Yesterday, we saw how simply by adopting an Ontario pricing system, McGill could get almost two-thirds of the way to financial independence from the Quebec government. Today, we consider if/how it could get the rest of the way and close the remaining $111 million gap.
One advantage that McGill has over pretty much every other university in the country is the national nature of its brand. It is absolutely astonishing how many top students from every part of the country want to study there. As a result, McGill has something pretty much no other institution in the country has – an inelastic demand curve. Not only could it easily charge more than it currently does, it could easily charge substantially more than any other institution in the country and still keep its enrolments essentially unchanged or even increase them.
Let’s say it keeps enrolments unchanged. My guess – and it’s no more than that – is that McGill could fairly easily charge another $3,000 or so above tuition at equivalent Ontario schools and not see any drop in demand. Even assuming the institutions takes 20% off the top for student aid, that’s an extra $2,400 per student, or nearly $50 million – which brings the cost gap down to about $60 million. Increase overall enrolments by another ten percent and the gap falls to just $40 million.
That’s close, but no cigar. Getting those last few million would require some potentially painful choices, mostly on the cost side. The least radical would involve shifting the enrolment mix towards undergraduate arts and business and away from graduate students. This may sound counterintuitive (aren’t prestigious universities grad-student-heavy?) until you realize that once you’re out of the public system and its funding formulae, the imperative is to push enrolment into programs with higher margins. Doing this doesn’t increase revenue, but it does reduce the cost of instruction somewhat.
More radically, McGill would probably need to think about ditching a couple of faculties – preferably ones which cost a lot of money but don’t do much for prestige. The two obvious candidates at McGill would be education and dentistry (the school of social work could probably go, too). Music would be on the cusp (it loses a ton of money and generally isn’t a prestige discipline, but McGill’sreally good at it).
Even all that probably doesn’t quite make it to break-even, but we’re definitely down to the last $10 million or so. That’s close enough that even the smallest cut to their operating grant would make leaving the public sector a serious option.
When should McGill go private? Maybe sooner than you think.