HESA

Higher Education Strategy Associates

Tag Archives: Newfoundland

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.

 

 

May 24

The Rock

No, not Dwayne Johnson (though You’re Welcome is indeed a great song).   I’m talking about Newfoundland (and Labrador), where the Minister of Advanced Education, Gerry Byrne, has decided to pick a fight with Memorial University of Newfoundland (MUN).

Why, you ask?  Good question.

MUN is in a position somewhat like the one the University of Alberta faced a couple of years ago, only worse.  Up to about 2012, a decade of hydrocarbon-fueled provincial budgets made MUN a pretty fun place.  The provincial government drenched the institution in money, which allowed it not only to keep tuition low (this year, $2,759 vs. Canadian average of $6,373), but also allow MUN to receive over $40,000 per FTE student, higher than the average in any other province (note this is not to say that MUN’s income per student was higher than that of any other Canadian institution.  It wasn’t.  But it made the top ten).

But of course, we all know the oil boom party came to a halt a few years ago.  Since then, it’s been cut, cut, cut – as I noted back here last week, provincial spending on post-secondary education has fallen by a remarkable 21% over the last six years). Some may want to accuse the provincial government of savagery in its cuts, but to be honest I’m not sure what choice they had.  Outside of OPEC countries, few jurisdictions’ budgets were as geared to the price of oil as Newfoundland’s, so when the price started to fall, across-the-board cuts were pretty much inevitable and there wasn’t much prospect of higher education being spared much pain.

So, MUN had to face cuts.  But the problem with cutting budgets at a university is a little thing called tenure.  Salaries of tenured faculty eat up about 30% of most Canadian universities’ budgets.  Throw in benefits and you’re up to around 40%.  If someone tells you to cut 20% the budget, but 40% of the budget is essentially untouchable, that means the rest of the budget has to be cut by about one-third.  And I don’t care what business you’re in, that stings.

But wait a minute, you say.  Doesn’t Newfoundland have the country’s lowest tuition, both for domestic ($2,759 vs. national average of $6,373) and international ($9,360 vs. $23,589) students?  Actually, aren’t international students only paying about 40% of the cost of their education?  After all, students there can afford a fee increase: only Manitoba has a smaller percentage of students receiving student aid.  There must be some flexibility there, right?

Well, as it turns out, no.  That would of course be the right thing to do, but the government doesn’t want to take the blame for raising tuition for middle-class students (though it doesn’t seem to have a problem cutting student aid to the poorest by 78%).  It flirted with allowing MUN to raise fees last year, but the university could see through that trap and refused.  This year, it ran out of room to manoeuvre and so proposed a set of fee increases which fell harder on out-of-province and international students than they did on domestic ones.  Cue grumbling about administrative waste, inefficiency, and high administrative salaries, not just from the usual suspects internally but from the Minister himself, who clearly wants to pose as a defender of students against the mean old administrators.  First, he says, MUN needs to wring out every bit of efficiency possible out of current structure – to that end, he says, the university needs to go back to “zero-based budgeting”.

Now, I don’t know any specifics about MUN, but it’s a fair guess that after ten years of having a firehose of money pointed at them by the provincial government, the institution had probably grown flabby in some areas.  It would be against human nature if it hadn’t.   But here’s the thing about university overspending: when it happens, it’s like blowing up a balloon.  The extra funds don’t cluster in one area, they are spread pretty evenly throughout the institution; like a balloon, the institution looks the same only bigger.  Did you really need to hire six people in student services instead of five?  Did you really need that extra tenure line in economics?  Could our profs maybe make 5% less than those at Dalhousie rather than exactly the same?  So fair play to the Minister – there are almost certainly efficiency gains to be had.

But note that most of the “extra costs” listed above are salary costs.  That’s normal because most universities spend 70%+  of their money on salaries.  And a lot of these salaries are covered by collective bargaining agreements which are pretty tightly worded to prevent job losses   How do you zero-base budget in that environment?  You can’t.  At best you wait for people to retire and then restructure around those who are left.  The Minister knows all of this perfectly well and that the idea of zero-based budgeting in this context is as dumb as a bag of hammers, yet for some reason he pretends otherwise.

It’s not that MUN doesn’t need to keep a lid on costs and restructure.  It does, and is already doing it.  But without breaking collective agreements (is that what the minister wants?  he should say so), cuts of this magnitude are very difficult to implement.  What MUN needs is some breathing space, something that a rise in fees would provide.  The Minister should stop trying to pick fights with the university, and try working constructively with it to mitigate the problems that the 21% cut his government’s cuts have created.

 

April 19

The Balkanization of Canadian Student Aid

So, a couple of things happened late last week worth mentioning:

First, the Newfoundland Budget was released and as predicted it was a slash-and-burn exercise.  The province, facing a deficit of something like 8% of GDP, had to make major changes.  Unbelievably, the tuition freeze stayed, sort of (more on this tomorrow), but student aid took a hit.  Remember in 2014 when Newfoundland eliminated grants?  That’s over, the first $40 week in provincial aid is now a loan again.  But more importantly, the government has completely eliminated grants for students studying outside the province if their program of study is offered inside the province.  So, a law student going to Dal gets the grant, but if God forbid you want to study Science or Engineering somewhere other than MUN – it’s loans only on the provincial side (said students would still receive federal grants).

Second, the premier of New Brunswick announced pretty much out of nowhere that low-income students in his province would be free and that details would be available from the Ministry of Advanced Education “in a few days” (at time of writing we’re still waiting).  Not many details yet – from the few nuggets available it sounds a lot like the Ontario program (provincial tax credits are being axed) – which is of course a Good Thing.  But one key point did come out, namely that the grant would not be portable.  If you chose to leave New Brunswick, it would be loans only on the provincial side.

I. Am. Furious.

The extent to which young people in Atlantic Canada are treated as “resources” to be hoarded is just appalling.  It’s almost never “how can we attract young people”, it’s “how can we keep the ones we’ve got from leaving”.  From a very young age, bright young people are essentially sold a bill of goods by guidance councilors and community leaders – “don’t leave the province, it’s a betrayal to leave the province, you are our future”.   The guilt-trips are outrageous.  And now along comes provincial policies in Newfoundland and New Brunswick to use financial means to punish students who have the temerity to want to study outside the province. 

At least you can sort of excuse the Newfoundland one on grounds of austerity because financially that government really is in trouble.  But New Brunswick?  They canned a huge graduate tax rebate last year and promised to re-invest the money.  There is no way that amount of money wouldn’t cover an extension of the program to out-of-province students.  Hell, Ontario actually cut total grant + tax-credit dollars in its announcement and still managed to extend the coverage of its new grants (currently, the Ontario Assistance Grant is portable but the Ontario Tuition Grant is not – the new grant is fully portable).  Instead, New Brunswick is doing this specifically to try to divert New Brunswick students away from out-of-province schools in order to give its own universities more tuition revenue and hence obviate the need for the province itself to actually pony up some money.  Brian Gallant calls that a win; we’ll see if he thinks the same when New Brunswick lose students after Nova Scotia and PEI retaliate in kind.

Now look, I get it.  People want what’s good for their communities, and the economics of Atlantic Canada have been scary for decades.  It’s easy to retreat into a defensive shell.  But holding your own youth hostage is not cool.  Those kids aren’t resources to be hoarded; politicians need to let them go and succeed wherever they want to succeed.  Student aid should be about expanding opportunity, not limiting it.

These changes need to be reversed.  And if the provinces won’t do it on their own, the federal government should change the legislation underlying the Canada Student Loans Program to penalize partner provinces whose loan programs don’t provide mobility across Canada.  More than ever before, their programs are built around federal largesse – Ottawa should extract something in return.  And freedom to study without penalty anywhere in the country is a right worth fighting for.

October 06

Interest on Student Loans – Time to Go Dutch

News out of the U.S. suggests that one possible casualty of that country’s budget crisis is the in-school interest subsidy on student loans. Since Canadian governments almost always end up copying the Americans on student aid eventually (see: income-based grants, rules on institutional designation, workforce-related loan forgiveness, etc.), this seems like a good time for Canada to review its own policies on student loan interest.

Some countries, like Germany and many developing countries, charge no interest at all on student loans (Newfoundland and Labrador eliminated interest on provincial student loans in its 2009 budget). This is a wastefully expensive way to run a student loan system (effectively, once interest rates are considered, it is paying students to borrow) and does a poor job of targeting public money to those who need it most. Other countries, like Australia, charge students inflation but no real interest – this is somewhat less wasteful but still not brilliant. Countries such as the Netherlands are charging students a rate based on the cost of government borrowing – that is, they aren’t subsidizing loans, but they’re providing it to students at a rate substantially below par. Then there are countries which charge students something close to a market rate, and use the “profit” to cover losses from defaults.

The U.S. and Canada are the only countries that try to mix different approaches – unbelievably cheap loans (i.e., full interest subsidies) while students are in school, and market-like rates when borrowers are in repayment. From a policy perspective this makes almost no sense whatsoever as the biggest subsidies go to people who borrow a lot, but who repay quickly. In a system where 20% of borrowers repay within two years (largely thanks to hefty gifts from family members), it’s hard to say that this is an effective way to spend money.

For about what we’re paying now, we could move to a Dutch scheme where we charge students the government rate of borrowing throughout their loans. It would increase student debt at graduation, but also make that significantly easier to pay back. The big winners would be people with low post-graduate incomes that require many years to pay back their debts; the big losers would be people who get family members to pay off their debts after graduation.

Which group would you rather got our tax dollars?

September 12

The Newfoundland Strategy

There was an interesting study out last month from a group of scholars at Memorial University of Newfoundland (MUN), led by Education Professor and Canadian Higher Education über-blogger Dale Kirby, called Matriculating Eastward . With MUN’s out-of-province student numbers skyrocketing in recent years (intake from the other Atlantic provinces has risen fivefold since 2002), the report used both quantitative and qualitative methods to examine the reasons that out-of-province students chose Memorial as their place of study.

Not surprisingly, cost emerges as the number one factor – with fees having dropped over 35% in real terms over the last decade, MUN has become the region’s low-cost education destination. But number two on the list was interesting – availability of program of choice. It’s a hint at least that cost on its own might not be enough to make a school a “destination” – it still needs a degree of comprehensiveness and reputation for quality capacity in order for people to want to go there in the first place.

The study unsurprisingly concludes that keeping MUN a low-cost environment is key to its remaining competitive for out-of-province students. But that’s not something the university can decide on its own – MUN’s tuition is a function of provincial government largesse. And the province’s return on investment for massively subsidizing out-of-province students depends to a large degree on whether or not they choose to stay in the province after graduation. Here, the study’s results are less encouraging – migrant students’ willingness to consider staying in the province after graduation is not much better than “neutral” (3.3 on a scale of 1 to 5, where 5 is “strongly agree”).

It’s an argument at least in favour of a two-tier tuition scheme, with one rate for home students and another for immigrants who are (arguably) just subsidy-shopping. As long as oil revenues stay healthy, it’s hard to see Newfoundland changing course. But if budget cuts ever loom, there’s every chance for Newfoundland could imitate Quebec and make visiting students pay in order to maintain locals’ privileges.