Last post, we surveyed the financial situation of Ontario universities and the evidence suggests that the “system” as a whole is sustainable given that total revenues generally exceeded total expenditures. However, that did not mean that there was not a sustainability issue given that as many as a dozen institutions were expected to run deficits going into the 2024-25 academic year. It would appear that some institutions are more sustainable than others and that smaller and more remote institutions in particular faced financial issues of which the Laurentian situation was the grimmest recent example. However, even larger and more research-intensive universities are not immune from financial issues as illustrated by the recent example of Queen’s University.
What are the solutions? The measures needed are either to reduce expenses, raise revenues or some combination thereof. With respect to revenue, you will have to assume the total provincial grant package is not going to change beyond what the government has promised. On the revenue side, there is enrollment revenue, and you can either raise price or quantity sold when it comes to students. Demographics suggest that domestic enrollment is finally starting to rise but international enrollment is not in the wake of federal measures and given domestic tuition is still frozen it means tuition revenues cannot be expected to be a big driver of sustainability. Moreover, much of the potential domestic enrollment increase over the next decade or so is going to be in the GTA which is of limited value to more remote regional universities.
Other revenue solutions? Fundraising? Ancillary revenues? Sales of goods and services? Research services? These already are being used and their growth potential depends on the local market. In the case of ancillary revenues like parking, food services or even residence fees, these took a large hit during the pandemic and have yet to recover. Students and even faculty and staff are no longer as likely or willing to be a captive market on campus. While there is still a desire for in-person course learning, many university students like the flexibility of online or hybrid options and these options naturally do not come with parking sticker revenues or food purchases in campus eateries. Fund raising to build endowments? These take a long time, and the reality is that donors like to contribute to goals with a tangible outcome – a building, a program, a scholarship – and not to a fund that will generate revenues for general operating expenses. Indeed, some donations by creating new programs or positions or a building will contribute to operating expenses in the long term even if they generate short term resources.
Which brings us to the cost side. One simple solution is simply a draconian government mandated across the board pay cuts to all university employees (there probably is a way to do if they put their mind to it). In 2022, salaries and benefits for Ontario universities were $10.5 billion out of total expenses of $17.2 billion – 61 percent. Academic salaries were only $4.8 billion or 28 percent of total expenses. If only 28 percent of total university expenses are academic salaries (46 percent of total salaries and benefits) – it does beg the question as to what all the other money is going to. Nevertheless, in theory, hundreds of millions of dollars can be saved by cutting salaries and benefits 5 or 10 percent – in the short term. However, a system wide cut is a blunt instrument and as noted some institutions are just fine without it. Moreover, an across the board cut - aside from the obvious political turmoil it would cause – does not address the structural issues of universities perhaps having the wrong mix of programs for their markets or even too many programs given their regional demand. A wage cut without addressing the structure of spending only postpones the sustainability problem to another day. And a wage cut to universities alone raises the more uncomfortable question about the wages and salaries for the rest of the broader public sector. If you think universities pay well, then take a look at municipalities and the health and education sectors.
Another cost side solution is a university-by-university approach tailoring government initiatives and responses to the unique issues of each institution. Maybe some institutions should be closed outright but every community with a university would fight (one hopes) to retain their university. Are there cost savings in universities working together to save on procurement of supplies or services? Can automation and AI streamline and reduce costs when it comes to management of students, human resource functions, recruitment, enrolment management? And of course, can one save money by more intensive use of current human resources? On the staff and faculty side we can term this as more “efficiency” or doing more with the same resources. On the faculty side, this inevitably means larger classes or more classes – an increase in class size and teaching loads. Of course, this may reduce program offerings and that leads to less diversity in both courses and programs. On the other hand, does every university need the same set of programs and departments?
All of these revenue and cost measures just outlined are not
new ideas. They have been around for
some time and ultimately involve nudging the trajectory of expenses and
revenues to ensure a more sustainable path.
They do not solve the fundamental problem outlined which is that Ontario
has a set of universities which its government and public really do not want to
pay more for. Ontario funds its
universities and regards it as a system but in reality, it is a set of semi-autonomous
but highly regulated institutions, each with its own funding situation – some of which
are sustainable and some which are not based on their debt and deficit
positions - and filled with processes that lead to slow decision making given the independence of staff and faculty in particular. Nudging them does not seem to work very quickly if at all.
Another solution? A complete overhaul of Ontario’s university system (I am not going to deal with community colleges but to some extent the same solutions can apply to them) that involves merging a number of the smaller institutions (along with more financially troubled larger ones if necessary) into an actual regional university system with individual campuses offering less diversified and more specialized offerings. This may be a way out given the politics of every major urban area in Ontario wanting a university but unrealistically expecting a full range of courses and programs that cannot be sustained given regional enrollment bases.
What might such a reform look like for any government willing to bite the bullet and incur the wrath of assorted regional electorates? Well, the more sustainable larger research-intensive universities would likely remain pretty much as they currently are. We all know who they are but at minimum would include University of Toronto, Western, Waterloo, McMaster, perhaps Queen’s and perhaps either Ottawa U or Carleton or maybe both. Some might add Guelph to this list or even York. As for the remaining universities – some of which are rather large – one could create three university systems: The University of Southern Ontario (Windsor, perhaps Guelph, Laurier, York, Universite de’Ontario francais, Brock), The University of Eastern Ontario (TMU, Trent, Ontario Tech, OCAD) and A University of Northern Ontario (Algoma, Lakehead, Laurentian, Nipissing, NOSM, Hearst).
Of course, simply merging these various institutions into one a system only makes sense if it is accompanied by program and administrative rationalization. For example, a University of Northern Ontario would not need six economics or six biology or six engineering departments or as many department chairs or eventually as many faculty and staff for that matter. There would also be a marked decline in the demand for Deans, Vice-Presidents, Associate Vice-Presdients and Presidents and assorted entourages. The same would go for a University of Southern Ontario or Eastern Ontario. Students would need to go to the campus where their specific program is being offered for their in-person courses or take them online. This would be a major restructuring of courses and offerings as well as how they are offered. Indeed, this rationalization via specialization of both administrations, faculty and staff in specific campuses linked by modern information and digital technology is where some savings might be. Simply merging universities, keeping all the programs intact and creating a new administrative apparatus with dominion over them all is not going to save any money. It will simply spend more. The goal is to reduce the expenditure side well below the current revenue side to provide more resources overall for the system. This outcome also requires government not take the savings and spend them on something else.
Is a merged campuses solution just a pig’s breakfast of acrimony and political chaos? Yes indeed. Could it work? Perhaps with the right set of skilled decision makers but let’s face it, this is 21st century Canada – skilled decision makers seem to be in short supply and outnumbered by word salad spewing political performers masquerading as the former. And then, why have three systems? Maybe those three systems that have been proposed could simply be combined into one – The University of Ontario alongside the remaining half dozen or so stand-alone universities. Each University of Ontario campus would remain on the footprint of the current university but with fewer programs and faculties and of course fewer administrators and staff. In some communities, you might even merge them with the local community college. Sure, there would be a lot of unhappy campers, but it would be the system that Ontarians are willing to pay for. If they don’t like it or if there are not enough places for everyone, they would be welcome to send their kids elsewhere – perhaps to another province or maybe an American liberal arts college?
Trying to change the Ontario university system to deal with long-term sustainability is a task that most governments are not up for. Most likely, the tendency will be to do nothing and let the system meander into yet another crisis down the road. This is the most likely path forward given that not only do Ontarians not want to pay more for universities, but they do also not wish to think about them unless their children have trouble getting into a desired program or a residence spot. In the absence of more public support for universities, another solution is to simply deregulate university tuition and let universities set their own fee schedules to attract and retain students based on what they see as their market and strengths. It remains that the tuition currently being paid by domestic students is less than half what it actually costs to educate them. The price is too low because it is subsidized by government. More tuition competition in the end would result in universities eventually making their own cost-side restructuring decisions given that what they offer would need to be more tailored to price. Such an approach would also need to be accompanied by an enhanced provincial student aid program to deal with lower income accessibility to university (and college) education.
However, again, none of this is new. All of these ideas have been around for a long time but always come up against the political culture of the province and the culture of universities. When it comes to universities, Ontarians want guaranteed access to a premium university system that provides a wide range of courses and programs but at discount prices. The government likes to create universities but does not like to fund them. Good luck with that.