Reworking the funding model to enhance quality

“What is the most powerful lever of change for post-secondary systems?”

The short answer: funding. This was the first argument of the day at a recent higher education policy symposium hosted by the University of Toronto. Policy-makers, scholars and higher education professionals discussed enrolment and funding for higher education in Ontario – Canada’s most populous province.

In April 2015 the government announced their intention to alter the funding model, but no clear path has been decided on. With 20 provincially funded and autonomous universities, any attempts at sector-wide change will be slow, complicated and have lasting ramifications.

Transformation of Ontario’s post-secondary sector is a top priority for the long-term economic strength of the province. In a recent call for reform, Ontario’s Ministry of Training, Colleges and Universities, or MTCU, set the following priorities for the province:
  • • Improved student experience and quality;
  • • Institutional differentiation;
  • • Financial sustainability;
  • • Increased transparency and accountability.
To reach these goals, the MTCU began a consultation process in March 2015, inviting key stakeholders to envision how a new funding model could contribute to these goals.

Current funding model

Presently, the funding system for Ontario’s universities is closely tied to enrolment numbers. A total 89% of government funding for universities is provided through operating grants that are linked to past and current student numbers. These government grants account for 40% of university operating revenue.

A further 46% comes from domestic (36%) and international (10%) tuition fees. Between tuition and government enrolment grants, a total 77% of university funding is linked to enrolment numbers. Simply put: if student numbers increase, so does funding.

Source: University Reform Consultation Paper, MTCU

While it may seem normal to reward universities for their increase in student numbers, Ontario’s policy-makers are worried that this incentive has been skewed out of proportion. Enrolment is currently the only performance indicator for which universities are rewarded in a substantial way.

The Higher Education Quality Council of Ontario, or HEQCO – a government agency focused on evaluation and policy research – has been particularly critical of this system.

Recently, HEQCO President and CEO Harvey Weingarten referred to the current enrolment funding model as “a disaster”. With universities scrambling to recruit students for their operating budgets, class sizes increase and universities stray from their unique mission, moving to offer programmes that require less investment.

To rectify this trend, policy-makers like Weingarten want changes to the funding model, suggesting that this is the only sure way to spark system-wide change.

Impending challenges

Ontario is rarely seen as a place in need of transformation by those outside Canada. There is a strong belief in the quality of Canadian degrees and Ontario is the nation’s biggest destination for international students. Likewise, when Ontario is ranked against other OECD countries for university educational attainment, the province places 10th.

But those who study the sector point to several factors that threaten the current quality, urging the government to take active steps to ensure Ontario’s post-secondary education sustainability.

The first challenge is seen in undergraduate enrolment numbers which are projected to plateau over the next five years. Though population trends suggest enrolment will increase again by 2021, the plateau will have imminent consequences for universities. With enrolment garnering the most financial reward in the current system, the pending reduction in numbers will directly impact universities’ financial capacity.

A second concern is declining quality as class sizes fluctuate and students are less prepared for their studies. York University’s George Fallis suggests that there is a “mutual disengagement pact” between faculty and students. The uncertainty of student numbers means fluctuating class sizes and part-time precarious instructors with less continuity at the institution. For both faculty and students, these factors reduce their engagement and commitment to the higher education process.

Finally, the recurring challenge for Ontario’s higher education: homogenous missions across functionally and geographically diverse institutions. Ontario’s universities range from less than 2,000 students (Algoma) to more than 80,000 (Toronto). Also, they are located in remote cities of less than 75,000 and mega cities of more than 2.5 million.

In the midst of this diversity, most universities aim to be comprehensive institutions, offering a full range of undergraduate programmes and continually expanding their graduate programmes. For several years higher education scholars and policy-makers have called for a differentiated system that cultivates research and teaching institutions separately.

Teaching institutions in particular need legitimating as essential institutions that allow the province to meet its growing demand for undergraduate degrees and prioritise quality in teaching and learning.

Visions of change

As the government moves ahead to rework the funding model, two pressing questions emerge: Can outcomes such as student experience, quality, differentiation and sustainability be achieved by a flip of the funding lever? Will complex institutions like universities simply change their mandates and missions because funding demands it?

Though policy-makers hope that the answer to both is yes, system-wide transformation will only be realised with clarity of purpose and respect for institutional autonomy. Too often noble aims such as “enhanced quality” are hard to quantify. In contrast student enrolment numbers provide a distinct outcome for governments to fund.

In the journey to a revised funding model, specific indicators of quality will need to be clearly articulated if universities are to be successful in achieving these outcomes and receiving their funding.

At the same time, specifying outcomes for institutions must be done with an understanding and respect for institutional autonomy. Ontario’s universities have a large degree of autonomy in their operational and financial governance.

While universities actively report on their expenses, they are free to decide where funds are allocated independent of the government. This long-time value of autonomy has resulted in a unique system where institutions set their own goals, monitored by a collaborative process of internal and external reviews.

Any changes in funding must allow institutions to determine their trajectory toward these goals, accounting for this delicate balance between clear objectives and institutional autonomy.

Grace Karram Stephenson is a higher and international education specialist with the Comparative, International and Development Education Centre in the Ontario Institute for Studies in Education at the University of Toronto in Canada.