University and College Affordability

How and why have fees increased?
ne of the most pressing and troubling issues confronting post-secondary education policymakers over the past decade has been the dramatic rise in tuition fees. Between 1990/91 and 2000/01, average undergraduate arts tuition fees across Canada rose by nearly 126%. This has understandably raised growing concerns about the ongoing accessibility of post-secondary education. Despite the visibility of this problem, however, there has been surprisingly little research done to fully explain why the costs of post-secondary education have increased. While a cursory analysis suggests that government funding cutbacks are primarily to blame, some recent attention has focussed on the internal spending patterns of universities. In particular, the salaries of academic staff are often singled out as contributing to rising costs. This report1 explores these issues by examining how and why tuition fees have increased in the past decade and what impact this is having on accessibility. What are the key factors that have contributed to the rapid escalation of fees? What role have government funding cutbacks played in this rise in costs? Have internal university expenditure decisions contributed to the problem? What are the effects of higher fees and what can policymakers do to ensure greater access to post-secondary education?

O

The research presented in this report shows the following:

Overall, when measured in constant dollars and per full-time equivalent student, tuition and other fees paid by university students rose by 64% between 1990/91 and 1998/99. Over the same period and measured on the same basis, university operating revenues from governments fell 25%. By 1998/99, university students were paying on average $1,587 more than in 1990/91, when measured in constant 1999 dollars. By contrast, universities were receiving $2,720 less per fulltime equivalent student from government operating grants compared to 1990/91. University expenditures on salaries have not been a factor in driving up university costs. In fact, spending on academic rank salaries, measured in constant dollars and per full-time equivalent student, was more than 16% lower in 1998/99 than in 1990/91. This suggests that students today are paying far more than previous generations, and are receiving less in return.
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How Fees Have Increased

Access to university, as measured as a proportion of the population attending, has to date been maintained despite the higher costs. However, gaps in participation rates between low- and high-income students are growing. With some exceptions, much of the response to rising fees from both federal and provincial policymakers has been focussed on increasing financial options to help students and their families meet the higher prices. This response does not actually reduce the cost of a university education.

The rapid rise of university tuition fees throughout the 1990s has been well documented. Across Canada, average undergraduate arts tuition fees rose 126% between 1990/91 and 2000/01 (see table 1). It is worth highlighting that there has been some marked provincial variation in tuition fee increases over this period, ranging from a low of 46% in British Columbia to a high of 208% in Alberta. As further illustrated in the table, fees rose another 3% in the most recent academic year, although tuition remained unchanged in Prince Edward Island and Newfoundland, and posted a decline in Manitoba where the government announced a fee rollback. It is also important to note that these figures refer to the cost of undergraduate tuition

Table 1: Average undergraduate arts tuition, 1990/91 to 2000/01
1990/91 1999/00 (current dollars) Canada Newfoundland PEI Nova Scotia New Brunswick Quebec
1

2000/01

90/91 to 00/01

99/00 to 00/01

% change 3,378 3,300 3,480 4,408 3,519 1,898 3,971 2,873 3,304 3,841 2,520 125.8 145.5 89.1 126.9 85.4 110.4 140.2 103.0 116.6 208.8 45.9 3.0 0.0 0.0 7.5 5.7 1.6 2.7 -4.8 4.4 5.0 2.0

1,496 1,344 1,840 1,943 1,898 902 1,653 1,415 1,526 1,244
2

3,281 3,300 3,480 4,101 3,329 1,868 3,865 3,018 3,164 3,658 2,470

Ontario Manitoba Saskatchewan Alberta British Columbia
1 2

1,727

Fees for both in- and out-of-province students are included in the weighted calculation. Fees for both public and private institutions are included in the weighted average calculation. Source: Statistics Canada

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Table 2: University tuition and all other fees per full-time equivalent student, 1990/91 to 1998/99 ($1999)
1990/91 1998/99 $1999 Quebec Manitoba New Brunswick Newfoundland Saskatchewan Canada PEI British Columbia Alberta Nova Scotia Ontario 1,524 2,352 2,692 1,923 2,313 2,487 2,068 2,837 2,055 2,656 3,241 2,318 3,621 3,740 3,863 3,989 4,074 4,223 4,377 4,388 5,021 5,077 52.1% 54.0% 38.9% 100.9% 72.5% 63.8% 104.2% 54.3% 113.5% 89.0% 56.7% % change

Source: Calculations based on Canadian Association of University Business Officers, Financial Statistics of Universities; Statistics Canada

only. Graduate student fees and tuition charged by professional schools, which are generally much higher, are not included. Moreover, these figures do not include other fees that universities charge and that students must pay on top of the basic cost of tuition. Combining these three sets of fees provides a more complete measure of the average full “sticker price” charged students. Using data from the Canadian Association of Business Officers financial statistics and information on full-time equivalent enrolment for institutions included in the CAUBO survey, we are able to create a better picture of the total fees paid by students. Adjusting for inflation, we find that the costs to students increased by an average of 64% between 1990/91 and 1998/99. Again, there are wide variations between provinces as shown in table 2. Total tuition and other fees

in 1998/99 ranged from an average of $2,318 in Quebec to $5,077 in Ontario. Between 1990 and 1999, tuition and fees rose fastest in Alberta (114%), Prince Edward Island (104%), and Newfoundland (101%), while fees increased more moderately in New Brunswick (39%) and Quebec (52%).

The Causes of Higher Fees
a) Declining Public Funding Our analysis confirms that the most significant cause of higher university fees is the decline in government funding. Between 1990/91 and 1998/99, university operating revenues from government sources declined 25% in real terms, or about $2,700 per fulltime equivalent student (see table 3). As illustrated in the table, by 1998/99 total
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Table 3: University operating revenues per FTE student, 1990/91 to 1998/99 ($1999)
Revenue per FTE Student 1990/91 Tuition and Fees Government Bequests & donations Investment income Other Total 2,487 10,894 51 241 120 13,793 1998/99 4,074 8,174 119 223 220 12,809 % change from 1990/91 to 1998/99 63.8% -25.0% 133.3% -7.5% 83.3% -7.1%

Source: Calculations based on Canadian Association of University Business Officers, Financial Statistics of Universities; Statistics Canada.

university operating revenues per full-time student were about 7% less than in 1990/91. By far, the major contributor to this decline was the drop in government operating grants. Only one other source of revenue ― investment income ― fell over this period, down by 7.5%. All other revenues rose. However, these increases were not enough to completely offset the decline in government funding. Tuition and fee increases jumped by nearly 64% between 1990 and 1999, making up about 60% of the losses in government funding in dollar terms. Fee increases were outpaced in percentage terms only by the sharp rise in bequests and donations (133%) and “other” sources of revenue (83.3%). However, these latter two items make up a relatively small proportion of total operating revenues. Taken together, the increase in these two items made up just 6% of the total dollar decline in public funding. As a result of declining public funding and rising fees, the composition of total university operating revenues per full-time student has shifted. In 1990/91, government grants and
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contracts made up 79% of all operating revenues. By 1998/99, this had fallen to 64%. This was accompanied by a substantial increase in tuition revenue as a share of total operating revenues — from 18% to 32% over the same period. The decline in the role of government funding has not only driven the rise in tuition fees, but has also encouraged university administrators to seek other forms of funding, in large part through increased private fundraising. However, this shift toward private revenue sources has meant less institutional flexibility over how those revenues can be spent. Donations are frequently targeted by donors for limited and specific purposes, and generally for spending outside of the basic operating budget. In this way, greater reliance on private funding sources means there are fewer unrestricted resources available for the general operating functions of the university. Consequently, private revenues have not been and will not be a substitute for public funding.

Table 4: University operating expenditures per FTE student, 1990/91 to 1998/99 ($1999)
Expenditure per FTE Student 1990/91 Academic salaries Other salaries Fringe benefits and travel Library acquisitions Supplies, furniture & equipment Utilities Renovations and space rental Scholarships & bursaries Externally contracted services Professional fees and insurance Property tax Institutional membership fees Debt repayments Buildings, land & site services Internal cost recoveries External cost recoveries TOTAL 5,871 4,000 1,524 255 1,349 444 194 113 251 127 41 66 74 0 -89 -413 13,806 1998/99 4,907 3,660 1,444 300 1,478 413 144 325 275 193 61 51 40 48 -94 -544 12,701 -16.4% -8.5% -5.2% 17.6% 9.6% -6.9% -25.8% 187.6% 9.8% 52.0% 48.3% -23.7% -45.9% – 5.7% 31.5% -8.0% % change from 1990/91 to 1998/99

Source: Calculations based on Canadian Association of University Business Officers, Financial Statistics of Universities; Statistics Canada.

b) Operating Expenditures Our analysis of university financial statistics shows that overall operating expenditures have not contributed to rising costs. As illustrated in table 4, total university operating expenditures, measured in constant dollars and per full-time equivalent student, fell 8% between 1990/91 and 1998/99, from

$13,806 to $12,701. In other words, the decline in expenditures was slightly greater than the decline in revenues. When expenditures are examined more closely by category, the only significant increase over the period in question was for scholarships and bursaries. This reflects the increased demand for student financial assistance in light of higher fees. Interestingly,
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Table 5: Number and Salary of University Teachers, 1990/91 to 1998/99
Full Professors Number Salary constant $ 1998 $92,154 $94,237 -2.2% Associate Professors Number Salary constant $ 1998 $72,080 $74,590 -3.4% Assistant Professors Number Salary constant $ 1998 $56,046 $56,137 -0.2%

1998-99 1990-91 Percentage change

8,433 8,559 -1.5%

7,773 7,626 1.9%

3,921 4,770 -17.8%

*Excludes francophone universities in Quebec and universities not included in the 1990-91 survey. Source: Centre for Education Statistics, Statistics Canada

this suggests that increased expenditures on scholarships and bursaries are partly responsible for keeping tuition higher than might otherwise be the case. In fact, many universities are increasingly justifying higher fees as a way to build up scholarship and bursary funds so that these funds can then be “redistributed” to other students. This “high tuition/high student aid” or “tuition subsidy” model of financing is one that is prevalent amongst private universities in the United States, but its value in promoting greater accessibility is limited. Not all students qualified to attend university are eligible for scholarships or bursaries, and this imposes a heavier burden on those from lower income households. In the end, this strategy, intended to increase access, may have the perverse effect of further limiting participation in post-secondary education along income lines. While increased expenditures on student aid may have had some impact on the jump in tuition, it is important to note what the data reveal about factors that have not contributed to rising costs. It is a popular perception that spending on salaries for faculty ― protected
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by the tenure system and the principle of academic freedom ― has been one of the major internal cost drivers.2 The figures presented in the table clearly do not support this view. As shown, spending on academic salaries per full-time student fell by over 16% from 1990/91 to 1998/99, or by nearly $1,000 per student. This is explained primarily by the decline in the number of full-time faculty as well as a real (i.e. inflation-adjusted) decline in academic salaries. As illustrated in Table 5, the overall number of professors fell between 1990/91 and 1998/99, with the largest losses occurring amongst the ranks of assistant professors ― those entering the system. At the same time, all ranks experienced a real decline in salaries. The decline in per-student spending on instruction is particularly troublesome since it directly affects the quality of education students receive. Fewer faculty mean larger classes, fewer course offering and less contact with instructors. In short, students today are paying more and receiving less in return.

The Impact of Higher Fees The increase in tuition fees over the past decade and the subsequent rise in student debt loads has ignited concerns about the accessibility of post-secondary education in Canada. However, the impact of higher fees on the ability of young people as a whole to attend university is sketchy. On the one hand, enrolment numbers have levelled off significantly in 1990s. However, the percentage of the population with a university degree has increased. In 1990, 17% of 24 to 29 year-olds had graduated from university. By 1998, this had risen to 29% (Statistics Canada, Education Indicators in Canada, 1999). Where the impact of higher fees seems to be most discernable is in terms of exacerbating inequalities in access. While overall participation rates have increased, there are significant gaps emerging between low- and

high-income students. According to Statistics Canada, although a higher percentage of 18 to 21-year-olds from each socio-economic quartile were participating in university in 1994 than in 1986, the disparity between the participation of the lowest quartile and the other quartiles increased. In 1986, there was little difference in university participation rates between students in the lowest quartile and the middle two quartiles. By 1994, however, a gap of 7 percentage points had emerged. What is alarming is that this gap appeared before some of the major tuition fee hikes in the middle of the decade (Statistics Canada, Education Indicators in Canada, 1999). In this regard, educational inequality is increasing.3 Inequality of opportunity to pursue a university education is not only a result of rising fees, but is closely linked to a growing trend toward income inequality amongst families in Canada. Figure 1 plots the rate of

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Table 6: University tuition and fees affordability index*, 1990/91 and 1998/99
Income quintile Lowest quintile Second quintile Middle quintile Fourth quintile Highest quintile 1990/91 0.14 0.08 0.06 0.05 0.03 1998/99 0.23 0.13 0.09 0.07 0.04

* Tuition and fees as a share of after-tax family income in constant dollars. Source: Calculations based on CAUBO, Financial Statistics of Universities; Statistics Canada, Income in Canada 1998, cat. no. 75-202, Table 7.2.

increase in tuition and fees and changes in real after-tax family income over the 1990/91 to 1998/99 period for Canada. All Canadian families are divided into five income quintiles, ranging from the 20% of families with the lowest after-tax income to the 20% of families with the highest after-tax incomes. As illustrated, the rise in tuition and fees far outpaced the increase in the after-tax income of families. In particular, the incomes of the bottom 40% of families were actually lower in 1998/99 than in 1990/91. To explore the issue of educational inequality further, we have developed an index that plots the financial capacity of different family quintiles to pay for the costs of tuition and fees. The affordability index expresses these cost as a share of after-tax family income in constant dollars. The closer the index is to zero, the smaller the share of after-tax income is needed to pay for the costs of university education. Conversely, an index closer to 1 indicates a greater proportion of family after-tax income is needed to cover the costs of tuition and fees. Table 6 illustrates the affordability index by family income quintile for 1990/91 and
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1998/99. As illustrated, the burden of rising fees have not affected all families equally. The 20% of families in Canada with the lowest income saw an increase in the affordability index from 0.14 to 0.23 during this period. Put another way, whereas these families would have had to set aside 14% of their after-tax income in 1990/91 to pay the costs of university tuition and fees, by 1998/99 they would need to devote 23% of their after-tax income. By contrast, the richest 20% of families saw only a modest increase in their affordability index — from 0.03 to 0.04. Consequently, the gap in the index between income quintiles rose significantly over this period, suggesting a greater inequality on the part of families from different income groups to finance the university education of their children. The difficulty that lower income families face in saving for their children’s education was highlighted in a recent Statistics Canada survey on approaches to educational planning. The vast majority of Canadian parents, it was shown, want their children to attend a college or university, but nearly half have not been able to set aside educational

Table 7: Post-secondary aspirations and savings, 1999
Household income % of children whose parents hope they will attend postsecondary institutions 79.8 85.8 90.6 93.4 95.0 % of children whose parents are saving for their postsecondary education 18.7 37.4 45.6 52.6 62.6

less than $30,000 $30,000-$49,999 $50,000-$59,999 $60,000-$79,999 $80,000 or more

Source: Statistics Canada, The Daily, April 10, 2001.

savings. Not surprisingly, there are significant gaps between low- and highincome households. The parents of 80% of children in low-income households hoped their children would pursue a post-secondary education, but less than 20% reported education savings. By contrast, parents of 95% of the children in high income households hoped their children would get a college or university degree, and 63% reported savings (see table 7). Conclusion The rapid rise in tuition and fees over the 1990s has been driven primarily by the reduction in government operating funding. Increased operating expenditures on student financial aid may have also contributed to increased fees. Contrary to popular opinion, expenditures on academic salaries have not been a factor behind the rise in tuition. It is true that some provincial governments have frozen and even reduced tuition in recent years as the economic climate has improved. However, much of the official response from both federal and provincial

governments has been focussed on efforts to expand the range of financial options to help students and their families pay for the higher costs of university education. In recent years, for instance, the federal government has introduced the Canada Millennium Scholarship, the Registered Education Savings Plan, and the Canada Education Savings Grant applied to private RESP savings. Importantly, none of these responses actually reduce the cost of tuition. In fact, since the RESP and CESG programs are linked to the ability of families to save money, they are really only an option for those with significant disposable income. As shown above, the most visible effect of rising fees has been to unfairly burden lower income households, a trend that is leading to greater educational inequalities. In this context, the rapid increase in the affordability index amongst the lowest income households is particularly worrisome and points to further inequities in accessibility in the years ahead. It is not inevitable that university fees continue to rise. The problem of higher fees is a political problem, caused by the rapid
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public dis-investment in post-secondary education over the past decade. As such, policymakers can take immediate steps to ensure that post-secondary education is affordable and accessible to all qualified students:

Increase core operating grants. If government funding cuts are the key reason why fees have risen, then an increase in public operating grants is the primary way fees can be frozen and lowered. Provide needs-based grants. Canada lacks a national student grant program and many provinces have eliminated non-repayable student grants in recent years. However, the greater availability of grants based on income would clearly permit more economically disadvantaged students from attending university or college without the risk of amassing mortgage-sized debts.

Ultimately, solving the emerging crisis of affordability in post-secondary education will require action on the part of both the federal and provincial governments. Such efforts will demand a new and rare spirit of federalprovincial cooperation in order to find ways to ensure that cost is not a barrier to any qualified student. This is a daunting challenge. Failing to meet this challenge, however, will mean future generations of Canadians will have to live with the fallout of an increasingly privatized system of postsecondary education and its import on educational opportunity and quality.

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Notes 1. Information on university revenues and expenditures in this report comes from data collected annually from the Chief Financial Officers of universities and university colleges across Canada by the Canadian Association of Business Officers (CAUBO). For Ontario universities, information is collected by the Council of Ontario Universities and subsequently compiled by CAUBO along with reports from other provinces. The information is prepared and distributed annually in electronic format by the Centre for Education Statistics of Statistics Canada. Collection and compilation of this information takes over a year, so that the most recent release covered fiscal years ending in 1999. 2. A recent Ottawa Citizen editorial argued that professors enjoy “generous salaries” that are accompanied by “equally generous conditions of service.” The editorial writers suggested that the next time students want to protest against rising fees, they should look at the salaries professors are earning. See “Prof’s salary 100(000),” Ottawa Citizen, April 6, 2001, p. A16. 3. This conclusion is supported by some recent local studies about the changing socio-economic makeup of incoming university students. A report prepared for the University of Guelph’s Senate Committee on University Planning in 1999 concluded that over a ten-year period, “relatively more students from higher-educated and affluent families chose admission to Guelph than those from lower educated and low-income backgrounds,” (Sid Gilbert, Ian McMillan, Linda Quirke, and Joanne Duncan-Robinson, “Accessibility and Affordability of University Education,” University of Guelph: December, 1999). Similarly, a report to the Senate of the University of Western Ontario found that between 1997 and 2000, when fees for medical school were deregulated and allowed to rise from $4,844 to $14,000 a year, the proportion of incoming students from families with modest and low incomes fell dramatically. The report notes that in 1997, 35.7% of incoming students came from households with incomes less than $60,000. In 2000, that figure had fallen to just 14.9%. Over the same period, the average family income of students increased from $84,000 to $140,000 (Medical Students of the University of Western Ontario, Access to Medical Education: A Proposal to the University of Western Ontario Senate, 2001).

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