Front Burner - The crisis facing Canada's colleges and universities

Episode Date: December 3, 2024

At the beginning of this year, immigration minister Marc Miller said the government was looking to rein in the number of international study permits it would be granting, in a bid to take pressure off the strained housing market. But that's been bad news for the post-secondary institutions for which a significant part of their operating budgets come from tuition fees from international students. Colleges in southern Ontario have been particularly hard hit, with many announcing cuts and consolidations — and there could be more to come.But it's only part of the problem. Alex Usher, the president of Higher Education Strategy Associates, explains the crisis Canadian universities and colleges are now dealing with: the result of years of cuts and a refusal to spend more on our post-secondary institutions.For transcripts of Front Burner, please visit: https://www.cbc.ca/radio/frontburner/transcripts

In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. This is a CBC Podcast. Hey everybody, it's Jamie. So across Canada right now, we are seeing all of these universities and colleges make cuts to programs and staff. This is the result of a massive drop in international student enrollment because of caps announced by the federal government earlier this year. Their goal was to issue about 35% fewer undergraduate study permits than in 2023.

And now they've announced plans to cut another 10% for 2025 and 2026. For years, universities and colleges have become increasingly dependent on international students to keep their budgets afloat. So how did it get to this point? Who will be the hardest hit and what happens next? Alex Usher is the president of Higher Education Strategy Associates. He spends a ton of time looking at what's working and what's not working in Canadian post-secondary schools. Hey Alex, thanks so much for coming on to FrontBurner. It's great to have you. Thanks for having me.

So I want to start with just a bit of context for these revenue shortfalls that colleges and universities are facing. Just how important have international student fees become to them over the years? Depends a lot on the institution. I mean, I think the key things to keep in mind are this. Total funding to institutions has stayed pretty stable over the last 15 years. It's kept up with inflation, didn't until 2022. It's a little bit below that since then. Right. Government funding, we were talking about? Yeah. And meanwhile, costs keep going up, right? So universities and colleges are labor-intensive organizations

and like law, labor-intensive organizations, their costs tend to go up faster than inflation. Same in the healthcare system, same in the K-12 system. I mean, this isn't, there's nothing particularly new about that. And so what you've been getting over time is you get a widening gap between what governments are willing to pay for and what institutions feel they need to keep offering the product they want to. institutions to charge domestic students higher tuition fees. And so that was the big run-up in domestic student tuition in the 1990s. We haven't allowed that this time around. So basically what we said is you're not getting any more for the last 10, 12 years, you're not getting any more funding from any domestic source, but be creative. And so institutions have been creative and they went overseas and they sold a product at a market price and that worked pretty well. And so we had this nice, you know, system where provincial governments pretended to pay for institutions and institutions pretended that that was where the money was coming from. And instead,

you know, it was all being subsidized by foreign students. And that worked really well until the federal government put a stop to it. Right. About a year ago. Yeah. And now that those, that tap has been turned off somewhat, like who is the hardest hit here and why? So there are three, let me start by saying there are three parts to that tap. There's what the federal government has done formally, which is to say, we're going to reduce the number of visas that we're doing. There's the informal part of the visa cap, which is that as the government reduced caps, it went around trash-talking Canadian institutions. And what people

abroad heard was not we're reducing international student visas back to historic levels it's we don't want international students and i've talked to people in lots of countries i was in indonesia last week and basically that's what people heard that's what they didn't your country ban student you know international students i'm like no that's not quite what they didn't like that's crazy how could they do that and so that's one of the reasons why even though we have these lower caps institutions have not been able to hit their caps. That's because the minister deliberately drove down demand.

Now, there's a third piece which happened in September. And that was that for community colleges, the government greatly reduced the ability of their graduates to receive what are called postgraduate work visas. So the international, the student visa cap came in January, postgraduate work visa cap came in September. So put all that together. What do you see? What you see is on the college side, you know, their numbers are getting nuked. It's been, you know, estimated that really only about 30, 35% of their graduates are going to be eligible for PGWPs, the postgraduate work program. So that means they're going to lose 70% of their international students. Now in Quebec, you know, where you don't have a lot of international students who come to

SAGE-UP, there are some, and in some places it's pretty important, but for the most part, it's not a huge deal. You know, that has a minor effect. You know, there, but there are lots of colleges in Ontario where you've got 70, 80% of the student body is now international students, you know, because there were a few institutions that were pretty gross and pigged out and that kind of thing. When you talk about the federal government trash-talking or some institutions that picked out, are we talking about the criticisms at some of these schools? Well, according to Mark Miller, immigration minister. There are, in provinces, the diploma equivalent of puppy mills that are just churning out diplomas.

And this is not a legitimate student experience. There is fraud and abuse and it needs to end. Is that what we're talking about here? Yes, that is what he was talking about. Well, what the minister was talking about specifically, I think, was what were called PPPs, that is public-private partnerships. And what that was, was that if you go back about 10 years, colleges in Ontario who were not in the GTA felt left out of the international student boom. And they said, what we'd really like to do is open campuses in the GTA.

And the government said, no, you can't do that. You're all, you know, you have geographic areas you're supposed to deal with. So please deal with them. And they said, okay, well, what if we find a private sector partner and we license our curriculum to those people? And so most GTA schools, schools outside the GTA did that. And they found, you know, so you have Northern College, which has about 700 students up in Timmins, had 7,000 students in Toronto. Like it was wild, right?

Some of that stuff. And so were there abuses? Yes. It is not the intention of this program to have sham commerce degrees or business degrees that are sitting on top of a massage parlor that someone doesn't even go to and then they come into the province and drive an uber if you need a dedicated channel for uber drivers in canada i can design that but that isn't the intention of an international student program so this is something we need um my critique of of mark miller would be if you don't actually say go after bad actors which he didn't uh't and couldn't to some extent because he's a federal minister and not a provincial minister, you give the impression that everybody's doing it and that everybody's like that. And that's what hurt applications abroad is because he was making accusations that certainly sounded like they were of the sector as a whole rather than a few bad actors.

I would be interested to get your thoughts here on the reason why they curtailed this program in the first place, is that it's part of a larger strategy to curtail immigration because of concerns that we haven't been able to absorb the influx of people coming into this country when it comes to housing and other services like health care. And so, you know, what do you make of that argument that, you know, these international students were also really driving up housing costs? And also for them as well, they were not, many of them have not been living in really good conditions, right? You hear stories about apartments with 13, 14 people in them, that this is also really taking advantage of them.

Well, so there was certainly a surge of housing prices, particularly in the summer of 2022. And that's when you really saw the numbers start to increase. I think there's certainly a case that the government had to do something. I think it's a pretty good case. I think the question is, you know, this blanket statement that the country couldn't absorb them is not true. I think Southern Ontario couldn't absorb them, you know, because that's where, you know, some of the bigger abusers were. And Ontario has been, has had notable difficulty building houses in the last little while.

You know, in comparison to say Quebec or British Columbia. So, you know, what happened was the government put in a national solution that punished everybody because southern Ontario couldn't get its housing and education system in order. And people were really puzzled. I had to go out when I was in Alberta, I was explaining it to people and they're like, Ontario is doing what? And they had no idea. And,

you know, and so they looked at it and went, that's crazy. Why are they, and we're being punished because of this. And they were, and they are to a certain extent. Right.

And again, it's just, it's once you allow the federal government to control such a big part of institutional budgets, you're inviting, you know, the level of government that is most ignorant about, you know, how higher education works and higher education finance and all that to have a lot of control that they shouldn't have. Hi, it's Ramit Sethi here. You may have seen my money show on Netflix. I've been talking about money for 20 years. I've talked to millions of people and I have some startling numbers to share with you. Did you know that of the people I speak to, 50% of them do not know their own household income? That's not a typo. 50%. That's because money is confusing.

In my new book and podcast, Money for Couples, I help you and your partner create a financial vision together. To listen to this podcast, just search for Money for Couples. I wonder if you could paint a picture for me of what you think this is going to look like now that these institutions don't have as much revenue coming in from these international students. What does that practically look like? What kind of programs might we see cut? Which programs?

Where? where? So let's start with Ontario colleges, because I think there's a different situation in Ontario colleges, in colleges outside Ontario and in universities. There's three different cases. Ontario colleges, you know, they're losing a lot of their students, as well as a lot of their income. So part of the reduction in income, and we're talking, you know, I would argue at a place like Conestoga, you're probably looking at a hit of about 60% of their total budget. You know, and that's thousands of job losses. They're going to be closing campuses. Now, that's okay, because they, you know, they used to only have one campus and now they have seven or eight, because that's what they've been using their international

student money on. So they'll just be going back in some ways to the status quo ante. Right. But with a lot less money to do it. I think if I look at some of the northern colleges, I don't know many colleges in Ontario where the total number of programs is going to be reduced by less than about a third. And which programs are they going to cut? Well, the easy ones are the ones that have low domestic enrollment. They're not going to worry about international enrollment because there won't be any international students left or there won't be very many.

And then the question is, what else do you do to balance the budget? And I think in a lot of cases, what's going to happen is they're going to say, okay, what are the programs that have low enrollment and have high costs? And which programs those are are going to be very different at different institutions. But I can tell you that one of the areas that costs the most is skilled trades. And I think that's right across the country. If you tell institutions we're cutting your budget by whatever it is, 5%, 10%, 20%, which I think is probably about what it is outside Ontario, those are the programs that are going to be the most obvious ones to cut.

Now that doesn't mean that's the ones they'll cut because they got to worry about what the provincial government's going to say. They got to worry about what the local community is going to say, but provincial governments love skilled trades, except when it comes time to fund them. And so they are expensive in most colleges, knowing all the colleges I know, lose money on their trades programs. And they were happy to do it as long as they could get international students. Now, it's not crazy. So, they're going to lose, in Ontario, they're going to lose a third of their programs. It'll be less than that outside Ontario.

But I think no matter where you go, you're looking at students, domestic students will have less choice of programs, particularly those in rural areas, I think, because, you know, the rural colleges spend a lot of money setting up low enrollment programs in thinly populated parts of the country. ironic here that housing crisis precipitated this, that the result might be the closure or curtailing of programs in the skilled trades that would help build more houses? Yeah. Yeah. Okay. Yeah. It's also ironic that it's mainly a Southern Ontario problem and that they're, you know, they're socializing the costs to, you know, New Brunswick and Newfoundland and British Columbia. So, you know.

What about some of these, well, I want to say the bigger guys. I don't know if that's the right word, but if we're looking at universities like Waterloo, McMaster, Western, UBC, McGill, UFT, obviously they do have international students. Does this affect them on the same level or, or obviously not on the same level, but does this affect them at all? Or obviously not on the same level, but does this affect them at all? Oh, well, it will. So this is where it gets complicated. I think in Ontario, so they're certainly getting a hit in Ontario. But on the other hand, they have the chance to make it back because a lot of the colleges are basically not going to be able to use their allocation letters. And eventually those will get redistributed to universities. And so in the medium term, two, three years from now, those numbers will bounce back at universities. Universities will spend the money necessary to attract international students. They'll have a

higher cap than they had this year, and they'll actually be able to meet that cap. So in universities, what you're looking at, you know, there are institutions, a lot of institutions in Ontario that are talking about $50 million deficits, $80 million deficits, $100 million deficits. I mean, they're bad for a year or two. And they're particularly bad in universities because universities can't close programs as easily as colleges can. Basically, the president says this one's done and it's done. Universities have got senates and they've got boards and they've got all sorts of stuff. And it's tough to close programs. And staff are tenured.

You can close a program, but you still got to pay the faculty. And faculty bargaining, collective agreements with staff have made it very, very expensive for universities to get rid of anybody. And in fact, most universities have got some kind of situation where they're legal. Well, they're required under the collective agreement to fire the cheapest people first. That is, we start with the people who've been there the least time. And so, you know, the most expensive people, the ones who frankly you probably want to get rid of, are the hardest to get rid of. Right. You've got a lot of tenured professors and yeah. Exactly. And 70% of costs at a university are staff costs.

So if you lose 5% of your income, 10% of your income, and you can't cut staff, you're talking about a reduction of, you know, 15%, 20%, 30% in the rest of the budget. And that's really painful. in which this starts to affect the quality of the education, where classes get packed with more students as universities try to make ends meet? Of course. Of course. That's exactly what, well, I mean, I think what you'll see at most institutions is because they can't close staff, they won't close programs very much, the debt to margin they will. And so largely what you're going to see is, yeah, you're going to see hiring freezes, and that means fewer staff. They might start hiring more temporary faculty, but I don't know. You'll see them, you know, there'll be pressers for faculty to do less

research and more teaching. That certainly will be part of it. There will be larger classrooms. I mean, you know, we could go back to the years, the 1990s, which is, you know, the last time we to the years, the 1990s, which is, you know, the last time we saw cuts of this magnitude. And there were some very big research universities where say chemistry students didn't get in the lab until third year. Wow. Because there wasn't enough money to run the labs. You know, it's that kind of thing. That's the kind of reduction of the quality of higher education that you're looking at. Now, I would just remind everybody that if we'd never had international students to begin with, that's where we'd be anyway. Because at

the heart of it, this is about provincial governments not wanting to spend their own money or not requiring their students or students' parents to pay more domestic fees. It's because we don't want to pay for it ourselves. Well, do you think that this would precipitate a change in attitudes around that, the lifting of the tuition cap or governments deciding that they're going to throw more money at this issue? We can hope, but I don't think that's especially likely in most places. Can you zoom out for me here? Like, compare what's happening here with other places in the world.

Does it work like this elsewhere? In the Anglosphere, yes. And so Australia is going through exactly the same thing. They're talking about visa caps. The UK has had trouble with international students ever since Brexit, and they haven't been able to hit their targets. And so you're seeing, you know, two thirds of institutions there are in deficit this year. What is happening across the Western world is as populations age, we're spending a lot more money on healthcare, we're spending a lot more money on pensions, you know, things that keep consumption up. But if you do that at the expense of spending on genuine investment, spending on science, spending on education, spending on youth, you know, that's the problem is there's a lot, there's a lot of other things out there that have a claim on the public purse. And I would argue that provincial governments are

probably reflecting the public mood in saying we prefer to give money so that people can feel richer than spending money on institutions that will make us richer in the future. I have a feeling you're going to bat this down quite easily, but let me ask it anyways. What about the argument that perhaps there could just be less post-secondary institutions and perhaps less people go to them? Fewer institutions doesn't change the cost very much unless you have fewer people going to them. So let's doesn't change the cost very much unless you have fewer people going to them. So let's focus on that second argument. Could we have fewer people in universities and colleges? I don't know. There are not many countries where access goes backwards, right? Because access to a university is access to a set of better paying jobs. That's the kind of thing

that might increase a willingness to pay tuition fees. That's the kind of thing that might get parents willing to, you know, voters willing to spend more money on educations if it looks like their kids can't get into university. And so I think, you know, I think the thing that might happen in the provincial election in Ontario, no guarantees because, you know, Ford's kind of Teflon. But, you know, the idea that universities or colleges might not have spaces for your kids in the programs they want. Hey, you know those really popular STEM courses that are really expensive to put on? We might not have as many of those as we used to.

And, you know, you wanted your kid to get into computer science. Well, they might have to settle for an education degree instead. That's where we'd be able to offer them some spaces. That is going to be interesting. That might be the first time in 20 years that education or access to education becomes what they call a kitchen table issue. We'll see. Hard to tell in advance about that. You might not want to pay the profs as much. You might not want to pay the profs as much. You might not want to pay them to do as much research.

Like I could see in the long term, you can't do anything about pay in the short term because you have collective agreements. Alex, this has been a pretty bleak picture that you're painting today. I just wonder before... Yeah, just light up a room and leave. that you're painting today. I just wonder before... Yeah, just light up a room and leave. That's what I do. Yeah, I love it. Just any big picture parting thoughts before we go today?

So, look, this feels like a very immediate crisis, something that's happened in the last 12 months, but it's actually something that's happened over the last 12 years. The ending of new funding for universities and colleges has been insidious. But you look at Ontario and between 2010 and last year, the system lost 28% of its public funding. And the tuition fees that the Ford government put on in 2019 that's cost uh institutions about 25 percent right so 25 reduction in real terms these are huge losses for an institution and

and that's the root cause of the problem which is that governments have just abandoned decided that they don't want to pay for uh the higher education system that they built 15 years ago. And that's the real problem. I think that's, I mean, international students, they were nice. They were a partial solution, but they were always a dodge from our own ability to, you know, to fund our system. But it's also a failure to manage the system. There's ways to manage systems, you know systems in which we could have had lower costs. Governments could have been clearer about what they would and wouldn't accept and what made sense to use, you know, in terms of ways to use public funding.

Government, like departments of higher education or advanced education in most provinces are a lot smaller than they were 10 or 15 years ago. There's just a lot less competence in provincial governments to manage these systems that have gotten more and more complicated over time and so frankly there's just a huge gap between the funding and the regulatory ability of governments to steer these systems and the nature of the systems themselves and we've allowed these things to get out of whack we're going to have to build that back that's not going to happen overnight um you know but balancing budgets takes time. Increasing government expenditures takes time. Like, none of these things are going to be fast. That doesn't mean that we won't have a better system 10 years from now, right? Like, I can see

that. So, I think, yeah, there's a lot of doom and gloom because the axis come down very quickly on a lot of institutions. But, you know, over the longer term, there's still the prospect, at least, of a system that is simply better run and better funded. All right. Alex, Usher, this was great. Really appreciate you coming by. Thanks so much. Okay. Cheers. All right, that's all for today. I'm Jamie Plessom. Thanks so much for listening.

We'll talk to you tomorrow. For more CBC Podcasts, go to cbc.ca slash podcasts.