Ontario’s post-secondary system is facing the problem of financial sustainability. Indeed, the inevitable question arises of whether Ontario simply has too many colleges and universities. An excellent overview of this question with an accompanying discussion is available here. And of course, there is always Alex Usher’s excellent blog on all aspects of Canadian universities with posts over the years on provincial and Ontario university finances. However, the question I wish to address in light of the evolution of Ontario university finances is whether the system can actually be made sustainable with sustainability defined as having the resources available to fund desired expenditures.
Resources are of course the revenues available to universities and they need to be compared to expenses. Figure 1 plots the total revenues and expenditures of the Ontario university system as a whole from 2001 and 2022 and based on this very simple metric, the system as a whole is “sustainable.” In 2022, the system took in $17.5 billion in total revenues whereas total expenditures were $17.2. However, this is overly simplistic because Ontario universities do not function as a system per se but as 24 institutions (20 publicly supported universities and four associated universities). Some of these institutions-usually large research intensive ones in southern Ontario - have been running substantial surpluses but a rather large number have been running deficits and acquiring debt with the most extreme example of what can happen there being the Laurentian insolvency.
The challenges facing a number of smaller institutions in particular and especially in Ontario’s north is that their revenues are having difficulty keeping up with expenditures. Part of the issue is that provincial government grants have essentially not been growing over time and provincial funding as a share of total university revenues has declined as illustrated in Figure 2. This leaves student tuition and fees and a plethora of other sources ranging from miscellaneous federal funds, ancillary fees, to investment income as the sources of sustainability. Tuition fees have grown since 2001 from 24 percent of total university revenues to 45 percent in 2022. The provincial share of university revenues has declined over the same period from 36 to 24 percent while all other remaining sources have also declined from 39 to 31 percent. Notes again, that performance across individual universities may differ substantially. Northern Ontario universities face particular challenges in growing domestic enrollment given that population is clustered in the GTA.
After a period of long-term provincial government behaviour which has essentially constricted their provincial grant funding and shifted reliance to tuition and other sources, the crux of the current set of issues is as follows. Since 2018, domestic tuition in Ontario was cut by ten percent and then frozen. Grant revenue has also been essentially frozen. Universities in the GTA with access to a lot of students have boosted their domestic enrollment to generate revenues. Universities without easy access to the GTA and its demographic advantages have recruited more international students, but all Ontario universities (and colleges in particular) have gone this route. However, that door is now being shut at least in the short term by the federal government over concerns about immigration affecting housing stocks.
In the short term, the provincial government also finally responded in spring budget 2024 to its Blue-Ribbon Panel Report which called for tuition increases and increased provincial funding of $2.5 billion dollars by providing a short term funding reprieve to universities that entailed about $1.3 billion over three years. This is really half of what was recommended by the government’s own panel and was accompanied by an extension of the tuition freeze. The Council of Ontario Universities noted this assistance while welcome has fallen far short of what was needed and that eight universities are still forecasting operating deficits for 2023-24 and 12 are projecting deficits for 2024-25.
So, where do we go from here? Well, the problem really is this: Ontario
does not want to pay for the university and college system it currently has. It certainly wants local universities with a
broad range of programs to educate their children, but it does not want to pay
for them. Ontario has too many universities (and colleges for that matter)
given what seems to be the expressed willingness to pay by governments and the
public. The Ontario public does not want
to pay more for universities in terms of out-of-pocket tuition nor does it want
to pay more in terms of increased government funding especially if it requires
raising taxes. This has been a feature
of Ontario’s political culture for quite a few decades now, no matter the
political stripe of the government. This
means that expenditures of the current system need to be tailored to what
Ontarians as demonstrated by the actions of their government seem to wish to
pay. More on that in a post to come.