Three General Operating functions compose Operational Support Costs – Computing & Communications, Central Administration, and Physical Plant. They are central activities that exist to support the overall operation of the university. (This is why these costs are measured as a percentage of Total University Expenditures in the Rankings Tables.)
These are vital functions – universities could not operate without them. They are also extremely expensive, and have grown at a highly disconcerting pace:
- In 2001 the average Top 25 university spent almost exactly $100 million (in 2018 dollars) on Operational Support Costs, but that had increased to over $192 million by 2018 – a REAL increase of 92%.
- At the U-15 universities outside of Québec the average cost has increased from $111 million to $248 million – up 124% in real terms.
- Across the “Top 3” (Toronto, UBC and Alberta) it has risen from $165 million to $489 million – up 197%.
- Average Operational Support Costs at Québec’s U-15 universities have risen from $141 million to $189 million – up just 33%.
All three Operational Support functions are impacted by inflation, and also by their own individual challenges. Nevertheless, these costs should be more “Fixed” than “Variable” in the PSE context, meaning that there is no reason for them to move in a close (upward or downward) relationship with factors such as enrollment or Sponsored Research grants.
A major issue emerges if the Operational Support Costs rise above the level (i.e., share of Total University Expenditure) of 2001. This would mean that, for whatever reason, these (largely staff) costs have grown faster than those for all the university’s other activities, combined – including Instruction, Student Services, Sponsored Research, and Capital activities. The following numbers are therefore disturbing:
- In 2001, across the Top 25, Operational Support Costs represented 15.3% of total university expenditure, but that had increased to over 16.0% by 2018.
- At the U-15 universities outside of Québec their share has increased from 13.7% to 15.9%.
- Across the “Top 3” (Toronto, UBC and Alberta) they have risen from 12.0% of total expenditure to 17.1%.
Given the dollar numbers involved, this growth is clearly depriving mission-central areas of major amounts of much needed funding, and triggering the pressure for more student fee increases and higher levels of provincial support.
For those who may be quick to dismiss those numbers as “the cost of running a university these days”, here’s some food for further thought:
- Average Operational Support Costs at Québec’s U-15 universities have actually FALLEN from 16.0% to 13.5%.
This situation has been developing over many years, and the ramifications cannot be ignored.
Since 2001 there has been an (inflation-adjusted) increase in Total University Expenditure (across the Top 25) of 82.8%. While expenditure on the Academic Activities (Instruction & Non-Sponsored Research, Non-Credit Instruction, the Library, and Sponsored Research) has increased by 72.0%, the cost of Operational Support has risen by 92.3%.
The Operational Support Costs are funded from the General Operating budget, where they compete for resources with other functions. The previous section, on Resource Allocations, reveals a clear correlation between the schools spending most on Operational Support Costs and those spending least on Instruction. Cost escalation in this area has long exerted a direct, adverse impact on the core-purpose teaching function.
So where has most of the growth occurred?4.15
The Physical Plant challenges facing our universities are well documented, with frequent discussion of ageing infrastructure and deferred maintenance, and Computing & Communications has developed a much higher profile since 2001.
And yet it turns out that the largest driver of increasing Operational Support Costs – by far – is Central Administration. The controversial issue of Central Administration cost is addressed HERE.
There is added danger in the ever-upward trend line for Operational Support Costs. Almost every year it sets a new national standard of overspending, creating a false sense of security for schools performing better than the average. The reality is that most universities in the Top 25 are performing at a problematic level, but some are already deep inside dangerous and unsustainable territory.
A major contributor to this problem has been the vigilance mechanisms (“key performance indicators”) in some provinces. By setting an ‘acceptable’ percentage for support costs or administration costs, they have inadvertently encouraged their universities to increase these costs at the same pace as income. When income increases, the ‘allowance’ for all the support areas increases in direct proportion – regardless of whether the additional spending is warranted or needed. That is a recipe for profligacy, and the “enabler” for the problems ahead.
The Operational Support Costs are the ones creating the greatest vulnerability to PSE’s two major risk factors – reduced provincial funding levels and declining enrollment. They represent the ticking time bomb referenced on the Front Page.
A glance at the Per FTE funding levels in the Income topic suggests that a reduction in provincial funding levels arrived several years ago, but its extent is difficult to ascertain because of the impact of increasing international enrollment on the Per FTE averages. What is certain is that the provinces are trying to balance many competing needs for major operational funding – health, social services, K-12 education and PSE. The post-secondary sector is the only one with an established user-pay income stream, and that reality increases the likelihood of diminishing provincial funding levels. In fact, it’s already happening.
Declining enrollment is in the forecast – and already here at some schools. The salvation has been increasing international enrollment, and the high fees paid by these students. The reality is that most Canadian universities (and provinces) have become addicted to this income, and it has allowed most of them to avoid the need to confront fiscal realities. But, just in the past year or so, Canada’s relationship with China and Saudi Arabia has deteriorated markedly, showing that a heavy reliance on international enrollment is not just unwise but foolhardy.
These risk factors magnify the urgency of confronting the issues sooner rather than later, although – in reality – “sooner” was ten or more years ago. These weaknesses have been partially covered (at some cost to Instruction) while enrollment has been on the way up, but they certainly won’t be covered when it heads downward. At that time, the cost to the Instruction area (and for students) will increase exponentially.
For all these reasons, the following rankings represent some of the most important information on this site:
SUMMARY RANKINGS - Universities SUMMARY RANKINGS - Provinces
DETAILED RANKINGS - Universities DETAILED RANKINGS - Provinces