All Posts Tagged With: "university finance"
Pension crunch could be worse than predicted
Fewer students means fewer professors which means fewer people paying in
Universities across the country are facing a $2.6 billion shortfall in pension funding but there could be an even bigger pension crisis on the horizon.
It’s no secret that Canada’s changing demographics will lead to a decline in university enrolment and with fewer students expect fewer professors.
The problem is that pension plans require people paying in in order to pay out. In fact, most pension plans require there to be a consistently increasing number of people paying in for them to maintain payouts.
Now, I don’t know the specifics of each plan, nor do we know how much university enrolment will decline, so it’s impossible to say how bad the situation will be. But a declining number of people paying in, coupled with a increasing number of people collecting benefits can only lead to massive problems.
And there’s another factor at play here, universities are increasingly employing more lecturers and part-time contract faculty, as opposed to full-time professors. These contractors aren’t paying in to pension plans and if they are, they’re probably not paying into the same fund that’s paying out to retired professors.
Since these plans draw a significant portion of their funding from investments, if the market rebounds significantly there could be something of a reprieve but it’s doubtful that a market rebound could bring the plans back to where they need to be now, let alone where they need to be in five or 10 years.
And who is this going to hurt? Well, the next generation of professors, who are going to be paying in to pension plans that have defined contributions rather than defined payouts. In other words, they’re going to pay for the retirement of their older colleagues but not have the same benefits when they retire.
But students are going to lose out even more. Universities are already talking about cuts to pay their pension debts and we can expect even more cuts to pay for this shortsightedness.
Universities to become ghost towns
Fewer students will leave universities short of funds to maintain their infrastructure, teaching staff and pay off their debts
For many Canadian universities increasing enrolment has been a point of pride but David Foot, author of Boom, Bust and Echo, recently told the Ryerson Eyeopener that due to Canada’s changing demographics “over the next two, three, four years the number of enrollments will start to decline.”
We’re already seeing this to a certain extent here in Quebec. English universities are increasingly attempting to attract Francophones because there is little room for growth in the Anglophone community. As well many Canadian universities are recruiting more and more international students to keep growth rates high. While the recent economic slowdown has pushed enrolment rates up, as the economy slowly recovers, and as those returning to school graduate, this factor will diminish.
Canadian universities are already becoming highly competitive when it comes to recruiting students from other parts of the country, open any student newspaper and you’ll see ads from other universities. Concordia ads have been spotted in Truro N.S. and while I was editor-in-chief of the Concordian student newspaper last year I received several emails from various universities encouraging me to apply for their journalism programs. This competition will only increase if enrolment drops and advertising and recruitment costs money that could be used for education.
Many, if not most, Canadian universities are carrying long-term debt in the millions of dollars and are counting on increasing enrolment to help pay off these debts. Lower enrolment will leave universities short of funds to maintain their infrastructure, teaching staff and pay off their debts.
Also, we’re currently in a period where universities are carrying out major construction projects. As part of the economic stimulus program the federal government is in the process of pumping $2 billion into university infrastructure and provinces are doing the same. Quebec alone is putting in more than $600 million. Now, not all of this money is going towards new buildings but a lot of it is. If enrolment drops will our expanded universities start to look like ghost towns?
Where all that money is going
Tuition rises, class size grows, and the bureaucracy gets big
The annual tuition fee debate has begun. This is the war dance that takes place every winter, when senior university administrators announce that students yet again face substantial hikes. Those administrators roll out the rationale they use every year: the increases are necessary to protect educational quality, top faculty costs top dollar, and the only alternatives are declining quality and staff layoffs or increased government funding. Students get angry. They claim that university is becoming a place for only the wealthy, that quality has suffered enough, and that debt loads are becoming unmanageable. Boards of governors—the guardians of public interest when it comes to the operation of universities—wring their hands and voice genuine empathy. They hope for solutions but find none. And then, as they always do, they approve the increases proposed by senior administration.
Here’s the thing: the students have a point—at least according to a detailed analysis of the finances of Canada’s largest 25 universities. A study of 21 years of data compiled annually by StatsCan for the Canadian Association of University Business Officers (CAUBO) reveals some startling trends. In 1987-88, the top 25 universities spent $6 billion across all their activities; by 2007-08, that had increased by almost four times inflation, to $21 billion. That equates to about 13 per cent of Canada’s health care budget, or more than the entire defence budget. And that’s only the top 25 schools.
Funding trends have driven a stronger focus on research. In 1988, sponsored research—commissioned by governments and corporations—accounted for 14.9 per cent of top 25 expenditures; by 2008, it consumed 24.7 per cent. A parallel decline (from 67.1 per cent to 54.8 per cent) occurred in general operating expenditures. This includes the areas central to undergraduate teaching and student life: instruction, the library, student services, and other functions such as central administration.
The analysis suggests teaching has not just fallen down the priority list; it has been pushed there by conscious resource allocation decisions. Less money is reaching the classroom. In 1988, almost 65 per cent of operating funds were directed to instruction and non-sponsored research, where the teaching happens. By 2008 this had fallen to 58 per cent—an effective cutback of $30 million a year at the average top 25 school. Within the G13 group of Canada’s largest, research-focused universities, the cutback averages $35 million, and $45 million for the top 5 (Toronto, UBC, Alberta, McGill and Montréal).
Why the declines? In large part, they’re because of skyrocketing central administrative costs. Shockingly, 20 cents is now spent on central administration for every dollar spent on instruction and non-sponsored research; back in 1987-88, 12 cents went to administration. At the average top 25 university, central administration (including external relations) now consumes $18 million that previously would have flowed to instruction. (For a G13 school, it’s $20 million; for the top 5, $39 million.)
