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.
