Yesterday, I discussed the peculiarities of Alberta’s financial reporting system for post-secondary education and how it reflects the province’s controlling approach towards post-secondary institutions (if you don’t believe me, ask anyone who’s been a senior admin at both an Albertan institution and one from another province, and see how often they get calls from Ministers and senior government officials).  Today, I want to talk about how that approach is likely to sabotage the governing United Conservative Party’s goals when it comes to post-secondary education and more generally look at what the government has to do to reach 2023 without a major disaster in the system.

(Just in case anyone’s wondering, I’m not in Alberta anymore. I’m in DC working on some stuff with the Strada Education Network and generally trying to recover from the enormous shock of the Hatsu Basho in Tokyo, where utterly unheralded outsider Tokushoryu won his first yusho with a 14-1 performance and an impressive final-day win against Ozeki Takakeisho.  Wild stuff.)

OK, so let’s start with the fact that the Alberta Government has a pretty strong democratic mandate to cut spending.  They were reasonably up-front that they were going to keep overall spending stable while increasing health spending, which implied significant cuts in other fields.  It wasn’t clear that some fields were going to take a bigger hit than others and we might all regret that our sector is taking an outsize hit, but no opposition party is ever specific on a ministry level about these things.  If the Alberta government wants to lop almost a third off the budget to post-secondary institutions over four years (as the current Ministry Business Plan suggests), so be it.  The issue is how the system can adjust most effectively.

So, let’s put this as bluntly as possible.  There are really only two things that jeopardize an institutions’ ability to respond.  The first is the Government’s seeming desire to reduce not just transfers to institutions but total institutional income and spending.  And the second is a badly-designed performance-based funding (PBF) system.  Let me start with the latter.

There are two things wrong with the PBF system.  The first is that in its current form, it threatens institutions with a second, possibly quite large, and unpredictable set of cuts on top of the planned cuts.  This is so unnecessary that the Minister himself, at the press conference announcing the punitive, all-stick, no-carrot system, said that he’d be in favour of a mechanism to at least ensure that money which institutions “lose” from performance-based funding be returned to higher performing institutions.  To which I can only say: TENNESSEE.  LOOK AT TENNESSEE.  THEY DO IT EXACTLY RIGHT, STOP SCREWING AROUND IMITATING ONTARIO’S OMNISHAMBLES OF A SYSTEM AND LOOK AT TENNESSEE, THEY EVEN PUBLISH ALL THEIR DOCUMENTATION RIGHT HERE FOR FREE, JUST READ IT PLEASE.   

(Quite apart from having the form of PBF correct, the implementation of the system a decade was handled beautifully.  The point of a PBF system is not to create sudden rewards or punishment: in fact, the best PBF systems have almost no effect in year 1, even if they are allegedly “100% performance based”, as Tennessee’s is.  The point is how incentives move in the long-term.  I know this is a hard concept to grasp if you’re a politician in a “get everything done in 4 years mode”, but there’s pretty much no faster way to destroy societal institutions than running them on an electoral cycle rhythm.)

Secondly, there’s also the insistence on having a large number of indicators; I’m hearing between eight and twelve, which strikes me as too many since no institution can focus on that many priorities.  There’s the fact that some indicators make no sense (the one which rewards low spending per student is doubly weird, both because it encourages institutions to shut down services regardless of value and because “please spend less money, we’ll give you more money if you do so” is bizarre as an incentive), or are flat-out contradictory (one which encourages student completion and another which counts student services as “administration” and incentivizes its gutting.)

I think the problem here is that for the Alberta Government, PBF is a shiny new toy, and right now they’re like the kid who’s just been given a hammer and thinks every problem is a nail.  There’s a reason that no other jurisdiction in the world has used performance indicators as a way to get institutions to deal with budget cuts: it’s because there are other, more rational ways to deal with the problem (for example, just cut the funding and be done with it).  Similarly, there’s a reason no one uses graduates’ median income as a measure: basically, most of what goes into graduate compensation doesn’t have much to do with institutional performance.

One argument I heard in Alberta in favour of this income measure was that government was concerned that some industrial sectors were reporting a great deal of frustration about the difficulty of working with universities.  Thus, it was suggested, perhaps putting pressure on institutions to get their graduates better salaries might also get them to work more productively with industry.

Now, you have to be careful a bit in dealing with arguments like this.  On the one hand, it’s based on a totally bizarre theory of change and a misunderstanding of how and why university units get involved with industry.  On the other hand, it’s totally legit that a government would want institutions to work more productively with industry in order to catalyse economic growth.  In fact, I would argue that during the funding hey-day of the 00s, universities and colleges did well precisely because governments thought of them as economic engines, and that more recent funding erosion has in part been because governments have ceased to think this. 

Governments have far better tools than PBF to light a fire under institutions.  Say you think the problem is that Engineering faculties are too stuck in a rut of dealing with legacy energy and construction companies, and not open to dealing with smaller, up-and-coming IT companies.  No problem: tighten up external quality assurance processes and force institutions to revisit the mix of companies on their faculty advisory boards every three years.  Much simpler and more direct than a set of performance indicators.

Given all this, the best advice I can give the Alberta government is this:

• Cut what you are going to cut and do it all to base budgets.  Don’t make PBF an extra set of cuts on top.
• Don’t introduce PBF next year.  Take the time to do it right (DON’T COPY ONTARIO, FOR GOD’S SAKE) and come up with better, less contradictory indicators.  It’s not like this government, already active on so many fronts, isn’t going to have umpteen implementation crises next year.  Why add problems when you don’t need to?
• If you do absolutely have to introduce PBF for whatever political reason, don’t make it a system which takes already-slashed resources from institutions.  Why not tie it to a system of rewards in terms of how many international students an institution can add, or how big a tuition increase it can impose? 
• There’s no reason to start a PBF system with a bazillion indicators.  Keep it to three at most, ones which are well-justified and which you know aren’t going to cause perverse consequences.  You can always add more later if you’re so inclined, but fewer indicators means fewer possible goof-ups, and that might be important in the next year or so.  
• Remember: PBF is not the only tool in the kit and many (most?) of the goals you want to achieve may be more effectively pursued with other instruments.