Postsecondary institutions to face a challenging year, with public pressure and financial deficits
A tour group of students, some with parents in tow, snaked around the sprawling York University campus last month surrounded by signs of a new school year ready to begin.
The tour guide expounded on the new horizons that the university can offer: There’s the building where you can learn a new language, over there you’ll find the science labs, the library has at least two million volumes, and did you know there are more than 300 student clubs on campus?
Similar similar scenes are playing out at universities across the country. But whether it’s at York, one of the country’s largest postsecondary institutions with more than 50,000 students, or at smaller, regional schools, it’s clear that to keep offering that range of horizons, universities are having to adapt to tough times.
The past year brought a number of external shocks to the Canadian postsecondary system, from a cap on international study permits that will cut tuition revenue, to protests over the war in Gaza that ruffled donors, to unfavourable funding decisions by provincial governments in Ontario and Quebec.
As students and professors return in September, they’ll be coming back to schools that are adjusting to straitened circumstances. Deficits are becoming more common and reserves are being drawn down. Hiring freezes are being implemented and services are being trimmed and consolidated.
In Montreal, Concordia University president Graham Carr had to confront many of these issues.
“You could pick one of any number of topics and that would have made it a challenging year, but it’s the convergence of topics which has made things particularly tense,” Dr. Carr said. “I don’t think anything could have fully prepared university leadership for what it’s facing today.”
In March, Gabriel Miller became president of Universities Canada, the national body that represents nearly 100 schools. In his first months on the job he met personally with about 70 per cent of Canada’s university presidents, by his estimate. He heard the same thing from nearly everyone, he said.
“The consensus is definitely that university finances in this country are not sustainable.”
For some smaller institutions, he added, it could be a year or two before their backs begin to break.
Budget documents for the year ahead refer to “headwinds” and “fiscal challenges.” They don’t call it an outright crisis, but the trend is worrying.
Universities don’t typically run deficits. In Ontario they can do so, while in B.C., legislation requires universities to seek government approval beforehand. For many years increasing international admissions has been how schools have coped with rising salary costs, but that will be more difficult as the caps imposed by the federal government and allocations handed out by provincial governments limit growth.
Hamilton’s McMaster University’s budget includes a message from its president that describes “unprecedented” financial difficulties facing universities across Ontario. McMaster expects an operating deficit of more than $30-million this year, one it says it can absorb.
It’s got plenty of company, particularly in Ontario. The University of Waterloo budgeted for a $75-million operating deficit this coming year. The University of Ottawa projects its deficit will be about $18-million.
Queen’s University in Kingston has planned for a nearly $36-million operating deficit and the University of Guelph is predicting operating deficits for the next three years. At the end of April, York University’s operating deficit for 2023-24 had ballooned to $142-million, nearly twice its projected size, and it projects an operating deficit of $132-million again this year.
Some schools have managed to steer clear of these troubles. The University of Toronto is still projecting an operating surplus of more than $500-million this year ($43-million lower than the year before) and the University of British Columbia projects a nearly $130-million surplus ($23-million lower than the year before).
But the troubles are widespread. At Simon Fraser University in B.C. the operating deficit this year was initially projected at nearly $50-million, although a hiring freeze and other cost saving measures brought the budget back into balance before it was approved by the board. The University of Alberta projects a $46-million operating deficit. McGill approved a provisional budget with a $12-million deficit, which it says could be nearly $90-million by 2028. And Concordia is aiming to find more than $35-million in savings this year just to keep its deficit to $34.5-million.
The pressure on schools has been building over the past year.
It began last August when the federal government threatened a cap on international student admissions, which it pushed through a few months later. Universities and colleges rapidly increased international admissions over the past decade, tripling the number of study permits issued, in part to boost revenue. Average international undergraduate tuition last year was more than $38,000, compared with about $7,000 for a domestic student.
But in many communities, housing shortages were exacerbated by the growth in student numbers, prompting the federal government to cut the number of study permits this year.
That came as a blow to a sector that had grown accustomed to being able to tap into the billions available in international tuition to cover their funding gaps.
Nearly every university mentions the negative impact of the international study permit cap in its budget documents. To take one example, the University of Guelph points out that 100 additional international undergraduate students would bring in $3.7-million more in revenue. Guelph has covered its operating deficit by dipping into reserves, which are forecast to have declined from more than $80-million in 2019 to less than $20-million this year.
At the University of British Columbia, international tuition is responsible for about 25 per cent of all revenue (or more than $600-million), compared with domestic tuition at 16 per cent and government funding at 40 per cent.
Last October the Quebec government hit English universities with a tuition hike and revenue claw-back that pushed tuition for out-of-province students to nearly twice the national average. McGill, which has seen applications drop, anticipates losing about $91-million in revenue from 2025 to 2028 as a result.
In early 2024, Ontario Premier Doug Ford declined to lift a tuition freeze that universities say leaves them financially hobbled. The roughly $900-million in additional funding he committed was about half of what an expert panel his government convened had said was necessary to address a serious sustainability risk.
Universities in Ontario have also had to adapt after the government’s Bill 124, which aimed to limit wage growth in the public sector to 1 per cent a year, was found to violate the Charter and was repealed. Wages and benefits typically make up 70 to 75 per cent of a university’s expenses. As the University of Ottawa puts it, the renegotiations resulting from the repeal of Bill 124 have had a significant financial impact, including tens of millions in retroactive salary payments and higher expenditures.
In April a wave of student encampments sprang up across the country demanding divestment from Israel. Universities struggled to balance the right to protest and free expression with demands of public safety. The conflict that ensued irritated some provincial governments and some private donors. Mr. Ford called for the encampments to be moved and Quebec’s François Legault called for police to dismantle them. It’s not clear whether protests will resume when students return, but if they do, universities may come under further pressure from government to curtail their impact.
Meanwhile, working away below the surface, university finances continued to deteriorate.
Queen’s went through public hand-wringing over its budget cuts, including an effort to eliminate courses with fewer than 10 students. At least 10 Ontario universities projected deficits, stirring memories of the crisis at Laurentian University in Sudbury.
In 2021, Laurentian filed for creditor protection, a shocking near-collapse for a publicly funded university. A lengthy insolvency process led to the loss of hundreds of jobs and dozens of program closings. Laurentian is projecting a narrow surplus this year.
The federal government this year passed legislation to prevent other publicly funded universities from using the Companies Creditors Arrangement Act, the legal process Laurentian invoked.
As universities face difficult financial circumstances, they’re also under pressure from public opinion. That’s significant because public pressure on governments is likely the best hope for universities if they seek to limit future cuts.
At a meeting in Quebec City in April, Canada’s university presidents were shown a PowerPoint slide that made them sit up in alarm: In just three years, the share of Canadians with a positive impression of the country’s universities had dropped nine percentage points.
It tumbled from 59 per cent in 2021 to 50 per cent in 2024, according to a survey conducted by Abacus for Universities Canada. The finding echoes data from the U.S., where a year ago Gallup found that confidence in higher education institutions declined from 48 per cent in 2018 to 36 per cent in 2023.
Mr. Miller said it’s hard to pinpoint what’s behind the loss of public confidence, and the survey didn’t have a ready answer, but he said university presidents see a warning in the shifting opinion data.
“I was struck by how seriously they took it and how unanimous they were in their feeling that we had to act on what we were seeing,” Mr. Miller said.
Mr. Miller said negative headlines connecting universities to ethno-religious conflict, housing shortages and concerns over immigration may have had a corrosive effect.
Universities need public support if they’re going to thrive, he added.
If the loss of public confidence gains steam, there is a risk that the governments that fund universities, regulate tuition rates and decide international student numbers may not be willing to cover the shortfalls.
Concordia’s president Dr. Carr said one of the attributes Canada has been proud of, particularly when compared with the U.S., is a robust, accessible, publicly funded system of higher education.
“Regardless of what university you were attending in Canada, you could get a good quality education with a significant portion of that funding provided by a provincial government,” Dr. Carr said. “Over the years, the level of funding pretty much across the country has eroded. It hasn’t kept pace with costs of delivering higher education. Now we’re starting to see that gap, which is structural in many provinces, creating situations where universities are in significant deficit, which is unfamiliar territory.”
Elizabeth Buckner, a University of Toronto professor who specializes in higher education, said provincial and federal government policies are working at cross purposes. Provincial governments have allowed transfers to universities to stagnate and encouraged them to attract international students to make up the difference.
“Everyone wants a world-class university system, but no one wants to pay for it,” Prof. Buckner said.
“How do we expect the universities to continue to provide high quality education if we don’t also increase the amount of money that we give to them?” Prof. Buckner said.
One development that broke favourably for universities this year was the federal government’s announcement in April pledging billions to boost to research granting councils, funding for graduate students and postdoctoral fellows and for research infrastructure. But most of the spending won’t occur before the next election.
Mr. Miller said the federal government’s promises are welcome, but the challenge for universities continues.
He described retaining public confidence as a crucial objective. Ultimately it’s the people, through their elected governments, that determine how universities will be supported. Mr. Miller said there needs to be an honest public discussion. He hopes the result will be a stronger, long-term funding arrangement with provincial and federal governments.
“The incoherence of public investments in higher education now is not only weakening the institutions, it’s creating confusion for the public about what the needs of these institutions are,” Mr. Miller said.
“Ontario is the textbook example. But to one degree or another, it is the case absolutely everywhere. And we have seen a denial of financial reality from too many governments in the past several months, and they will either come to grips with it or it will become an existential problem.”
This article was first reported by The Globe and Mail
