A couple of weeks ago, I wrote about Justin Trudeau’s record. A couple of people wrote in to chide me that I had not included the passage last year of Bill 59, a piece of omnibus legislation which among other things prevents postsecondary education institutions from using the Companies’ Creditors Arrangement Act (CCAA). I know a lot of professors—and perhaps more importantly, faculty unions and their provincial/national associations—think that this was a “Good Thing” because “Look What Happened at Laurentian.”

To quote from an OCUFA press release from when the legislation passed last summer.

“Public universities are not businesses and should not be treated as such, and this bill is a crucial piece of legislation that will protect university students, faculty and staff from corporate-style restructuring policies that prioritize creditors over the public interest,” said Jenny Ahn, Executive Director of OCUFA.

“We saw to it that the catastrophe caused by Laurentian’s bankruptcy will never happen again. Years of OCUFA campaigning have paid off, and together with our allies, our advocacy has resulted in a more secure future for our vital public universities,” said Nigmendra Narain, President of OCUFA.”

Read this carefully. OCUFA thinks the problem at Laurentian was the declaration of bankruptcy and the use of the provisions of the CCAA to cut headcount, not the fact that the university was on the verge of running out of money. It thinks that taking away the ability to use bankruptcy protection makes universities “more secure” despite the fact that this legislation does nothing to make it any less likely that a university or college living on the edge might face a catastrophic cash crunch.

This…is not a good read of the situation. It mistakes symptoms for causes. To understand what’s going on here, it’s important to separate what happened at Laurentian—where the administration deliberately drove the bus off the cliff by declaring insolvency when other options existed—with a case where a university has no other option.

Despite the university’s claims in 2021, it was not a certainty that Laurentian would have run out of cash in the absence of its declaration of insolvency. The university claimed that this was imminent, but a careful look at the cash flow statements that were published as part of the CCAA process suggest that this was probably not the case (although it would have been a very close-run thing). And in any event, there was always the option proposed by the provincial government, which was a small loan to tide things over until the government could get a handle on the institution’s finances, and the possibility of much larger assistance if the institution’s claims of poverty turned out to be true. The university, at the time run by a President who seems to have been both deeply naïve and yet weirdly overconfident about his ability to build a new university on the ashes of the old one, refused this offer. (For more on the circumstances around the triggering of the Laurentian bankruptcy, see this blog from November 2022.) It’s quite natural to wish that there had been some process that would have prevented Laurentian from invoking the CCAA when other options were available.

But imagine another university—or perhaps more likely, college—gets to the point Laurentian did, or a little further. No cash, no government support, and now, post Bill 59, no ability to escape creditor protection. What happens then? The answer is that the institution would just…halt. People would stop getting paid. Possibly some people would keep working for free for some time out of a sense of duty to the students in the way professors at Soviet universities often went months without pay during the collapse of 1991-93. But it’s more likely that many would quit. It would be chaos, both for employees and students.

The point here is that though CCAA wasn’t the right medicine for Laurentian in 2021, it doesn’t follow that CCAA might never have been the right medicine. Institutions which get into financial difficulty need to have some way to get themselves right. The perils of not having some system like that can be incredibly grim (and if you don’t believe me, have a look at some of the work done on this question in the UK context by an outfit called Public First—“disorderly exit” is not pretty) .

Now, you could argue that creating a process to legally allow universities to restructure their debts in cases of near-insolvency is actually a provincial responsibility, not a federal one. And you’d be right! But most provinces don’t have one, so the federal legislation simply sets up a vacuum. So, fill the vacuum, you say. Well, take a look at the one province that has such legislation on the books: that is, Nova Scotia which passed Bill 100 in 2015. And guess what? It does exactly what CAUT and others hated about the CCAA in that it allows an institution to apply to the province for what amounts to a declaration of insolvency which—if granted by the province—would allow for the override of any provisions in collective agreements, including the right to strike. 

Will the other nine provinces soon look to do something similar? I would bet yes, even if they don’t do it all at once. As long as universities are independent autonomous organizations, freely able to enter into contracts, there will be a need to have a fair, legal process for when they get into financial difficulties. And this process will necessarily map fairly closely onto bankruptcy legislation because the one thing institutions need when they get into trouble is financial flexibility—and ability to cut costs quickly. Faculty unions know this: it’s why they have spent so much time over the past thirty years negotiating exigency clauses which make it effectively impossible for institutions to do exactly this (for more on financial exigency, do read this HESA piece from 2015 outlining how they work and what costs they impose on universities). 

The real point here is that to make a public university genuinely financially secure requires adequate public funding and competent, cost-conscious management. Neither is guaranteed. In the absence of such guarantees, there needs to be some kind of legal process in place to allow institutions time to turn around their finances. The alternative to a world where institutions can’t access such a process is not some world in which governments run to the rescue every time an institution starts getting tight on cash: it’s a world in which universities simply seize up if and when the money runs out. 

Not pretty. And it’s why I personally don’t consider Bill 59 a win for postsecondary education.