Where all that money is going

Tuition rises, class size grows, and the bureaucracy gets big

by W.D. Smith

Where all that money is goingThe 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.)

Even this reduced level of classroom funding now seems less focused on providing quality education. A key measure of university commitment to quality is faculty salary expenditure. However, only 57.6 per cent of instruction and non-sponsored research budgets now goes to academic salaries—well below the 64.2 per cent of 1987-88. These “savings” are used to fund increased cost levels for non-academic staff, travel, benefits and professional fees. On top of that, there has been a swing away from full faculty and toward cheaper, less experienced teaching assistants and sessional lecturers.

In short, the analysis confirms what students and faculty have long suspected: a disproportionate share of new income has been used not to maintain quality, but to expand the central bureaucracy. That is especially vexing for students, who have absorbed huge fee increases. In 1987-88, the average top 25 university derived $24 million, or 15 per cent, of operating income from fees. Last year, it was $160 million and 34 per cent. For this, students face larger class sizes and, increasingly, teachers who aren’t much older than they are.

Why does instruction continue to suffer when general operating incomes, especially student fees, have increased faster than inflation? Why are increases of even this magnitude not enough? One possibility: many top universities have set themselves the task of joining the elite group of world leaders. They’ve appointed highly driven executives who, in turn, have built burgeoning support teams. These are big-salary employees. The very exercise of pursuing higher rankings within global academia may be deflecting funds away from the classroom, increasing the financial burden on students and lowering standards in undergraduate education.
Have Canada’s top universities become preoccupied with status rather than excellence? We cannot succeed without dynamic universities, and they need adequate resources to do the job well. But for all their collective intellect, they are not immune to certain dangers. As publicly funded institutions, their missions are a matter for public debate, not internal aspiration. They can’t preach one thing in their M.B.A. classes but practise another in their operations.

Boards of governors risk a damning failure of governance if they do not address these concerns. Even if they do, they might encounter in university administrators the tendency to resist unflattering comparisons by trying to discredit the data. But this data is not easily dismissed. The universities themselves provided it.

Consultant W.D. Smith worked with students and university administrators in Canada and abroad for 25 years before retiring in 2008.

Where all that money is going

  1. Have Canada's top universities become preoccupied with status rather than excellence?

    Hmmm . . . Could the Macleans university rankings have anything to do with this?

  2. Incredibly insightful article. Thank you for this illuminating research.

  3. Prestige – forged from high-profile research chairs and headline-grabbing announcement – is the gasoline in the engine of universities. Undergraduate students' tuition subsidizes the ambitions of their school's administrators. When that ambition is unbridled like, say, Indira's at the UofA, and things go awry, it's once again undergraduate students who pick up the tab.

    That said, I wonder how different the metrics look at student-centered institutions, like BC's university-colleges, AB's new universities or the undergraduate uni's in the Martimes?

  4. In 1987/88, the number of university students in Canada was around 500,000. By 2007/08 that had increased to over 1 million. (Numbers from Statistics Canada.) This alone accounts for almost the entire increase in university spending from $6 billion per year to $21 billion per year. (Inflation over that period was a factor of 1.65: $6 billion x 2 x 1.65 = $20 billion.) The main reason that university tuition fees are increasing faster than inflation is that government spending on universities has not kept pace with the increase in university participation. Canadian education remains very good value for money, both for the student and the Canadian taxpayer.

    • I'm not sure about your enrollment number, DMB. According to the Association of Universities and Colleges of Canada (“the voice of Canada's universities”, so they should know), full-time enrolment grew by 56 percent between 1987 and 2006.

      But the article is not about the income growth because a decent chunk of it was specifically granted for sponsored research. Nor is it about government funding levels, although I agree with your point about that.

      The article is about the efficiency of our universities and about their commitment to undergraduate education.

      Much of the increased operating money (which includes vastly-increased tuition fee income) has never made it to the classroom. A shockingly large proportion has been lost to major increases in central administration costs, among other things. Even worse, most schools have opted to spend less on seasoned faculty and more on TAs and sessionals. And just ask the students about class size.

      That's certainly not an increase in value for money – for students, governments, taxpayers or anyone else.

      • Does anyone have the contact co-ordinates for W.D. Smith?

      • Hello "WD". If it's easy for you, can you tell me where I might find the StatsCan report that you cite? Is it in the public domain? Thanks. iain Murray, Assoc Prof, U of Guelph.

  5. Given that Universities today are little more than extensions of various left-wing ideology, one wonders if the profs are worth the money they are being paid. Frankly, once the profs are safely ensconced in the Ivory halls….it's almost impossible to get rid of them, no matter how incompetent and over-paid they are.

    • Santorum….is that you?

    • That is just the point: the universities are no longer, if they ever were, extensions of “various left-wing ideology [sic],” but have instead become feeding grounds from an overbearing decidedly right-wing “business model” driven administrative class. The government money available around the world for post-secondary education has been identified by HR “professionals” and targetted for the picking. People go to university and pay for university for the teaching and the learning, not for the administration.

      • That’s “feeding grounds FOR” not “from….”

  6. Hold on a minute… this has only now come to peoples' attention? I've been saying this since I first applied to the U of A in 1998. Academia has not been about learning for quite some time now. Have a look around the U of A campus at the various empty shells of buildings unoccupied and unfinished, then ask again where tuition dollars are spent. Does our illustrious President really earn her $600K (+ travel of course)? It's enough to get an invite to the 2009 Bilderbeg meeting.

    Universities are for learning. Laboratories are for research. Quality of learning is far important to most students than is the prestige of the institution. @DMB: you obviously have not been a post-decondary student for some time now.

  7. Looks like the students should be hiring the instructors and administrating the University. Universities have operated under that organization before.

  8. This is certainly no surprise to many of us working or studying at universities, although I'm definitely glad to see it discussed in Macleans. From my own experience, I've seen my university administrators receive regular yearly salary increases in the range of 10% (in one year the increase alone for the President was 40,000+ – equivalent to another teaching staff position at the university) while staff have to fight tooth and nail for a cost of living increase. At the same time class sizes have skyrocketed. Graduate seminars which would have 10 students in the 1990s now have 40 students. My 3rd year special topics in poli sci has a 130 when a decade ago it would have been no more than 30. An increasing number of faculty are contract and have to reapply for work every 4 to 8 months (and teach more courses than they can reasonably handle). Students deal with enormous class sizes and profs who are overworked. TAs and sessionals are being asked for reference letters for grad school as students have in some cases never had a tenured prof during their degree (at least not in a seminar setting). The quality of education has tanked.

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  10. Wow. This is really an amazing article. I couldn't agree more with you guys. Well done.

  11. ‎”Teaching and non-sponsored research” is a strange lumped-together category to focus on, since the it could shrink just because more research is able to find a “sponsor,” e.g. from the Tri-Council. A shift from university-funded research to Tri-Council-funded research doesn’t actually count as a “cutback in teaching,” but the cobbled-together accounting categories used in this article make it seem that way.

    And the measure of ballooning-administrative-costs is that category’s ratio to “teaching and non-sponsored research.” So you could have no change whatsoever in the ratios of teaching, research, administration, but make it look like admin was increasing just because research was shifted from non-sponsored to sponsored. 

    Note that I don’t think this is what’s been happening. But badly-conceptualized accounting categories mean that these numbers don’t add anything to the intuitions we already have about what’s been happening.

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