Funding Formula Review

This article is associated with the WLUFA Advocate 4.4 November 2015.

Submission from Wilfrid Laurier University to Sue Herbert, Executive Lead [University Funding Model Reform]
August, 2015

Thank you for providing an opportunity to comment on development of a new funding formula for Ontario’s universities.

Provincial expenditures on university education have increased dramatically over the past two decades in Ontario driven largely by access pressure and the cost of wages and benefits which have been universal in the broader public sector. Per student funding has declined in real terms, and new restrictions and inequities in tuition policy have been created. Among outcomes of the existing framework is a size-based stratification of the financial health of institutions, specifically the declining financial sustainability of small and medium-sized universities.

Adding to the pressure, many universities—including Laurier—have responded to changes in government policy and in student and employer needs and expectations by investing increasing resources in key student services which are essential to student success and well-being. Such expenditures are generally not well supported by public funding. In addition, all universities have been required to divert resources intended for teaching and learning to support a wide variety of regulatory requirements from across government.

Further, the expectations of how universities deliver programs, and the skills and knowledge students are expected to graduate with, are very different than they were when the funding formula was developed. Universities strive to improve quality and excellence in student learning outcomes through the use of pedagogically-proven teaching and learning approaches such as active learning classrooms, experiential learning opportunities inside and outside the university, technology enhancements, entrepreneurship training, modern laboratory and performance facilities, and a growing list of other initiatives.

Institutional Context:
Laurier delivers exceptional education at one of the lowest cost per student profiles in the Ontario system. The University struggles with a persistent structural deficit which has been managed historically only through ever-increasing enrolment. In future Laurier’s financial sustainability will depend on government policy, changing demographics, and our ability to innovate and compete within the sector.

For Laurier, and for the university system, a successful and effective funding framework will be based upon sound public policy principles, will take account of and avoid unintended outcomes; and will address systemic problems created by the existing framework.

While it can be argued that the unique history of every university in Ontario has created reasons and rationale for the funding they receive based on the current funding formula, we would offer that it is time to move beyond the historical context and to fund all universities according to transparent, objective and common public policy objectives. In the following sections, we set out key assumptions and propose a set of principles on which a new funding formula can be based.

Assumptions:
In developing a set of principles for the Ontario Funding Formula Review which we outline below, we assume that existing student assistance programs will continue: in our view, it is important that student assistance remains an equally high priority for government and for universities to ensure opportunity for access to all with ability.

We also assume that metrics applied to performance and/or funding levels/decisions will be appropriate to the goals being funded, transparent, objective, simple, verifiable by the universities, and accompanied by expert review.

We think it is worth noting that the cost structures of universities have changed with increased expectations for universities to administer new publicly-mandated initiatives. We assume that society will continue to ask universities to take on additional responsibilities whether to provide increased accessibility (AODA [the Accessibility for Ontarians with Disabilities Act]), to address issues such as gendered violence, to increase representation of Aboriginal and new Canadians, to combat mental health challenges among other public policy directions. Rather than expecting universities to fund these worthwhile initiatives from already constrained operational grants, we recommend that new programs be funded with new budget allocations appropriate to each initiative.

Finally, we put forward our recommendations for a new funding formula based on the premise that a regulated environment should create similarly sustainable universities competing on an even playing field. For those programs where government wishes to allow unregulated tuition—an open marketplace—we recommend other, related principles.

WLU endorses the following principles for funding the university system:

• Principle 1– Education in BA and BSc programs—the liberal arts and sciences—should be affordable for the student and sustainable for the university and the public through a combination of cost-indexed government grants and tuition. Comprehensive liberal education is a hallmark of advanced societies, and it provides significant positive benefit for both the public and the individual being educated. Therefore it should be regulated to be broadly and affordably accessible for all those who have the ability to succeed in post-secondary education while being economically sustainable for the university.

Unfortunately over the past decades, total revenues (combined grant and tuition) for BA and BSc programs have not kept pace with costs because the corresponding government grants have not been indexed to rising costs, and regulated tuition increases have been less than cost increases. This has resulted in unsustainable financial futures for institutions that have remained true to missions of excellent liberal arts undergraduate education. In response many institutions have increasingly added specialized and professional programs to improve their economic health indicators rather than focussing on providing primarily BA and BSc programs.

A new funding formula should give renewed priority to liberal arts and science education and to the sustainability of all universities providing foundational BA and BSc programs. Contrary to popular belief and prevailing narratives the evidence is clear: employment outcomes for liberal arts and science graduates are excellent.

• Principle 2 – All universities should earn the same total revenue per student for what are substantially the same courses of study. In other words all universities should receive the same revenue (grant plus tuition) for a BA in history, or a BSc in chemistry. Of course the revenue for different programs will differ in recognition of different costs of deliveryamong disciplines (see also next principle). There is no sound public policy basis for significant variation in per-student revenues for substantially the same program at different universities.

• Principle 3 – In a regulated tuition environment (see below for unregulated tuition environments) there is no sound public policy basis other than differences in cost of delivery for differences in grant or tuition revenues for substantially the same academic program either within or among universities.

• Principle 4 – If government determines that some academic programs should be exempted from tuition controls (unregulated environment), then:
(a) such programs should be equally exempted at all universities;
(b) the government grant should be equal for substantially the same exempted programs at all universities [principle 2];
(c) all universities should be free to deliver such tuition-deregulated programs if they can satisfy quality control standards (open marketplace); and,
(d) there should be no caps or quotas for enrolments in any unregulated program for any institutions (open marketplace).

Tuition in such exempted programs will reflect competitive open-market pricing based on student perceptions of quality, relevancy and affordability. Tuition will vary, like the price of a cup of coffee, among vendors (universities) and potentially even within the same institution depending, for example, on mode or location of delivery. In an open market there is no sound public policy basis for differences in tuition regulation or differences in the size of government grants for substantially similar programs, nor in the opportunity among universities to offer such programs.

• Principle 5 – If government priorities require that some universities receive more funds than others for substantially the same service, then the basis for such differences should be transparent to all (for example; northern, other regional, linguistic, special research initiative, economic development, etc…), and the additional funds should be flowed in special envelopes or transfer payment agreements and not comingled with per-student funding to avoid embedding inequities over time. The need for, and the extent of, special payment funds should be regularly and transparently reviewed by experts and adjusted as appropriate.

• Principle 6 – Universities should be encouraged to innovate and develop quality programs. Doing things differently within the Ontario Post Secondary Education sector has been encouraged by the development of Strategic Mandate Agreements (SMAs). In order to further encourage creative approaches within the university sector, we recommend that some predictable portion of funding be tied to the delivery of quality, innovative programs whose success can be measured against pre-determined criteria that are objective and transparent to all independent observers.

Conclusion
We have not suggested a specific funding model for universities because there is a wide variety of funding models and approaches that might be applicable to the goals of government. Articulation of clear goals and targets for the system would help to narrow the range of potential funding formula approaches. We regret that wide discussion about specific goals and targets for the Ontario university system did not precede a revision of the funding formula.

Given this did not take place, we feel it is all the more important that a funding formula closely meets the principles set out above. A funding formula that meets the principles will be one that is transparent, rational, predictable and sustainable; providing a solid basis for the taxpayers in Ontario for their support of university education.