The Finances of the University: Lakehead’s Exceptional Performance

 

With all the doom and gloom about the finances of Canadian universities these days, it is refreshing to know that some universities have been doing well in coping with all the fiscal challenges thrown at them over the last decade.  Nowhere is this more the case than in Ontario where domestic tuition fees were cut 10 percent in 2018 by the province, and have remained frozen since, provincial government grants have generally been a declining source of revenue and the flow of international students curtailed by the federal government. While Ontario produced Laurentian, it has also produced Lakehead where the last decade has seen a better financial performance than one might have expected which is good news for Thunder Bay, northwestern Ontario and of course the students, staff and faculty at Lakehead.

The evidence is quite convincing.  Figure 1 (and subsequent figures) takes data from the audited financial statements of Lakehead University from 2014 to 2025 and plots total revenues and expenditures.  Between 2014 and 2025, Lakehead’s total revenues grew from $177.3 million to $246.0 million - 38.7 percent – while total expenditures grew from $167.0 million to $230.5 million – a 38 percent increase.  While the pandemic period from 2020 to 2022 saw a dip in revenue growth, since 2022, revenues have managed to grow faster than spending. Indeed, over the period 2015 to 2025, the average annual growth rate of revenues was 3.3 percent compared to 3.0 percent for expenditures.  

 

 

The result has been a decade where the budget has usually been balanced, sometimes with substantial surpluses, and the long-term debt been reduced.  Figure 2 plots Lakehead University’s deficits (-)/surpluses (+) as well as the total long-term debt again from 2014 to 2025.  Out of these 12 budget years, Lakehead ran a surplus 75 percent of the time with an accumulated surplus of $43.9 million while the long-term debt has decreased nearly 16 percent going from $111.5 million in 2014 to $94.0 million in 2025.  The worse deficit year was 2022 with a deficit of $16.7 million in the wake of the pandemic but the three years since has seen growing surpluses with 2025 at $13.5 million.

 

 

Drilling down into some of the data, Figure 3 presents the data for Lakehead’s major revenue sources – provincial government grants and student fees.  In 2025, these sources made up 82 percent of Lakehead’s revenue with the remainder a combination including investment income, research income, ancillary fees, and sales of goods and services.  The narrative regarding provincial government grants should be nuanced by the fact that there are the general operating grants and then more specific restricted grants tied to conditions.  In 2014, the value of the operating grant was $65.3 million, and it then proceeded to decline through to 2019 when it reached $62.9 million.  Note that this decline preceded the arrival of the Ford government in 2018 showing that in the end universities in Ontario do not have any tried-and-true political party friends at the provincial level. Grants then rebounded in 2020 declining to a low of $61.6 million in 2022. Since 2022, the operating grant has been somewhat erratic rising to $66.7 million in 2023, falling to $61.0 million in 2024 and then climbing again to $69.5 million in 2025.  Stable funding it is not.  As for restricted grants, they climbed in fits and starts going from $15 million in 2014 to almost $17 million by 2021 and then rising more steeply to 30.5 million in 2025. 

 

 

While total provincial grants to Lakehead grew 25 percent from 2014 to 2025, the real revenue story is in student fees which rose from $57.5 million to $102.4 million – an increase of 78 percent.  This is even though overall enrolment has grown but not in leaps and bounds.  The revenue increase is largely the result of a compositional shift as more higher tuition paying international students arrived at the university.  Given that many of these students are primarily graduate level and in disciplines that are in demand, it appears the immigration restrictions have not hit Lakehead’s enrolment as hard as some other universities.  This suggests a careful mix of programs tailored to demand.

So, to summarize, Figure 4 presents the average annual growth rates of these major indicators for the 2015 to 2025 period.  Total revenue at Lakehead has grown at an average annual rate of 3.3 percent while expenditures have grown 3 percent.  This in and of itself presents a picture of fiscal sustainability rooted on both the expenditure and revenue side.  While general operating grants have only grown at an average annual rate of 0.7 percent, restricted grants (targeted to some purpose) have grown 8.7 percent annually and student fee revenue has grown 5.5 percent.  And the icing on the cake is that long-term debt has been declining at -1.5 percent annually. 

 

This is extremely good news and evidence that even in today’s challenging university environment, it is possible to succeed both financially and academically as a university offering programs in a fiscally sustainable manner.  Lakehead has managed this operating as it does in a dispersed fashion with campuses in Thunder Bay, Orillia and Barrie making it a province wide university.  This success may indeed serve as a model for future of Ontario’s universities. This success is also a testament to the strength of its board and administrative leadership as well as its students, staff and faculty.  It is nice to have some good news for a change.

No quick fix for Ontario’s economic decline

 This originally appeared in the Fraser Institute Blog, August 13th.

 Ontario continues a decades-long economic malaise. From time-to-time economic analysts arise to point out the decline only for the news to be treated as so much water off a duck’s back. Indeed, the complete picture as measured by real per-capita GDP has evolved to the point where the response should be alarm rather than concern.

Moreover, the solutions now being advanced by the Ford government (and others) to move Ontario’s economy forward are quick big fix projects that do not address economic fundamentals. Despite an economy considered Canada’s powerhouse in terms of size, export intensity, and manufacturing depth, the trends are disconcerting. This is not a short-term aberration attributable to the tariff disputes with the United States but a sustained inability to effectively grow the economy.

The chart below plots Ontario’s real per-capita GDP (in 2020 dollars) along with the average real per-capita GDP of the rest of Canada from 1926 to the present using data from Finances of the Nation. For most of the last 100 years, Ontario has been the wealthiest province in the Canadian federation as measured by real per-capita income. Moreover, the gap has usually been substantial.

 

 

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For example, in the 1920s, the per-capita income of the rest of Canada was about two-thirds that of Ontario. This proportion persisted well into the early 1970s at which point it began to quietly erode. By the late 1970s, the average real per-capita GDP of the rest of Canada had reached more than 80 per cent of Ontario’s. The economic boom of the 1980s masked Ontario’s decline but the period since the 1990s has seen its relative decline continue and the per-capita GDP of the rest of Canada now is just over 100 per cent that of Ontario.

In 1960, Ontario has the highest real per-capita GDP of all 10 provinces. By 1990, it was in second place just behind Alberta but ahead of British Columbia. In 2005, Saskatchewan surpassed Ontario moving it to third place while by 2022 Ontario’s rank had moved to fifth place. Essentially over the course of just over half a century, Ontario went from the top province in terms of per-capita GDP to mid-ranked. Ontario is exhibiting more characteristics associated with the Atlantic provinces—Ontario received equalization for the first time in 2009—than the more dynamic western parts of the country. A province that once had hopes as high as the tallest tree, now is lucky to aspire to economic heights akin to a lilac bush.

What has happened to Ontario is more than a re-equilibration of the federation as resource rich provinces developed or the effects of adjustment to a more competitive free trade world in the wake of the FTA and NAFTA. Simply put, Ontario has experienced a productivity decline rooted in a failure to boost business investment. While Ontario is a mineral and resource rich province, it has been unable to bring resource projects online—the Ring of Fire a case in point. This has been accompanied by a governmental and business culture focused more on process and regulation than on trying to get things done and a cultural shift to gaining wealth through supply restraint and asset appreciation rather than hard work.

Nowhere is this more evident than in housing investment where population growth has outstripped additions to housing stock. The regulatory framework towards getting projects approved, permitted and built is generally a labyrinth. Large amounts of both suburban and northern land were environmentally sequestered from development without steps to ensure density development creating artificial scarcity particularly in the Greater Toronto Sarea (GTA). The effects on new supply were worsened by the fact that new housing began to be treated as an investment by the public and a revenue source by governments given the plethora of tiny investor driven condo buildings and the development charges accounting for a large proportion of the price of new housing.

While there are signs that the Ontario government is finally trying to overcome these past missteps, it’s an uphill struggle given the continual grasping at quick fixes designed to promote rapid economic growth. The passage of Bill 5 gives the Ontario government the powers to establish special economic zones to speed up mining and other development projects. One suspects the goal is to speed up development in the critical mineral rich Ring of Fire area which has been on the cusp of development for decades but has yet to really go anywhere. Yet it may be too little too late as critical minerals are considered crucial for electric vehicle production but the demand appears to be slowing.

The Ontario government does not have a coherent economic strategy designed to boost long term productivity and investment but rather is hitching its wagon to quick fix large scale investment projects and the attraction of federal investment dollars in the face of President Trump’s economic and commercial assaults on the Canadian economy. Among the nation building projects that the Ford government would like federal support for are a tunnelled expressway under Highway 401, all season road access to the critical minerals of the Ring of Fire, new nuclear generation projects, and a new deep sea port on James Bay.

Ontario is also supporting the idea of an east-west pipeline made with domestically produced steel that would connect to a not-yet-built port of James Bay as well as a new rail line from the mineral rich Ring of Fire to mineral processing facilities in Western Canada. Strangely enough, Ontario has not put forward the enhancement of the vital east-west Canadian highway link passing through its north as a major nation-building project which is a curious oversight, instead leaving it up to municipalities to advocate.

In many respects, this aspirational mega project vision of economic development for Ontario is a serious case of déjà vu as many of these projects resemble a wish list from the 1960s and 1970s. Even developing deep-water ports on James Bay is a concept with a history stretching back to the 19th century. Some of these projects—such as new pipelines—are tied to resource development and are welcome given Canada’s comparative advantage in resources but a return to simple hewers of wood and drawers of water is also not where we should be going.

How does Ontario invest in 21st-century resource extraction in a manner that boosts high technology and create backward linkages into our tech and AI industries? How can Ontario break through the regulatory morass slowing the construction of homes, new resource projects and economic activity in general—regulations that in total have been estimated at 386,000 requirements? What will Ontario do to create tax incentives for business investment and individual labour supply, given that highest marginal personal income tax rates are close to 54 per cent?

Getting on the quick fix mega-project bandwagon is easy. Putting in place the environment that might help some of these projects succeed is not.

 

Long-Term Municipal Debt in the Northern Ontario Big Five

 

Well, I have been reacquainting myself with municipal debt in Ontario over the last little while culminating in this short piece for the Fraser Institute and a discussion with Jonathan Pinto’s Up North focusing on northern Ontario and Sudbury in particular. There is also this interesting item regarding Farquier-Strickland which suggests that some smaller and more rural Ontario municipal governments are under quite a bit of stress and that large debt loads can have an impact on the long term financial sustainability of municipal finances.  In any event, municipalities going bankrupt in Ontario is something out of the 1930s and most of the current regulations governing municipal finances were a response to the financial turmoil of the Great Depression. 

It turns out that during the Great Depression: “By 1935, 20 percent of Ontario municipal debt was in default (Hillhouse 1936). During the early 1930s, more than 40 Ontario municipalities and school boards defaulted on their obligations.” [Cote and Fenn, 2014]. It is this historical context that haunts some of us as municipalities take on debt even though current debt burdens are well within the debt service requirements of provincial regulation in Ontario and for the most part (Farquier-Strickland excepted I suppose) Ontario municipalities have built up substantial reserves. 

Nevertheless, it is worth monitoring municipal debt levels and the accompanying figure presents the total long-term debt of the big five northern Ontario municipalities from 2000 to 2023 with data obtained from the multi-year reports of the Ontario government’s municipal Financial Information Review.  In 2000, the total debt burden of these five municipalities was relatively closely clustered with Greater Sudbury at $13.3 million, Thunder Bay at $45 million. The Sault and North Bay at $26 million respectively and Timmins close to zero. Things have progressed since then, though for the longest time it was Thunder Bay that was the long-term municipal debt outlier zooming ahead of the others such that by 2008 it peaked at $230 million before coming down somewhat.  Nevertheless, until 2019 it still had the largest total debt of any of the northern Ontario big five.

 

 

Starting in 2019, Greater Sudbury began to ramp up its municipal debt– after a more modest ramping up from 2014 to 2019 – and from 2019 to 2020 went from $70 million to $262 million.  By 2023 it had reached $325 million and is apparently poised by 2027 to reach $600 million. As of 2023, the northern Ontario big five collectively had nearly $700 million in Ontario debt.  With Sudbury’s ramping up to $600 million along with other anticipated expenditures in these other major northern Ontario cities, the total should surpass $1 billion by 2027.  Debt service costs on this debt in the case of Sudbury will likely double from the current 3-4 percent of total own source revenue but remain well within the provincial guideline of no more than 25 percent. Still, all other things given, more money for debt service means less money for current programs.  It is a trade-off that needs to be considered.