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Provinces would rather pay students than universities

What 2013 provincial budgets mean for the higher education sector.

By ALEX USHER | MAY 22 2013

There is a pattern emerging in provincial budgeting for higher education over the past couple of years which deserves more attention than it has been receiving. Though some new net money has been reaching universities and colleges, within the sector as a whole governments seem far more interested in funneling money to students than providing support for institutions themselves.

There are three important caveats regarding the budget data presented here need to be made. The first is that what provinces budget for higher education often has only a vague relationship with what actually gets spent. Last year in Quebec, for instance, what eventually got allocated to institutions was a good $120 million less than what was budgeted.

The second caveat is that for consistency, one needs to compare budget figures with previous years’ budgets, rather than with actual spending, which are also, obviously, not quite related to reality. So what we are comparing isn’t so much provincial spending as spending intentions, which is interesting itself in terms of analyzing political priorities.

The third caveat is that “total operating grants” (I’ve excluded capital funding) are different from “formula funding.” Generally, governments seem increasingly keen to give money for specific purposes outside the formula: in Ontario, for example, 25 percent of the announced operating “increase” was for a special fund for student mental health. There is little predictability for institutions around these funds.

So, to start with, Figure 1 shows changes in transfers to institutions, comparing last year’s budget cycle to this year’s.

Figure 1: Change in Provincial Operating Transfers to Institutions, Budget 2012-13 to Budget 2013-14

Six of ten provinces had cuts, albeit mostly relatively small ones; Saskatchewan is the real outlier, where the good times continue, seemingly unabated. Nationally, there was an absolute net decline of about $120 million in provincial funding, on a total expenditure of $16 billion. That’s a fall of 0.7 percent, or 1.7 percent in real (after-inflation) dollars, which makes it the third year in a row that real transfers have fallen ( down 1.6 percent in 2011-12, and down 0.27 percent in 2012-13) but the first time since the late 1990s that nationally, spending has dropped in nominal dollars.

The story is very different when we look at student aid. That $120 million cut to institutions was more than balanced out by a $135 million increase to student aid.

Figure 2: Change in Student Aid Expenditure Estimates, 2012-13 to 2013-14, by Province

Some of these changes require explanation. According to a year-on-year comparison of provincial estimates, British Columbia and Newfoundland both appear to have cut student aid, but in B.C. the reduction may be a matter of re-categorizing certain expenses and in Newfoundland (where the budget speech talked about enriching the program this year) it would appear the government budgeted high in the previous year, and is bringing estimates down accordingly. But the key point remains: nationally, aid is up by $135 million (or about 6.4 percent), to $2.3 billion a year.

This is not a one-year fluke. If we extend the baseline back to 2011-12, which allows us to see the full effect of the Ontario tuition rebate scheme, we see the following:

Figure 3: Change in Student Aid Expenditure Estimates, 2011-12 to 2013-14, by Province

It may seem hard to believe, but student aid expenditures are up 25.4 percent nationally over two years. Institutions, on the other hand, received a 0.9 percent increase in that period. In dollars, student aid is up $465 million and institutional funding is up $156 million. Or to put it another way, for every new dollar going into higher education, just 25 cents are going to institutions.

Figure 4: Distribution of New Provincial Appropriations for PSE, 2011-12, 2013-14

A 75-25 split between student aid and institutions would make sense if provincial governments were allowing institutions to raise tuition fees to make up for real declines in provincial support, as they did in the 1990s. But this isn’t the case: in 2012-13, tuition fees rose nationally by just over 2.5 percent; in 2013-14, the increase will almost certainly be less than two percent. The 75-25 ratio might be justifiable if student aid money were going to poorer students to relieve their burden; but that’s not true either. The Ontario 30 percent grant, by design, produced no net new aid for lower-income students and instead ended up in the hands of middle-class families.

The plain fact of the matter is that right now, governments find handing over money to students more politically attractive than giving money to institutions. The general public seems to prefer cheaper higher education to better higher education. The key task for university leadership over the next 24 months will be to reverse these two trends.

Alex Usher is president of Higher Education Strategy Associates, based in Toronto. His daily blog on matters concerning higher education in Canada is HESA’s One Thought to Start Your Day.


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