Investing for the Future: Post-Secondary Education Issues and the Canadian Federal Election

Transcription

1 Investing for the Future: Post-Secondary Education Issues and the Canadian Federal Election September 2008

2 InvestingfortheFuture:Post SecondaryEducationissuesandtheCanadianFederalElection Introduction OnOctober14,2008,Canadianswilltraveltothepollsforthe40 th CanadianGeneralElection onlytwo yearssincethe2006electionwhichbroughttheconservativegovernmenttopower.inpreparationfor the election, the Educational Policy Institute (EPI) is publishing a series of election related papers, including an overview of the top post secondary education issues in Canada and platform analyses of eachparty spositions. Thispaperprovidesanoverviewoffourkeypost secondaryeducationissuesfromafederalperspective: FundingPost SecondaryEducation InvestmentsinResearch Tuitions,StudentAidandAffordability AccessandPersistence The purpose of this document is to act as a resource for those interested in education as an election issue. It provides factual, up to date information on existing government policies and spending, along with key recent research findings. Later in the campaign, as each national political party releases its platformsandeducationpolicies,epiwillbereleasingaguidetothepartyplatforms. EducationalPolicyInstitute 1 P a g e

3 InvestingfortheFuture:Post SecondaryEducationissuesandtheCanadianFederalElection FundingPost SecondaryEducation Overthepastfiveyears,Canada sprovincialgovernmentshaveincreasedspendingonpost secondary educationby50%,from$13bin2003to$19.5bin2008.whilepublicspendingonalllevelsofeducation iscomparabletotheoecdaverage(4.6%),fundingforpost secondaryeducationincanada at1.4%of GDP isalreadysubstantiallyhigherthantheoecdaverageof1.1%(figure1). Figure1:PublicSpendingonEducationasaRatioofGDP(%),2005 Source:OECD,EducationataGlance(2008) WhileCanada sconstitutionidentifieseducationasanareaofexclusiveprovincialjurisdiction,thishas not prevented the federal government from playing a growing role, especially in post secondary education: HumanResourcesandSocialDevelopmentCanada(HRSDC)managesasubstantialportfolioof student financial aid programmes for post secondary students, including the Canada Student Loan(CSLP)andCanadaEducationSavingsGrant(CESG)programmes; IndustryCanadaisresponsibleforanumberofinitiativesthateitherdirectlyorindirectlyfund researchactivitywithinthecountry spost secondaryinstitutions; TheDepartmentofFinanceprovidestaxcreditstopost secondarystudents,alongwithtransfer paymentstoprovincialgovernmentsthatarenowatleastpartiallyearmarkedforreinvestment inpost secondaryeducation. Ottawa s involvement in research and student financial aid are discussed in greater detail below, but oneofthecentre piecesofthefederalroleinpost secondaryeducationistheannualblocktransfersof cash and tax points to provincial governments. Established Programs Financing(to help the provinces fund health care and post secondary education) and the Canada Assistant Plan (for social programs) werecombinedintothecanadahealthandsocialtransfer(chst)in1996,andthendividedagaininto thecanadahealthtransfer(cht)andcanadasocialtransfer(cst)in2004.broadlyspeaking,asthese federaltransfersfellinthemid 1990sandthenroseagainsubsequently,sotoodidprovincialspending on post secondary education, though because these transfers were not tied directly to provincial spendingthereisnowaytoaccuratelymeasurehowthechangesaffectedpsespending. EducationalPolicyInstitute 2 P a g e

4 InvestingfortheFuture:Post SecondaryEducationissuesandtheCanadianFederalElection In theCSTwillgrowto$10.6Bincashand$8.5Bintaxpointtransferstotheprovinces,andthe federalgovernmenthasdesignated$3.2bofthattotalforapost secondaryfundingenvelope. Overthecourseofthe1990s,atimeofsignificantgovernmentausterity,Canadianuniversitiessawthe proportionoftheirfundingfromprovincialgovernmentsourcesdeclinefrom76%to56%.since2003, most provincial governments have undertaken substantial public reviews of their post secondary systems with a view to providing directions on new investments. Since then, public spending on universitieshasalreadyreboundedfrom$6.3bin to$8.5Bin Combinedwithaseries oftuitionfreezes,restrictionsandrebatestoensurethatatleastpartoftheincreasedfundingwouldbe passedontostudentsintheformofreducedcosts,provincialfundingisnowgrowingagainasasource ofuniversityoperatingrevenues. Whileaone timetransferof$1bforpost secondaryinfrastructureduring and (Figure 2) and the creation of a designated and expanded $3.2B post secondary funding envelope within the CST in are both welcome news, those federal investments are still small compared to the annualinvestmentbeingmadebyprovincialgovernments(figure2),andthegapislikelytogrow.while provincialfundingofpost secondaryeducationincreasedbybetween8%and12%foreachofthepast fouryears,thefederalgovernmenthasmandatedincreasesofonly3%peryearforthepost secondary componentofthecst. Figure2:FederalTransfersandProvincialFundingforPSE($B) Source:FederalandProvincialDepartmentsofFinance EducationalPolicyInstitute 3 P a g e

5 InvestingfortheFuture:Post SecondaryEducationissuesandtheCanadianFederalElection InvestinginResearch Nations invest in research and development (R&D) in order to ensure that their economies remain competitive and productive. If Canadians hope to maintain their high standard of living, those investmentsmustcontinuetogrow. Theprivatesectorfundsmorethan50%ofallR&DactivityinCanada,thoughmuchofthisisindirectly subsidizedbythefederalgovernment.thescientificresearchandeconomicdevelopment(sr&ed)tax credit is one of the most generous tax subsidies in the world, and allows private sector companies to immediately expense 20% (35% for small businesses) of their R&D expenditures. This amounts to an indirectfederalsubsidyofatleast$3beachyear,andmostprovincessupplementitwithanadditional 10% 15% of matching tax credits. The impact of the SR&ED is increasingly being called into question, however: R&DspendingbyCanadianbusinesseshasbarelyincreasedindollartermsinrecentyears(Table 4),andhasactuallydeclinedasapercentageofthenationaltotal(seealsoResearchInfosource, Canada stop100corporatespenderslist2007analysis andc.d.howeinstitute, GivingWith OneHand,TakingAwaywiththeOther:Canada staxsystemandresearchanddevelopment, October2006); As a result of little or no growth in private sector investments, Canada s Gross Domestic ExpenditureonR&D(GERD)hasdeclinedfromapeakof2.09%in2001(Figure3); Canada s overall investments in R&D are falling further behind the OECD average (2.2%), and other nations including smaller ones such as Denmark, Finland, Korea, and Austria invest substantiallymoreoftheirnationalwealthinr&d(figure3). Figure3:GrossDomesticExpenditureonR&D(GERD)as%ofGDP Source:UNESCOInstituteforStatistics In addition to indirectly encouraging R&D activity through SR&ED and other programs, the federal governmentalsomakesdirectinvestmentsinresearchandinnovation.eachyear,morethan$2binr&d activities takes place within various federal government laboratories and research centres (Table 4). Another$3Bofthe$10BofR&Dactivitythattakesplacewithinpost secondaryinstitutions(table4)is alsofundedbythefederalgovernmentthroughthethreemajornationalgrantingcouncils Canadian Institutes of Health Research (CIHR), Natural Sciences and Engineering Research Council (NSERC) and Social Sciences and Humanities Research Council(SSHRC) as well as through other federal creations EducationalPolicyInstitute 4 P a g e

6 InvestingfortheFuture:Post SecondaryEducationissuesandtheCanadianFederalElection suchasthecanadafoundationforinnovation(cfi),whichhascommittedmorethan$4.4btoresearch infrastructureatpost secondaryinstitutionsandelsewhereduringthepastdecade. Table4:GrossDomesticExpendituresonR&D PerformingSector($B) BusinessSector $14.27 $13.54 $14.04 $14.95 $15.36 $15.36 $15.77 FederalGovernment(Intramural) $2.10 $2.19 $2.08 $2.08 $2.41 $2.30 $2.34 Post SecondaryInstitutions $6.42 $7.46 $8.14 $9.06 $9.52 $9.97 $10.43 ProvincialGovernments $0.28 $0.28 $0.28 $0.29 $0.30 $0.32 $0.32 PrivateNon Profit $0.06 $0.06 $0.09 $0.10 $0.11 $0.12 $0.12 TOTALR&D $23.13 $23.53 $24.63 $26.48 $27.70 $28.07 $28.98 Source:StatisticsCanada Inlessthanadecade,federalfundingoftheTri Council(CIHR,NSERC,SSHRC)hasmorethandoubledto $1.5B (Figure 5). If the newly created Canada Research Chair ($250M), Indirect Costs of Research ($300M)andNetworkCentresofExcellence($80M)programmesarealsofactoredin,fundingthrough thetri Councilhasalmosttripled.Whilefundingincreasesbetween averagednearly11%per year,however,theyhaveslowedsignificantlysincethen,droppingtoonly4.4%in (Figure5). Furthermore, a growing portion of those smaller increases are now being targeted at mandated researchprioritiessuchashealthsciences,energy,andtheenvironment. Figure5:TotalTri Council(CIHR,NSERC&SSHRC)FundingandAnnualPercentageIncreasesinFunding Source:CIHR,NSERC,SSHRC AmongOECDcountries,Canadahasamongthehighestproportions(nexttoSpain,PortugalandGreece) ofitsr&dbeingconductedbythepost secondaryratherthanthebusinesssector.whileuniversitiesare becomingincreasinglycentraltocanada sr&deffort,itisworthrememberingthatthisisaby product oftheoverallweaknessofr&dactivityinthewidercanadianeconomy. The federal government and an increasing number of provincial governments are also making significant investments designed to expand the number of highly qualified personnel (HQP) earning graduatedegreesatcanadianuniversities.thenumberofcanadianjobsrequiringgraduatecredentials EducationalPolicyInstitute 5 P a g e

7 InvestingfortheFuture:Post SecondaryEducationissuesandtheCanadianFederalElection hasgrowntomorethanonemillion,andenrolmentsinmaster sandph.d.programmeshavealready increasedby60%duringthepastdecade from65,000tomorethan100,000 tomeetthatdemand. This is being further encouraged through new federal initiatives like the Canada Graduate Scholarship (CGS) and ACCELERATE internship programmes. It is unclear, however, how a general expansion of admissionsandenrolmentswillimpactonthequalityofuniversitygraduateprogrammes,ortheability ofhqpgraduatestofindemployment. Tuition,StudentAid,andAffordability Fornearlyadecade,Canada spost secondaryinstitutionswereexpectedtoeducatemorestudentsand expandtheirresearchandinnovationcapacitywhilereducingtheirrelianceonpublicfunding.student fees were the only major source of revenue left for universities to draw upon, so university tuitions morethandoubledacrossthecountry,risingfromanationalaverageof$2,000in tojustover $4,500in (Figure6,redcolumns),andincreasingfromlessthanaquartertomorethanathird ofuniversityoperatingbudgets(figure6,blueline). Figure6:UniversityTuitionFees,IncludingasaSourceofOperatingRevenue Source:StatisticsCanada,CAUBO Asthecostsforpost secondarystudyincreasedduringthepastdecade,thefederalgovernmentbecame thesourceofmorethanhalfofallfinancialaidby : The Canada Student Loans Program(CSLP) provides nearly $1.8B in loans and grants for postsecondary students in the greatest financial need; it is delivered in combination with various provincialprogramswhichprovideanother$2.6binloansandgrants(figure7); Federaltaxcreditstotalnearly$1.4B(Figure7)andareauniversalformofassistanceavailable tostudents(andparents)asannualtaxdeductionsforeducation relatedexpenses(tuitionfee Tax Credit and Education Tax Credit), and as Student Loan Interest Credits and Scholarship Exemptions; RegisteredEducationSavingsPlans(RESPs)currentlycostthefederalgovernment$700M/year and were introduced in 1998 to encourage parents to invest early for their child s postsecondary education. In combination with the Canada Education Savings Grants (CESG) and Canada Learning Bonds (CLB) for low and modest income households, these initiatives have EducationalPolicyInstitute 6 P a g e

8 InvestingfortheFuture:Post SecondaryEducationissuesandtheCanadianFederalElection already encouraged investments of $22B in RESP accounts that now account for one in three Canadianchildrenaged0 17.In2006alone,morethan$1BinRESPassetswerewithdrawnto supportmorethan190,000post secondarystudents; Studentsalsoreceivescholarshipsandbursariesthroughotherfederally fundedprogramssuch asthecanadamillenniumscholarshipfoundation($350m/year),thetri Council,etc.; Universitiesnowprovidestudentswithasmuchas$1B/yearforfinancialneedand/oracademic merit,thoughthisisprimarilyatthegraduatelevel. Figure7:TotalFinancialAidAvailabletoPost SecondaryStudents Source:EducationalPolicyInstitute,StateofStudentAidinCanada,2006 7(forthcoming) Although the past decade of tuition increases have been an obvious financial burden for Canadian students, especially at universities, the growing availability of a variety of forms of financial aid has lowered the actual sticker price of a post secondary education. When tax credits are taken into consideration, the net cost of education to students in actually was only $283 higher in real dollarsthanitwasadecadeearlier(figure8). Figure8:TuitionandNetTuitionAfterTaxCredits(in2007RealDollars) Source:EPI,BeyondTheStickerPrice(forthcoming) EducationalPolicyInstitute 7 P a g e

9 InvestingfortheFuture:Post SecondaryEducationissuesandtheCanadianFederalElection Ifinstitutionalassistance($1Bperyearforwhichasmanyas40%ofundergraduateuniversitystudents werebeneficiaries),resppayouts($1bperyearcurrentlyand190,000recipients),andavarietyofother newprovincialgrants,taxcreditsandtuitionrebatesarealsofactoredin,thenetcostsactuallyseemto be increasingly manageable for most post secondary students. This is reinforced by other data which showsthefollowing: Most provinces or post secondary programs that underwent significant tuition increases in recentyearsnotonlyexperiencedanegligibleimpactonoverallparticipationorpersistence,but actuallysawenrolmentsincreaseinsomecases; Both the proportion of post secondary students with debt, and their average debt, appear to havelargelystabilizedoverthepastdecade. Moreandmoreresearch,infact,appearstoconfirmthatfinancialissuesontheirownarenotthemost important determinants impacting upon an individual student s access to and persistence in postsecondaryeducation. AccessandPersistence In recent years, there has been some encouraging growth in post secondary enrolments. While communitycollegescontinuedtoenrolapproximately500,000studentseachyear(figure9),university enrolments increased since 2000 by nearly 200,000 in undergraduate and more than 100,000 in graduate programs(figure 9), and grew by more than 250,000 part time students. Enrolment growth hasbeenparticularlysignificantforfemales,whonowcomprisemorealmost60%oftheundergraduate studentbodyandcloseto50%ofallgraduatestudents. Figure9:Full timecollegeandundergraduateuniversityenrolments Source:StatisticsCanada Not all Canadians are attending in equal numbers, however. Studies have repeatedly shown that parentaleducationlevelsarethemaindeterminantofpseaccess.thismeansthatyoungpeoplefrom families with higher incomes tend to be more likely to attend PSE, especially university. Also over EducationalPolicyInstitute 8 P a g e

10 InvestingfortheFuture:Post SecondaryEducationissuesandtheCanadianFederalElection representedrelativetotheirshareofthepopulationarechildrenofimmigrants,mostvisibleminorities, andfemales.conversely,aboriginalyouth,youthwithdisabilitiesandmalesareproportionatelyunderrepresented. Overthelongrun,theimprovementofaccessmattersbecauseofdemographics.TheratioofCanadians aged55andolderisgrowing,whiletheratioofthoseaged15andyoungerisinsteadydecline(figure 10).Withanadultpopulationthatisrapidlyagingandretiring,andwithgenerallyhigherlevelsofskills required in the labour market, the demand for young workers with post secondary credentials will continuetogrowatarapidpace.currentratesofpost secondaryparticipationandcompletionmustbe maintainedandincreasedinordertomeetthisdemographicchallenge. Figure10:PopulationAged19andYoungerand55andOlder Source:StatisticsCanada ManyprovincesarealreadyexperiencingthedemographicshiftanddecliningenrolmentswithintheirK 12 systems, and in the Atlantic provinces it is being felt by post secondary institutions as well. Nationally,theimpactofdemographywilllikelybegintobefeltinanother3 4years.Inordertoprepare forthatnewreality,someimportantchallengesneedtobeaddressed: Between 2000 and 2005, the average earnings of young men without a post secondary educationgrewwhilethosewithauniversitydegreedecreased,whichmayexplainwhyasmany as one quarter of high school graduates continue to choose work over post secondary study, particularlyamongmalesandinprovinceswherethereisastronglabourmarketdemand; While much of the recent focus has been on financial need, a growing number of studies are showing that academic achievement and parental influence account for most of the participationgapinpost secondaryeducation.inthemostrecentstatisticscanadastudyonthe issue, only about one eighth of the difference in university going rates between children from poorandwealthyfamiliescouldbeexplainedby financialreasons ; Youthwhohavetraditionallybeenespeciallyunder representedinpost secondaryeducation such as those from low socio economic backgrounds, first generation learners and Aboriginal students faceanumberofdifferentbarriersthatimpedeaccess,includingacademic,financial, andinterestandmotivation; EducationalPolicyInstitute 9 P a g e

11 InvestingfortheFuture:Post SecondaryEducationissuesandtheCanadianFederalElection From1993to2003,therewasalsoasignificantchangeintheeducationalchoicesofCanadians as more obtained university degrees while fewer earned credentials from private and public collegesandtradeandvocationalinstitutions(figure10). Figure10:Post SecondaryCredentialsof25 34YearOldCanadians Source:StatisticsCanada If Canada hopes to increase post secondary participation and completion rates, and address the demographicandlabourmarketneedsofthefuture,bothfederalandprovincialgovernmentsmustturn their focus away from needs based student aid programs and towards other issues. As explained recently in a publication of the Association of Universities and Colleges of Canada(AUCC), To have a real impact on the proportion of low income students in university programs, aid programs need to focusonmorethanfinancialassistancedeliveredatthetimeofacceptanceandentrytouniversity.they need to address the range of factors that begin to affect potential higher education students much earlieronintheireducation. EducationalPolicyInstitute 10 P a g e