Ontario budget and tuition policy – revenue impact

Russ has prepared for you a projected outlook for university revenue for academic year 2010-11, combining the impact of both the budget and tuition announcements of the past few days.  His current best estimate of the increase in university revenue at this time is 6.8% over the current year for the system as a whole (institution specific results will vary).

I have received a few e-mails and phone calls over the last few days that suggest that some people believe that as a result of the budget, compensation is off the table as a bargaining issue. In fact, it is bargaining as usual for all faculty associations in the upcoming year, whether or not they are certified trade unions.  The Finance Minister indicated in the press in the days following the budget that the government fully expects hard bargaining to occur this year; clearly, he does not anticipate that public sector unions will simply roll over as a result of this budget.  

Given that so much of next year’s funding increase is tied to the system enrolling 20,000 additional students, I anticipate that workload and complement issues will continue to dominate the discussion for many associations.  Nonetheless, you should keep in mind that there are no new legislative bars to bargaining compensation increases for your members, nor is any of the money described in Russ’ analysis tied or restricted (other than the usual tuition offset for student aid).

All the best,
Donna

Donna Gray
Research Director, OCUFA
83 Yonge St. Suite 300
Toronto ON M5C 1S8
office (416) 306-6038
cell (416) 647-339-7840

University revenue 2010-11 – current outlook

Notes for the OCUFA Collective Bargaining Committee

Russell Janzen, Senior Research Analyst

March 30, 2010

Provincial government funding

The provincial budget made two notable announcements with respect to operating funding for postsecondary institutions. The first was of $155 million in additional 2009-10 funding to be provided for enrolment growth. Of this amount, $65 million had already been allocated to universities in the 2009 fall economic statement. How much of the remaining $90 million will be going to be universities has not yet been revealed.

The budget also announced that $310 million in additional funding would be provided for the 20,000 additional postsecondary spaces previously announced in the speech from the throne. These spaces are to be filled in the coming year, 2010-11. The proportion of increased funding going to universities has not been announced, but will be determined by actual enrolment increases. At the moment, it is expected that 11,000 of the additional places will be for university undergraduate enrolments. Achieving that goal would require a 3.2% increase in enrolment, well within the average annual increase of 4% over the past decade.

Based on the per student funding differential between college and university undergraduate students, universities’ share of the added funding could be approximately $200 million. Combined with $17.2 million for graduate expansion, an increase of $217.2 million in operating funding represents a 7% increase for universities. As far as OCUFA is able to determine at the moment, the downside increase would still be 6.3%.¹ Other than $17.2 million for graduate expansion scheduled to be added to operating funding for 2011-12, we have no indications of the government’s plan for future operating funding.

Tuition

Provincial tuition policy was announced after the budget. The policy extends the existing tuition policy by two years, but brings a version of the tuition set-aside back into the picture. Subject to an overall cap of 5% in tuition fees, the policy permits first year tuition increases of 4.5% for undergraduate programs and 8% for professional programs. Tuition increases for students in the continuing years of their program will be capped at 4%. Ten per cent of increased tuition revenue must be set aside for bursaries and other student aid.

If the overall 3.2% enrolment increase for 2010-11 is achieved, and tuition increases are the maximum permitted, the combined effect would be to increase tuition revenue by 8.4%. After taking account of the tuition set-aside, the net increase would be 7.5%.

Combined revenue impact – 2010-11 only

Given the above considerations, and assuming that other student fees rise at the same rate as tuition and other revenue sources increase by 2% (the Bank of Canada inflation target rate), the increase in all operating revenue should be in the order of 6.8%. In the downside scenario, the overall increase would be 0.3 percentage points lower. The following illustration is based on system-wide distribution of income sources. Each institution’s distribution, enrolment and tuition increases will vary.

		Unadjusted	Enrolment	Tuition	Revenue
Source	Share	Increase	+ / – %	set-aside	Impact
per cent
MTCU	47.6%	7.0%			7.0%
Tuition	38.1%	5.0%	3.2%	10.0%	7.5%
Other fees	5.6%	5.0%	3.2%		8.4%
Other	8.7%	2.0%			2.0%
Total	100.0%				6.8%
Illustrative example – assuming $1 million total revenue				Tuition	Revenue
	Previous	Increase		set-aside
dollars
MTCU	$476,137	$33,149			$509,286
Tuition	$380,851	$31,831		$3,183	$409,498
Other fees	$55,845	$4,667			$60,512
Other	$87,168	$1,743			$88,911
Total	$1,000,000	$71,390			$1,068,207

As a note of caution, this scenario may hold for one year only. The next generation of multi-year accountability agreements have not been finalized and there are no indications that a multi-year funding program will follow. And because current and forecast program spending includes the PSE infrastructure stimulus funding, the provincial budget offers no clues as to the government’s plans for operating funding beyond this year.