Tuition Policy is Also Subsidy Policy

Indeed higher education has intrinsic value. Yet, despite the ongoing insistence by many that we should not "treat schools like factories or businesses," Manitoba is forced to consider the cold financial question of how to pay for PSE.

With few exceptions, governments remain the only supplier of the service to "preserve equity and fairness." Direct beneficiaries of the service pay a "user fee" - in this case, tuition - for use of the service. Meanwhile, taxpayers pay a subsidy toward the service.

Obviously, this funding model is what our universities and colleges use now. It may seem absurd at first, but this model is not much different from the funding of public transit or a variety of agricultural services.

But just what are we subsidizing as taxpayers ? Just what do students support with their tuition, and why?

The "Hidden Barrier:" Student Aid and Cost of Living for Needy Students

The MTA recognizes that one significant financial barrier to PSE access is the need to defer income potential, or worse, to cover the cost of living while focusing exclusively on studies.

The socialization of student life through cost-of-living grants as called for by the Canadian Federation of Students is culturally, financially and politically unacceptable. Many taxpayers, particularly those amongst the working poor, are in neither the mood nor the position to subsidize the daily lives of students, particularly when the majority of PSE students who are either already from upper income groups or will enter that income strata after graduation.

These cost-of-living expenses, like tuition fees, represent an input cost to the final product - an educated student. The best way to reduce input costs for students is not through subsidy but rather through actual reductions of the cost itself. Subsidies are the more expensive route.

Restructuring of Manitoba's various governments and agencies are an effective means of reducing cost-of-living barriers. By reducing the cost of government (and, incidentally, the cost of PSE), Manitoba will be in a position to actually reduce the government-imposed costs-of-living for every needy Manitoban, student or not.

The faster we can repay our provincial debt, the faster we will be in a position to raise base personal deductions on income tax, allowing the working poor (many of whom are students) to keep more of their dollars to meet cost-of-living expenses. Reduced sales taxes will have a similarly positive impact. Reduced property taxes will allow many cash-strapped mature students to keep their home while attending school. Lower taxes on properties and utilities will keep rent and shelter costs low. Lower payroll taxes will make enhanced job creation for the student labour market possible. A more efficient transit system will create lower transit fares for students. All of these factors would have a significant and direct impact on a student's ability to survive while enrolled for studies.

A Rebuttal to Gross Cost Calculations of Tuition Share
- the "Greenvale Model"

The Point being made here is that we don't have a revenue problem. We have a spending problem. Canada spends more of its GDP on higher education (1.7%) than the OECD (Organization of Economic Cooperation and Development) average (1%).

An alternative to the multiuniversity model with all its bells and whistles was advanced by St. Mary's University Professor, Peter March, who had the pleasure of speaking to students at this university a few years ago.

March's key impact on tuition policy can be found in his guarantee that a Greenvale model institution would guarantee tuition fees equal to or less than those offered in public institutions in the same province, without accepting a single dollar of operating or capital subsidies from taxpayers. He achieves this goal in a tested financial model through three simple steps:

1. By eliminating virtually all non-educational costs from institutional budgets.

2. By creating a performance-based pay scheme for professors

3. By eliminating the need for sprawling physical plant and campus and replacing them with a replica of the British tutorial-based instruction system

4. By redefining what we mean by tuition

What is Tuition?

Canadian conventional wisdom defines tuition as a fee paid by students, with revenue intended to help cover the costs of education. In theory, tuition represents a "reasonable contribution" to overall costs.

There are serious problems with this perception.

PSE analysts typically define the "cost of education" as the cost of a particular institution. Students are said to be paying "21% of the cost of education." That figure is derived from a cynical and simplistic formula:

((tuition collected / gross institutional expenditure) x %)

Almost any public discussion of tuition in Canada begins with this premise.

As "the cost of education" - a.k.a. the cost of the institution - continues to rise, stakeholders then seem justified in increasing pressure on students and taxpayers to maintain relative shares of overall. Strangely, even student unions have come to accept what we call the "gross cost" formula as a fair basis for determining tuition policy.

1. To discover the true cost of an education and thereby calculate the rate of tuition, Professor March by eliminating virtually all non-educational costs from the institution itself.

To strip down the university to its bear essentials, March proposes making do with less. That is, no more:

1) Registrar's office

2) Admissions office

3) Deans and Dean's offices

4) Alumni Office

5) Art Gallery

6) Arena and Sportsplexes

7) Bookstore

8) Athletics

9)

10) Computer services

11) Conference office

12) Food services

13) Continuing education

14) Media services

15) Residences

16) Student services

17)

18)

19) Student employment

20) Research office

21) Personnel office

22) Plant operations

23) Security

24)

These services will either not be provided or will be provided at cost by the professors and by the surrounding private sector. It is believed that the surrounding community can provide and would greatly benefit from having the opportunity to provide such services as bookstores, sports facilities, child care facilities, etc.. These burdens are thus lifted from the Administration [and students and taxpayers ! ], thereby substantially reducing the operating costs of the College. The remaining essential services fall under one category - academic."

March's list of extraneous university activities provides considerable ammunition for those looking to cut PSE budgets, control tuition levels and still preserve education.

2. By creating a performance-based pay scheme for professors

March - a tenured professor and former faculty union president - argues that this pay structure serves neither taxpayers' interests nor students' interests. First, he notes that the existing tenure structure guarantees that between 40%-60% of total institutional instructional faculty is totally unaccountable for poor teaching, and so he argues for its elimination. He then argues that "public service" as defined above cannot be measured or supervised, and should not be funded from the budgets of educational institutions.

We concur with March's argument. Salary funding for professorial research is unaccountable and unnecessary, and should not be drawn from tuition or subsidy revenues.

But what of the need to remain professional, and keep up to date ? What of the need to pay for the costs of research and instruction ?

As to professionalism, hundreds of other professions rely on the continuing will and whim of their members to keep up to date without additional compensation of $20,000-$45,000 annually for unsupervised professional growth.

The second concern - which is particularly valid for scientific disciplines - is easily addressed through an argument unmentioned by March. The "arrangement at Oxford and Cambridge" is preserved in part by the knowledge that tax-funded and corporate research pools make hundreds of millions of pounds available to researchers. Such funding is usually offered on a per-project basis that is much more accountable than the salary-funded research in Manitoba.

A similar pool of capital is available to Manitoba academics. Literally billions of tax dollars are available annually for research, through agencies like the Canada Council, the Social Sciences and Humanities Research Council of Canada, the Medical Research Council and the Natural Science and Engineering Research Council of Canada, to name a few. It is rare indeed to find a Manitoba academic who will proceed with a major research project without first applying for support from one of these funding bodies. In fact, the U of M received $50.5 million in "sponsored or assisted" research funds over the 1995-196 fiscal year from provincial, federal, corporate and other sources.

The Greenvale alternative is a pay scheme based on the number of students taught, with variable fees set by individual professors at a level that must be equal to or lower than existing tax-subsidized course rates. The use of external examiners would force professors to teach to a certain standard, and published results of a professors' class success or failure rates will allow students to create their own free-market style accountability mechanism. If a professor cannot teach successfully, demand will fall and the professor's salary will also fall until the problem is corrected.

3. By eliminating the need for sprawling physical plant and campus and replacing them with a small-class replica of the British tutorial-based instruction.

This point is self-explanatory. The U of M currently spends over $20,000,000 of its operating budget on management and operation of its physical plant. It continues to add to those costs by adding new capital expenditures, despite declining enrollment.

The provision of free offices for professors, the massive administration, the diverse range of offices and services and the total failure to use technology to replace concrete are all heavy financial burdens on students and taxpayers. The alternative Greenvale model would almost be a "virtual college." Some class, reading and study space would be available, but professors would be encouraged to work face to face in libraries, restaurants, homes or other suitable locations for tutorial-style instruction, thereby reducing the need for a multi-building campus. Laboratory or lecture hall space would be available for low-cost rental.

The "Greenvale Revolution" and Implications For Provincial Tuition Policy

The Greenvale proposal should lead policymakers to step far, far away from the gross cost formula when determining the "cost of education" paid by students and taxpayers. A new, fairer formula to calculate the current cost of education would include:

A. cost of academic salaries

B. Instructional overhead costs (e.g. maintenance of laboratory, computer and scientific equipment necessary for student research or instruction)

C. The cost of calendar production

D. The cost of basic administration (transcripts, admissions)

E. Capital costs directly related to classrooms, libraries, maintenance, laboratories, etc.

Thus, a calculation of the existing student share of the "cost of education" would be:

((Tuition collected / (A+B+C+D+E)) x %)

Greenvale is bold example for policymakers, as it offers a practical, affordable and quality alternative to the rising costs of the multiversity bureaucracy.

Tuition: A "Pro-Taxpayer, Pro-Student" Solution

Tuition fees are a user fee or input fee, levied by the state on those who choose to participate in the near-monopoly PSE system. Like any user fee, it should be designed to take from the payer no more than is required for operation of the actual service.

Our society cannot afford prohibitive levels of tuition, nor can it afford prohibitive levels of subsidy for PSE institutions. The MTA rejects suggestions that the PSE system needs more gross revenue. Rather, as with almost every case of government-provided service delivery, we feel that a better solution can be found in thoughtful overall cost reductions.

INCOME CONTINGENT LOANS

The Manitoba Taxpayers Association and its parent federation are on record as supporting loans-based student aid. We must, however, stress the need for fairness to both students and taxpayers, as is best embodied by the flexible loan repayment plans found in some income-contingent loan models. We also stress the need to ensure that taxpayers do not needlessly bear the cost of administration of such loans. If a private-sector agency or business is in a position to manage student aid, carefully regulated government cooperation with the private-sector is ideal.

By: Victor Vrsnik
Posted: January 20, 1998
Topic: Manitoba

Contact the regional director Colin Craig for further information.

Type: Related

Join Us   |   Donate