HESA

Higher Education Strategy Associates

Tag Archives: Provincial

September 11

The Growing Importance of Fee Income

I made a little remark last week to the effect that on present trends, student fees would pass provincial funding as a source of revenue for universities by 2020-2021 and combined fed-prov government funding by 2025.  Based on my twitter feed, that seems to have got people quite excited.  But I should have been a little clearer about what I was saying.

First of all, by “on present trends”, I literally meant do the simple/stupid thing and take the annual change from 2014-15 to 2015-16 and stretch it out indefinitely.  One could use longer-term trends but for provincial government funds, the difference is minuscule because the 1-year and 5-year trends are pretty similar.  It’s harder to do that with the federal money because it jumps around a lot on an annual basis (is there a federal infrastructure program in a given year?  Have they given a one-time bump to granting council dollars?  etc.) and so medium term trends are harder to discern.   Second, when I said it would pass government funding, I meant for the entire budget, not just the operating budget (feds don’t really contribute to operating budgets).  And third, I was speaking in terms of national averages: regional averages vary considerably and in some provinces, fees passed government grants as a source of income some time ago.

Anyways, I thought it would be fun to do some inter-provincial comparisons on this.  To make things simple, I’m going to exclude federal funds from the exercise, and just look at provincial grants and student fees.  As previously, the data source is the Statcan/CAUBO Financial Information of Universities and Colleges Survey.

Let’s start by looking at how grants and fees compare to the size of the operating budget of universities in each province.

Figure 1: Provincial grant and fee income as a percentage of operating income, by province, 2015-16

Now, remember: some provincial and fee income goes to areas other than the operating budget and operating income is not restricted to just student fees and government grants.  Thus, you shouldn’t expect the two sets of lines to add up to 100%.  In some cases they add to more than 100%, in some cases less.  But no matter, the point is here that already in 2015-16 fees represent a greater portion of the operating budget than government grants in Ontario and an equal proportion in Nova Scotia.  In BC and PEI, fee and grant income are close-ish, but in the other six provinces government grants predominate.

Now let’s look at the five-year percentage change in income, in real dollars, from fees and grants.  This one is kind of complicated, so bear with me.

Figure 2: Change in income from provincial grants and student fees, by province, 2010-11 to 2015-16

There are seven provinces which share a pattern: increasing real fee income and decreasing real provincial grant income, though the extent varies.  The biggest shifts here are in Ontario and BC.  Quebec is the only province which has seen an increase in income from both sources.  In all eight of these provinces, we can do straight-line projections of the future pretty easily.

But then there are two provinces – Newfoundland and New Brunswick – which have seen net decreases in both sources of income.  Basically, this is what happens when a demographic collapse happens at the same time as a fiscal collapse.  In per-student terms this doesn’t look quite so bad because enrolments are declining, but since staff don’t get paid on a per-student basis that doesn’t help much when it comes to paying the bills.  It’s hard to do straight-line projections with these two because it’s quite clear the fee income declines aren’t going to continue indefinitely (the demographic collapse stabilizes, eventually).  So we’re going to say good-bye to these two for the rest of this analysis, while wishing them the very best in dealing with their rather significant challenges.

Ok, for the remaining eight provinces, let’s combine the info in those last few graphs.  Let’s take the income by source data in figure one, and then apply the trend changes in figure 2 to each province.  The easiest way to show this in a graph is to show fee income as a percentage of provincial grant income.  We can show this out to 2024-25, as seen below in figure 3.

Figure 3: Projected ratio of student fee income to government grant income to 2025, by province

What figure 3 really shows is that Canada is heading towards a much more financially heterogeneous higher education system.  For the country as a whole, fee income for universities should surpass provincial government grants in 2020-21.  But this masks huge variation at the provincial level.  Ontario and Nova Scotia (by now) already exceed that level.  BC will get there in three or four years, PEI will get there by 2024-25.  But the other provinces aren’t on track to hit that level until 2030 at the earliest (and in Quebec’s case it’s about 2055).

Another way to think of this is that in about a decade’s time, the funding landscape in places like Quebec, Manitoba and Saskatchewan is going to look the way it did in Ontario ten to fifteen years ago.  At the same time, Ontario’s funding landscape is going to look a lot like big American public schools, with less than 30% of the operating budget (and probably something like 15% of total funding) coming from provincial governments.  Differing incentives facing different universities means they are probably going to be run quite differently too: expect a greater variety of institutional cultures as a result.

Now, as with any straight-line projection, you should take the foregoing with a healthy amount of salt.  Politics matter, and funding trajectories can change.  This is one possible scenario, not necessarily the most likely but simply the one most in line with current trends.

But keep in mind that the above is the probably good news scenario for Ontario.  The bad news scenario would see the percentage of funds coming from fees restricted not by increasing the government grant, but by restricting student intake, or the intake of international students (which is where the big gains in fees are really coming from).  So even if you find this scenario disturbing: be careful what you wish for.

May 15

Provincial Budgets 2017

Springtime brings with it two certainties: 1) massive, irritating weekend traffic jams in Toronto as the city grants permits to close down Yonge street for a parade to virtually any group of yahoos, thus making it impossible to go from the cities east to west ends and 2) provincial budgets.  And with that, it’s time for my annual roundup of provincial budgets (click on the year for previous analyses – 2016 2015 2014 2013.  It’s not as bad as last year but it’s still kind of depressing.

Before we jump in, I need to remind everyone about some caveats on this data.  What is being compared here is announced spending in provincial budgets from year-to-year.  But what gets allocated and what gets spent are two different things. Quebec in particular has a habit of delivering mid-year cuts to institutions; on the flip side, Nova Scotia somehow spent 15% more than budgeted on its universities.  Also, not all money goes to institutions as operating funding:  this year, Newfoundland cut operating budgets slightly but threw in a big whack of cash for capital spending at College of the North Atlantic, so technically government post-secondary spending is up there this year.

One small difference this year from previous years: the figures for Ontario exclude capital expenditures.  Anyone who has a problem with that, tell the provincial government to publish its detailed spending estimates at the same time it delivers the budget like every other damn province.

This year’s budgets are a pretty mixed bunch.  Overall, provincial allocations after inflation fell by $13 million nationally – or just about .06%.  But in individual provinces the spread was between +4% (Nova Scotia) and -7% (Saskatchewan).  Amazing but true: two of the three provinces with the biggest gains were ones in which an election was/is being held this spring.

Figure 1: 1-Year change in Provincial Transfers to Post-Secondary Institutions, 2016-17 to 2017-18, in constant $2017

Province Budget Figure 1 Year Change Provincial Transfers

 

Now, this probably wouldn’t be such a big deal if it hadn’t come on the heels of a string of weak budgets for post-secondary education.  One year is neither here nor there: it’s the cumulative effect which matters.  Here’s the cumulative change over the past six years:

Figure 2: 6-year Change in Provincial Transfers to Post-Secondary Institutions, 2011-12 to 2017-18, in constant $2017

Figure 2 6 year chage in provincial transfers

 

Nationally, provinces are collectively providing 1% less to universities in inflation-adjusted dollars in 2017-18 than they were in 2011-12.  Apart from the NDP governments in Manitoba and Alberta, it’s really only Quebec which has bothered to keep its post-secondary funding ahead of inflation.  Out east, it’s mostly been a disaster – New Brunswick universities are down 9% over the last six years (not the end of the world because of concomitant enrolment declines), and a whopping 21% in Newfoundland.

The story is different on the student aid front, because a few provinces have made some big moves this year.  Ontario and New Brunswick have introduced their “free tuition” guarantees, thus resulting in some significant increases in SFA funding, while Quebec is spending its alternative payment bonanza from the Canada Student Loans Program changes (long story short: under the 1964 opt-out agreement which permitted the creation of the Canada Student Loans Program, every time CSLP spends more, it has to send a larger cheque to Quebec).  On the other side, there’s Newfoundland, which has cut it’s student aid budget by a whopping 78%.  This appears to be because the province is now flouting federal student aid rules and making students max out their federal loans before accessing provincial aid, rather than splitting the load 60-40 as other provinces do.

Figure 3: 1-Year change in Provincial Student Financial Aid Expenditures, 2016-17 to 2017-18, in constant $2017

Figure 3 1 Year change in student aid expenditures

 

And here’s the multi-year picture, which shows a 46% increase in student aid over the past six years, from $1.9 billion to just under $2.8 billion.  But there are huge variations across provinces.  In Ontario, aid is up 83% over six years (and OSAP now constitutes over half of all provincial student aid spending), while Saskatchewan is down by half and Newfoundland by 86%, mostly in the present year.  The one province where there is an asterisk here is Alberta, where there was a change in reporting in 2013-2014; the actual growth is probably substantially closer to zero than to the 73% shown here.

Figure 4: 6-Year change in Provincial Student Financial Aid Expenditures, 2016-17 to 2017-18, in constant $2017

Figure 4 6 Year Change in Provincial Student Aid

So the overall narrative is still more or less the same it’s been for the past few years.  On the whole provincial governments seem a whole lot happier spending money on students than they do on institutions.    Over the long run that’s not healthy, and needs to change.

June 13

A Marginally Less Mediocre Set of Provincial Budgets

So, it’s that time of year when I bring you the round-up of what’s happened in provincial budgets over the past few months. Usually, when I do this, I look both at student financial aid and transfers to institutions; this time, I’m going to skip the student financial aid stuff because there’s essentially no change (rock steady since 2013 at around $2.35 billion in constant dollar terms).

One thing that happens a lot when you look closely at budget estimates is that it’s surprising how often what’s actually in the budgets doesn’t actually match how they are described in news reports. For instance, this year it was widely reported that post-secondary institutions in Newfoundland got the chop – but according to budget papers their operating budgets are essentially unchanged from last year (though capital budgets have been cut by $5 million). On the other end, the Alberta NDP was widely applauded for major new investments in higher education but as near as I can tell, this year’s operating transfers are only 3% (in real dollars) ahead of where they were two years ago (though capital funding is way up). That doesn’t mean that the alternative narratives are wrong; I’m looking at big-picture all-inclusive province-wide transfer data; there are other ways of slicing the data which get you quite different results. But its’ worth keeping in mind that the pictures that governments and institutions see are not always the same.

Anyways, here are the year-on-year changes in provincial PSE budgets, in constant dollars:

Figure 1: Year-on-year change in inflation-adjusted transfers to post-secondary institutions, 2015-16 to 2016-17, by province

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Four provinces saw a decline in both real and nominal dollars: Newfoundland, PEI, New Brunswick and Saskatchewan. Of these, two (NL, SK) saw cuts land disproportionately on the capital side. In New Brunswick, a couple of weeks after the budget, the government announced a one-off increase in funding from some weird new innovation/growth slush-fund-y kind of thing which generally has me a bit perplexed; however, because these comparisons are for reasons of comparability budget-to-budget, I have not included this here (they will presumably show up in higher baselines in next year’s comparison. British Columbia and Nova Scotia both increased expenditures, but by slightly less than inflation.

Quebec’s budget increase was slightly (0.18%) larger than inflation. Ontario’s increase was 0.8% but this was entirely due to a bump in capital spending – if we focused on operating dollars alone Ontario would show a slight decline. Manitoba’s new Progressive Conservative government increased spending on higher education of 1.75%; that’s slightly less than what the departing New Democrats had promised but still second-best in the country (don’t get comfortable; the budget cuts are coming next year). Alberta saw a stonking increase of nearly 11% in real dollars but roughly two-thirds of the growth in spending there comes from higher capital expenditures; like the federal government, Alberta has gone big on campus construction as a recession-antidote. With respect to the rest of the increase, some of it actually seems to stem from measures adopted in the previous fiscal year but only actually spent in this fiscal (Alberta, recall, had a weird budget cycle last year which saw the budget only adopted in October).

So the good news is that there was an increase in government expenditures nationally, but how big an increase is a matter of interpretation. If you include capital spending (as I do here), then nationally we had an increase of $375 million, or a just under 1.6%. However, very little of that is going into capital expenditures; take out the changes as one can discern in capital funding (not all provinces break it out clearly in their estimates) then the increase falls to less than $100 million, or less than half of a percentage point.

Over the last five years, what we see is a 3.1% decline in total transfers to institutions, as shown below:

Figure 2: Total Provincial Transfers to Post-secondary Institutions, 2011-12 to 2016-17, in constant 2016$

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Now, it’s important to keep these numbers in perspective. There are a lot of countries where institutions have got hit a lot worse. And of course, our institutions are able to offset losses in public funding by raising tuition (a bit), adding students and taking in more full-fee paying international student – paths not always open to institutions elsewhere.

But on the other hand, bear in mind that system-wide our costs are rising by 3% a year after inflation. Something, eventually, is going to have to give.

April 18

Some Alternative Explanations for Provincial Funding Decisions

So, last week (see here) I contrasted the fact that higher education was a consistent winner at the federal level over the past twenty years, and contrasted that with the fact that higher education had largely been a loser at the provincial level since about 2010 (and not just in the sense that funding is falling in real terms – also in terms of having the ability to offset those losses with higher fees).  I went on to suggest that this contrast was more than passing curious since both levels of government are ultimately responding to the same electorate.  And I finished by saying that the only possible answer here was that politicians and the public are a lot happier with what universities and colleges are doing on the research front than on the undergraduate teaching front.

A few readers pointed out that it was a bit facile to call that the “only possible answer” and offered some possible alternative explanations, including:

  • The state of the economy and provincial fiscal capacity.
  • Changing demographics and lower student numbers
  • The fact that some provinces at least have privileged resource development over knowledge production
  • Provinces understand that universities can make up the difference by loading up on international students

OK, so clearly I shouldn’t have said my explanation was the “only” possible explanation.  But I still think it’s the most likely one.  Let’s run through those possibilities.

State of the economy?  Both levels of government are suffering from weak growth, so it’s difficult to use as an explanatory variable.  Yes, the feds are in somewhat better shape fiscally and able to dive into debt in part to fund higher education, but that hardly explains higher education’s success in the latter Harper years.

Privileging resources production over knowledge production?  I think that actually proves my point.  If post-secondary education can’t compete with commodities whilst we are in the middle of the mother of all commodity downswings, then post-secondary education’s perceived value proposition must really be terrible.

Demographics?  This could be a more persuasive argument – the reductions in the real value of grants look somewhat less scary in some provinces if you express them in per-student levels.  But a) that doesn’t explain a reluctance to see tuition rise and b) the reductions in government grants don’t map onto changes in demographics very well (i.e. the biggest drops aren’t in the provinces with the biggest demographics issues).   This factor is in fact probably exercising some influence on policy-making but I don’t think it’s in the foreground.

The “foreign students will pay for the difference” argument?  This is an interesting one because it reverses the usual causality argument – is increasing internationalization of enrolments a cause or a consequence of government funding decisions?   I tend to view it as the latter, but can’t really rule out the former.   But man, if it is the former, provincial politicians should be called out on this.  Someone ought to actually force them to say “do you expect post-secondary institutions to increasingly fund themselves by being finishing schools for the Asian middle-class”?  Because if the answer is yes, everyone needs to be thinking much more carefully about their internationalization plans.

So maybe there are some other potential explanations.  But ask yourself this: can anyone imagine a government relations strategy which is successful in reversing this decline which doesn’t rest on an improved “offer” from post-secondary institutions?  Even if demographics were the problem, the answer to the problem is still going to hinge on the question “what can institutions do better/differently that would change politicians minds?”  Even if dissatisfaction with current offerings is not the (sole) root of the problem, can anyone imagine a positive solution which involves universities and colleges staying at the status quo?

No?  Me neither.

May 04

Worst Set of Provincial Budgets This Century

It’s the first week of May, and at HESA Towers that means it’s provincial budget analysis time.  As of now, nine of ten provinces have submitted budgets.  Sure, PEI is missing, and Alberta is presumably going to have to re-do its budget once the election’s over, but neither of them is likely to have a budget before June, so now’s as good a time as any.

(Islanders feeling slighted may rest assured they are not being singled out.  Our policy is to ignore anyone who can’t get a budget passed by May.  Last year we ignored Quebec.)

Some standard but important caveats on this data: What we’re comparing here is announced spending in provincial budgets from year-to-year.  But what gets allocated and what gets spent are two different things; Quebec in particular has a habit of delivering mid-year cuts to institutions, and student aid budgets can change rapidly if there is a shift in demand and/or interest rates.

On top of this, governments do not report expenditures consistently.  In some cases (i.e. Quebec, the three maritime provinces), provinces make it difficult to differentiate between operating and capital expenditure; in other cases (Ontario, for example), we don’t have consistent data for operating and capital estimates, and so we can only report on operating budgets.  That’s not a huge deal because what we are trying to do here is not compare absolute values of transfers across provinces, but rather look at relative change in each province over time, but it is still  something to keep in mind.

Finally, changes in total transfers may be different from changes in formula funding: as governments continue to micromanage institutions, an increasing portion of total funding is being disbursed in what to institutions seems a fairly capricious (or at least unpredictable and unguaranteed) manner.  Changes in institutional funding may therefore differ from the published provincial funding amounts.

OK, on to the real numbers, which I believe are the worst since 1997 or so: this year, total budgeted transfers to institutions nationally (minus PEI) is a little over $16.9 billion.  That’s down a little over $300 million in nominal dollars, for a fall (in real dollars) of 2.4%.  There were only two provinces – Manitoba and Nova Scotia – where institutional transfers were bigger than last year’s, and of these only Manitoba actually saw an increase larger than inflation.  As predicted back here, the province worst hit was Newfoundland, where the fall in the oil price tore a $1 billion hole in the budget, and as a result post-secondary expenditures took a hit of over 8%.

Changes in Operating Grants (Canada minus PEI), Budget 2014-15 to Budget 2015-16, Real $2015

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On the student financial aid (SFA) side, overall we see an increase of 1.1% in real dollars, but this conceals some major differences at the provincial level.  Alberta is down nearly 17%, and Saskatchewan is down 33%.  Whether this reflects changes in demand (fewer people applying, which would make sense demographically in Saskatchewan, at least), or the results of minor tweaks in need-assessment formulae, or simply the result of adopting new reporting practices, is difficult to tell.  So far as I’m aware, neither province has introduced major changes to its student aid system this year, so it’s hard to see what’s driving these shifts (though having now published them, I’m pretty sure I’ll be getting calls/emails from both with explanations).  On the other side, New Brunswick is projecting an 11% increase in student aid, which is both massive and a bit baffling given shrinking populations and capped tuitions.

Changes in SFA Budgets (Canada minus PEI), Budget 2014-15 to Budget 2015-16, Real $2015

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So what we see this year again is a continuation of the trend of increasing SFA support, and stagnant or declining institutional aid budgets.  Just to give you a sense of what’s going on here, here’s the net increase/decrease in absolute funding for SFA and institutional budgets over the last four years.

Total Changes in Budgeted Expenditures (Canada Minus PEI), Budget 11-12 to Budget 15-16, Real $2012

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Or, to put that in percentage terms:

Percentage Real Change in Budgeted Expenditures (Canada minus PEI), Budget 11-12 to Budget 15-16

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The SFA numbers, it needs to be said, are highly influenced by Ontario, which accounts for 75% of the increase in provincial spending.  In fact, four provinces (BC, Saskatchewan, Manitoba, and Newfoundland) have actually seen decreases in SFA expenditure over the past four years, though that is likely because of healthy income growth related to resource prices – we’ll see if that holds next year.

So there you have it.  Worst set of provincial budgets for institutions so far this century, but student aid still keeps growing.  How long can the starve-the-institution, feed-the-students game last?  My guess is this pattern will continue playing out for some time to come.

April 30

An Alberta Election PSE Primer

As long-time readers know, when there are important elections looming, I like to do analyses of party platforms.  There is such an election in Alberta next Monday.  It has never before occurred to me to write about Alberta election platforms because never before has it seemed like the Alberta PCs, who have been in power since Nixon’s first term, ever seemed likely to lose their majority (for the record, I never bought the polls in 2012).  And yet here we are, just a few days out, with the Conservatives in third, and the NDP running first in rural Alberta in some polls.

These are strange times.  Like, Book of Revelations strange times.  (“And when he opened the seventh seal, there was a silence about the space of half an hour, until the first polls began to trickle in” – Rev 8:1.)

And so, without further ado, here’s what the parties have to say:

The “Prentice Plan” (apparently the words Progressive Conservative don’t focus test well, despite the Party having been in power since Prohibition) promises a “world-class education system”.  Most of it is about K-12, but PSE does receive three vague-to-the-point-of-meaninglessness bullet-points.  These are: i) enhance financial aid and student awards; ii) develop a plan to ensure stable funding for institutions; and, iii) ensure apprenticeship training is more inline with labour-market demands.  For anyone who’s been awake for the last four years, this is baffling: the Tories slashed grants in 2010, and have yo-yoed institutional funding since 2008 (it’s 5% up!  It’s 7% down! Whee!).  Given the collapse in oil sands production, the most obvious way to “align apprenticeships with workforce needs” is probably to simply stop doing them for a year or two (see here for more on the link between commodity prices and apprenticeships).  So their platform seems to be mostly about running against their own recent record, with a little fantasy thrown in. Oh, and no commitment to more money for institutions, so far as I can tell.

The Wildrose Alliance Party, of course, does not have a record on which to run.  No one does, because the Tories have been in power since the late 17th century.  And that lack of familiarity with power shows in the party’s PSE platform, which is called – wait for it – “World-Class Post-Secondary, Trades & Skills Training” (imaginative, huh?).  They have an affordability and accessibility portfolio, which is pure Glen Murray (better transfer credit, more online delivery), a research policy that is nothing of the sort (more collaboration with industry, more tax credits for undergraduate students – yes really), and a trades/skills policy that is a mix of the good (more dual credit programs in trades in secondary schools), the banal (better information in high schools), the already-being-done (collaborate with other provinces to make trades certifications more portable), and the slightly weird (allow trades completers to choose between an oral and a written exam).  Note, however: no new public money for institutions.

The New Democrats, or rather, “Alberta’s New Democrats”, presumably to distinguish them from the ravening socialists who periodically run their neighbouring provinces, make only three PSE-related commitments in their platform.  One is with respect to re-installing the Summer Temporary Employment Program for youth ($10 million).  The second is “stable funding for universities and colleges” – in practice, a set of guaranteed annual increases of about 5% per year, which is quite substantial.  The third is to impose a total freeze on tuition, which undoes about 50% of the good of promise number two.

So if you’re in Alberta and you’re voting education in this election, the NDP would seem to be the obvious choice. That said: even if they are elected, and even if they are competent enough in government to deliver on their promises (a challenge for any non-incumbent party in a province where the government has been in power since the latter part of the Tang Dynasty), the net increase in money for institutions will still be below the rate of increase in universities’ underlying costs.  Cutbacks will still happen.  Sorry.

April 01

Some Inter-Provincial Finance Comparisons

Last week, I blogged about how OECD figures showed Canada had the highest level of PSE spending in the world, at 2.8% of GDP.  Many of you wrote to me asking: i) if the picture was the same when we looked at other measures, like per-capita spending or spending per-student; and, ii) could I break things down by province, instead of nationally.  I am ever your servant, so I tried working on this.

I quickly came up against a problem, which was simply that I could in no way replicate the OECD numbers.  Using numbers from FIUC (for universities) and FINCOL (for colleges), the biggest expenditure number I could come up with for the 2011-12 year was $41.75 billion in institutional income.  Dividing this by the 2011 GDP figure of $1.72 billion used in Education at a Glance (itself inexplicably about 3% smaller than the $1.77 billion figure Statscan reports for 2011) gives me 2.43%, rather than the 2.8% Statscan reported to OECD.  There is presumably an explanation for this (my best guess is that it has something to with student assistance), and I have emailed some folks over there to see what’s going on.  But in the meantime, we can still have some fun with inter-provincial comparisons.

Let’s start with what provinces spend on universities:

Figure 1: University Income by Province and Source as a Percentage of GDP

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In most provinces, total university expenditure is right around two percent of GDP.  Only in two provinces (Saskatchewan, Alberta) is it significantly below this, and only in two (Nova Scotia, Prince Edwards Island) is it significantly above.  In terms of public expenditure, the average across the country is about one percent of GDP.  Nova Scotia, at 3.2%, is likely by some distance the highest-spending jurisdiction in the entire world.

Now, some of you are no doubt wondering: how the heck can Nova Scotia universities spend two and a half times what Alberta universities spend (in GDP terms) when the latter are so bright and shiny and the former are increasingly looking a little battered?  Well, I’ll get more into this tomorrow, but the quick answer is: Alberta’s GDP is eight times higher than Nova Scotia’s, but it only has about three times as many students.

Of course, universities aren’t the whole story.  Let’s look at colleges:

Figure 2: College Income by Province and Source as a Percentage of GDP

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This is a wee bit more interesting.  Most provinces are bunched closely around the 0.5% of GDP mark, except for Quebec and Prince Edward Island.  If we were using international standards here, where college is usually interpreted as being ISCED level 5 (or level 5B before the 2011 revision), Quebec’s figures would be much lower because CEGEP programs leading to university are considered level 4 (that is, post-secondary, but not actually tertiary), and hence would be excluded.

But PEI is the real stunner here: apparently Holland College accounts for nearly 1.2% of GDP.  This sounds ludicrous to me and I have no explanation for it, but having looked up Holland College’s financials it seems to check out.

Here’s the combined picture:

Figure 3: Total PSE Income by Province and Source as a Percentage of GDP

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So, what we see here is that most provinces again cluster around spending 2.5% of GDP, which would put their spending roughly on par with the world’s second-biggest spender, Korea (but slightly behind the United States).  Saskatchewan, at 2% of GDP, would still be ranked very highly, while Alberta, at 1.73% would be only a bit above the OECD average.

The crazy stuff is at the other end: PEI and Nova Scotia, where higher education spending exceeds 3.75% of GDP.  And yeah, their GDP is lower than most of the rest of the country (GDP/capita in those two provinces, at $39,800 and $41,500, respectively, is less than half what it is in Alberta), but there are lots of OECD countries with GDPs of roughly that level of income (e.g. Spain) who spend about a third as much on education.

Tomorrow, we’ll look a bit more at per-student spending.

July 14

Paul Cappon, Again

You may have noticed that Paul Cappon – former President of the Canadian Council of Learning – had a paper out last week about how what the country really needs is more federal leadership in education.  It is desperately thin.

Cappon starts by dubiously claiming that Canada is in some sort of education crisis.  Canada’s position as a world-leader in PSE attainment is waved away thusly: “this assertion holds little practical value when the competencies of those participants are at the low end compared with other countries”.  In fact, PIAAC data shows that graduates of Canadian universities, on average, have literacy skills above the OECD average.  Cappon backs up his claim with a footnote referencing this Statscan piece, but said document does not reference post-secondary graduates.  Hmm.

And on it goes.  He cites a Conference Board paper putting a $24 billion price tag on skills shortages as evidence of “decline”, even though there’s no evidence that this figure is any worse than it has ever been (Bank of Canada data suggests that skills shortages are always with us, and were worse than at present for most of the aughts), or that a similar methodology would not lead to even bigger figures in other countries.  He cites a low proportion of STEM graduates in engineering as cause for concern, despite a total lack of evidence that this percentage has anything at all to do with economic growth.

Ridiculously, he proclaims that the Canadian education system (not higher education – all education from kindergarden onwards) is less effective than the Swiss because they beat us on some per capita measures of research output (which are of course largely funded through pockets entirely separate from the education budget).  Yes, really.  For someone so in favour of evidence-based policy, Cappon’s grasp on what actually constitutes evidence is shockingly tenuous.

Having cobbled together a pseudo-crisis, Cappon concludes that “the principal cause of our relative regression is that other countries are coordinating national efforts and establishing national goals… Canada, with no national office or ministry for education, is mired in inertia, each province and territory doing its best in relative isolation.” Now there is no evidence at all that the existence of national systems or national goals makes a damn bit of difference to PIAAC outcomes.  Germany comes in for all sorts of praise because of its co-operation between national and state governments, but their PIAAC and PISA outcomes are actually worse than Canada’s.  Yet Cappon believes – without a single shred of evidence – that if only there were some entity based in Ottawa that could exercise leadership in education that everything would be better.

Two points: first, our nation rests on a very simple compromise.  Back in 1864, the *only* way in which Catholic, Francophone Lower Canada could be tempted into agreeing to a federal government with representation by population was if that new level of government never, ever, ever got its hands on education.  That was, and is, the deal.  It’s not going to change.  Period.

Second, everyone needs to remember that there was a time not long ago that the Director-General of CMEC suggested exactly such a body to some deputy ministers in Ottawa, and Ottawa created a body not dissimilar to what Cappon is describing.  But said CMEC DG didn’t tell the provinces he was negotiating this deal with the feds.  When he was offered the leadership of the new organization, he jumped, taking several CMEC senior staff with him.  The result was that provinces, feeling betrayed by the DG’s chicanery, refused to work with the new organization.  As a result, it achieved little before being shut down in 2011.

That DG, of course, was Paul Cappon.

This report is essentially a self-justification for a dishonest act performed nearly a decade ago, rather than a genuine contribution to public policy.  If Cappon actually cared about repairing federal-provincial relations around learning, a mea culpa would have been more appropriate.

May 02

A Mediocre Crop of Provincial Budgets

As you all may remember, we here at HESA Towers like to do an annual round-up of how PSE and student assistance has fared in provincial budgets.  It’s been a bit difficult this year, what with Ontario taking its sweet time to table a budget, and Quebec tabling one in March, but failing to pass it before the election was called.  Since the latest betting is that Quebec won’t actually put a budget together until sometime in July (fully 21 months after the last one), I thought we’d put together a 9-province review right now.

(A couple of small methodological notes here: when we look at year-on-year changes, we’re comparing budget-to-budget, not budget-to-actual or budget-to-forecast.  Also, we’re displaying amounts in real [i.e. inflation-adjusted] 2014 dollars.  Got that?  Off we go.)

Let’s start with Student Aid.  Student Aid budgets went up again nationally this year, but only by a very slight 1%, with most of that increase coming from Alberta.  In most provinces, very small real decreases are what’s on the menu (caveat here: take the New Brunswick number with a grain of salt.  Their budget presents student aid data in the most ludicrous & opaque manner possible, so there’s been some guesswork on our part.  We could be off a couple of million).  But still, that’s up 24% in real terms compared with 2011-12, mostly because of the freakishly large increases in student aid spending in Ontario due to their tuition rebate.

Changes in Student Aid Expenditure (Canada Sans Quebec), Budget 2013-14 to Budget 2014-15, 2014 Constant $

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As noted last year, be careful in interpreting Figure 1: student aid is meant to be counter-cyclical.  As student incomes rise, need goes down, and so too would aid expenditures.  So a declining budget may just mean that governments are projecting (based on trends seen in their own program files) that students might be slightly better off this year than last.

Now, the big one: PSE operating grants.  Taking inflation into account, this year’s increase in operating grants in the 9 provinces was… $7 million (or, roughly 0.066%).  Seriously, it’s that on the money.  If you’re wondering why the Nova Scotia number looks so large (a 9% increase), it’s mostly due to jiggery-pokery, and the timing of payments to certain universities in the previous year – the actual number is somewhat smaller. 

Changes in Operating Grants (Canada sans Quebec), Budget 2013-14 to Budget 2014-15, 2014 constant $

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Looking at the transfers over a slightly longer period, we see that provincial funding to institutions is up slightly in nominal terms, but down 3% in real dollars since 2011.  Over that period, provinces have, on the whole, tended to be more generous to students than universities, as the figure below shows.

Increases in Funding to Operating Grants and Student Aid (Canada Sans Quebec), Budget 2011-12 to Budget 2014-15, Nominal $

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Basically, this year’s budgets are stand-pat for higher education, keeping up with inflation but no more.  But since higher education costs – notably faculty salaries – tend to increase faster than inflation (see a longer explanation here), cutbacks in non-salary items are baked-in for the coming year, and likely for several more years to come.

That is, unless salary increases start to come down a little.  Don’t hold your breath.

April 25

Nova Scotia Ditches a Bad Subsidy

About a decade ago, a really bad policy idea started making its way across the country’s “have-not” provinces.  I can’t remember if it started in Saskatchewan or New Brunswick, but within a couple of years it had spread to Manitoba and Nova Scotia, as well.  The details (and generosity) of this policy varied somewhat, but the gist of it was this: “let’s pay our graduates not to leave the province by refunding a portion of their tuition, via tax reductions, once they graduate”.  Sometimes this was dressed up as a “talent attraction policy”, in the sense that it would benefit people coming in from outside the province; in the main, however, it was understood that this money was mainly about keeping “our” kids at home.

Now this was a dumb idea from almost any policy perspective you can imagine, but the two most obvious ones are:

1)      Effectiveness.  Most youth, even in the most economically depressed provinces, tend to stay where they are: in the provinces where these programs were introduced, the “stay” rate ranged from about 75-85%.  So even if you bring the stay-rate up by 10 percentage points, that still means that for every student you successfully keep, eight others will get to keep cash for doing exactly what they were going to do anyway.

2)      Horizontal equity.  If you have a couple of tens of millions in cash that you want to devote to youth – and lord knows there isn’t much of that around – why in the name of all that’s holy would you hand that money over to the group of youth who are the most employable, and have the best prospects?  Especially if you’re not actually changing their behaviour, all this does is reduce the cost of education and make it easier for tomorrow’s upper-middle class to start accumulating assets.

Anyways, though it wasn’t much noticed outside the province, Nova Scotia dropped the tax rebate, largely because it was ineffective – young people continued to leave the province.  While it drained a lot of money, it simply wasn’t big enough to change many people’s minds about leaving.  And this makes sense: if the reason someone moves from Halifax to Toronto is a $10K/year difference in pay, a $2k tax rebate isn’t going to change their mind.

Of course, it would have been a lot better if the Nova Scotia Government had actually put that money back into some other youth-serving purpose – the community college, say, or student assistance (a category in which Nova Scotia remains among the most miserly in the country).  But with the province hemorrhaging money, it’s not exactly a surprise that this money is going straight to deficit-reduction, no matter how unfortunate that might be.

Interesting trend, though: first Quebec and now Nova Scotia have started dialling back on tax credits – with no apparent backlash.  Hopefully, this is the start of a trend that allows us to restore some sanity to the way we subsidise higher education.

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