Background document

Trends in Higher education Finance backgrounder

June 2008

• Universities are a $26 billion enterprise in Canada serving more than 1.5 million full- and part-time and continuing education students and employing more than 150,000 faculty and staff. Those numbers are up significantly from 2001 when universities were a $16 billion economic enterprise with 1.3 million students.
• The university sector is larger than the pulp and paper industry, the oil and gas extraction industry, the utilities sector, the combined arts, entertainment and recreation industries and such prominent manufacturing industries as aerospace, motor vehicle, and plastic products.
• More than one third of research conducted in Canada is performed at Canadian universities

International Funding Comparisons

• Institutions in the U.S. have a funding advantage over Canada – which has implications for the quality of education for students. U.S. public universities and four-year colleges received $29,000 CAD per student in 2006 compared to Canadian universities with revenue (including tuition) of just $21,000 CAD per student in 2006. (Figure 3.1)
• Between 1987 and 2006, faculty growth in the U.S. matched enrolment growth, with both growing by 33 percent. During the same period, full-time enrolment grew by 56 percent in Canada, almost triple the rate of growth in faculty which grew by only 18 percent. (Figure 3.2)
• The National Survey of Student Engagement (NSSE) shows Canadian universities scored significantly lower than their American counterparts especially on student-faculty interaction and active and collaborative learning. NSSE measures institutional practice and student behaviour in numerous areas of engagement known to be associated with positive learning outcomes. (Figure 3.3)
• Since 2000, institutions in the U.K. and Australia have experienced significant funding increases. U.K. per student revenues grew from $17,000 CAD to $20,600 between 1994-95 and 2006-07 and are expected to continue to increase in coming years as tuition fees increase from ₤1,000 to £3000, (approx $2,000 CAD to $6,000). In Australia, per student funding was $21,200 CAD in 1996 but fell to $18,800 in the late1990s, before beginning to recover in 2003. By 2006, per student revenues matched Canada’s $20,000 CAD per student.
  

National University Funding

Research Funding Up But Institutional Costs Not Fully Covered

• In the past decade, external research funding has grown significantly in Canada. Federal investments in research doubled from $1.2 billion in 1996-97 to $2.4 billion in 2006-07. Research sponsored by the private and not-for-profit sectors grew from $910 million to $1.7 billion over the same period. In addition the federal government invested $337 million in university research infrastructure in 2006-07 through the Canada Foundation for Innovation.
• Research projects involve direct and institutional or “indirect” costs. Direct costs are the costs of conducting a specific research project, such as research equipment, stipends for research assistants and publishing-related costs. They typically make up the vast majority of funding provided by external sponsors. (Figure 3.6)
• Institutional costs are incurred by universities as a result of hosting the research project. They include operating, maintaining and renovating research facilities, managing research proposals and reporting, complying with regulatory and safety requirements, managing intellectual property and promoting commercialization.
• Institutional costs are estimated to be 40 percent of the direct costs of research, but external research sponsors only cover a portion of these costs. Universities drew an estimated $1.7 billion from their operating budgets to cover unfunded institutional costs for externally funded research in 2006-07. The federal government provided $315 million for institutional costs through the Indirect Costs program in 2006-07.

Capital Funding Up But Deferred Maintenance Remains A Challenge

Capital spending at Canadian universities has grown significantly since 1997. Recent increases have been targeted at new buildings and infrastructure to meet rising enrolment and research demands. Capital funding was less than $500 million in 1998-99 and rose to approximately $1.2 billion in 2006-07. (Figure 3.4)

• In 2000-01, accumulated deferred maintenance for physical infrastructure on university campuses across Canada was conservatively estimated at $3.6 billion. By 2006, Ontario universities alone had accumulated an estimated deficit of $1.6 billion while universities in Atlantic Canada were facing a deficit of $863 million.

Government Funding Per Student Has Fallen

• Despite significant increases in government funding, rapid increases in student numbers have resulted in less overall revenue per student to support teaching and unsponsored costs of university research activities. University operating revenues fell from $21,000 CAD per student in 1980-81 to $15,000 CAD per student in 2006-07.
• Student enrollment has grown 56 percent since 1987 with 31 percent of that growth happening between 2000 and 2006.
• Declines in per student operating revenues were driven largely by reductions in government per student funding for Canadian universities (primarily from provincial governments) which fell from $17,900 CAD per student in 1980-81 to $9,900 CAD in 2006-07. (Figures 3.5, 3.8)