Canadian Lawyer magazine has an interesting little story about tuition rises at the University of Toronto.  Apparently, tuition there has been rising at 8% per year for some time now, and students, understandably, are upset.

That’s a pretty run-of-the-mill story.  More interesting, however, was Dean Benjamin Alarie’s defense of the hikes.  To wit:

“The cost of satisfying our obligations increases steadily over time, and without corresponding provincial [government] increases to our funding, we need to find a source to finance those inexorable budget increases.  The rate of increase of staff and faculty compensation is the product of a mix of collective bargains that have been struck and arbitration awards by labour arbitrators, and so there’s not much scope for the law school and the university generally to resist that part of the academic inflation.”

At one level, this is undoubtedly true.  Costs – mainly labour – are rising faster than inflation, and government funding isn’t keeping up; short of increasing student-teacher ratios, tuition needs to rise in order to keep things level.

But those collective bargains and arbitration awards are campus-wide, so costs shouldn’t be rising faster in law than elsewhere.  And the rest of the university gets by on something a little less that 5% per year.

So what’s driving those extra costs in law?  Universities’ financial reporting is sufficiently opaque that it’s hard to know for sure, but one has to suspect that cross-subsidization might be involved.  That is, institutions are taking advantage of the high demand for professional education to jack-up tuition, and funneling some of that money to other programs.

There’s nothing wrong with cross-subsidization, per se.  We do this between lower-and-upper year students all the time.  Arguably, the entire rationale to run higher education through universities (as opposed to a collection of discipline-based schools) is precisely to allow cross-subsidization between departments.  But this gets progressively harder to defend as fees rise.  If I’m paying 30% of the costs in my program, and someone else is only paying 25%, there’s an implicit cross-subsidy, but it’s not enough to necessarily get excited about.  On the other hand, if I’m paying over 100% of program costs, I’m going to get a little tetchy.  Students will pay it, of course – and gladly so, if the value of their degree is seen to be high.  But in a recession, when the short-term value of degrees is questioned, it’s a really tough sell.

Alarie says his challenge is to try to explain to students the university’s financial situation so they can better understand these cost increases.  In fact, that’s a challenge for the whole sector: as tuition rises, so too must financial transparency – including on cross-subsidies.