By David Robinson

Earlier this year, Statistics Canada reported a “continuing improvement” in university finances over the previous fiscal year. That conclusion will likely evoke feelings of cognitive dissonance among the country’s academic staff. Everywhere, it seems, the message from  administrations is that finances are tight, budgets need to be trimmed, and everyone needs to do more with less.

So what’s going on?

In 2022-2023, total reported revenue at Canadian universities rose by $2.2 billion over the previous year to $47.5 billion. Meanwhile, expenditures increased $1.4 billion to $45.1 billion, resulting in a collective surplus of about $2.4 billion.

But this overall funding snapshot obscures some important aspects of the larger picture.

First, let’s look at the operating finances of institutions — the funds that pay for the core academic functions of the university, including salaries. Universities receive their operating funds from two principal sources: provincial operating grants and tuition fees. In 2022-2023, provincial funding grew by just 1.8%, far below the inflation rate of 4.4%. Tuition fees, by contrast, were up by almost 5%.

This mirrors a longer-term trend where tuition revenues have grown faster than government grants. In fact, in 2016 we passed a pivotal point. That was the first year since the early1950s when total university income from direct government sources was lower than income from tuition fees and nongovernment revenue sources.

Of course, a significant share of the nearly $15 billion in tuition fees that universities collected in 2022-2023 was supported by government grants. The federal government’s Canada Student Grants program, for instance, costs about $3.4 billion a year. The point I’m making is that provincial governments by and large are not keeping up with their contributions to university operating budgets.

It’s also important to note significant provincial differences. In Newfoundland and Labrador, there was a 3.4% reduction in provincial operating grants in the most recent year. Alberta recorded a 3.6% drop in provincial grants in 2022-2023, and a whopping 22% reduction compared to just four years ago.

On the expenditure side, another long-term trend has been the declining share of spending devoted to academic salaries. In 2000-2001, academic salaries made up 36% of all operating expenditures. Just over 20 years later, that figure has fallen to under 29%. Meanwhile, spending on non-academic salaries has risen from 28% in 2000-2001 to over a third today.

In short, we’re seeing not just a decline in provincial government funding, but also a shift in how universities are spending their operating funds.

These changes are occurring amid increasing financial uncertainty. Preliminary data show a steep drop in international student enrolments that are hitting colleges and some smaller universities disproportionately hard. On the flip side, the most recent demographic projections indicate a significant increase in the 18- to 21-year-old cohort over the next 10 years that, if participation rates remain steady, could result in increased domestic enrolments of between 15% and 35%.

The question is, are our institutions ready for the influx of new domestic students? The long record of stagnating provincial funding suggests not.