One of the things that continually astonishes me about universities is how few people who work within them actually understand how they are funded, and what the budget drivers really are.  So this week I’m going to walk y’all through a simplified model of how the system really works.

Let’s start by stating what should be – but too often isn’t – the obvious: universities are paid to teach.  They are paid specific amounts to do specific pieces of research through granting councils and other kinds of research funding arrangements, but the core operating budget – made up of government grants and tuition fees – relates nearly entirely to teaching.  This is not in any way to suggest that teaching is all professors should do.  It is, however, to say that their funding depends on teaching.  Want a bigger budget?  Teach more students.

This link is more obvious in some provinces than others.  In places like Ontario and Quebec, which have funding formulae, the link is clear: each student is worth a particular amount of money based on their field and level of study.  In others, like Alberta and British Columbia, where government funding comes as a block, it’s not quite as clear, but the principle is basically the same.

So the issue within the institution is how to get the necessary amount of teaching done.  One way to work out how much teaching is needed is this little formula:

X = aϒ/(b+c)

Where “X” is the total number of credit hours a professor must teach each year (a credit hour here meaning a student student sitting in one course for one term – a class with 40 students is 40 credit hours), “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.

Now, let’s plug in a few numbers here.  Average professorial compensation, including benefits, is approaching $150,000 in Canada.  Faculty salaries and benefits are about 44% of total operating budgets, meaning that for every dollar spent on faculty compensation, another $1.27 is spent on other things.  For argument’s sake, let’s say the average income from government is about $6,000 per student (or $600 per credit hour) and average tuition income, including that for international students, is about $8,500 per student (or $850 per credit hour).  These last two figures will vary by field and level of study, and by province, but those numbers are about right for undergraduate Arts in Ontario.

So, what does our equation look like?

X = 2.27*150,000/($600+$850) = 235.

In this simplified world where all students are undergraduate Arts students, at current faculty salary rates and university cost structure, professors on average have to teach 235 credit hours in order to cover their salaries.  If you’re teaching 3/2, that means 5 classes of 47 students each; if you’re teaching 2/2 that means 4 classes of 59 students apiece.

Now, I know what you’re going to say: there’s not actually that many profs teaching that many students.  And that’s true mainly because I’m low-balling the per-student income figure.  Add in graduate students and the per-student income rises because of more government subsidy.  Choose another discipline (Engineering, say), and income rises for the same reason.  But at universities like, say, Wilfrid Laurier, Saint Mary’s, or Lethbridge, which are big on Arts, Science, and Business, and low on professional programs, this is pretty much the equation they are looking at.

More tomorrow.