Universities seek students, private contracts amid funding crunch

Some Canadian students face higher tuition and less financial aid as universities take unpleasant steps to balance their books amid rising costs and receding investment income. Meanwhile, some universities are seeking additional students as one solution to their woes.

Emily Chung · CBC News · Posted: Apr 17, 2009 10:23 AM EDT | Last Updated: April 17, 2009

Queen's University in Kingston, Ont., announced this spring that it will cut some degree programs with low enrolment and 47 faculty, but it is far from the only university making cuts.

"I think I'd have to say that we certainly are facing severe difficulties," principal Tom Williams said, but he added that universities in almost every other province across the country are in a similar situation.

The University of Guelph is also cutting several majors and degree programs, as well as imposing a hiring freeze, postponing building projects and making cuts to travel and special events. Other universities are slashing scholarships budgets, planning to raise tuition, or clawing back discretionary spending on things such as equipment.

The funding problems being faced by universities right now aren't really new, said Williams, whose own institution has had to make cuts to its base budget in 11 of the last 14 years. He blamed the fact that provincial grants have not risen with costs such as wages, equipment, operating costs of buildings and library resources.

Endowments take a blow

But this year has been especially hard because investment income from endowments that many universities rely on have shrunk dramatically due to the stock market slide.

"Once the recession hit, our flexibility funds really basically took the brunt of that," said Williams, who said Queen's University's endowment accounts for 10 per cent of its budget and its value had fallen more than 20 per cent in the past year. The endowment funds both operating costs and scholarships.

Queen's was not the only university to take the hit on investments. University of Calgary president and vice-chancellor Harvey Weingarten reported in March that his university ended 2008-09 in deficit because it had to write down its asset backed commercial paper (subprime mortgage) investments, which chopped the university's endowment by a fifth.

Consequently, it is taking a number of steps to trim its budget, such as reining in hiring.

Many universities interviewed by CBCNews.ca estimated that endowments make up roughly five per cent of their budgets, although the money was targeted at specific areas in most cases.

For some universities, such as the University of Toronto, endowments fund specific programs and contracts such as named professorships. The contracts must be honoured regardless of the state of the fund. Because of that, said Rob Steiner, the university's assistant vice president, some departments will be allowed to borrow money from the university in order to cover those contracts if they absolutely must.

At many other universities, especially smaller ones, endowments aren't used to cover operating costs, but fund primarily scholarships and student financial aid — a purpose for which they are crucial.

David McBride, director of university advancement at Bishop's University, said virtually every scholarship at the tiny Quebec university is paid for out of endowments from charitable donations. "The university doesn't have the money to do it."

Some universities, such as Bishop's, Queen's and the University of Regina, said they won't be cutting scholarships or financial aid this year, but student aid could suffer in the long run if the market doesn't rebound.

However, others are already trimming their scholarship budgets.

The University of British Columbia has said in the media it may issue fewer merit-based awards, while Memorial University of Newfoundland told CBCNews.ca it will likely reduce the amount of each award or bursary by a few per cent.

Endowments aren't the part of university budgets that rely on investment income.

Some universities are keeping an eye on their staff pension funds, which have also plunged in value with the market. Phil Hooper, comptroller at the University of Prince Edward Island, said the university and its staff may both have to make additional contributions to the pension plan if the market doesn't recover, and that will require more money from the university's operating budget.

Students as an income source

In another development, universities are eyeing new sources of income, including students themselves, both indirectly and directly.

The University of Calgary plans to increase its undergraduate enrollment by 1,500 — twice as much as it had previously committed.

Universities typically rely on provincial funding for about 40 to 60 per cent of their budget, much of it provided on a per student basis.

"Needless to say, the increase in student numbers adds revenue to the university," University of Calgary vice-chancellor Weingarten said in his March statement.

McBride said boosting enrollment is Bishop's University's "number one priority" at this time.

For Bishop's, which currently has 1,700 students, a change of 50 students has a "fairly substantial impact on our budget," McBride said. That makes the university more vulnerable to the ebb and flow of enrollment than larger universities, he added.

University enrollment often goes up during a recession. In fact, the Council of Ontario Universities reported in January that the number of applications it had received this year came close to a record. The only year it received more applications was in 2003, when Ontario eliminated Grade 13 and two high school classes graduated at the same time.

But while the recession boosts university enrollment in cities, most of the students who attend Bishop's come from outside Quebec, McBride said. Being away from home increases their costs and that makes attracting students more difficult in hard times.

The University of Regina faces a different challenge — good times. The economy in Saskatchewan remains relatively strong, and that means fewer young people are flocking to university instead of working, said Barbara Pollock, the university's vice president of external relations.

Tuition hikes

Her university is planning a recruitment and marketing drive and a fundraising drive, but is also trying to boost its revenues from students directly — by hiking tuition, which makes up 30 to 50 per cent of the budget of most universities.

Universities in some provinces don't have that option because of tuition controls, but the University of Toronto is lobbying Ontario to give it some more leeway.

Currently, said Steiner, tuition fees can rise an average of only 4.5 per cent a year at an Ontario university.

"It sounds like it's at inflation or above, but in reality when you actually look at the cost of running a university … that actually doesn't keep pace."

Steiner wants to be able to raise tuition seven to nine per cent a year, in step with cost increases. He argued that students are actually paying only about $100 more a year in tuition than they were a decade ago once increased tuition tax credits are factored in.

Allowing larger tuition hikes is an idea supported by the U.S.-based Educational Policy Institute, which issued a report in February arguing tuition increases — coupled with an appropriate bump in financial aid — are needed to maintain the quality of education at post-secondary institutions. The group predicts the current recession will pare down private donations and eventually lead to cuts in public funding as governments try to balance books after years of deficit spending.

Some universities are getting around tuition caps by trying to boost programs that don't fall under tuition controls.

Queen's University's Williams said all of his university's schools and faculties are looking for ways to offer more non-degree programs and certificates.

Industry money

In addition, the university is trying to earn money by renting out their property and facilities. For example, Queen's owns a piece of land that is approved for testing explosives that it would like to start renting out for that purpose, either to the private sector or the military.

Bishop's is trying to attract more conferences and meetings. And the University of Toronto is trying to attract more research funding from industry.

"You have to be careful because that research can be highly directed," Steiner said. "You have to be sure that the money you're getting is actually funding worthwhile academic projects."

He added that large, research-focused universities face special challenges because their facilities are expensive to build and run.

Williams shared a similar point of view. He added that while the government is investing in new research facilities these days, it's hard for universities to take advantage because universities usually have a to raise a share of the cost themselves.

"Given the recession, donations are way down," Williams said. "It's very, very tough to come up with your share of the money these days."

Nevertheless, Steiner insists that universities aren't really that much worse off this year than usual and long-lived institutions like universities don't panic over a one-year swing in their investment portfolios as other organizations might do.

"There's no air of crisis here," he said. "It's not that we're at all in any denial, it's more … I think the rest of the world is hurting in the way that universities have been hurting for awhile."

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ABOUT THE AUTHOR

Emily Chung

Science, Climate, Environment Reporter

Emily Chung covers science, the environment and climate for CBC News. She has previously worked as a digital journalist for CBC Ottawa and as an occasional producer at CBC's Quirks & Quarks. She has a PhD in chemistry from the University of British Columbia. In 2019, she was part of the team that won a Digital Publishing Award for best newsletter for "What on Earth." You can email story ideas to emily.chung@cbc.ca.