September 20, 2023

 

Some 2.2 million students study at Canada’s universities, colleges and polytechnics – the equivalent of about one in every eighteen Canadians. It’s a constantly regenerating sector that, at any point in time, contains almost 10% of the future national workforce – people whose skills and financial circumstances will be vital to Canada’s social and economic well-being. Serving them well is a critical success factor for our nation’s future.

On the Home page we saw that the face of PSE in Canada has changed significantly since 2001, and not for the better.

Student fees have increased at a rate which far exceeds inflation, leading to ever-deepening student debt.

Despite the massive run-up in their fees, lower levels of funding are making it to the classroom; students encounter larger class sizes, and a gradual swing away from seasoned faculty and towards cheaper adjunct faculty and sessional lecturers.

This could only lead to declining educational standards, and so it has proven to be. Since 2010, most of Canada’s leading universities have tumbled in the Quacquarelli Symonds global university rankings.

Students and faculty, the two central components of PSE, have understandably become frustrated and angry. The natural temptation is to look for a common adversary. Inevitably, the crosshairs land on the provinces, and the widespread view is that the problems result from inadequate funding.

It is always discomforting to go against the popular narrative, but the numbers reveal that income inadequacy is not the central cause of PSE’s challenges. Across the Top 25, REAL General Operating Income (GOI) – i.e., adjusted for inflation and increased enrollment – increased by 21.6% between 2001 and 2010, and (even after provincial taps were turned own) by 7.9% between 2010 and 2020. Only since 2020 have we seen a real decline.

The student frustration is an entirely understandable reflection of the fact that, caught between provinces that won’t pay any more and university administrations that can’t control their spending, they have become the primary contributors. In 2001, 61.5% of GOI came from provincial grants and 32.8% from student fees, but students now contribute more (52.5%) than the provinces (44.0%). While international student fees have magnified the extent of this shift, tuition and other fees for domestic students have increased exponentially. Faculty, caught between those same poles, are constantly required to do more with less.

Certainly, the provinces deserve to be in the crosshairs, but not just because they have been reducing their commitment to PSE and shifting the cost onto students. While that is valid reason for frustration, any provincially funded sector must accept that funding will wax and wane for various reasons. PSE is the most likely to wane; unlike the other high-expenditure provincial sectors (health, social services, and K-12 education), PSE has a user-pay income stream – student fees.

Regardless of the degree to which each province supports its post-secondary sector, financially and ideologically, they all share one common culpability – the failure to ensure adequate vigilance and sound governance. A key determinant of income adequacy is expenditure efficiency, and this is where the universities and the provinces have failed. That can be attributed to systemic deficiencies that have been building, unaddressed, over decades.

Post-secondary institutions consume billions of dollars of public and student funding, but their finances are complex and largely opaque to the general public. The taxpaying public and fee-paying students rely on senior administrators (Senior Admin) and a Board of Governors (Board) to ensure the overall health of each institution. At the top of the pyramid are the provinces; while they should not inject themselves into campus affairs, they have a fundamental duty to their citizens – and especially their younger generations – to make sure that the educational system is working effectively.

The current state of Canadian PSE represents a failure of governance at all those levels.

The Eight Elements of Governance Dysfunction

Today’s deepening challenges can be attributed to eight problematic characteristics that are evident to some degree at every PSE institution in Canada:

• 1. University governance has become a very “top-down” process

Critical decisions are made during the annual budgeting process – the only time at which the general public sees digestible information about university finances. It is selectively released to make the case for more provincial funding, and to justify impending student fee increases.

Senior Admin makes recommendations to the Board, providing information supporting the desired decision. Student representatives claim that they can’t afford what their institutions are expecting of them. Administrators warn that anything less will trigger significant cutbacks, which is enough to convince faculty and staff representatives. The Board almost always votes to approve the budget presented by Senior Admin.

Senior Admin drives the process, as it should, but the comparators supporting its recommendations to the Board are carefully selected. Comparisons with better-performing peers, and longer term comparisons with the university’s own past performance, are seldom included. This leaves Board members unaware of major factors that would produce different decisions; there’s an abundance of such comparisons on this site.

As the saying goes, “information is power”, and it is key to effective governance.

There are two dangers in a top-down approach in which one party controls the information.

The first is that the controlling party can overplay its own interests when formulating the budget, rendering itself immune to the challenge imposed on others.

The second is that control of the information can create a situation in which, instead of Senior Admin reporting to the Board, almost the reverse relationship exists.

The protection against those dangers rests in the fullness of the information presented to the Board, but that – as discussed below – is a critical failure point.

• 2. The process seems blind to causes and consequences

Much of the budget debate at the Board focuses on percentages rather than dollar numbers, and this can detach the Board from the reality of their decisions. Percentages have a way of making significant change seem inconsequential.

Rather than being told that a support cost “has only increased by one percent of General Operating expenditure”, what Board members really need to hear is what this represents, and the consequences of that change.

One percent of General Operating Expenditure (GOE) represents $8.2 million at the average Top 25 school; that’s how big these budgets are.

At current contribution levels (52.5%), $4.3 million of that “only … 1%” will need to come from increased student fees, much of which will end up in student debt. If the province doesn’t cover the remaining $3.9 million, increasingly likely these days, the rest will have to come from a combination of even larger fee increases, and cutbacks.

Those outcomes are far from inconsequential.

There is a deep-rooted, systemic inability to recognize cause and consequence. When costs rise needlessly, so will student fees and student debt – and, if that’s not enough, so will cuts impacting the teaching area.

• 3. Inadequate vigilance allows destructive longer-term trends to develop

Effective monitoring is central to vigilance, and vigilance is central to efficiency.

The failure to monitor allows big damage to occur in small increments

The insidious dimension revealed by this analysis is that inefficiency doesn’t develop with a one percent increase in a single year. It develops in a succession of smaller increments that slip by unnoticed. The supposedly inconsequential becomes much more consequential – without anyone really noticing.

The chart on the Home page provides a vivid illustration of that kind of insidiousness at work. If Senior Admin had recommended, back in 2001, that the university should increase spending on non-academic staff from 47 cents per dollar of faculty salaries to 56 cents, the recommendation would have received short shrift from the Board.

However, that transition has happened. It just occurred in small increments over two decades.

Blinded by apparent inconsequence, PSE has fallen victim to the malignancy that can result from it.

The failure to distinguish between fixed and variable costs is destructive and dangerous

There is a “Golden Rule” for any organization, whether in the private or public sector, that faces variable activity levels and relies on income to pay the bills: Don’t allow “Fixed Costs” (in areas that are less impacted by activity level changes – that’s enrollment in PSE) to rise faster than “Variable Costs” (in areas that are more sensitive to them).

Even though that Rule is taught by their own Business faculty, most universities have done the complete opposite.

On the Home page we saw some disturbing numbers.

Since 2001, enrollment has increased by an average of 57% across the Top 25, but inflation-adjusted expenditure on Central Admin has increased by 130%. That is more than frustrating – especially when the inflation-adjusted increase in Instruction expenditure was held to 88% over the same period.

Even since the provinces started throttling back their support in around 2010, magnifying the importance of strong cost control, Central Admin cost has continued to increase at a higher rate than expenditure on Instruction; while enrollment increased by 21% and spending on Instruction rose by 24%, Central Admin cost increased by over 39%.

During two decades of increasing enrollment, the universities have allowed costs in less enrollment-sensitive areas to rise much faster than costs in more enrollment-sensitive areas. Much of the bill, of course, was delivered to the students, and worked its way into student debt.

This has potentially lethal longer term ramifications for sustainability – that’s precisely why the Golden Rule exists. In the event of any significant decline in a key income, the only response would be a combination of major increases in student fees and damaging cuts to Core Mission areas. That’s exactly what we’ve already seen. If a further decline results from falling international student enrollment, we’d see the same thing – but on steroids.

The failure to monitor is inexplicable

Changes in budget allocation levels create a cost-and-impact spiral by bestowing additional funding on some areas only by taking it away from others. The consistent pattern of the last two decades has seen increased allocations to the Support areas at the expense of the Academic area.

The universities have no excuse for lacking awareness of this damaging spiral. The information that would have prevented it from emerging – and worsening, year after year – is freely available through CAUBO. That’s why they created the organization back in 1937. All the financial numbers utilized on this site came from CAUBO.

The universities have either failed to use this information as the critically important vigilance tool that PSE needs it to be, or they have ignored the disturbing trends it reveals. They surely can’t have shared the data with their Boards.

• 4. The Normalization of Deviance is threatening

The numbers show that the issues outlined on this site are evident nationwide, to some degree, because all the universities are beset with similar governance issues.

They compound their weaknesses by comparing themselves to peers suffering from the same issues. This illustrates the danger of “social proof” – the notion that if everyone else is doing it, then it must be okay. A trend line develops toward ever-lower common denominators.

This triggers a “normalization of deviance” – a term coined by American sociologist Diane Vaughan in her book on the Challenger space shuttle disaster. It refers to a process in which a pattern of potentially dangerous behaviour becomes the norm, only to turn into a severe problem after “a long incubation period … with early warning signs that were either misinterpreted, ignored or missed completely”.

Diane Vaughan (4 January 2016). The Challenger Launch Decision: Risky Technology, Culture, and Deviance at NASA, Enlarged Edition. University of Chicago Press. pp. 30-1. ISBN 978-0-226-34696-0.

Unfortunately, it is not hyperbolic to cite the Challenger analogy, because PSE has its own version of missing or ignoring signs of impending failure.

• 5. Overconfidence has been an enabler

The inefficiency has been able to develop because there have always been ways to cover its cost – increasing provincial grant levels (at least until 2010), rising enrollment (and the prospect of larger increases as Canada’s population grows), increasing student fees (coupled with the removal of restraints on those increases), and cutbacks in the academic area.

A key element has been the rapid growth in international student numbers, which now account for over 13% of total enrollment. Fees for international students are around four-times those paid by domestic students.

Until now, there have always been ways to paint over the rust of inefficiency, and that has created a fiscal smugness. Today’s inefficiency is not rectified by tomorrow’s enrollment increase; it will still be there, and the historical numbers tell us that it will be worse.

Sooner or later, reality usually obliterates overconfidence, and Canadian PSE is heading rapidly for that moment.

• 6. The lack of adequate information makes it impossible for Board members to fulfil their roles

A 2016 study by the Canadian Association of University Teachers (CAUT) revealed that almost half of the Board members at Canada’s 15 research universities were from the corporate sector, 42% from the university community (academic staff, support staff, and student representatives), and some 8% from within the public service.

A governing board without adequate information is lip-service to effective governance. A board cannot fulfil its legal duty if it lacks the necessary information. The informational deficiencies render Board members unaware of the the real issues facing the institution they govern, and the root causes.

The Public Members are unable to fulfil their fiduciary duty

The CAUT survey found that the majority of Board members are from the corporate or “public service” sectors. These individuals are often known as “Public Members”.

Most external appointments are made by provincial ministries. These prestigious positions are key components of the structure necessary to keep Canadian PSE strong and publicly accountable. Public Members have a fiduciary duty to the province and its citizens to protect the best interests of the institution and those whom it seeks to benefit – not a duty to the minister or the governing party. This legal (and moral) duty means that they should use their connections to advocate for the best interests of their institution – not sit quietly by when damaging cuts are imposed.

There is a widespread view among students and faculty that the presence on the Board of so many individuals from the corporate sector represents a “corporatization” of university governance, and that this is at the heart of PSE’s challenges.

Corporate dictation of the academic agenda undoubtedly has troubling implications, but there’s another angle that warrants consideration. It can be argued that the issue is not the mere presence on the Board of individuals from the corporate sector, but the fact that they don’t function in the ways that made them successful off-campus. Had they done so, our universities would not be in their current situation.

One of the clearest illustrations is the universities’ failure to recognize the distinction between the largely-fixed cost areas and the more variable costs of Instruction. Allowing fixed costs to increase faster than variable costs would be a terminal failing in the corporate world (and even in the non-profit sector), but most Public Members have sat by while it has happened on campus.

It’s not the corporate backgrounds of Board members that pose the threat to PSE, so much as their failure to bring to the university Board table the skills and perspectives that made them successful off-campus.

Again, that has happened because they have been unaware of the issues and causes – they have lacked the information necessary to fulfil their fiduciary duty. The increase in the cost of Central Admin since 2001 would surely never have hit 130% (inflation-adjusted) if Board members were aware that it was happening.

Constituency representatives are unable to protect the interests of their constituency

The CAUT survey found that 42% of the Board members come from the academic community – academic staff, support staff, and student representatives. The presence of these knowledgeable, elected, campus individuals represents one of the system’s most important “checks and balances” – even if their interests sometimes conflict.

However, lacking information renders their presence token. In the absence of data that may enable them to better protect the interests of their constituency, they gain no benefit from their seat at the table, and are just swept along by the process to a pre-ordained outcome.

Students are the group most disadvantaged by the weak governance and provincial oversight. When the Board is determining the level of a student fee increase, they find themselves stuck in a corner with few allies. Senior administrators have continually pursued higher than necessary fee increases, but opposition to them among faculty and staff representatives (natural “allies” of students when it comes to protecting PSE) is usually relatively mild; that’s almost inevitable when the student fee increase has a direct impact on the university’s salary and wage settlements.

The students make impassioned pleas but rarely support them with numbers that might cause other Board Members or provincial ministries to reconsider. That’s a failure in duty on their part, and it’s one they must rectify. However, to be fair, pulling these numbers together is an onerous exercise.

But nobody on the Board should have to go digging for key information. It should be provided to everyone.

• 7. Provincial ministries have failed to ensure effective governance

The two lightning rods for campus anger directed at the provinces are inadequate funding and interference in academic freedom. The first of those is clear, but the second is subject to differing interpretation. Without taking any position on the validity of its definition, we’re again able to draw some insight from what CAUT has to say about the matter.

The last of the six elements of CAUT’s Policy Statement draws an extremely important distinction – “Academic freedom must not be confused with institutional autonomy.” Too often, those terms are used interchangeably, as though an incursion on institutional autonomy is automatically an attack on academic freedom. That’s not the case.

PSE institutions can never be truly autonomous when more than 90% of their Operating revenue comes from the public – through either government grants (funded by taxpayers) or student fees. Furthermore, it could certainly be argued, based on all the issues outlined on this site, that academic freedom has far more to gain than to lose from improved financial oversight of our universities.

There must be some “strings attached” to this funding if the public interest is to be protected. The big question is “Who can pull those strings?”

The entities best placed to ensure that universities use their funding prudently (this relating to cost-efficiency, not academic focus) are the provincial ministries. However, they are understandably (and rightly) reluctant to fulfil that role by direct intervention – even when they feel it may be warranted by their duty to protect the public interest.

So what is the solution?

It was observed above that “A governing board without adequate information is lip-service to effective governance.”

In the absence of adequate information there are no strings to pull. The decision-making becomes perfunctory – almost always following the recommendations of Senior Admin. As we see throughout this site, those recommendations have not served PSE well over the past two decades and more.

The solution has two components, both of which are dependent on the provinces – appointing capable, objective Public Members to the Board, and ensuring that they (and the rest of the Board) have the tools with which to do the job.

Public Members are successful individuals from various sectors of the off-campus community, and PSE’s wellbeing rests largely in their hands. Appointments to PSE Boards cannot just be rewards for loyalty or service to the governing provincial party – of whatever stripe. While those connections will always carry considerable weight, these individuals must do what they are legally obligated to do. Just being on the Board is nothing. Being the Board is everything.

When it comes to the tools to do the job, the provinces have again failed their mission – divided by their differences rather than united by their similarities.

Instead of fixing the governance issues they all face, too many provinces have responded with their own form of top-down management. Having been culpable in the governance failure, they try to ‘solve’ the resultant problems with two things that only make them worse: implementing cuts that end up negatively impacting the classroom, and removing constraints on student fee increases, thus making PSE more expensive and less accessible, and driving students deeper into long term debt.

PSE is an area of vital national interest falling under provincial jurisdiction. Most of the current issues transcend provincial borders and may only be addressed effectively with inter-provincial cooperation. The ministries need to work together, regardless of their differences, to confront the destructive issues they all face in their PSE sectors.

One of their first actions should be to implement something advocated by the Educational Policy Institute (in a paper co-written by PSE consultant Alex Usher, founder of Higher Education Strategy Associates) in November 2006 – the creation of a Pan-Canadian Common University Data Set (Read it HERE). This central database would cover all the key information required to monitor the efficiency of every Canadian university. 

That has long been a prerequisite for effective fiscal vigilance and improved governance. Had Usher’s recommendation been implemented, many of PSE’s current issues – at the national, provincial and campus levels – would have been addressed before they became so damaging. (It should be noted that, while universities make their data available through CAUBO, there is no similar information source for colleges and polytechnics. Given what this analysis has revealed for the universities, it is very unsettling that such an important sector appears to be flying almost completely off the public radar.)

Inter-provincial cooperation in areas of vital national interest is not a choice but a duty. The provinces have been part of the problem, and they must now, individually and collectively, become the catalysts in implementing the solutions.

This does not compromise their own provincial autonomy in the PSE sector. It enhances the ability of all provinces to keep their PSE sectors strong.

If these pivotal Boards are to become more effective, and if Board members are to fulfill their legal duty, the ministries must ensure that they have the tools to do the job. Until they do, Canadian PSE will keep running headlong towards deep adversity.

• 8. Canadian PSE’s “Challenger Moment” may be closer than we think

All the above issues culminate in the situation that PSE faces today – declining efficiency, tumbling educational quality, rapidly-increasing student cost, and skyrocketing student debt levels. As bad as that is, an even gloomier scenario might be just over the horizon.

The Challenger disaster was caused by the refusal, despite numerous warnings, to act on the recognition that a little O-ring seal could fail in certain circumstances – with catastrophic consequences.

Diane Vaughan’s “normalization of deviance” theory postulates that it usually takes an unforeseen event to transform yesterday’s dangerous behaviours into today’s disastrous consequences. With the Challenger tragedy the unforeseen event was an unseasonably cold morning on launch day in southern Florida.

The greatest threat to Canadian PSE is certainly not unforeseen because it has been recognized in the sector as a significant vulnerability – the deepening addiction to international student fee income. These students are courted not for the cultural boost they bring to campus, but the financial one.

This was always a risky reliance. The vast majority of Canada’s international students come from two countries – India and China, and both (like many other countries around the world) are pumping money into their own PSE sectors with the goal of strengthening their economies and keeping more of their students at home.

Recent geopolitical trends, like the growth of the BRICS alliance, may well result in a larger and stronger power block established to rival The West. China would certainly be on the other side of a fractious divide, and India might be. That would not bode well for Canada’s international student numbers.

But whatever that vulnerability was before, it became deeper in September 2023, with the sudden deterioration in Canada’s relationship with India – home for some 40% of Canada’s international students.

This threat has been staring Canada’s PSE in the face for years, but key decision-makers at the campus and provincial levels have chosen to avert their glance, pretend it’s not there, and carry on as normal.

 

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These issues have been permitted to grow beyond the awareness and control of those who were there to prevent them. That’s an abject failure of governance and governments.

It is crucial to the future wellbeing of Canadian PSE – and the future of Canada itself – that these deepening challenges are addressed as a matter of urgency. To wait any longer risks turning major problems into an inevitable crisis.

To repeat the comments at the foot of the Home page:

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 governance at their PSE institutions. That is 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.

 

 

Why have I created the site?

When a site like this appears from the ether it’s understandable that visitors will want to know where it comes from, who put it there, and what their motivation might be.

Retired since 2008, I spent twenty-five years of my life working at two major universities, initially within central administration but mostly with student government.

I’ve chosen to poke my head above the parapets of retirement because the financial inefficiency of our post-secondary institutions has long been a personal hobby-horse, and because nothing has changed since I wrote an article on this topic for Macleans in January 2010 (see HERE). I’ve continued accumulating the data, and created this site because I’m concerned at things I continue to see, long after they first became issues. I hope to keep the site updated (time, circumstances and health permitting) as new numbers and new issues emerge.

Of course, I have a natural fondness for students, having worked so closely with them for so many years. But I’m also a Canadian, a father and a grandfather, and that’s why I decided to devote personal time and money to the development of this site. The current situation is damaging, dangerous and unsustainable, and it is negatively and needlessly impacting young lives and the fabric of our country.

Nobody has “put me up to this” – only my two grandchildren can do that to me these days. After spending so much time on this analysis over the years, sharing my concerns is something I feel I have to do before the lid closes on me. And before those grandchildren (hopefully) set foot on campus for the first time.

My hope is that the site will help to spotlight issues that have needed to be addressed for a long time. This reaches to the heart of things that are very important – our students (those of today and future generations), our post-secondary institutions, and the unique Canadian society in which we are privileged to live.

On a closing note, I must beg your indulgence. I was born eons before the technology-crazy world of today appeared. The nature of the subject matter makes this site text- and table-heavy, and that won’t work so well for people who do most of their surfing on smartphones and small tablets. And, regardless of how you access it, the site will appear rudimentary and lacking in glitzy features; that’s down to two things – at my age it’s substance over style every time, and (this being funded entirely from my own savings) there are limits on the affordability front.

William Doswell Smith – Edmonton, Alberta