Hi all. Today’s post is on last week’s announcement of a support package for post-secondary education by the Government of Ontario. I’ll be as descriptive as possible; more on the actual distributional impacts will follow.

(For a longer version of all this, you may want to check into Monday night’s edition of The Agenda, in which I expound on this stuff along with Mike Schreiner, Peggy Sattler, and Shamji Adil. Fun times. Thanks to Steve Paikin for inviting me on.)

Just to recap the situation in Ontario: the system is facing two big financial challenges. The first is that successive Ontario governments have shown no interest in funding higher education. Apart from a couple of years under Dalton McGuinty, Ontario has ranked last in per-student public funding of post-secondary education for most of the last four decades. Over the past decade or so, things have got much worse. Grants to institutions have been held roughly constant since about the time Kathleen Wynne took power—over the past decade, the real value of these grants has fallen by 28%. When Doug Ford came to power, he reduced and then froze tuition fees without compensating institutions; as a result, the real value of fees has gone down by 25% since 2018.

This was the challenge that the Blue Ribbon Panel was set up to discuss. You can see my analysis of its report back here. The quick version is that it recommended an immediate increase of 10% in base financing and (effectively) a 6% increase in tuition, and then increases roughly equaling inflation after that. Total increase in funds after inflation would be over $2 billion over three years (how much more depends on your projections for inflation).

But since the Blue Ribbon Panel report came down, the system has been hit by a second challenge. The primary way that institutions have coped with having their domestic income choked off is to aggressively court international students. So much so that the government of Canada eventually felt it necessary to introduce a system of visa application caps specifically designed to reduce visas in Ontario by a projected 100,000 next year. If you assume that these spots are mostly in the colleges where tuition is in the $15K range, and the remainder in the university sector where it is in the $40K range, then you come up with a minimum sector-wide hit of about $1.8 billion (I actually think it will be significantly bigger than that—maybe more like $2.5 billion—for reasons I will get into next week).

On February 26, the provincial government made a funding announcement purporting to deal with all of these issues and a little bit more.

With respect to the first challenge –that of declining domestically-sourced funding—the Government offered $700 million over three years in new public money and $0 in new tuition: that is, about a third of what its own panel recommended. Moreover, from what I can tell, this money is not front-ended the way the Panel recommended; rather, it is to be phased in over time. My take on this therefore is that these funds are not doing much more than keeping up with inflation. Not what the Panel recommended, not even vaguely close to sufficient.

On the second challenge, that of lost international student revenue, the province announced a $203 million fund to be given to “institutions in the greatest need” (which I understand to mean institutions who get clobbered the most by the loss of visas, and which I hereby affectionately dub the “Conestoga Bailout Fund”). Quite apart from the fact that at best, making up about 12% of the anticipated losses, it’s not entirely clear when the money will flow, or to whom. In order to work out which institutions have “greatest need,” some period of time will presumably need to elapse so that comparative data can be generated. My first thought here is that we shouldn’t count on this money going out in 2024-25; it could be 2025-26 instead. Which is better than a punch in the nose, but not exactly what you’d call timely assistance.

Then, the province also announced a raft of smaller measures, including:

• $167.4 million over three years in additional funding for capital repairs and equipment.
• $100 million in 2023-24 to support STEM program costs at publicly assisted colleges and universities with enrolments above currently funded levels.
• $65.4 million to support research and innovation, including $47.4 million for the infrastructure refresh of Ontario’s Advanced Research Computing systems and $18 million for their ongoing operations and maintenance.
• $10 million in additional one-time funding through the Small, Northern and Rural Grant for colleges and Northern Ontario Grant for Universities in 2024-25. This funding will support financially vulnerable institutions while the government works with them on efficiency initiatives.
• $23 million to enhance mental health supports, including $8 million for the Postsecondary Mental Health Action Plan over the three years.

These are all good ideas, and the government deserves more kudos that it is going to get for these. Yes, the Northern Grant thing is too small and deffo should not have anything to do with an “efficiencies agenda” clearly not designed by anyone who understands Northern Ontario, but I think the government missed a trick by not holding these announcements back until the budget. They were always going to get slammed on this half-assed announcement: tying these sensible measures into an otherwise useless announcement just means foregoing a rare chance to get some applause.

Anyways, to get a sense of how these measures collectively stack up just for next year, take a look at Figure 1 below. It shows estimated province-wide institutional income for the current year (left column), for next year with no government intervention (second column), for next year with the announced changes (and assuming the package is actually worth $400M next year, which is unclear), and what the Blue Ribbon Panel suggested. It’s all in 2023 dollars, and I’m assuming an inflation rate of 2.5%.

Figure 1: Total Projected Operating Income Under Various Scenarios, Ontario PSE Institutions, 2023-24 and 2024-25

So, let’s start by looking at what I call “government-controlled revenue”: grants to institutions plus domestic tuition fees. Under the status quo ante (column 2), which involved frozen tuition and grants, this was expected to drop in real terms by about $275 million ($150 million on the grant side, $125 million on the tuition side) due to inflation. Under the announced plan (column 3), that negative $270M turns into a $130M increase (+$400M in new grants minus the $275M in inflation). But this pales in comparison with the roughly $520M real increase proposed by the Blue Ribbon Panel (column 4). The difference, mainly, comes from the decision on tuition.

But what Figure 1 also shows is that all this messing around with government-controlled revenue pales in importance compared to what’s going to happen on international fees—a hit of about $1.8 billion. And like I said, I think that estimate is probably on the low side. Bottom line: the sector is losing about $1.7 billion next year, minimum, which is about 9% of total operating income (and at some institutions it will be bigger). Some of that of course will be offset by the fact that there will be fewer students to teach…but that’s still a very big hit. In fact, it’s the biggest single-year hit since the Harris government ordered a 15% cut back in 1996.

Then, finally, the government announced:

• $15 million over three years beginning in 2024-25 through the Efficiency and Accountability Fund to support third-party reviews that will identify actions institutions can take to drive long-term cost savings and positive outcomes for students and communities. These reviews will target structural issues as well as operational policies in order to improve sustainability and student experiences.

I’m not sure how these contracts are going to be distributed (I suspect outfits like Nous/Cubane will do very well out of it even though their methodology is really poorly suited to dealing with small universities), but I guarantee you that from the province’s POV these will be a failure. When the Conservatives talk about “efficiencies” they don’t actually mean organizational efficiencies. They mean high professorial and administrative salaries. What they really want is for everyone to take a pay cut because well-paid professionals on the public dime = bad. And that’s not what Nous/Cubane-style analyses are meant to uncover. Likely result: frustration.

That’s all for now. More next week.