SEPTEMBER 2023: ANALYSIS NOW EXPANDED TO COVER THE TOP 50 UNIVERSITIES

Many of Canada’s universities have been dragged down by a wave of bureaucratization that has deflected funding away from the classroom, undermined educational quality, and needlessly driven up student fees.

This troubling pattern has been building for over twenty years and shows few signs of abating.

All the financial and enrollment numbers utilized on this site come from the universities themselves. The financial numbers are inflation-adjusted and expressed in 2022 dollars. University finances are complex, but those most relevant to their educational role are contained within the key General Operating (GO) Fund. Each of its eight different “functions” can be assigned to a category – Academic-Focused, Operational Support, and Student Services (see foot of page).

The chart below shows the “Big Picture” of General Operating (GO) finances for the average Top 25 university. It quantifies the changes in the sources of its GO Income and how it chose to spend that money.

The “Per FTE” (full-time equivalent student) numbers shown below (and throughout this site) are particularly insightful because they represent “REAL” dollars – adjusted for both inflation and changes in enrollment. Positive values denote increases exceeding inflation and enrollment combined.

 

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Income Overview

Real GO Income has increased by 28.6% since 2001, but that’s the product of two distinct periods – Pre-2010 and Post-2010.

Between 2001 and 2010 Provincial Grants increased by 13.4% in Real terms across Canada’s Top 25 universities, while Student Fee incomes increased by 33.2%. In 2001, Grants represented 61.5% of GO Income and Fees 32.8%; in 2010 Grants accounted for 57.4% and Fees 36.0%. (These numbers differ from province to province and from school to school.)

From around 2010 the income picture began changing significantly as most provinces started reducing the level of their operating grants. The trigger was the growth in international student enrollment, bringing with it high volumes of new fee income. The provinces saw (and encouraged) this as a way of relieving themselves of some funding responsibility.

The reduced provincial support has shifted the funding balance, and most of the weight now falls on students. Since 2010 Grants have declined by 19.0% in Real terms while Fees have increased by 54.4%. The provincial share of total GO income slipped to 44.0% in 2022, and the student share increased to 52.5%.

The 28.6% increase in REAL GO income since 2001 (5.8% since 2010, despite the reduced provincial commitment) does not suggest that income is the central issue for Canada’s universities. That may not align with perception in the post-secondary sector, although it’s an understandable perception – created by the provinces’ regrettable decisions to reduce funding. The universities (and provinces) have now become addicted to the income from international students, and this could prove to be a critical vulnerability in the years ahead.

The key determinant of income adequacy is not the amount of the income but how effectively it is used. If a university fails to properly utilize its funding, it will inevitably create the perception among those most disadvantaged by that failure (usually students and faculty) that the only major problem is funding, when the issue might also be spending. In essence, we can’t tell if a university’s income is adequate if it’s not spending that money prudently.

Expenditure Overview

Every university must maximize the delivery of funding to its “Core Mission” academic areas, while having due regard for the need to provide support services to students, and operate the institution as cost-effectively as possible. This should always be the imperative, but it became even more important when provincial support levels started to decline in 2010.

The above chart, and many other numbers on this site, show that the universities have failed to fulfil this fundamental duty:

  • Real Operational Support expenditure increased by more than Academic-Focused expenditure both before and after the provinces started to reduce funding; since 2001 Support spending has increased by 31.3%, while spending in the Academic areas increased by only 13.5%.
  • As a result, Support Costs have risen from 25.6% of GO Expenditure in 2001 to 27.2% in 2022. (See HERE for more.)
  • All of that increase, and more, came from Central Administration (Central Admin), which moved from 11.0% of GO expenditure in 2001 to 13.1% in 2022. (Since 2001, enrollment has increased by an average of 57%, but inflation-adjusted expenditure on Central Admin has increased by 130%.)
  • Over the same timeframe, expenditure on Instruction and the Library fell from 64.5% of GOE to 60.5%.

Small percentages tend to obscure big realities. Each 1% of GO expenditure represented $8.2 million at the average Top 25 university in 2022. At their average contribution level of 52.5%, at least $4.3 million of it had to come from student fees.

 

The growth of Central Admin cost was instrumental in triggering a major rise in administrative cost. The following chart provides disconcerting insight into the dramatic increase in spending on administrative activity:

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In 2001 the average Top 25 university spent 47.7 cents on non-academic salaries & wages in Instruction and Central Admin for every dollar it spent on faculty salaries; last year that number was 56.8 cents, and it’s still rising.

That translated into an additional cost of $16.1 million for administrative support at the average Top 25 university in 2022. The only ways to fund it were through increased student fees and classroom cuts; the students’ share in 2022 alone was at least $8.5 million. That same scenario played out every year in which that cost level increased. And these are just the averages – the numbers were significantly higher at some schools. See HERE for more on this damaging trend.

The Consequences

The inefficiency has triggered numerous destructive consequences:

  • Despite paying far more in fees, students are receiving less in educational quality. Faculty are constantly required to do more with less. THIS is how it looks from the student and faculty perspective.
  • Surely not by coincidence, most of Canada’s leading universities have fallen in global university rankings. Thirteen of the U15 (“an association of fifteen leading research universities across Canada”) have fallen in the QS Global Rankings since 2010 (see HERE). Most have performed well in areas associated with internationalization, so much of the decline results from deteriorations in academic quality (including things like student/teacher ratio) and academic reputation.
  • The rising cost is needlessly impairing affordability and accessibility, and fuelling the deepening national issue of student debt. More students are graduating with bigger loans – hamstrung by repayment obligations just as they’re trying to build their lives and careers.

The PSE system is either blind to these consequences or untroubled by them, and that reflects poorly on our society. It must be galling for students to hear dismissive, patronizing comments like “think of it as an investment in your future” – invariably uttered by people who graduated years ago at far lower cost and emerged with far less (if any) debt.

  • There are some damaging dimensions at the macro level.  

The loan repayments swallow disposable income, creating a significant drag on the Canadian economy. Around 500,000 students graduate into the workforce every year, most with some level of repayment obligations that have to be their first spending priority.

Canada is a delicate tapestry of dynamic large cities and vibrant smaller communities. The costs are much higher for students who have to live away from home, and they emerge with higher debt levels. The resultant repayment obligations force most to pursue higher-income opportunities in major centres when they graduate. We can’t lament the the decline of Canada’s smaller communities if we’re needlessly contributing to it.

 

How could this happen in a supposedly collegial environment, in which key stakeholders (including students and faculty) often have a mandated presence on the governing board? Who can stop it?

Today’s issues result from fundamental flaws in post-secondary governance, as described in the ABOUT page. Decision-making has become very “top down”, the information necessary for proper vigilance is lacking – leaving Board members unable to fulfil their fiduciary responsibilities, and the key campus constituencies have been relegated from participants to observers. Provincial ministries have sat by while the resultant issues have developed – and have even compounded them.

The inevitable outcome is what we’ve been seeing for more than two decades, and it has been punishing for educational quality and, especially, for students – Canada’s “next generation”. 

They are caught between the ever-tightening jaws of a vice. On one side is declining provincial funding, and on the other is the inability of most universities to control their support and administrative costs. As if rapidly increasing fees and declining quality weren’t enough, they also face fast-rising living expenses – especially for accommodation. Is it any wonder that student debt is a deepening national issue?

Where does this end? How does it end? With it costing more to “administer” a university than to actually be one?

The only thing that will reverse these trends is greater awareness of the issues and, of course, much stronger governance.

The goal behind this website is to focus attention on the issues, and this is where rankings are important. As troubling as the above numbers are, they are just averages, and all averages are the product of above-average and below-average performers. It is unfair for all of them to be found guilty by group average, when some schools have far more remedial work to do than others.

However, rankings create the potential for false comfort; performing at an above-average level is not an attribute if group-wide performance has been declining for decades. That is demonstrably the case in many of the Topic areas on this site – a classic example of the concept of “normalization of deviance”, discussed on the About page.

Rankings require the schools to stand the test of comparison – not just with their peers but also with their own past. If a university is out of step with either, questions need to be asked. There may be explanations in some cases, but a reluctance to face those comparisons and questions is precisely what has allowed these issues to develop and worsen.

The same goes for provincial ministries. They appoint a significant proportion of the Board of Governors members, and have their own duty of oversight. The ministries can also be ranked – based on the performance of the universities they oversee.

So, throughout this site, in all the Topics it addresses, there are rankings covering the performance of both the universities and the provinces. They culminate in an Overall Efficiency Ranking for each Top 50 university (and each provincial ministry) in 2022. Some will doubtless take issue with this approach; PSE generally doesn’t welcome unflattering comparisons. But the assessment criteria are multi-dimensional, and the assessments utilize the universities’ own numbers. How else can we determine their efficiency in pursuing their Core Mission?

This front page addresses the “big picture” – the Overall Ranking; the Topics pages provide the supporting detail.

 

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The analysis on this site provides disturbing insight into something that is opaque to anyone outside a core group of senior administrators. Although they consume billions of dollars of pubic and student funding, the finances of our universities only move into public view, briefly, when their annual budgets must be approved. Even then, only limited snippets of carefully-selected information are released, with a focus on highlighting income inadequacy and justifying student fee increases.

The cost of the inefficiency is met by students, in reduced quality and needlessly-high fees. It is met by the classroom, in lower relative funding levels and constant demands for faculty to do more with less. It is met by recent graduates, who must start to build their careers and lives with years of crippling student loan repayments ahead of them. And it is met by Canada, as its top universities tumble in the global rankings, and its economic growth is constrained because ever-increasing numbers of Canadians are entering the workforce with their disposable income throttled by loan repayment obligations.

The systemic disregard for these direct connections has been flagrant.

The provinces and universities cannot keep pushing the cost of their own weak vigilance and governance onto the shoulders of new generations of students, leaving the burden to weigh them down as they try to build lives beyond the gates of campus.

Removing reasonable constraints on Tuition Fee increases has not solved the problems – it has fed them.

The provinces, individually and collectively, must act to improve the standard of oversight and governance at their PSE institutions. That’s the only path to improved efficiency, higher educational standards, enhanced accessibility and affordability, and success in addressing the deepening issue of student debt. It is also the only path to sustainability.

In fairness to those in administrative or political power today, these issues are not of their creation, but the responsibility for rectifying them sits squarely in their hands. Canada and its “next generations” need them to meet that responsibility.

 

The financial analysis on this site focuses on the General Operating (GO) Fund, which represents over 64% of total expenditure at the average Top 50 university. It covers Instruction & Non-Sponsored Research, Non-Credit Instruction, and the Library (Academic-Focused), Computing & General, Physical Plant, and Central Administration (Operational Support functions), and Student Services. Almost three-quarters of the GO budget is spent on staff. The numbers come from the universities themselves, via their affiliated organizations – the Canadian Association of University Business Officers (CAUBO), and Universities Canada, both working in conjunction with Statistics Canada. For the analysis on this site, General Operating Income excludes income from the Sales of Services and Products, and General Operating Expenditure excludes Internal Sales and Cost Recoveries. For explanations and more information on all these numbers, please see Data Sources.