In the wake of the Laurentian insolvency, there is growing interest in the state of university finance in Ontario – at least amongst universities. For the most part, for the Ontario government Laurentian and its plight might as well be on the moon. They would undoubtedly be much more preoccupied had the insolvency happened to the University of Toronto or Ryerson and then maybe not given at least one pundit has suggested that the current government really knows nothing about universities.
In any event, the final report on what happened at Laurentian that might shed a definitive story of what has happened there is still to come though one media account summarizes it as too many programs, too many instructors, too many managers, too few students and not enough money. And the previously mentioned pundit would add that tenured professors are overpaid while part-timers are underpaid, though relative to who or what is never elaborated upon. That is essentially the level of financial debate regarding universities in Ontario.
So, what can we learn from the information available on the recent state of university finances? Well, an examination of university financial reports for 2020 is one way to start by comparing the deficits (-) or surpluses (+) of 20 Ontario universities. It turns out that in 2020 a surprising number of universities did run a deficit – seven to be precise – but the majority ran surpluses. The range runs from a deficit of -$21.5 million for Ryerson to a surplus of +$441 million for University of Toronto. The interesting thing is how could both the largest and the smallest university deficit both be in downtown Toronto institutions given the similarity of the operating environment but there it is.
Comparing deficits for Ontario universities really needs to
be adjusted for the scale of institutions in terms of enrollment given that total
enrolment in 2020 (as taken from the AUCC web site) ranged from a low of 1,370
for Algoma University to a high of 93,081 at University of Toronto. Using absolute deficit numbers is not going
to tell you much. Figure 1 thus presents
the deficit (-)/surplus (+) per student.
The largest deficit per student is actually Wilfrid Laurier at -$527 per student in
2020 followed by Ryerson at -$455 and then Nipissing and Laurentian at -$374
and -$339 respectively. Deficits are not
a specific northern Ontario problem given the list includes Wilfrid Laurier,
Guelph, Ryerson, Windsor and Ontario Tech.
Are there any characteristics that might explain why these
institutions had deficits in 2020 while the others had surpluses – the largest
at Algoma and University of Toronto respectively, now there is an interesting
juxtaposition – at $5364 and $4,738 respectively. The first and the last in terms of total
enrollment both have the largest surpluses per enrolled student. Who would have thought? Algoma and U of T as the Alpha and Omega of Ontario universities.
Why not address the elephant in the room. Do deficits or surpluses have anything to do with how generous faculty salaries are? Figure 2 provides a ranking of average faculty salaries (all ranks) for these 20 universities taken from Statistics Canada with the exception of Algoma, which for some reason is not in the salary statistics for universities from Statistics Canada. However, I took an average of the salaries provided in the latest Ontario salary disclosure (which I would imagine actually biases the number upwards a bit).
The results here are also interesting. Unlike the steepness of the deficit/surplus profile, this profile is rather gentle going from a low of $111,000 at OCAD to a high of $176,550. University of Toronto not only manages to generate the largest surpluses in both absolute and per student across all of Ontario universities, but it has managed to do it with the highest average faculty salaries. Laurentian, is decidedly middle of the pack when it comes to faculty salaries along with Wildfrid Laurier and Western. Indeed, if you plot the deficit/surplus against the average faculty salary for these 20 universities, you get Figure 3 which gives the counterintuitive result (especially if you are an Ontario cabinet minister) that higher faculty salaries are correlated with bigger university surpluses.
Of course, Figure 3 is only an association. What you really want to see is if there indeed is a statistically significant relationship between the two variables after controlling for some confounding factors. Figure 4 presents the results of a very simply linear regression of the surplus per student on average faculty salary (avgfacsal), per student tuition revenue (perstudenttuition), whether or not the university has a medical school (medschool) (which can be an expensive proposition), and the ratio of government grant revenue to tuition revenue (granttuitionratio) for the university. Moreover, to account for the scale of institutions it is a weighted regression with the weighting factor being total student enrolment.
The results show that arguing that higher faculty salaries will
give you a better financial position is indeed not the right call. On the other hand, the coefficient is also not
negative nor significant for that matter.
In the general scheme of things, universities are not so dopey as to go
around paying more than they should for the help nor are they captives of
fiscal terrorist faculty associations when it comes to compensation. Guess what? Having a medical school is not
significant to a deficit/surplus position. More interesting, neither is the ratio of grant revenue to tuition revenue. That is to say, government support of universities
has stagnated so much that it really was not a statistically significant
determinant of a university’s financial health in 2020. That is not to say it could not be or never was but in 2020 it is not.
What is the most significant determinant in this albeit limited set of variables? Tuition revenue per student. The regression coefficient is positive and quite significant. Figures 5 shows that there is indeed a nice positive slope to the relationship between surpluses per student and total tuition revenues per student. And who are those two high-flyers at the far northeast corner of the chart? Why the Alpha and Omega of Ontario universities - you can decide which should be which. Figure 6 shows it is little Algoma U – obviously the little university that could - and big U of Toronto – which is really not a surprise. They appear to have boosted their enrolment as well as got the right mix of students (i.e. higher paying international students) to ensure their financial survival – at least for 2020. Who knows what the future will bring?