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.)

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. This article paints a simple picture of bloated University administration, and stops there – inferring that the problem is too many people not working hard enough, or that Universities have their priorities out of fact. I can’t dispute the statistics, but I would encourage Maclean’s to dig deeper into WHY more administrative staff are necessary. I think you’ll find it’s due to a significantly increased administrative burden being places on Universities (and all organizations, really) thanks largely to legislated requirements and rising expectations. With every ‘political/spending scandal’ comes a new layer of processes that must be followed to propose/track/confirm/audit how the money is spent. Add to that new requirements thanks to things like FIPPA, AODA, funding reporting requirements, new audits, space utilization tracking, engagement and success assessments and surveys, etc. etc. etc. SOME ONE has to do this work. While we all sit back and demand that Univerisities prove that our money is being used responsibily, we fail to realize that there is a cost associated with such demands. Transparency is not free.

  2. I always tend to suspect big organizations of becoming bloated over time, especially when funded by public money which can seem like an endless tap for the taking. I’ve heard stories about government organizations blowing through money so they can say “see? we need more money next year”… Just for the sake of it I guess.

    So then the problem is basically the same sort of management that’s screwed up so many businesses lately by forgetting the original point of the business?

    It’s almost like government reacts to this trend as well: ‘If you’re just going to waste it, we’ll be giving you less money’. Public opinion is a fickle thing, but sometimes the numbers come in and confirm the suspicions.

  3. What, exactly, is wrong with universities investing more or their resources into research, even if it is at the expense of undergraduate education? What, exactly, is wrong with having world-class universities? Frankly, I think our country is starved far more for high quality research and innovation than it is for marginal enhancements in the education of our undergrads.

  4. ABarlow, if you read the article again you’ll see that I didn’t say there is ANYTHING wrong with spending more on research – or with having world class universities.

    However, I cannot agree with the suggestion that it’s okay to do this at the expense of undergraduates, especially when they are being hit with vastly higher tuition fees. Significant operating money has been deflected away from the classroom and into central administration, among other things, and we are seeing the downgrading of teaching faculty. These are not recipes for even “marginal enhancements in the education of our undergrads”. They’re a guarantee of declines. They also don’t take us any closer to having world class universities or high quality research and innovation.

    Do you work in or around research?

  5. Although this report focuses mainly on large Canadian Universities, I’m sure a similar investigation will find the same thing has happened at small primarily undergraduate institutions. For example, a detailed look at the budgets and expenditures for a particular university of about 4000 students finds that the administrative expenses (not salaries and benefits but operational supplies and expenses, institutional dues, legal, audit and other, and travel) have increased by 30% in just 2 years!

  6. I think a point is being missed about the spending on research. Research funding DID grow at a substantial rate in the 90s and first part of this decade, with increases to the budgets of the national granting agencies (particularly CIHR at one point) and creation of new, big dollar programs like the Canada Foundation for Innovation, The Canada Research Chairs, and Genome Canada. This money radically increases the total funds available to the bigger universities, making it appear that they have lot more money to spend. However, these are not discretionary funds; they have to be spent on the research projects for which the funds were requested. And these funds , particularly Genome Canada and CFI, do result in large increases in administrative burdens.

    I am not saying administration in universities is efficient and could not be improved, just that the increases in funds for research reported above, while reflected in Universities’ bottom lines (they report total funding from all sources and brag about it) are not something that can be targeted towards undergraduate teaching.

  7. First, I confess I work at a University, but my primary role is instruction. In reference to research $, I suspect you might find that most $ go as salaries to summer students, graduate students or other people who are still being trained (i.e. taught). However, I agree the I feel I am seeing an increase in central administration staff numbers and costs.

  8. First, I applaud the article. The quality of education is going down at big research universities. It is simply impossible to provide the same education in a 400 person “theatre” as it is in a 15 person seminar.

    Although the suggestion is likely to find little support, I feel like taking teaching away from researchers may be the solution. Large university administration is selected from amongst successful–ie. publishing–professors.

    If instead they were chosen from successful teachers–who may or may not have wonderful publication records–I believe the focus would shift. Perhaps the teaching (ie. classroom, facilities and faculty time) budget would not be the first to suffer in the face of increased administrative costs if the quality of teaching was considered paramount.

    @ Ian Hunt:

    If you look at most summer and graduate positions (at least in the sciences and engineering fields) you’ll find that summer and graduate student salaries are considered “scholarships” for the purposes of university accounting, and are not put under research budgets. Instead they make up part of the declining portion of the budget dedicated to operating expenses.

    In fact, such scholarships–largely spent on grants which help graduate students earn just slightly more than minimum wage–are often used as a response when undergraduates are told that universities will use their tuition dollars to support disadvantaged students.

  9. Hello “Transparency is not free”. It’s intrigued that you choose anonymity in your posting about transparency. You are correct to say that increased reporting requirements have added an administrative burden, but THIS added burden is all ALL levels… where do you think the administrators get a lot of the info they need to report? The bigger cost in administration is really in marketing. Universities are tripping over themselves creating slick marketing campaigns and images. We hire consultants and are even using the word “re-branding”. Perhaps we now have too many universities. Perhaps the funding formulae are in need of change. For certain, there is need of examination and critical debate. Iain Murray, University of Guelph

  10. Why can the government not fund or subsidise all education? It has been happening in Australia for years. Yes we pay higher taxes as a result of the benefits we receive, but we do have a great welfare system and education is available to those who want to participate.

  11. From an Australian perspective much the same has happened. The undeniable figures are (from 1996 to 2006 since this is the data that’s readily available):

    Income to universities (all universities in Australia):increase almost 100% in real terms

    Student numbers: increase about 40%

    Student-staff ratios: increase about 50%

    Even with no extra income this would represents a reduction in teaching staff while student numbers are increasing and income is increasing dramatically. The increased income is largely through overseas full-fee paying students. As vice chancellors are keen to tell us government actually declined (albeit only slightly) in real terms over that period.

    We are told the same story as Canadians about increases in accountability and reporting requirements but most of that 100% increase in income would have come with very few strings attached – except perhaps to provide a good education to the full-fee students. Instead we significantly increased student-staff ratios. Our marketing departments are burgeoning as is the number of pro/deputy vice chancellors with high salaries and large administrative overhead.

    I commend: http://www.youtube.com/watch?v=7vsIZAFOd-c

    Eva’s message is about Liberal Arts but it applies more widely. Aside from sports coach expenditure, everything she says would be valid in essentially every university in Australia.

  12. Pingback: Macleans – Where all that money is going | Free Education Montreal

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