Ontario's War on Universities: Coincidence, Incompetence or Strategy?

 

As the Laurentian saga continues to unfold, one is forced to consider the possibility that what is in play in Ontario is not a one-off event of an unfortunate university that did not manage its finances well but perhaps a broader strategy to restructure the university sector.  While such an opinion will be labelled as paranoia by many it remains that a number of variables seem to be coming together that may ultimately create a number of Laurentians. 

 

If this is happening by coincidence, then it is ultimately a reflection of the inconsistency and incompetence of government policies. If it is not a coincidence, then it remains that perhaps conditions are being created to provide incentives for universities to change in a manner that the Ontario government thinks they should. It is no secret that governments have a predisposition for professional programs as opposed to arts and science and the list of the 69 discontinued programs at Laurentian happens to include a rather large number of arts, science and social science programs. 

 

Universities are semi-autonomous and increasingly subject to government program and operation oversight, but they are still independent enough to resist the types of rapid program shifts that government politicians, policy makers and bureaucrats are fond of as they pursue assorted agendas and flavours of the month.  Their faculty associations have also negotiated agreements that include exigency clauses that make it difficult and expensive if not impossible to implement short-term, long-term or permanent layoffs.  How to get around exigency clauses and get rid of tenured faculty? Why file for insolvency under the Companies’ Creditors Arrangement Act (CCAA) which essentially allows the university to financially restructure and get around the exigency clauses.

 

Financial pressure is needed to create a situation whereby a university may eventually feel it needs to file for insolvency.  Ontario universities have been subject to essentially declining or frozen grant funding for a number of years now.  They have compensated by raising the revenue portion from tuition on domestic students, but the Ontario government decided to cut tuition fees by ten percent and then frozen them. Indeed, it has now extended the freeze for a second year because it says it “wants to protect students’ and families’ pocketbooks during the COVID-19 pandemic.”  

 

Now, Ontario and Canadian demographics are such that the pool of domestic university aged students has not been growing substantially and the result is the pursuit of international students who not only are coming in large numbers but can be charged higher tuition than domestic students.   However, on the same day that Ontario announced that it was extending the Ontario domestic student freeze another year (out of province students are exempt from the freeze) it was also revealed that the federal government was facing demands by Ontario to suspend the entry into Ontario of international students.  Needless to say, given the importance of international students and their tuition to the finances of many Ontario universities, the results for university finances this fall would be catastrophic.

 

So, what are we to make of all this?  Is this all an unfortunate coincidence of a number of independent measures and decisions randomly coming together to create a financial storm for the university sector? Is it simply the result of a government that does not understand how to consult and as a result makes damaging policy decisions that border on incompetence?  Or has the government decided to take the case of Laurentian as an opportunity to see if it can create the nudge for massive changes in a university sector that to date has been able to resist change? 

 

Of course, the pursuit of such a strategy requires a sophisticated and calculating behind the scenes over-mind and the Ontario government to date has not exhibited such a tendency.  It probably is a combination of coincidence and poor policy making.  On the other hand, it could be as simple as the Ontario government realizing that most people do not care too much about universities making them an easy target for financial cuts to what remains of government university funding down the road. Smaller universities in the end require less grant funding. 

 

 

Why Hospitals (And Long-Term Care) in Ontario Need More Funding

When it comes to provincial budget season, Ontario’s health sector invariably will lobby for more funding.  As part of the string of posts I have been doing on health care spending in Ontario starting in November dealing with the four “ages” of Ontario spending, I want to explore the case for more funding for one aspect of the Ontario health care system in particular – hospitals.  In the lead up to the 2020 budget, the Ontario Hospital Association has made the case that with Ontario’s aging and growing population, there are too many patients waiting for beds.  Given that Ontario spends less per capita than any other provincial government in Canada, it needs this year an increase of $922 million for hospitals – a 4.85 percent increase – simply to maintain access. 

While the shortfall compared to other provinces is a good point, the case for hospitals is evident even if one looks at Ontario hospital funding on its own.  Figure 1 plots both nominal and real (in $2019) per capita hospital spending in Ontario from 1975 to 2019 using data from the Canadian Institute for Health Information’s National Health Expenditures (NHEX) database.  Real per capita nominal spending has grown from $210 in 1975 to reach a peak of $1,494 in 2019.  This may seem impressive until one adjusts for inflation and reveals an increase from $1,118 to $1,494 instead.  Indeed, real per capita spending has essentially declined since 2010 when it peaked at $1,583.  In other words, Ontario hospital spending has not kept up with the combination of both inflation and population growth since 2010 and has actually declined by 6 percent.

 

Things look even worse when you look at the average annual growth rate of real per capita spending that compares hospitals to the other categories as done in Figure 2.   

 

The capital category – which of course means new or expanded facilities such as hospitals and long-term care homes as well as equipment has dropped on average -4.8 percent annually.  So much for all of that infrastructure money at both the federal and provincial levels.  Where has it gone is a good question.  After capital, the next largest declines average annual declines are for other professionals at -2.3 percent (i.e., provincial funding for things like eye exams are a factor here),  hospitals at -0.6 percent and then other institutions – which include mainly long term care homes.  The increases are for physicians, drugs, and most dramatically public health, administration and “other health spending” which includes things like home care services.

Institutional care in Ontario – namely hospitals and long-term care – are one area that needs some spending revitalization (including both capital and operating spending) if there is to be any hope of dealing with both rising costs, as well as the greater service demands from a population that is both aging and growing.

Should Lakehead University Go Private?

Universities in Ontario are in a transition period as the provincial government brings in a new performance based funding formula that ties a substantial portion of the government grant revenue to a set of ten indicators. The new Strategic Mandate Agreement – known as SMA3 -  includes performance indicators such as “Research Funding”, “Graduation Rates” and oddly enough “Graduate Employment Earnings”.  How a university is expected to acquire information on the latter is a bit of a puzzle to me.  

While the previous formula also had a set of performance based indicators, they were more numerous.  It remains that a reduction in the number of indicators while increasing the proportion of revenue tied to those indicators makes the prospects of future short-term revenue volatility a greater possibility.  The public may be willing to accept a 5 or 10 or 20 percent revenue fluctuation in its local university and the subsequent disruption to programs and enrollment, that it would not tolerate if a similar model were applied to say hospitals or physician services or the provincial drug plan.  In these latter examples, people could die in the wake of disruption from sudden funding changes, whereas in the case of universities it would be unlikely.

Lakehead will of course also be impacted by these changes to the funding formula and one wonders if in the long-run, Lakehead – not to mention other universities – should give serious consideration to ending their dependence on provincial government funding entirely and go completely private.  The immediate reaction to this is to cringe given that provincial grants in Ontario still account for anywhere from 30 to 50 percent of university revenues and their elimination would probably necessitate as much as a doubling of tuition fees.  Lakehead University is for example closer to 50 percent for its revenue share from grants, while University of Toronto is closer to 30 percent.

However, freeing oneself from the clutches of the provincial government might come with some benefits.  Provincial governments in general have been encroaching on university autonomy for the last 50 years.  In Ontario, if one goes back to the 1960s and 1970s, provincial grant revenues for some universities accounted for well over 50 percent of their revenue.  Even more interesting is that despite accounting for the lion’s share of their funding, the provincial government generally left them alone to run their own affairs.  Over time, as the provincial government has reduced its relative contribution, it has also gradually become more intrusive by setting performance targets, establishing lengthy bureaucratic quality assurance reviews and tying more and more funding to short term goals linked to provincial economic development and employment visions. 

At the same time as grant funding has been reduced, the provincial government has also regulated and circumscribed the ability of universities to raise tuition because of the political fall-out.  So, universities in Ontario – like many in the country – have come to have less autonomy from the provincial government while at the same time having their funding growth restricted.  The government is calling more and more shots while providing less and less funding value.  For its 30 to 50 percent funding share, it basically wants universities to operate as arms of the provincial training, education and economic development ministries.  Moreover, its mandated goals end up affecting 100 percent of university operations and performance while only providing at best half the general grant revenue.

It is unlikely that any Ontario university would want to push the envelope and drastically change its funding.  It would require a degree of innovation and risk taking that universities as currently structured and configured in their operations would be quite averse to.  Indeed, the lack of experience in operating as a private and more profit oriented institution is a significant obstacle. Still, one wonders how much more autonomy universities in Ontario are willing to cede to the provincial government.  Are there any rams among the sheep?