handing those out like candy.  For those who find Ontario’s current regime of 3% annual increases unbearable consider the price hikes which occurred under Mike Harris.  1996: 20%.  1997: 20%.  1998: 20%.   Plus de-regulation of fees in graduate and professional programs.  And yeah 30% of that money was set aside for student aid, but those are still some big honking increases.

The third way students bailed out universities was more indirect.  That baby boom echo had some serious political clout behind it.  When the boomers’ kids were in school, boomers made sure universities were at the top of the agenda.  It happened quite suddenly, too.  From nowhere, higher education came to top voter’s lists of concerns in 1996, right about the time the leading edge of the echo turned 18.  It was that polling that made the federal Liberals suddenly enthusiastic about things like Millennium Scholarships, Canada Education Savings Grants and education tax credits.

Problem is that this time around, none of this is happening.  The demographic reality is that in most of the country youth numbers are shrinking, meaning likely fewer domestic students.  The political reality is that politicians are no longer so keen on higher tuition (in part, ironically, because past access gains mean that many more people now pay them, thus making them a bigger political liability).  And the social reality is that the boomers – whose children have now pretty much passed through university – are now more worried about their parents than their kids.

In short, none of the pillars of eventual recovery which existed in the late 1990s now exist.  Increasing domestic student numbers saved universities and colleges in the 1990s by producing much higher institutional revenues (overall, university income rose by nearly a third between 1996 and 2000).  They flat out won’t this time.  That’s why spending cuts loom quite large right now – and will do so until student numbers pick up again early next decade.

January 23

Classroom Economics (The End)

So we spent Monday looking at the economic basics of classroom and teaching loads, and Tuesday looking at how difficult it is to improve the situation by increases in tuition or government grants.  Wednesday we saw that reducing average academic compensation (presumably via increasing the proportion of credits taught by adjuncts) can be quite effective in reducing teaching loads, while on Thursday we saw how trying to achieve a similar effect through attacking costs other than academic compensation would require enormously painful – and probably unrealistic – cuts.

What can we conclude from all this?

There is no silver bullet here.  You can’t solve everything on the revenue side because governments: i) aren’t going to fork over the stonking huge amounts of money required to change things; ii) aren’t going to permit large tuition increases; and, iii) at some point are going to put limits on the extent to which universities can escape domestic fiscal problems by becoming finishing schools for the Asian middle class.  At the same time, you can’t solve everything by decreasing average academic wages because: i) tenure; ii) unions; and, iii) casualization can’t go on indefinitely.  Finally, you can’t solve everything by cutting “fat” on the non-academic side because the size of the bloodletting would simply be too big.

So, realistically, the solution to keeping teaching loads (and hence class sizes) manageable is to work at the margins on all three, at once.  The income one is probably the easiest: even if government does not have more money, it could (as I argued back here) allow tuition to rise without students being unduly affected if it simply reformed student aid to make it more efficient and transparent.

On non-academic costs, vigilance is key.  Costs need to be kept in check.  There is a need to continually become more efficient – which probably means looking more seriously at outsourcing certain functions. Bits of IT come to mind, as do bookshops.

On academic salaries, there’s no big secret about what needs to be done.  Every time wages increase, universities either have to get more income, or increase the number of sessionals, or raise teaching loads.  That’s simple arithmetic.  To the extent an institution can keep enrolments up and get a little bit more money per student, on average, the situation can stay relatively stable indefinitely (though it isn’t going to get any better).

Where this gets tricky is where student numbers – and hence income – start to fall.  We didn’t explore that this week because our equation – X = aϒ/(b+c) – assumes that there is budget balance.  But when enrolment drops, expenditure has to drop in the medium term because the lack of students means you can’t release the pressure by increasing teaching loads.

So when you see the number of applicants to an institution drop by, say, 20% (as first-choice applications have now done at Windsor) over two years, you start to worry.  Without the option to increase loads, expenditures have to fall, and as we’ve seen, the least disruptive way to do that is to increase sessionals.  But since tenure exists and you can’t force out a professor and replace them with a sessional, that’s a marginal solution at best.  Academic compensation will have to fall: either through wage freezes, pension changes, or a reduction in the number of academic positions.  Either that or the institution will close.

There’s no sinister conspiracy here, no evil administrative plots.  It’s just math.  More people should pay attention to it.

January 22

Classroom Economics (Part 4)

Yesterday we looked at ways to get the teaching budget down.  Today, we’re going to look at the other half of the cost equation: all that overhead.  And we’re going to look at it by asking the question: how big a cut in overhead would it take to equal the effect of replacing 20% of your credit hours with sessionals (which, as we saw yesterday, reduces overall teaching loads by 17%)?

Recall the equation: X = aϒ/(b+c), where “X” is the total number of credit hours a professor must teach each year (a credit hour here meaning one student sitting in one course for one term), “ϒ” is average compensation per professor, “a” is the overhead required to support each professor, “b” is the government grant per student credit hour, and “c” is the tuition revenue per credit hour.  Given that equation, the answer to our question is simple: you need to drop overhead by 17%.  But how might one go about achieving a cut that size?

On average across Canada, universities spend about $16,300 per FTE student on things other than academic staff compensation (yes, really).  Over half of that – 54% or so – goes to non-academic staff compensation: the professional staff, the cleaners, the lab techs, the janitors, etc.  They’re all in there.  No other single item comes close.  The table below shows the full breakdown.  Most of those categories are pretty self-explanatory, except perhaps for “other” operational expenditures (which is mostly long-term space rental and property taxes, with a few miscellanies thrown in for good measure).

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Now imagine you want to achieve your 17% reduction without firing anyone, or trying to get them to give back salary – what are your options?  Well, to start with, it’s important to acknowledge there’s a bunch of things in here that are difficult to touch.  Scholarships, for instance.  And not paying interest isn’t too smart.

So that leaves only 35.8% of the whole non-academic budget.  Squeezing 17% out of that would be pretty horrific; it would require cuts of as close to 50% as makes no odds.  What do you think our universities would look like with half the library acquisition budget gone?  Half the travel and communications budget gone?  Half the budget for light and heat gone?  It’s simply not an option.

All of this, of course, means that balancing budgets this way leaves you with very few options other than reducing labour costs.  Say you had a way to reduce your non-academic staff costs by 10% – either by wage rollbacks or layoffs, or some combination of the two: you’d still have to find a way to squeeze 20% out of the rest of the non-academic budget to make the math work.  And that would be tough.

Bottom line: there is no easy salvation here.  Any serious reduction in costs on this side will require some bloodletting in terms of staff.  That’s never easy to stomach.

My wrap-up on all this tomorrow.

October 15

The Problem with Cutback Narratives

Let’s discuss how we talk about cutbacks.  And let’s talk about the University of Alberta.

U of A has been rather radically affected by the recent cutbacks imposed by the Alberta government.  But here’s the weird thing: apparently it’s not enough to say “we’ve had cuts of 7%”in one year”.  Instead, people feel the need to enhance that figure in many ways.  It’s not just a 7% cut, they say – “we were told by government to budget based on 2% growth, so it’s actually 9%”.  Or, “11% over two years”, etc.

If that’s not enough to invoke sympathy, people turn to statements like: “well we have to absorb a 7% cut, but that’s on top of the 18% we’ve already taken in the last four years.”  This, apparently, is a quote from the Dean of Science.  I have to hope it’s a misquote, because it’s not even vaguely true.

First, although the government grant fell 7%, that doesn’t mean revenue will fall 7%, because the University can always get new revenue – even with a ridiculous and unconscionable tuition fee freeze – by changing their enrolment mix to favour more expensive programs (professional master’s degree) and students (i.e. foreign ones).  In fact, according to a planning document which came out last month, the 2013-14 operating budget for faculties is actually 0.2% higher than it was last year (Science did take a 2% hit, but hey, someone’s got to pay for that 6% bump that Medicine received).

Second, it’s preposterous to say that cuts have been sustained over a four-year period.  Here’s the actual budget of the faculty of Science over the past four years:

University of Alberta Science Budget, 2009-10 to 2013-14, in Millions

 

 

 

 

 

 

 

 

 

 

 

 

… and for faculty operating budgets in general…

University of Alberta Faculties’ Budget, 2009-10 to 2013-14, in Millions

 

 

 

 

 

 

 

 

 

 

 

 

… and total operating budgets…

University of Alberta Operating Budget, 2009-10 to 2013-14, in Millions

 

 

 

 

 

 

 

 

 

 

 

 

The problem, as you can see, isn’t primarily about income.  The problem is that when your business is 60% labour costs, and you can’t fire people, and you hardwire-in annual 4% rises in labour costs, there isn’t a lot of flexibility in the system.  When revenue growth slows below 4%, cuts – sometimes quite painful ones – do occur… in non-salary areas.  Indeed, between 09-10 and 12-13, the Faculty of Science did cut the materials budget by 25%, from 2 million to 1.5 million… but the salary & benefits budget went from 69.2 million to 76 million over that same period.  Hmm.

Universities didn’t have to build brittle systems that would shatter if revenue growth fell below 4%.  The academic community, through a thousand little decisions, made this bed for itself and now has to lie in it.  Yet the dominant narrative is one of universities being passive victims of outsiders’ (i.e. government) actions.  A more thoughtful response – one befitting an institution devoted to dispassionate analysis – might be a bit more of an introspective one.

September 30

The View from Vilnius

I spent an enjoyable couple of days in Lithuania last week, at a meeting of the EU’s Directors General of Higher Education.  I was there to talk about some research we at HESA (along with some colleagues from DZHW in Germany) are doing for the European Commission, assessing the impact of cost-sharing on institutions and students.  Unsurprisingly, at the margins of the conference (and occasionally within its proceedings), what really drove conversation were tales of austerity, and their effects on higher education.

One thing I hadn’t previously understood was just how different the dynamics of cutbacks are in continental Europe.  In many countries, professors are civil servants; that is, they are employed by the government rather than their institution.  This means that governments can impose salary adjustments directly, rather than faffing about giving a cut to institutions, and then letting universities hash it out with academic unions. And hand out salary cuts they have: in Portugal, the cut was around 15%; in Greece, 25%.  I wonder how that would play out in Canada?

(This, by the way, is why one should take care in interpreting news of “cuts” to European universities.  University budgets in some countries exclude professors’ salaries, because those are paid directly to the professors.  In such places, a 10% cut to university budgets actually just means a reduction in non-salary items, or about 5% in our terms.)

Even among the minority of countries which have managed to keep their budgets stable, or increased them a bit, there is a new mood of ruthless efficiency.  Finland, for instance, while still being flush in relative terms, hacked 20% from the Polytechnics’ budget because they were thought to not be delivering the goods on employability.  Waste not, want not.

The problems mostly came at dinner, when I was asked about conditions at Canadian universities.

“Not bad,” I said.  “Weathered the storm so far.  Just starting to head into the difficult bits now.”

“How difficult?” I was asked.

“Oh, well, um… we have some freezes in government funding now.  But institutions can still get to 2.5% growth through tuition increases.”

Frowns aplenty.  A 2.5% increase in revenue is not “difficult” in Europe.

“But wait”, I said.  “In some provinces, we have actual cuts.  Alberta, for instance, had a 7% cut.”

At this point, everyone around the table chimed in with the cuts they’ve had: “Ten!”  “Fifteen!” “Eighteen”.  Alberta wasn’t impressing anyone.

“But isn’t Alberta quite rich?” someone asked.

“Well, yes,” I said.  “And they do spend a lot on higher education.  Over $19,000 per student.  But that was before the cut”.

At this point, frowns were replaced by jaws hitting the floor.  The European average is about half that.

Nothing like going abroad to get some perspective.

August 19

Cuts at the University of Alberta

If anybody wants to know what Ontario universities are going to look like over the next couple of years, they could do worse than check out what’s going on in Edmonton.

To recap: In its spring budget, the Government of Alberta cut 7% from university operating grants.  Since then, Alberta universities have been working out how to deal with this cut.  At Athabasca, it’s meant significant layoffs.  At Mount Royal it’s meant program closures.  At the University of Alberta, so far, there’s been more sound and noise about the size of the cutbacks ($60 million over two years) than details.  

The university initially tried to persuade the faculty union to give back some or all of the raises it won for 2013 and 2014 in the last round of collective bargaining.  Predictably, this went nowhere, although the faculty union’s rationale (“it doesn’t matter if we refuse because saying yes wouldn’t come close to delivering a comprehensive solution”) had the merit of being amusingly reminiscent of those used by the anti-Kyoto crowd (“it doesn’t matter if we don’t meet Kyoto commitments, because China”).  This seemed to take the administration by surprise and out came a buy-out plan which – it is feared – could see many productive mid-career faculty leave (though I’m skeptical – where would they go?  Not many universities with salaries comparable to Alberta’s are hiring these days)

Note, though, that the 7% cut in operating grants does NOT mean a 7% cut in the budget.  That’s because the University of Alberta only gets 65% of its money from government.  When you add in all the new money it is getting from students – mostly international ones – income for 2013-14 is likely going to be almost close to what it was in 2011-12 budget.  Yet this is enough to force the university into salary buy-outs, position terminations, the elimination of travel and hosting budgets, etc.  And if you think it’s bad being a prof, try being a grad student: in the Arts faculty, 20 percent of TA positions are being cut. 

How is it that all these positions and activities could be funded three years ago but can’t be in 2013-14 on exactly the same budget?  The answer, unfortunately, is simple: tenure, low productivity and the prioritization of research all cause serious cost inflation such that even the tiniest reduction in university budgets causes absolute chaos.

Here’s the thing: no sane President can go to the public and argue that their institutions are doomed without perpetual budget increases of 3-4%.  The ONLY alternative is to make university cost structures less rigid.  Any university not focusing on that problem is in deep trouble.

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