A Tale of Lacking Vigilance and Weak Governance

The years since 2001 have seen a significant decline in financial efficiency at many of Canada’s Top 25 universities (based on income).

This analysis focuses on the key General Operating Fund, which represents around 60% of the budget at the average university, and covers areas such as Instruction & Non-Sponsored Research (or “Instruction”), Student Services, the Library, Physical Plant, and Central Administration. Three-quarters of the GO budget is spent on staff.

The site does not address the critically important area of Sponsored Research. That complex topic is better addressed elsewhere.

The numbers utilized in this analysis 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. See Data Sources.

All dollar numbers on this site, and the associated analysis, are inflation-adjusted to 2018 levels.

Five core themes define the current situation. Some schools exhibit them to a much greater degree than others, but these are recurrent characteristics. The degree to which the issues are evident at each university, and each province, can be seen in the rankings tables at the foot of each Topic. Summary Rankings appear at the foot of this page.

 

THE CENTRAL THEMES

 

The increase in General Operating Income has far exceeded both inflation and enrollment growth

Much of the public dialogue surrounding post-secondary education (PSE) attributes its challenges to a deficiency of income, especially from the provinces. A review of the income and expenditure patterns brings a very different perspective to that narrative.

In fact, everywhere other than in Québec, General Operating Income (GOI) has risen much faster than inflation and enrollment combined. The Top 3 (Toronto, UBC and Alberta) have seen the largest increase.

2.1 S) Growth of General Operating Income – By Sub-Group

Read more about Income

 

The share contributed by students has increased significantly

2.2

 

That chart portrays the increase in REAL DOLLARS – i.e., after adjusting for both inflation and enrollment.

Essentially, the growth has come from increased student fees. Across the Top 25, the provincial contribution has now regressed back to 2001 levels, but the per-student contribution has exceeded inflation by 85%. This has caused a major shift in the cost burden – away from public funding and towards student funding. In 2001, 61.5% of General Operating income came from the provinces and 32.8% from students; in 2018 those numbers were 47.8% and 46.4%.

It’s important to note that the substantial growth in international student enrollment has skewed these averages. International students pay much higher tuition fees, and universities do not receive an operating grant for them. Together, in respect of domestic students, these factors cause the increase in student fee averages to be somewhat overstated and the level of provincial contributions to be somewhat understated, especially at universities and provinces with higher proportions of international students. (There’s more on international enrollment in the “Income” topic.)

However, even with those factors considered, the pattern is clear. In 1988, students paid less than 18 cents in Tuition for every dollar spent by their university on Instruction and the Library. In 2009 that number was 45 cents. By 2018 it had swollen to over 63 cents. These are inflation-adjusted numbers, providing chilling insight into the cause of burgeoning student debt.

Read more about Student Costs

 

The most salient point is this: In overall terms, REAL General Operating Incomes (i.e., after accounting for cost-of-living and enrollment increases) have risen by 31% MORE than inflation since 2001 at the average Top 25 university. At the “Big 5” (Toronto, UBC, Alberta, McGill and Montréal) that “real growth” number is 44%, but just 21% for the Province of Québec.

This substantial growth in real income indicates that PSE’s challenges do not rest on the income side of the ledger.

 

The funding is increasingly being consumed in support functions rather than allocated to core-mission areas

Given the substantial increase in real income, today’s challenges are more the result of resource allocation decisions. On the expenditure side there are few, if any, complexities attached to the domestic/international student split.

Some universities deploy their General Operating funding much more efficiently than others.

Two General Operating functions attract the greatest attention in discussions surrounding financial efficiency and resource adequacy – Central Administration and Instruction.

Central Administration has long been a controversial area on campus due to the perception that it never stops growing, consumes resources that are needed in the classrooms, and increases the need for provincial and student funding. Since 2001 its cost has increased from 11.0% of General Operating expenditure to 12.3%. (Outliers: Waterloo 16.5%, Dalhousie 9.1%) See Top 25 Rankings Read more about Central Administration

Every General Operating dollar spent on Central Admin is a dollar than can’t be spent somewhere else.

Since 2001, across the Top 25, Instruction has fallen from 58.6% of GOE to 57.4%. (Outliers: Laval 67.4%, Simon Fraser 50.7%) See Top 25 Rankings

As shown in the Rankings Tables, relatively small percentage movements and variances can represent tens of millions of dollars.

Read more about Resource Allocation

 

The growth in Other Salaries & Wages has been faster than the growth in Academic Salaries

Across the Top 25, Total University expenditures on Other Salaries & Wages have grown by 76.8%, while those on Academic Salaries have increased by 67.5%.

Within General Operating, Other Salaries & Wages have grown by 85.3%, Academic Salaries by 71.2%. The much-discussed swing away from full faculty (those with Academic Rank) and towards adjunct faculty and sessional lecturers is evident in the numbers; expenditures on the less-seasoned faculty have increased by 86.9%.

Salaries & Wages in the problematic Operational Support area (Computing & Communications, Central Administration, and Physical Plant) have increased by 98.4%. See more on Operational Support costs below.

These are averages, and some universities are exhibiting these patterns to a much higher degree. In fact, university-wide, five schools are spending more on Other Salaries & Wages than they spend on Academic Salaries.

Read more about Salary Budget Deployment

 

The growth of Support Costs is threatening sustainability

Three General Operating functions provide operational support to the entire university – Central Administration, Computing & Communications, and Physical Plant. The university could not operate without them, but they are not “mission central” activities.

Across the Top 25, Operational Support costs have increased by 92.3% (inflation-adjusted) since 2001. In contrast, expenditure on the Academic activities (Instruction, Non-Credit Instruction, the Library, and Sponsored Research) has increased by just 72.0%. Operational Support activities now consume 16.0% of Total University Expenditure – up from 15.3% in 2001. (The dollar impact of this widespread escalation, at some schools, is substantial.)

4.2

 

Again, those are REAL DOLLARS – showing the growth over and above both inflation and enrollment.

As Operational Support increase, so does the pressure for more student fees, more provincial grants, and more classroom cutbacks.

Each increase in Operational Support Cost levels is a step away from sustainability. At the highest-spending schools the cost has reached a level at which it represents a “Ticking Time Bomb”. (See the Vulnerability Rankings at the foot of this page.)

Read more about Operational Support Costs

 

 

The problematic shifts result from a combination of lacking vigilance and weak governance. These issues developed under somebody’s “watch”. That watch, in this analysis, spans almost twenty years, and embraces numerous generations of senior campus leadership, multiple boards of governors, and a succession of provincial ministries of all political stripes.

The individuals sitting in those positions of power today can, for the most part, be absolved from responsibility; they didn’t create these problems. However, it is their duty to resolve them.

See more on the genesis of the problem on the ABOUT page

 

THE RANKINGS

 

Vigilance and governance have been better at some schools than at others. Encasing them all in multi-school averages does not focus the spotlight on those with issues to address, so it’s important to move past the averages and measure the relative performance of individual universities.

The same is true for the provinces. The fiscal efficiency of each publicly-funded PSE institution is a reflection on its province. While provincial governments respect the academic autonomy of their PSE institutions, they still have a duty of vigilance – to ensure the effective use of public funds, and to safeguard PSE and students.

The rankings show the performance of each university and each province, comparing it with the past and its peers. This enables us to see beyond the relatively modest change of the past year or two, and recognize the substantial regression since 2001.

In some areas the overall average may not suggest a widespread problem, but the school-level numbers expose an issue at some universities.

In other areas, such as Central Administration, the numbers reveal an endemic issue. Here, being better than average is not an attribute; in the midst of an epidemic, being “less sick” than your neighbour doesn’t make you well.

One of the most insightful components of the Rankings Tables is the measurement of the dollar impact of the variances; this brings some stark reality to these issues in a way that percentages can’t.

The rankings will not be well received in some quarters. Our universities are precious national resources but they tend to resist comparison. However, the lack of comparisons (both with peer schools and previous years) is precisely what has allowed these issues to develop and worsen.

The analysis provides a glimpse beyond the otherwise opaque, using the universities’ own numbers. What more can we do to keep a caring, public eye on our universities than use the numbers they report?

The value of the rankings rests in their ability to enable each university to build on areas of strength, and address (or, at least, explain) areas of apparent weakness.

Most of the factors explored on this site include rankings and comparisons as part of the assessment. This paves the way for summary rankings that reflect how well each university, and each province, is performing across a compendium of areas. Those can be seen below.

The rankings assess five areas – Education-Focused Expenditure, Support Cost Efficiency, Budgetary Commitment to Education, Student Support, and Student Cost. See the detailed rankings and an overview of the factors measured HERE.)

 

SUMMARY RANKINGS - Universities SUMMARY RANKINGS - Provinces

 

As noted above, the growth of Operating Support costs poses particular danger. The universities in the most precarious position can be seen at the foot of the Vulnerability Rankings:

VULNERABILITY RANKINGS - Universities

 

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It should be deeply troubling for the provinces and especially the students providing all that increased funding to see the escalation in Support Costs at many leading universities. Inevitably, this has reduced their level of focus on the mission-central academic side.

At the heart of this troubling dynamic is the rampant bureaucratization that has developed over the past two decades. The cost of it in dollar terms is shocking, but the true toll it has taken on teaching and learning cannot be measured.

The charts and tables on this site provide sobering insight into the significant change since 2001, but along with the beneficial insight comes a danger.

There may be a temptation in the universities and provinces performing near the current national averages to be more accepting of the status quo. That would mean a continuation of the same behaviours, leading to the same pattern of classroom cutbacks, fee increases for students, and mounting student debt. Meanwhile, serious issues remain unaddressed. And, at some schools, a time bomb keeps ticking.

That is neither an acceptable status quo nor a sustainable one. In fact, continuing to accept it would be a dereliction of public duty.

PSE is a vital national interest under provincial jurisdiction.

It is morally wrong and dangerous for provinces and universities to keep pushing the cost of their own inefficiency and weak vigilance onto the shoulders of new generations of students, leaving the burden to weigh them down as they try to build lives beyond campus.

The provinces must insist that their PSE institutions attain much higher levels of efficiency before implementing further student fee increases or faculty cuts.