On The Brink – How the Recession of 2009 Will Affect [Canadian] Post-Secondary Education – Executive Summary (February/2009 Policy Paper)

The Educational Policy Institute is an international, non-profit think tank dedicated to the study of educational opportunity. It is based in Virginia Beach, Virginia, with offices in Winnipeg, Canada, and Melbourne, Australia. The mission of the Educational Policy Institute is to “expand educational opportunity for low-income and other historically-underrepresented students through high-level research and analysis.”

The Report is available here: On the Brink: How the Recession of 2009 Will Affect Post-Secondary Education

The institutions that will prosper will be ones that can fundamentally
restructure their costs and develop major new revenue streams, such as overseas
education (that is, not just bringing students to Canada, but the much tougher job of
bringing Canadian education abroad). The challenges of such an environment are great,
and institutions need to consider their responses to it as soon as possible.

Executive Summary

With the global recession in full effect, post‐secondary education in Canada is about to face some very significant challenges. The purpose of this report is to outline the likely main effects of this global recession on the Canadian post‐secondary education (PSE) sector, as well as suggest a series of measures that governments can take to help institutions survive the worst of the crisis.

The most immediate challenges facing the system over the coming years include:

• Decreasing Institutional Revenues – In the short‐term, with global markets in decline, university endowments will produce lower levels of revenues in the foreseeable future. The lack of endowment revenue will impact discretionary income at institutions and force institutions to allocate resources more strategically. In the medium‐term, as governments inevitably try to bring their budgets back into balance, PSE institutions will be hard‐pressed to maintain their current funding levels to post‐secondary institutions. Cuts – possibly quite significant ones – are highly likely starting in 2011.

• Increasing Institutional Costs – Institutional defined‐benefit pension plans have also been greatly affected by the financial crisis; PSE institutions will have to spend more to cover their deficits. Faculty and staff who have seen significant losses in their RRSPs will also be less likely to retire; this means that institutions will have to pay more for older, more expensive staff instead of replacing them (as they do on a regular cycle) with younger, less expensive labour.

• Increasing Enrolments in Colleges and Master’s Programs; Declining
Apprenticeship Registrations – Historically, recessions produce jumps in the
enrolment of short‐course programs. Enrolment jumps are therefore likeliest in
two‐year college programs and university graduate programs. Without
additional funding, institutions offering these programs may be negatively
impacted. Meanwhile, apprenticeships in Canada are going to dramatically
decrease due to the drop in available employment. Without an abundance of
work in the construction and manufacturing industries, employers will be shy to
take on new, unskilled employees.

• Increasing Student Aid Costs and Institutional Need‐Based Award Problems –
Based on data from previous recessions, this recession will likely cost federal
student aid programs an additional $400 million due to more students accessing
student aid and the increased generosity of grant programs. Endowment
decreases may deal a blow to students given that a significant portion of
institutional need‐based aid originates from endowments; if these funds are
underwater, then institutions will either need to supplement the funding from
other income or temporarily suspend some need‐based awards.

These are a daunting set of challenges. Undoubtedly, institutions will be forced into
some belt‐tightening. The likeliest consequences of these actions are:

• Hiring freezes for full‐time staff and an increased use of part‐time and sessional
staff. This certainly can reduce costs in the short‐term, but as the recent strike at
York University showed, is not a cost‐free strategy.

• Reductions in Graduate Scholarships. In part, recent increases in graduate
scholarships have been driven by a need to stay competitive with a hot labour
market. With the job market cooling down, this may not be quite as necessary.

• Cuts in library spending. In brief: shorter hours, fewer journals, fewer staff.

• Deferring maintenance. True, the Government of Canada is offering a lot of
money to clean up old maintenance problems. But with so much money in the
maintenance pot, institutions may not see the harm in reducing their own
expenditures in this area, particularly once the federal money runs out in 2011.

• Larger class sizes. Not necessarily at the undergraduate level, where class sizes
may already have run up against the space constraints set by the size of the
campus’ largest lecture theatres, but at the increasingly crowded master’s
degree level. Expect fewer seminars and more lectures in an attempt to bring
down per‐student costs at this level.

Governments can help institutions face these challenges as long as they act now and
implement solutions that will help, not hinder in the short and long‐term. These actions
include:

Pay for a salary‐restructuring – One‐time pay outs to older staff will allow institutions to
bring in younger, less expensive labour.

Don’t let enrolment formulas constrain institutions from meeting the shifting demand
– Ensure funding formulas reflect the immediate change in capacity at college and
university.

Allow tuition increases – Institutions need more income and institutions and
governments do not have immediate money to fund the gap.

Protect and improve the student aid programs that matter; chop the ones that don’t –
There will be the temptation to cut; governments need to make sure money gets into
the hands of those who need it most.

Fund brains, not buildings – Classrooms cannot come at the expense of research and
researchers.

Measure what matters, ignore what doesn’t – concentrate on measures that are
indicative of the system and system demands.

The Long Term

While it is possible that post‐secondary education will be able to weather the storm and
return to “normal” in four or five years’ time, there is a possibility that by that time
demographic realities will have changed sufficiently that the sector may not regain
previous funding levels. By 2014, large numbers of baby boomers will be moving into
retirement, thus increasing the dependency ratio and straining public finances still
further. If this is the case, we may have already hit “Peak Post‐Secondary” and
institutions may be facing an era of permanently declining per‐student revenues.

There are no easy answers for institutions facing Peak Post‐Secondary. Issues of
institutional “productivity” – hitherto a dirty word in academia – will come to the
forefront. The institutions that will prosper will be ones that can fundamentally
restructure their costs and develop major new revenue streams, such as overseas
education (that is, not just bringing students to Canada, but the much tougher job of
bringing Canadian education abroad). The challenges of such an environment are great,
and institutions need to consider their responses to it as soon as possible.

The Report is available here: On the Brink: How the Recession of 2009 Will Affect Post-Secondary Education

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