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Government - intermediary - university : the financial decision-making role of the Universities Council… Southern, Lee 1983

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GOVERNMENT - INTERMEDIARY - UNIVERSITY: THE FINANCIAL DECISION-MAKING ROLE OF THE UNIVERSITIES COUNCIL OF BRITISH COLUMBIA By LEE SOUTHERN B.A., The University of Manitoba, 1965 M.A., The University of Manitoba, 1970 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF EDUCATION in THE FACULTY OF GRADUATE STUDIES Department of Administrative, Adult and Higher Education We accept t h i s thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA A p r i l 1983 © L e e Southern, 1983 I n p r e s e n t i n g t h i s t h e s i s i n p a r t i a l f u l f i l m e n t o f t h e r e q u i r e m e n t s f o r a n a d v a n c e d d e g r e e a t t h e U n i v e r s i t y o f B r i t i s h C o l u m b i a , I a g r e e t h a t t h e L i b r a r y s h a l l m a k e i t f r e e l y a v a i l a b l e f o r r e f e r e n c e a n d s t u d y . I f u r t h e r a g r e e t h a t p e r m i s s i o n f o r e x t e n s i v e c o p y i n g o f t h i s t h e s i s f o r s c h o l a r l y p u r p o s e s m a y b e g r a n t e d b y t h e h e a d o f m y d e p a r t m e n t o r b y h i s o r h e r r e p r e s e n t a t i v e s . I t i s u n d e r s t o o d t h a t c o p y i n g o r p u b l i c a t i o n o f t h i s t h e s i s f o r f i n a n c i a l g a i n s h a l l n o t b e a l l o w e d w i t h o u t m y w r i t t e n p e r m i s s i o n . D e p a r t m e n t o f A d u l t . A d m i n i s t r a t i v e & H i g h e r E d u c a t i o n T h e U n i v e r s i t y o f B r i t i s h C o l u m b i a 1 9 5 6 M a i n M a l l V a n c o u v e r , C a n a d a V 6 T 1 Y 3 D a t e 4 J u l y , 1 9 8 3 D E - 6 ( 3 / 8 1 ) ABSTRACT T h i s study examines the f i n a n c i a l decision-making r o l e of the U n i v e r s i t i e s C o u n c i l of B r i t i s h Columbia as an i n t e r m e d i a r y i n government-university r e l a t i o n s . I t focusses on the major d e c i s i o n s taken by the U n i v e r -s i t i e s C o u n c i l i n the p e r i o d 1974-1982 i n e x e r c i s i n g i t s s t a t u t o r y mandate f o r u n i v e r s i t y f i n a n c i n g . The purpose i s two f o l d : t o determine whether any problems e x i s t f o r the U n i v e r s i t i e s C o u n c i l as an i n t e r m e d i a r y i n the performance of i t s f i n a n c i a l decision-making r o l e ; and, i f problems e x i s t , t o recommend a p p r o p r i a t e f u t u r e courses of a c t i o n to address them. T h i s task i s attempted, f i r s t , by making a review of the l i t e r a t u r e , t o e s t a b l i s h what has a l r e a d y been l e a r n e d about the performance of i n t e r m e d i a r i e s i n a government-university s e t t i n g and the nature of u n i v e r s i t y c o s t s and f i n a n c i a l behaviour; second, by u t i l i z i n g an elementary mode of a n a l y s i s which i n v o l v e s the c o n s t r u c t i o n of simple, d e s c r i p t i v e models r e p r e s e n t i n g some of the elements r e c o g n i z e d to be p r e s e n t i n the i n t e r a c t i o n between governments, u n i v e r s i t i e s , and i n t e r m e d i a r i e s ; t h i r d , by r e c o u n t i n g the d i f f i c u l t i e s a c t u a l l y encountered by the U n i v e r s i t i e s C o u n c i l i n r e c e n t d e c i s i o n s concerning (i) the annual recommendation to government about the u n i v e r s i t i e s ' f i n a n c i a l requirements, and ( i i ) the annual a l l o c a t i o n s to the u n i v e r s i t i e s for general operating purposes; and fourth, concluding with some suggestions concerning the Council's f i n a n c i a l decision-making role i n future. The examination discloses two basic problems associated with the Council's approaches for discharging i t s f i n a n c i a l mandate. F i r s t , Council has not been able to formulate a f u l l y s a t i s f a c t o r y perception of the f i n a n c i a l requirements of the u n i v e r s i t i e s . Second, i n absence of such a perception the Council has not succeeded i n developing an acceptable long term methodology for the a l l o c a t i o n of the p r o v i n c i a l operating grant for u n i v e r s i t i e s . In addition, the analysis suggests that an intermediary i n higher education requires the retention of s i g n i f i c a n t support from the other major e n t i t i e s i n the system. The study concludes by suggesting that Council explore a more e x p l i c i t planning approach to guide i t s f i n a n c i a l decision-making r o l e . TABLE OF CONTENTS Chapter Page One INTRODUCTION 1 Purposes 3 Methodology and Organization 3 Origins of the Intermediary 4 Background and Description of the Un i v e r s i t i e s Council of B r i t i s h Columbia 10 Two REVIEW OF THE LITERATURE 15 Government-University Relations 15 Summary of the Implications for an Intermediary 26 University Costs and Fi n a n c i a l Behaviour 28 Summary of the Implications for an Intermediary 40 Three CONCEPTS AND ANALYSIS 43 The Emergence of the U n i v e r s i t i e s Council.... 51 Four ANALYSIS OF COUNCIL'S ROLE IN THE DEVELOPMENT OF THE ANNUAL OPERATING FUNDING RECOMMENDATION FOR THE UNIVERSITY SYSTEM 56 The Request for Funds 56 The Council's Approach 59 Basic Problems 61 Five ANALYSIS OF COUNCIL'S ROLE IN THE ALLOCATION OF THE ANNUAL PROVINCIAL OPERATING GRANT 77 The Council's Approach 78 Basic Problems 90 Six CONCLUSIONS 93 BIBLIOGRAPHY 107 APPENDICES 115 iv LIST OF APPENDICES Appendix Page A. University Act RS Chapter 419 PART 12 Sections 63-75 incl u s i v e 116 B. Description of University Budget Preparation Processes: UBC 123 SFU 127 UVic 131 C. Basic Formula used for D i v i s i o n of the Annual P r o v i n c i a l Operating Grant 1970-71 to 1973-74 134 D. General P r i n c i p l e s Underlying the A l l o c a t i o n of the Annual P r o v i n c i a l Operating Grant and Revised Formula Methodology 13 5 E. General Purpose Operating Grant 1971-72 to 1981-82 145 F. Simplified Description of the Impact of the Al l o c a t i o n Formula Components 14 6 G. UCBC Policy Statement: Programs of D i s t i n c t i o n . . . 147 v ACKNOWLEDGMENTS Five people have contributed s i g n i f i c a n t l y to the successful completion of t h i s study i n terms of c r i t i c a l advice and encouragement. They are Dr. John Dennison, Dr. Lome Downey, Dr. W.C. Gibson, Dr. Michael Shaw and, i n p a r t i c u l a r , Dr. G.N. Perry. I thank them a l l . I am gratef u l to the Un i v e r s i t i e s Council for making i t possible to conduct t h i s study. My appreciation i s also due to Ms. Sharon Price for her s k i l l f u l typing. v i 1 Chapter One INTRODUCTION In the l i t e r a t u r e on the administration of higher education there are few studies which attempt to learn why buffer or intermediary agencies are introduced into an operational environment i n the f i r s t place only, i n some instances, to be abandoned l a t e r . I t i s not clear, for instance, whether the success or f a i l u r e of such administrative instruments can be attributed to any s p e c i f i c factor, or factors, such as the structure or design, a mal-functioning decision-making procedure, or, even at a more rudimentary l e v e l , the human element. In B r i t a i n , the University Grants Committee has become a venerable i n s t i t u t i o n , although not without i t s c r i t i c s . In the neighbouring province of Alberta a higher education commission with somewhat corresponding duties to perform was dismantled a f t e r a very short period of service. I t i s reasonable to expect that, from time to time, the government w i l l review the performance of i t s intermediary i n respect of the role which has been assigned to i t by statute. Indeed, i n the non-university sector i n B r i t i s h Columbia the precedent for Government review has been l e g a l l y established: councils as well as the colleges and i n s t i t u t e s are mandated by statute to report at regular i n t e r v a l s why they "should continue to e x i s t " and i n turn, the minister i s instructed to report to Government "about measures that should be taken to remedy to improve the s i t u a t i o n disclosed by the report" (College and 2 In s t i t u t e Act, section 66). B r i t i s h Columbia's experience with i t s own intermediary, the U n i v e r s i t i e s Council of B r i t i s h Columbia, i s barely nine years old and, thus f a r , the performance of the Council has not been subjected to external evaluation. In t h i s study a beginning e f f o r t i s made to mobilize and assess what i s presently known about t h i s performance i n the s p e c i f i c - and highly sensitive - area of f i n a n c i a l questions: as i n the decisions taken with respect to the financing of the u n i v e r s i t i e s . Pending an accepted i d e n t i f i c a t i o n of the causal factors of success or f a i l u r e of such intermediary bodies, from an education administrator's standpoint i t i s s t i l l somewhat uncertain what data - s t a t i s t i c a l or otherwise - would best represent the issues under discussion for measurement purposes. At some stage s t a t i s t i c a l techniques may be brought to bear on the accumulating information. Using the methodology at hand, which reduces to a serious attempt to reconstruct and analyze the events which precede and follow an observed event (although not a controlled experimental protocol*), t h i s study deals mainly with selected events that transpired during the period 1974-1982. Some leading questions are advanced but the treatment followed here stops short of an e f f o r t to set forth and t e s t s p e c i f i c hypotheses. *See: A l l e n Newell and Herbert A. Simon, 1972. 3 PURPOSES This study examines the major decisions taken by the Uni v e r s i t i e s Council of B r i t i s h Columbia i n the period 1974-1982 i n exercising i t s statutory mandate for university financing. The purpose of t h i s examination i s two f o l d : i) to determine whether any problems e x i s t for the Univer-s i t i e s Council as an intermediary i n the performance of i t s f i n a n c i a l decision-making rol e ; and i i ) i f problems e x i s t , to recommend appropriate future courses of action to address them. METHODOLOGY AND ORGANIZATION E f f o r t s to analyse the performance of intermediaries have been handicapped by the lack of a generally accepted t h e o r e t i c a l model. Robert Berdahl (Berdahl, 1971), a leading authority, recently concluded that: "We are s t i l l far from having a sa t i s f a c t o r y goals oriented evaluation process for statewide boards" and, further, that no quantitative l i n k s have been demonstrated between the structures and powers of intermediaries and univer s i t y system performance. He notes also, with respect to the state of the art of evaluation of intermediaries, that: One searches the relevant l i t e r a t u r e i n vain for objective cannons of proof which would remove the subject from controversy and contradictory arguments. (Berdahl, 1971:40) Lacking a generally accepted model, a researcher 4 undertaking to conduct an analysis of an intermediary's per-formance must endeavour to construct an appropriate mode of analysis. The task i s attempted i n t h i s study, f i r s t , by making a review of the l i t e r a t u r e , to es t a b l i s h what has already been learned about the performance of intermediaries i n a government-university setting and the nature of university costs and f i n a n c i a l behaviour (Chapter 2 ) ; second, by u t i l i z i n g an elementary mode of analysis which involves the construction of simple, descriptive models representing some of the elements recognized to be present i n the int e r a c t i o n between govern-ments, u n i v e r s i t i e s , and intermediaries (Chapter 3 ) ; t h i r d , by recounting the d i f f i c u l t i e s a c t u ally encountered by the Univer-s i t i e s Council i n recent decisions concerning (i) the annual recommendation to government about the u n i v e r s i t i e s ' f i n a n c i a l requirements (Chapter 4 ) , and ( i i ) the annual a l l o c a t i o n s to the u n i v e r s i t i e s for general operating purposes (Chapter 5 ) ; and fourth, concluding with some suggestions concerning the Council's f i n a n c i a l decision-making role i n future (Chapter 6 ) . ORIGINS OF THE INTERMEDIARY Nearly t h i r t y years ago at a conference of the Association of B r i t i s h U n i v e r s i t i e s of the Commonwealth, Canadian educator and President of the University of B r i t i s h Columbia, Dr. N.A.M. MacKenzie prophesied that: Because of the nature of our contemporary world and society, the inevitable trend i n most countries... has been 5 towards a greater dependence on and p a r t i c i p a t i o n by government i n respect of university finances and revenues... This dependence i s l i k e l y to continue. (Berdahl, 1959:183) In Canada today, government i s by far the predominant f i n a n c i a l patron of the university. Indeed, the use of public money constitutes the essence of government-university r e l a t i o n s . The expenditure of public money necessarily e n t a i l s some degree of government control and scrutiny and the c r u c i a l question relates to the nature of that control. In most of the public sector the processes of government control over the appropria-t i o n and expenditure of tax money are well established. In the case of government-university r e l a t i o n s , however, the opera-t i o n a l nature of that control i s less c l e a r l y defined. The intermediary body i s one organizational mechanism with which many governments have sought to monitor appropriately the expenditures of public money by the u n i v e r s i t i e s while simulta-neously respecting, to the extent practicable, t h e i r autonomy for the purpose of preserving academic freedom. Noted international educator, Lord Robbins of the United Kingdom, has succinctly described the c o n s t i t u t i o n a l invention of the intermediary i n t h i s context as follows: If the state i s w i l l i n g to entrust the d i s t r i b u t i o n of public money for t h i s purpose and the scrutiny of the way in which i t has been spent, not d i r e c t l y to a government department inevitably subject to p o l i t i c a l control and influence, but i n d i r e c t l y to a n o n - p o l i t i c a l expert commission or committee; and i f that body makes i t s grants in forms which impose a minimum of precise s p e c i f i c a t i o n on the d e t a i l of expenditure, then there i s created a p a r t i a l i n s u l a t i o n which should be s u f f i c i e n t to protect academic i n s t i t u t i o n s against the cruder incursions of p o l i t i c s and to create an area i n which freedom to main-t a i n t h e i r own standards and i n i t i a t e t h e i r own develop-ment i s reasonably well preserved. (Robbins, 1980:91) 6 In the United Kingdom, the prototype of an intermediary, the University Grants Committee (U.G.C.), was established i n 1919. In North America the requirement for, and use of public funds by u n i v e r s i t i e s led, much l a t e r , many j u r i s d i c t i o n s to es t a b l i s h intermediary bodies i n higher education. In the United States the concept of the intermediary took three general forms: the voluntary agency, the governing board and the coordinating agency. Voluntary agencies are formed by the u n i v e r s i t i e s themselves for the promotion of i n s t i t u t i o n a l s e l f - i n t e r e s t i n order to obtain the greatest amount of public funds with minimal bureaucratic structures and reporting requirements. A governing board i s characterized by i t s le g a l mandate to govern a l l aspects of a l l u n i v e r s i t i e s within i t s j u r i s d i c t i o n . The membership i s generally composed i n s i g n i f i c a n t measure of i n s t i t u t i o n a l representatives. The coordinating agency i s a form of intermediary which most clos e l y resembles the B r i t i s h conception i n that i t has system-wide r e s p o n s i b i l i t i e s assigned by statute but allows the existence of governing boards with l e g a l r e s p o n s i b i l i t i e s for the i n t e r n a l management of the i n d i v i d u a l i n s t i t u t i o n s . Three major types of coordinating agencies are i d e n t i f i a b l e (Hollick-Kenyon, 1979:66 et seq.): those with advisory powers composed of a majority of i n s t i t u t i o n a l representatives, those with advisory powers composed of a majority of lay public members and those with regulatory powers composed of a majority of lay public members. 7 With respect to the powers of coordinating agencies, Glenny has stated normatively that such groups ought, i n order to be e f f e c t i v e , to be able to gather i n s t i t u t i o n a l data, formulate master plans, approve new programs and review budgets (Glenny, 1976). These three i n t e r - r e l a t e d areas of r e s p o n s i b i l i t y have been generally assigned to coordinating agencies i n the American model. A large body of l i t e r a t u r e exists which examines the ef f e c t s of coordinating agencies. These examinations focus generally on the balances between the powers of the agency and the powers of the i n s t i t u t i o n s to control and take decisions. There are no s p e c i f i c guidelines r e s u l t i n g from these studies which would enable a government to es t a b l i s h a "proven" intermediary. I t has been observed that: there have been no studies to indicate that elaborate coordination does or does not a f f e c t levels of state expenditure for higher education, percentage of a popula-t i o n attending college, cost of i n s t r u c t i o n or increased productivity of higher education. (Berdahl, 1971:256) Berdahl maintains that i t i s impractical to attempt such measurements. The American conception of an intermediary only proposes that powers of budget review, program approval and planning ought to be assigned the intermediary on the grounds that such matters require examining i n the public inte r e s t and neither the government nor the u n i v e r s i t i e s are the appropriate bodies to conduct the examination. Those decisions of the intermediary which are c r i t i c a l to the appropriate exercise of these powers are i n the main only definable by the experience of i n d i v i d u a l j u r i s d i c t i o n s . 8 In Canada, the establishment of intermediaries occurred primarily i n the 1970s when most provinces effected substantial changes i n t h e i r l e g i s l a t i v e arrangements of government-university r e l a t i o n s . Michael O l i v e r , author of one of the p r o v i n c i a l studies on higher education, has commented i n retrospect on these endeavours i n t h i s country: P r a c t i c a l l y a l l of the Reports dealt with the relations between u n i v e r s i t i e s and government. I t i s hard to i d e n t i f y any luminous insig h t s . The best that can be said for us i s that a l l the Report writers were asking the rig h t question: How to preserve a reasonable degree of univers i t y autonomy at the same time as making univer-s i t i e s part of a w e l l - a r t i c u l a t e d system responsive to and accountable to the public that they serve... Satisfactory models for university government rel a t i o n s are scarce. The proposals of the other Commissions do not seem to me to be i n s p i r i n g . (Gregor, , 1979:39) Such commentary notwithstanding, many changes occurred. Five provinces created separate m i n i s t r i e s responsible for post-secondary education, although two have since abandoned t h i s approach. With one exception, (Newfoundland) a l l provinces established advisory and coordinating agencies following the example of the University Grants Committee i n the United Kingdom. Three provinces (the Maritimes) replaced t h e i r intermediaries with a j o i n t higher education commission, the Maritime Provinces Higher Education Commission. The Hurtubise-Rowat Report has described the establishment and evolving role of these p r o v i n c i a l mechanisms thus: the basic problem of u n i v e r s i t y - p r o v i n c i a l r e l a t i o n s i s the role of the intermediary bodies... these bodies o r i g i n a l l y came into existence to advise the p r o v i n c i a l governments on the f i n a n c i a l resources to be allocated to the u n i v e r s i t i e s and on the d i v i s i o n of these resources among them. The si t u a t i o n has changed to such an extent that i t i s now the r e s p o n s i b i l i t y of p r o v i n c i a l governments to ensure education and comprehensive planning 9 of t h e i r future development... In our view, therefore, because exclusive intervention by government i s undesirable, intermediary bodies are needed not only to perform the advisory and a l l o c a t i v e functions of the e x i s t i n g university commissions but also to assume these newer functions of coordination and planning. (Hurtubise-Rowat, 1970:108) This recommendation that intermediaries accept a planning function based upon observation of the Canadian context r e f l e c t s both the 7American conception of the role of the coordinating agency and the terms of reference of the prototype intermediary, the U.G.C., which were amended i n 1946 to include the following: ...to a s s i s t , i n consultation with the u n i v e r s i t i e s and other bodies concerned, the preparation and execution of such plans for the development of the u n i v e r s i t i e s as may from time to time be required i n order to ensure that they are adequate to national needs. (Owen, 1980) Underpinning a l l planning, however, l i e the f i n a n c i a l resources required for the implementation of the plans. Planning i s , therefore, i n t e g r a l l y related to the f i n a n c i a l decision-making process. In B r i t i s h Columbia the role of the intermediary i n government-university r e l a t i o n s i s prescribed i n the University  Act mainly i n terms of a set powers granted to the Council. It was l e f t to Council to decide how to exercise these powers i n the f u l f i l l m e n t of i t s f i n a n c i a l mandate. An examination of the h i s t o r i c a l record of Council's f i n a n c i a l decision-making i n r e l a t i o n to i t s role as an intermediary i n higher education i s the subject of t h i s study. 10 BACKGROUND AND DESCRIPTION OF THE UNIVERSITIES COUNCIL In B r i t i s h Columbia the major investigative work and recommendations on the establishment of an intermediary were reported to the Minister of Education i n 1969 by the Advisory Committee on Inter-University Relations under the chairmanship of Dr. G.N. Perry. This Report emphasized the primacy of the f i n a n c i a l issue i n government-university r e l a t i o n s as follows: When the u n i v e r s i t i e s come to re l y heavily on governmental grants for operating and c a p i t a l purposes, the determina-t i o n and a l l o c a t i o n of these grants becomes an important, i f not the c r u c i a l element i n the univers i t y budget-making process. (Perry, 1969:15) Accordingly the Report included a major discussion of the formula approach for determining the p r o v i n c i a l operating grant to u n i v e r s i t i e s along with a s i m p l i f i e d hypothetical model of i t s application. The Perry Committee concluded that a new intermediary should be established i n B r i t i s h Columbia and further that: the new intermediary should have the r e s p o n s i b i l i t y for representing the system i n i t s budget discussions with governmental authorities and for d i s t r i b u t i n g such grants (both operating and capital) to the i n s t i t u t i o n s i n the system. (Perry, 1969:3) In 1973 a University-Government Committee was struck within the Ministry of Education to examine the forms of university governance "with p a r t i c u l a r reference to the relati o n s h i p between the Un i v e r s i t i e s and the P r o v i n c i a l Government". In 1974 t h i s body reported that: an intermediary body known as the Un i v e r s i t i e s Council i s necessary i n B r i t i s h Columbia for the r e c o n c i l i a t i o n of public accountability with univ e r s i t y autonomy and to ensure a greater s e n s i t i v i t y to s o c i a l needs i n the 11 development of university education. (Young, 1974:27) The general thrust of the recommendations were that t h i s proposed Council should be advisory and persuasive i n nature as opposed to executive and regulatory. The Committee, however, did recommend that the U n i v e r s i t i e s Council have a l l o c a t i v e powers over operating and c a p i t a l financing of the u n i v e r s i t i e s . The Committee also recommended that the Council engage i n f i n a n c i a l planning by investigating multi-year budgeting systems. When the establishment of t h i s new intermediary occurred i n 1974 i t did have, as an i n t e g r a l part of i t s mandate, advisory power for the determination of the l e v e l of p r o v i n c i a l operating and c a p i t a l grants and regulatory power i n the a l l o c a t i o n of the operating grant to the u n i v e r s i t i e s . I t i s pre c i s e l y these two statutory powers on which t h i s study focuses i n i t s examination of the U n i v e r s i t i e s Council's performance i n f i n a n c i a l decision-making. Although the study focuses on the f i n a n c i a l decision-making role of the U n i v e r s i t i e s Council, i t i s e s s e n t i a l to have some view of the general structure and powers of the Council. The s p e c i f i c d e t a i l s of these matters are described in the University Act (Appendix A) . An abridged description follows, and a b r i e f account of i t s emergence i s given i n Chapter I I I . The U n i v e r s i t i e s Council of B r i t i s h Columbia was established by statute i n 1974 with defined " r i g h t s , powers, duties and l i a b i l i t i e s " which for reference purposes w i l l be 12 said to constitute the formal d e f i n i t i o n of the Council's role i n government-university r e l a t i o n s . The Council consists of eleven persons, including a designated chairman, appointed by the Lieutenant-Governor-in-Council. A vice chairman i s elected annually by the members to act as chairman during any periods of incapacity of the chairman to discharge his duties. Members are appointed for three year terms, renewable once. The chairman's i n i t i a l term of three years i s renewable twice for periods of f i v e years. Certain categories of people are prohibited from serving as Council members: members of the federal parliament and the p r o v i n c i a l l e g i s l a t i v e assembly, employees or students of the u n i v e r s i t i e s , public servants i n the M i n i s t r i e s of Education, Finance, or U n i v e r s i t i e s , Science and Communications, and non-residents of the province. A member holds o f f i c e u n t i l a successor i s appointed, unless the appointment i s revoked or death or resignation occurs. A person appointed to f i l l a vacancy holds o f f i c e only for the remainder of the term for which the predecessor was appointed. The Act also declares that a vacancy on the Council "does not impair the authority of the remaining members...to act" [Section 64(10)]. Six members constitute a quorum and the chairman holds the deciding vote i n the event of a t i e d vote. Expenses incurred i n the discharge of Council business are reimbursable by Council and remuneration for services i s set by the Lieutenant-Governor-in-Council. The U n i v e r s i t i e s Council i s a corporation and an agent of the p r o v i n c i a l crown and since October 1978 possesses f i n a n c i a l 13 autonomy over i t s operating funds. I t i s , however, dependent by statute upon the Lieutenant-Governor-in-Council for the appointment of an executive d i r e c t o r and for the d e f i n i t i o n of the incumbent's positions, duties, remuneration and other terms and conditions of employment. In a l l other matters the Council alone i s i n a position to provide a system of organization for the conduct of i t s a c t i v i t i e s i n government-university r e l a t i o n s . The Council i s annually required to report to the Minister for both i t s i n t e r n a l finances and the u n i v e r s i t i e s ' f i n a n c i a l operations. In t h i s l a t t e r regard the Council i s s p e c i f i c a l l y required to report on e s s e n t i a l l y three matters: the univer-s i t i e s ' requests for operating grants for the next f i s c a l year, the operating grant recommended by the Council for the u n i v e r s i t i e s i n the next f i s c a l year, and a statement of the a l l o c a t i o n of the current year's operating grants made by the Council to the u n i v e r s i t i e s , including a resume of a l l the funds provided by the p r o v i n c i a l government. The minister i n turn i s accountable to the Legislature i n respect of the Council's f i n a n c i a l reports and accordingly i s required to submit them to the p r o v i n c i a l Legislature within a prescribed time l i m i t . In accordance with the accepted convention of university autonomy i n Canada, the Council's powers are circumscribed i n the following manner: ...the u n i v e r s i t i e s council s h a l l not i n t e r f e r e i n the exercise of powers conferred on a uni v e r s i t y , i t s board, senate and other constituent bodies by t h i s Act respecting (a) the formulation and adoption of academic p o l i c i e s and 14 standards; (b) the establishment of standards for admission and graduation; and (c) the selection and appointment of s t a f f . (Section 70) Various sundry sections of the Act address Council a c t i v i t i e s : both open and closed meetings are permitted, members and s t a f f are protected from personal l i a b i l i t y i n the performance of t h e i r duties, with approval of the Cabinet i t may own and dispose of property and with m i n i s t e r i a l approval i t may enter into agreements with assorted governments, public agencies, people and associations and may on i t s own decision conduct i n q u i r i e s and examine people under oath. 15 Chapter Two REVIEW OF THE LITERATURE This chapter i s divided into two parts: government-univers i t y r e l a t i o n s and university costs and f i n a n c i a l behaviour. Each section concludes with a summary of the implications for an intermediary i n higher education as revealed i n the l i t e r a t u r e review. GOVERNMENT-UNIVERSITY RELATIONS The question i s sometimes asked 'Whose side i s the University Grants Committee on?' This question misunderstands, i n our view, the r e a l i t i e s of our function. We are not on any 'side'. We are concerned to ensure that a vigorous and creative University l i f e prospers i n t h i s country without interference from the Government of the day and at the same time to ensure that the taxpaying community, represented by Parliament and the Government, gets a proper return for i t s money i n t h i s f i e l d of considerable public expenditure. (U.G.C. Report 1968) In examining the conceptual role of an intermediary to advise the state about the requirements of university funding i t i s important, at the outset, to note the fundamental basis upon which B r i t i s h and Canadian parliamentary governments operate with respect to public finance. S i m i l a r l y , the special view i n which u n i v e r s i t i e s are held i n these two countries must also be b r i e f l y defined. The nature of public finance can be simply stated: governments acquire income by levying taxes on the electorate; subsequently, the elected representatives of the people assembled i n Parliament approve the budget or 16 proposed expenditures of the government of the day. In return for t h i s approval, a measure of accountability i s exacted by Parliament from the Government min i s t r i e s who spend the money. In terms of the special view of the u n i v e r s i t i e s , i t i s generally accepted that i n order for u n i v e r s i t i e s to carry out th e i r mission, the optimal environment requires that each university be self-governing, free to determine the subjects of both teaching and research, to appoint i t s own teachers and researchers and to develop and apply i t s own c r i t e r i a for the admission and graduation of students. Thus the democratic basis for public finance coupled with the special view of the autonomy of u n i v e r s i t i e s establishes the broad l i m i t s of an intermediary's r e s p o n s i b i l i t i e s i n government-university re l a t i o n s ; namely, to be accountable to government for the expenditure of public money by the university and to protect the university's autonomous functions from unwarranted govern-ment interference. That a realm of government-university r e l a t i o n s exists at a l l i s evidence of the fact that each party maintains an int e r e s t i n the a c t i v i t i e s of the other. Today, government i s interested i n u n i v e r s i t i e s , generally, because of t h e i r contribution to the enlightenment of society but, s p e c i f i c a l l y , because of t h e i r t r a i n i n g of highly q u a l i f i e d manpower, whereas univers i t y i n t e r e s t i n government focuses mainly on the f i n a n c i a l support which government supplies to i n s t i t u t i o n s providing a public service. That the state's i n t e r e s t i n university education i s not properly constrained to monetary 17 matters, has been pointed out by Berdahl as follows: The state has a legitimate i n t e r e s t i n the o v e r a l l p o l i c i e s of the universities...whether or not public funds are involved. The u n i v e r s i t i e s should form t h e i r educational p o l i c i e s with s e n s i t i v i t y for national needs, and, i f subsidized by public funds, af t e r consultation with the appropriate governmental o f f i c e r s . In case of disagreement over ends or means between the state and the u n i v e r s i t i e s , the u n i v e r s i t i e s ' judgement should p r e v a i l , with the understanding that they have the r e s p o n s i b i l i t y of demonstrating the wisdom of t h e i r decisions within a reasonable time frame, and subject always to ultimate p o l i t i c a l intervention i n the face of a major breakdown i n higher education. (Berdahl, 1959:193)) Berdahl has further distinguished two types of autonomy to which the state's i n t e r e s t can extend: (i) substantive autonomy, which relates to the goals, p o l i c i e s and programs that an i n s t i t u t i o n chooses to pursue, and ( i i ) procedural autonomy which relates to the techniques chosen to achieve these goals. He argues that generally the state's procedural controls, which normally accompany the expenditure of public money, are marginal and not necessary for accountability and the safeguarding of the public i n t e r e s t . Such controls ought to be limited to those demonstrably required for good budget practices. Berdahl further argues, respecting those substantive controls which are those related to decisions about educational goals and p o l i c i e s i n higher education, that the state's legitimate i n t e r e s t should be expressed as "a conscious act of state sovereignty... through a suitably sensitive mechanism". The questions immediately aris e i n what substantive decisions should the state p a r t i c i p a t e and through what sort of mech-anism? There are three fundamental points to be noted from 18 Berdahl's work i n r e l a t i o n to t h i s study. F i r s t , there i s a legitimate, i f vaguely defined, role for the state i n the higher education p o l i c y . Second, the state's provision of public funding i s i n t e g r a l l y related to i t s role and t h i r d , i f an intermediary i s to be charged with a f i n a n c i a l decision-making role i t must be cognizant of the state's i n t e r e s t s . Having noted the extent of the state's broad i n t e r e s t i n higher education i t i s recognized that the operative nexus of the state's r e l a t i o n s with the u n i v e r s i t i e s remains the provi-sion of f i n a n c i a l resources. This r e l a t i o n may be viewed as a " s o c i a l contract" entered into between government and university with each party having roles to perform which are broadly defined by respective sets of r e s p o n s i b i l i t i e s for the maintenance of the r e l a t i o n s h i p . In discharging t h e i r r e s p o n s i b i l i t i e s and thereby i n performing t h e i r r o l e s , both government and u n i v e r s i t i e s must meet a cer t a i n number of requirements i n terms of the practice of modern democratic governance. On the government's part, a r e s p o n s i b i l i t y i s undertaken to sustain the supply of f i n a n c i a l resources for the provision of higher education services which are determined largely by the u n i v e r s i t i e s and i n part by the government. The require-ments associated with t h i s r e s p o n s i b i l i t y include: assurances that operating and c a p i t a l funds provided from the P r o v i n c i a l revenues w i l l be wisely used for the benefit of the Province, and...continued freedom to decide for i t s e l f i n the l i g h t of actual budget circumstances, rather than by statutory authority, what operating or c a p i t a l funds should be supplied from P r o v i n c i a l revenues to the U n i v e r s i t i e s . (Perry, 1969:5) 1 9 The u n i v e r s i t y on the other hand, assumes r e s p o n s i b i l i t y for the development and delivery of i t s services and i n turn requires: an assured source of operating and c a p i t a l funds reason-ably matched with enrolment and cost increases... an equitable treatment as between u n i v e r s i t i e s , and...an opportunity to engage i n long range planning. (Perry, 1 9 6 9 : 5 ) These conditions lend a special character to government-university r e l a t i o n s . Indeed, they give r i s e to the need for reco n c i l i n g parliamentary accountability for public expendi-tures with university autonomy for the assurance of academic freedom. Such a r e c o n c i l i a t i o n must take into account the requirements of each party and i n doing so, as Lord Robbins has pointed out, both government and university are not q u a l i f i e d to perform the task. With respect to government's d i s a b i l i t y , Robbins states: The decision to spend immense sums of money on higher education i s e s s e n t i a l l y a p o l i t i c a l decision and no sensible person would wish to deny the ri g h t of ministers to lay down broad p r i n c i p l e s of po l i c y and administration in t h i s connection...The evaluation of the performance of pa r t i c u l a r i n s t i t u t i o n s and the a l l o c a t i o n of funds between them i s a function which, i f i t i s to be discharged e f f i c i e n t l y and without danger to academic freedom, needs to be done i n an atmosphere from which p o l i t i c a l considerations are absent. (Robbins, 1 9 8 0 : 9 0 ) Lord Robbins has also succinctly explained why u n i v e r s i -t i e s i n d i v i d u a l l y are i l l suited from assessing and reporting d i r e c t l y on t h e i r f i n a n c i a l a f f a i r s to the Government as follows: . . . i t i s u n l i k e l y that separate consideration by indepen-dent i n s t i t u t i o n s of t h e i r own a f f a i r s i n t h e i r own circumstances w i l l always r e s u l t i n a pattern that i s comprehensive and appropriate i n r e l a t i o n to the needs of society. (Robbins, 1 9 8 0 : 1 3 ) 20 I t was i n recognition of these d i s a b i l i t i e s on the part of both government and university that a c o n s t i t u t i o n a l invention was created i n the United Kingdom i n 1919 when the University Grants Committee was interposed i n the r e l a t i o n s h i p . Its general purpose was to e f f e c t the r e c o n c i l i a t i o n of public accountability and i n s t i t u t i o n a l autonomy, with the s p e c i f i c i n s t r u c t i o n of i t s founding treasury minute reading: to enquire into the f i n a n c i a l needs of university educa-ti o n i n the United Kingdom and to advise the Government as to the application of any grants that may be made by Parliament towards meeting them. (Owen, 1980) Consequently, i t i s clear from the outset that the appropria-ti o n and expenditure of public funds are seminal factors i n government-intermediary-university r e l a t i o n s . U n i v e r s i t i e s , l i k e a l l organizations, operate i n a funda-mentally p o l i t i c a l environment. " P o l i t i c s " i n t h i s context i s defined as the resolution of c o n f l i c t based upon the authorita-t i v e a l l o c a t i o n of resources. Hence government-university re l a t i o n s are " p o l i t i c a l " because they are characterized by c o n f l i c t or adversarial r e l a t i o n s caused by two basic factors. F i r s t , each university pursues goals consistent with i t s own perception of i t s s e l f - i n t e r e s t which i s ultimately defined as i n s t i t u t i o n a l s u r v i v a l . These sets of i n s t i t u t i o n a l perceptions may c o n f l i c t both with each other and with the government's interests f o r , as Robbins observed, they may not be "approp-r i a t e . . . t o the needs of society" (Robbins, 1980:13). A raison  d'etre of the intermediary i s p r e c i s e l y to make judgements to a s s i s t i n the resolution of such p o l i t i c a l c o n f l i c t s . The second factor which establishes p o l i t i c a l r e l a t i o n s i n 21 the u n i v e r s i t y sector i s the s c a r c i t y of resources available to support i n s t i t u t i o n a l a c t i v i t i e s . There are two p o l i t i c a l consequences of t h i s s c a r c i t y . In the f i r s t instance the basic determination of the t o t a l amount of public resources to be appropriated for the u n i v e r s i t i e s c o l l e c t i v e l y i s a p o l i t i c a l decision made by the government of the day i n l i g h t of the competitive claims of other public sectors. In the subsequent a l l o c a t i o n of t h i s amount among the u n i v e r s i t i e s , i n s t i t u t i o n a l s e l f - i n t e r e s t s create a second competitive or p o l i t i c a l s i t u a t i o n for resolution by the intermediary. The implication of t h i s p o l i t i c a l environment for the intermediary i s that i t must develop an independent perception of the issues and t h i s i s made more d i f f i c u l t because i t cannot r e l y , for fear of bias, solely upon the submissions of either the government or the u n i v e r s i t i e s . This r e s p o n s i b i l i t y to maintain o b j e c t i v i t y obliges the intermediary to develop i t s own information system and to employ i t s own analyses i n support of i t s decision-making. This requirement for information i n order for an intermediary to make i t s own decisions i s not e a s i l y s a t i s f i e d . In intermediary-university r e l a t i o n s a v i r t u a l monopoly of information i s held by the i n s t i t u t i o n s . This r e s u l t s from the fact that the bureaucracy which exercises control over the provision of a service maintains a monopoly on much of the information required for the evaluation of that service. While competition for resources may cause a bureaucracy to release information i n support of i t s objectives, the adversarial 22 nature of the competition does not necessarily ensure that such information w i l l be i n a form capable of comparative analysis by the intermediary. To a s i g n i f i c a n t degree t h i s i s indeed the case i n the presentation of the u n i v e r s i t i e s ' operating requests i n B.C. where lack of comparability prevents i n t e r - i n s t i t u t i o n a l analysis i n many areas. In such circumstances the intermediary may have the power to request information, as does the Council (University Act, section 69j), but i t i s often frustrated by the i n s t i t u t i o n s ' claims concerning the d i f f i c u l t y i n providing i t i n comparative form. A d d i t i o n a l l y , an intermediary i s handicapped i f i t must assume the onus for formulating information requests requiring a detailed l e v e l of response i n the absence of comparative budget information. Perry has succinctly described the pr e v a i l i n g s i t u a t i o n : Is there a way of organizing the data about the three u n i v e r s i t i e s . . . i n such a way that important 'differences' could be spotted rea d i l y and judgements made? Take, for example, the budget information.. .Would i t be possible to transform the 'dollar t o t a l s ' into recognizable 'policy-indicators', so that Council members could gain t h e i r own perspectives of the way the u n i v e r s i t i e s appear to be managing t h e i r f i n a n c i a l a f f a i r s ? And when f i n a n c i a l requests are submitted along with new and emergent programs, would i t be possible for the Council to assess the reasonableness of the estimated, a d d i t i o n a l , operating funds? This has been a somewhat inexact decision-making area. (Council Document* 15) To improve the Council's a b i l i t y to make better use of the information provided, Perry has suggested the following general *For any "Council Document" reference see Bibliography l i s t i n g : U n i v e r s i t i e s Council of B r i t i s h Columbia (UCBC) Documents. 23 approach: By transforming the basic dollar-revenue equals d o l l a r - expenditure relationship into appropriate a n a l y t i c a l forms, i t i s possible to bring p o l i c y decisions into view, whether they a f f e c t admission q u a l i f i c a t i o n s , t u i t i o n fees, remuneration of faculty and s t a f f , support services, and so on. The fundamental rela t i o n s h i p of equality between income and outgo remains constant, but attention i s directed towards the s p e c i f i c decisions that are involved i n maintaining that r e l a t i o n s h i p . . . Insofar as f i n a n c i a l data are concerned, s p e c i f i c a l l y what i s proposed i s : that a l l aggregate d o l l a r data presented to the UCBC should be transformed into a compatible unit form by 1) putting the data i n terms of a per fu l l - t i m e equivalent (FTE) student, and 2) also showing the data i n terms of a per ful l - t i m e (FTE) faculty member. (Council Document 15) Such transformations have been undertaken at Council and the e x i s t i n g information i s being brought into compatible form. Yet an intermediary cannot alone be expected to answer a l l i t s evaluative questions through the development of a better information system. The university has a d e f i n i t e role to play in these judgemental matters for the intermediary accepts the assumption that an autonomously governed i n s t i t u t i o n can best judge how to allocat e resources amongst i t s in t e r n a l constituencies. In B.C., the University Act indeed devolves that power of judgement to the u n i v e r s i t i e s by proscribing governmental or Council interference with general purpose operating grants ("...a university i s not required to use operating grants allocated to a university for any p a r t i c u l a r aspect of i t s operations," Section 69f). Accordingly the onus for providing information about the formulation and res u l t s of those judgements rests appropriately 24 with the i n d i v i d u a l i n s t i t u t i o n s . In i t s annual budget report, for example, the University of Toronto presents information respecting the p o l i c i e s , plans, assumptions and judgements on which i t s decisions are founded. I t also provides guidelines which indicate the general directions of the budget develop-ment, that i s , the general p o l i c i e s , procedures and p r i o r i t i e s to be followed i n developing the budget and which therefore provides the context for budget review (University of Toronto, 1982:1). I t i s p r e c i s e l y t h i s kind of information which an intermediary requires as a basis for i t s evaluation of i n s t i t u t i o n a l f i n a n c i a l requirements. I t i s f a i r to conclude that for the purposes of formulating an independent perception of the f i n a n c i a l issues besetting u n i v e r s i t i e s an intermediary must maintain i t s own information base and develop an i n t e r n a l capacity to analyze t h i s information. I t must also persuade the u n i v e r s i t i e s to the extent possible to disclose relevant information about t h e i r f i n a n c i a l decision-making. The formulation by an intermediary of an independent perception of the u n i v e r s i t i e s ' f i n a n c i a l requirements i s , however, constrained by the l i m i t a t i o n s of the available a n a l y t i c a l methods per se. This factor affects both government and intermediaries, the former i n i t s decisions to appropriate resources among the public sectors and the l a t t e r i n i t s advice to government about the requirements of the higher education sector. Dobell and Zussman have observed that i n making these types of decisions there i s an "unavoidable absence of 25 d e f i n i t i v e c r i t e r i a for resolving problems of public choice" (Dobell, 1981:415). Methods employed to evaluate public services are generally subject to serious l i m i t a t i o n s . Drury states: evaluation i s subject to a n a l y t i c a l l i m i t s a r i s i n g out of the lack of a n a l y t i c a l c r i t e r i a or relevant information to guide the key choices to be faced. (Dobell, 1981:404) In commenting on the results of program evaluation undertaken i n government Dobell observes that "even the most dedicated do not argue that evaluation e f f o r t s have led to decisive results or s i g n i f i c a n t government action" (Dobell, 1981:406). A number of factors have been offered i n explanation of t h i s s i t u a t i o n including, for example, lack of agreed theory and purpose, problems of implementation and misdefinition of the nature of information needs. A more important contributing factor, however, i s the fact stated by Zussman that: there has never been any demonstrable l i n k between performance, measured by e f f i c i e n c y and productivity indicators, and levels of compensation... at the executive l e v e l either i n the private or public sector. (Dobell, 1981:408) In the u n i v e r s i t y sector i t i s f a i r to say that any evaluation process i s l i k e l y to be performed i n an adversarial context and designed to maximize the cause of the i n s t i t u t i o n undertaking i t rather than to analyze any system of i n s t i t u t i o n s . For, as Dobell notes, Within such a framework of advocacy the bureaucratic incentives do not press i n the d i r e c t i o n of continuing searching evaluation. (Dobell, 1981:413) It i s indeed a brave university administration that would conduct such a process, and a braver one s t i l l that would 26 release the evaluative r e s u l t s when the chances are that negative r e s u l t s i n terms of the i n s t i t u t i o n ' s performance may well r e s u l t i n a reduction i n funding. Dobell concludes that: evaluation to appraise the continued v a l i d i t y of program goals, productive e f f i c i e n c y and resource costs requires useable knowledge...But useable knowledge i n t h i s context w i l l not, i n general, come from the evaluation processes...or indeed, from any established body of conventional technique based on generally acceptable professional p r i n c i p l e s . (Dobell, 1981:418) This usable knowledge takes the form of values, perceptions and p o l i t i c a l judgements, often supported by, but not necessarily determined by, evaluation information. I t i s clear then that there must be an accommodation made to the l i m i t s imposed by a n a l y t i c a l approaches. Under these circumstances questions arise for an intermediary respecting what can reasonably be known about university f i n a n c i a l decision-making and the degree to which formal evaluation of budget information can be expected to provide such knowledge. SUMMARY OF THE IMPLICATIONS FOR AN INTERMEDIARY The preceding review of the l i t e r a t u r e concerning the normative role of an intermediary i n government-university relations discloses the following three implications for consideration i n the examination of the U n i v e r s i t i e s Council's f i n a n c i a l decision-making. F i r s t , both government and u n i v e r s i t i e s maintain l e g i t i -mate interests i n higher education and the pot e n t i a l for 27 c o n f l i c t gives r i s e to the c o n s t i t u t i o n a l invention of an intermediary body. Hence, an intermediary's role must not be wholly characterized as one of advocacy for the u n i v e r s i t i e s nor of agency for the government because an intermediary bears r e s p o n s i b i l i t y to both p a r t i e s . I t must, therefore, develop an independent perception of the issues i n i t s decision-making. Second, i n order to gain an independent viewpoint an intermediary requires an independent information system which includes knowledge about the interests i n and p o l i c i e s for the operations of higher education which are held by the government and the u n i v e r s i t i e s . Third, there i s a l i m i t a t i o n posed by the available a n a l y t i c a l methods on the extent to which university f i n a n c i a l decision-making can be analysed. Summed up, the intermediary i s obliged to persuade both government and the u n i v e r s i t i e s to formulate and disclose t h e i r perceptions about t h e i r interests and the decisions taken i n pursuit of them i n higher education. Persuasion i s necessary because the p o l i t i c a l dynamics of the environment works i n other ways against such disclosure. The a n a l y t i c a l l i m i t a t i o n s of formal evaluation processes i n the public sector further oblige an intermediary to bring the major parties at i n t e r e s t into i t s confidence and through persuasion seek "useful knowledge" from them. I t i s clear that the intermediary's usefulness i n advising the government about the f i n a n c i a l requirements of the u n i v e r s i t i e s depends upon two primary functions: (i) i t s 28 success i n the use of persuasion to gain t h i s "useable knowledge" and ( i i ) i t s a b i l i t y to develop t h i s information into a defensible independent perception of the f i n a n c i a l issues. UNIVERSITY COSTS AND FINANCIAL BEHAVIOUR The examination of an intermediary's decisions i n the performance of i t s f i n a n c i a l decision-making role i n government-university relations requires an understanding of the nature of unive r s i t y costs. The reason i s that university f i n a n c i a l behaviour places l i m i t a t i o n s upon the a n a l y t i c a l approach employed by an intermediary to determine the funding requirements of the i n s t i t u t i o n s . Within the general p o l i t i c a l environment of government-intermediary-university r e l a t i o n s , u n i v e r s i t i e s operate i n f i n a n c i a l patterns which are peculiar to t h e i r roles as i n s t i t u t i o n s of higher education. This section attempts to define and explain t h i s behaviour with p a r t i c u l a r reference to the implications i t has for the evaluative function of an intermediary. The work of two scholars, Garvin and Bowen, i s used i n t h i s analysis. Garvin has developed an economic model of university behaviour involving the concept of u t i l i t y maximization. In t h i s model, two factors are involved i n the determination of the university's u t i l i t y function. The f i r s t underlying factor i s defined as "goal consensus". For a university which has two 29 sets of decision-makers, the administration and the faculty, a consensus on goals i s necessary for in c l u s i o n i n the u t i l i t y function. The second factor follows l o g i c a l l y i n that "those a c t i v i t i e s which enhance an organization's p r o b a b i l i t y of surv i v a l are l i k e l y to be pursued". Having set out the factors underlying a university's u t i l i t y function, Garvin proceeds to define that function as including three components: i n s t i t u t i o n a l prestige*, student qu a l i t y and student quantity. Garvin explains, c i t i n g supporting studies, that the pursuit of prestige s a t i s f i e s the requirement of a consensus goal i n that i t i s a feature of the a c t i v i t i e s of departments and i n d i v i d u a l faculty members. I t also meets the second requirement as a means of ensuring i n s t i t u t i o n a l s u r vival because prestigious i n s t i t u t i o n s and faculty members tend to at t r a c t more research and operating income through grants and student fees. Student qu a l i t y i s also sought as a goal of i n s t i t u t i o n a l prestige. Students who are more highly q u a l i f i e d academically raise the l e v e l of graduate and research work, contribute to a more stimulating teaching s i t u a t i o n and enhance an i n s t i t u -tion's reputation. Those that become recognized scholars * The sense of i n s t i t u t i o n a l prestige i s captured i n the following observation by Christopher Jencks and David Riesman quoted by Garvin: The t y p i c a l president's greatest ambition for the future i s usually to 'strengthen 1 his i n s t i t u t i o n , and operationally t h i s turns out to mean assembling scholars of even greater competence and reputation than are now present. (Garvin, 1980:22) 30 r e f l e c t well on t h e i r teachers' prestige. The t h i r d factor i n Garvin's university u t i l i t y function i s student quantity as representative of i n s t i t u t i o n a l commitment to a philosophy of service which involves granting greater a c c e s s i b i l i t y to the public. Increased enrolment also tends to a t t r a c t greater government resources i n both the operating and c a p i t a l sectors. It i s noted, however, that expanded student numbers may r e s u l t in trade-offs i n q u a l i t y , for example, i n lowered admission standards. These three factors, i n s t i t u t i o n a l prestige, student quality and student quantity, comprise the u t i l i t y function which u n i v e r s i t i e s attempt to maximize i n t h i s economic model. Garvin contends that university f i n a n c i a l behaviour regarding resource a l l o c a t i o n s can be interpreted by the model according to calculations which equate marginal u t i l i t y value and marginal costs to determine the optimal trade-offs i n the following manner: In u t i l i t y terms: for example, the h i r i n g of an eminent l i t e r a r y scholar may be deemed more important than that of a prestigious geographer because of the greater contribu-t i o n to o v e r a l l i n s t i t u t i o n a l prestige made by the former, while i n monetary terms, a prestigious b i o l o g i s t may be considered more desirable than an equally prestigious mathematician because of the former's a b i l i t y to tap a larger pool of outside grants. (Garvin, undated:10) While Garvin's u t i l i t y maximization model has a t h e o r e t i -c a l l y l o g i c a l q u a l i t y which helps explain the behaviour of u n i v e r s i t i e s at the broadest l e v e l , i t s a t t r a c t i o n diminishes rapidly when i t i s applied to s p e c i f i c r e a l cases. Garvin admits that i t i s but a supplementary view to be applied i n some undefined but j o i n t way with c o l l e g i a l , bureaucratic and 31 p o l i t i c a l models developed by others. The concept of u t i l i t y maximization embodies both the model's strengths and weaknesses. The l a t t e r arise because the u t i l i t y function i s defined too r e s t r i c t i v e l y . For example, i t i s u n l i k e l y , i n Garvin's example, c i t e d above, that the trade-o f f s i n faculty h i r i n g decisions are focused on two prestigious scholars from d i f f e r i n g f i e l d s . A more representative s i t u a -t i o n would be a trade-off c a l c u l a t i o n between the costs of h i r i n g the faculty member and the costs of reducing some other item of expenditure i n the department or faculty i n which the appointment i s to be made. In t h i s case the university would, t y p i c a l l y , attempt to hire both prestigious faculty members. Al t e r n a t i v e l y i t can be also suggested that the university's f i r s t option would be to explore the p o s s i b i l i t y of r a i s i n g more revenue i n order to take on the desired new faculty without having to make any re c i p r o c a l expenditure trade-off at a l l . Indeed Garvin i n a footnote i m p l i c i t l y recognizes the d e s i r a b i l i t y of t h i s option when he quotes Anthony Downs: Growth tends to reduce i n t e r n a l c o n f l i c t s i n an organization by allowing some (or a l l ) of i t s members to increase t h e i r personal status without lowering that of others. Therefore, organizational leaders encourage expansion to maximize morale and minimize i n t e r n a l c o n f l i c t s . Every bureau's environment changes constantly, thereby s h i f t i n g the r e l a t i v e importance of the s o c i a l functions performed by i t s various parts, and resources appropriate to each part. Such s h i f t s w i l l be res i s t e d by the section losing resources. But these dissensions can  be reduced i f some sections are given more resources  without any losses being experienced by others, (emphasis added) (Garvin, 1980:47) This suggestion raises the p o s s i b i l i t y that the u t i l i t y function should be expanded to include a revenue generation 32 factor: namely, that a university i n i t s attempts to increase i n s t i t u t i o n a l prestige, to a t t r a c t highly q u a l i f i e d students and more of them, seeks to maximize i t s revenues to accomplish these goals because the costs of these e f f o r t s are determined by the revenues available. A revenue generation factor i s advanced by Bowen in a concept e n t i t l e d "the revenue theory of cost". I t means that the greater the revenues of a university the greater the costs, for i n s t i t u t i o n s r a i s e a l l the money they can and spend i t a l l . Bowen1s theory and i t s underlying p r i n c i p l e s are based upon a number of large-scale cost studies on American u n i v e r s i t i e s and, the theory therefore, has the advantage over Garvin's model of an empirical basis. Bowen suggests that there i s a set of laws which explains the f i n a n c i a l behaviour of u n i v e r s i t i e s , namely, that: 1) the dominant goals of a university are educational excellence, prestige and influence; 2) i n the quest for these goals "there i s v i r t u a l l y no l i m i t to the amount of money an i n s t i t u t i o n could spend for seemingly f r u i t f u l educational needs (and expenditures once admitted into the budget become long term commitments from which i t i s d i f f i c u l t ever to withdraw)"; 3) each i n s t i t u t i o n raises a l l the money i t can; 4) each i n s t i t u t i o n spends a l l i t raises (except for possible accumulation of small reserves and endowments); 5) the cumulative e f f e c t of the preceding four laws i s toward ever increasing expenditure (with no incentives to 33 parsimony or e f f i c i e n c y ) . (Bowen, 1980:19) These laws p a r t i a l l y i l l u s t r a t e the dynamics of the p o l i t i c a l environment of government-university r e l a t i o n s . Their operation establishes the competitive behaviour for f i n a n c i a l resources. The implication i s that constraints i n university expenditures cannot be expected to emanate from within the i n s t i t u t i o n s but rather w i l l r e s u l t from externally imposed l i m i t s . As Bowen points out with respect to the argument for improved e f f i c i e n c y through better management techniques, measures such as energy conservation actions, etc. ...might reduce costs, but they would do so only i f revenues were cut commensurately. If revenues were not so reduced, any saving would simply be expended elsewhere i n the i n s t i t u t i o n and no net saving would occur. Unit costs are determined not by changes i n e f f i c i e n c y but by changes in revenues. (Bowen, 1980:17) This point can be i l l u s t r a t e d i n the u n i v e r s i t y system of B r i t i s h Columbia. Under the University Act each university i n accordance with i t s resources has a duty "to provide instruc-tion i n a l l branches of knowledge" [Section 46(b)]. The University of B r i t i s h Columbia* has acknowledged t h i s duty i n i t s statement of mission and has observed legitimately that the f u l f i l l m e n t of such a r e s p o n s i b i l i t y requires the u n i v e r s i t y to ensure among other things "that every e f f o r t i s made to r e c r u i t and develop faculty of the highest quality" (UBC, 1979:25). This view accords with Garvin's proposition that the pursuit of *UBC i s selected for i l l u s t r a t i v e purposes only; either the University of V i c t o r i a or Simon Fraser University could be substituted to make the point equally well. 34 prestige, i n t h i s case "faculty of the highest q u a l i t y , " forms part of UBC1s u t i l i t y function. I t also i l l u s t r a t e s Bowen1s law that the amount of money an i n s t i t u t i o n could spend for legitimate academic purposes, i n t h i s case to secure the highest q u a l i t y faculty to teach a l l branches of knowledge, i s v i r t u a l l y l i m i t l e s s . Under such conditions one would have to look elsewhere for grounds on which to expect UBC to acquiesce i n , much less to propose, any action whose e f f e c t would be to reduce i t s a b i l i t y to of f e r new and enriched programs taught by highly q u a l i f i e d faculty. In fac t such voluntary action could be f a i r l y argued to be tantamount to abdication by UBC of i t s duty and mission. I t follows from t h i s position that the only circumstances i n which one could expect voluntary i n t e r -u n i v e r s i t y academic cooperation at the i n s t i t u t i o n a l l e v e l are those i n which an in d i v i d u a l u n i v e r s i t y has decided to s e t t l e for "half a loa f " . In such a s i t u a t i o n an intermediary cannot count on the u n i v e r s i t i e s to promote actions on the basis of the well-being of the system of u n i v e r s i t i e s because such decisions may have an adverse e f f e c t on the s e l f - i n t e r e s t of an ind i v i d u a l i n s t i t u t i o n . Hence the onus i s l i k e l y to f a l l mainly on the intermediary to make judgements on behalf of the univer-s i t i e s c o l l e c t i v e l y . Under these conditions there are two implications respecting the f i n a n c i a l decision-making of an intermediary. F i r s t , i t i s u n r e a l i s t i c to expect the u n i v e r s i t i e s i n d i v i d u a l l y to develop budget requests based upon v o l u n t a r i l y reduced o v e r a l l expenditures ( i n f l a t i o n aside). Such 35 reductions, i f sought, w i l l come about for a l l u n i v e r s i t i e s only when the province appropriates a reduced general purpose operating grant, or at an i n d i v i d u a l u n i v e r s i t y when an i n t e r -mediary provides a reduced a l l o c a t i o n of funds. Second, i f a university requests additional operating revenues i t must assume the r e s p o n s i b i l i t y for demonstrating that the r e s u l t i n g increased unit cost w i l l a f f e c t favorably the performance of the i n s t i t u t i o n . There are several other implications for the role of an intermediary that flow from Bowen1s basic findings about how much u n i v e r s i t i e s cost and how much they should cost. The four findings relevant to t h i s study relate to the following matters: 1) the d i v e r s i t y of univer s i t y costs and th e i r i n t e r n a l i n s t i t u t i o n a l a l l o c a t i o n s ; 2 ) the basis of "need" i n university costs; 3) the r e l a t i o n between educational cost and outcomes; and 4) the guidelines for what higher education should cost. These findings w i l l now be described i n d e t a i l . D i v e r s i t y of Cost In attempting to answer the question concerning how much 36 u n i v e r s i t i e s spend i n terms of educational cost* Bowen found that "amazing" and substantial cost differences p e r s i s t i n the t o t a l per student cost of university education and that differences i n expenditures remain even when only educational costs are considered and when the i n s t i t u t i o n s being compared seem to have similar missions, location and size and to be rendering services of similar q u a l i t y . (Bowen, 1980:114) He concludes that such d i v e r s i t y i n unit costs, that i s i n the expenditures of u n i v e r s i t i e s per student can only be explained i n terms of the revenue theory of cost. Bowen also finds that among comparable i n s t i t u t i o n s the differences among i n s t i t u t i o n s i n the way they allocate t h e i r resources i n t e r n a l l y are also remarkable. On the basis of the data, one i s hard put to i d e n t i f y a pattern of a l l o c a t i o n that could be c a l l e d normal. (Carnegie Council, 1980:414)) This great d i v e r s i t y i n educational expenditures both i n terms of the amounts spent and the a l l o c a t i o n of the amounts suggests that there i s no empirically based general model to determine what p a r t i c u l a r u n i v e r s i t i e s cost. Bowen's basic thesis i s that the costs are inex t r i c a b l y related to what the * Bowen defines educational cost: Educational cost refers to current expenditures af t e r excluding outlays for organized research and public service, a prorated share of overhead cost attributable to research and public service, and outlays for the opera-tions of a u x i l i a r y enterprises such as residence h a l l s , dining f a c i l i t i e s , student unions and teaching hospitals. What remains after these exclusions i s current expendi-tures for the education of students. These include outlays for i n s t r u c t i o n and departmental research, student services, student f i n a n c i a l aid paid from i n s t i t u t i o n a l funds, and a prorated portion of expenditures for academic support f a c i l i t i e s such as l i b r a r i e s , computers, admini-s t r a t i o n and plant operation and maintenance. This remainder i s c a l l e d educational cost. (Bowen, 1980:115) 37 u n i v e r s i t i e s decide to spend (which, i n turn i s determined by the amount available for expenditure). Need The determination of unit costs i n u n i v e r s i t i e s i s often based on a rather i l l - d e f i n e d concept of "need". But as Bowen observes on the need argument: To conduct education of a s a t i s f a c t o r y quality...a certain r a t i o of faculty to student, or an appropriate salary scale...etc. are needed...Because higher education i s conducted at so many d i f f e r e n t levels of expenditure and with so many d i f f e r e n t a l l o c a t i o n s of resources, however, there i s no precise need that can be objectively defined and defended. (Bowen, 1980:16) This finding suggests that i n order to argue need as a basis for a request for funding the onus i s upon the university to demonstrate that a benefit can be attributed to increased f i n a n c i a l resources. An intermediary would then be i n a p o s i t i o n to make decisions based upon comparative benefits rather than upon the i l l - d e f i n e d concept of need. An alterna-t i v e approach to discerning a more objective evaluation of need would also place the onus for demonstration upon the i n s t i t u -tions. This would involve the notion of trade-offs among "needs" which can be pursued by establishing constraints upon p o t e n t i a l l y available resources and asking the u n i v e r s i t i e s to determine the p r i o r i t y of t h e i r needs - and hence to define a degree of need. Outcomes Bowen observed that the r e l a t i o n between educational cost 38 and outcomes i s tenuous: so l i t t l e i s known about the r e l a t i o n s h i p between the amount of resources and educational outcomes. The depth of t h i s ignorance i s indicated by the almost universal tendency to judge i n s t i t u t i o n a l r e s u l t s or quality i n terms of inputs rather than outputs and to assume without  evidence (emphasis added) that more inputs somehow w i l l i n e v i t a b l y produce commensurately greater or better r e s u l t s . (Bowen, 1980:121) The indications, however, are that increments of money y i e l d r e l a t i v e l y small increases i n outcomes for . . . i n s t i t u t i o n s with about the same f i n a n c i a l resources apparently produce quite d i f f e r e n t educational r e s u l t s . So i t must be evident that there i s more to excellence i n education than money and that i t behooves i n s t i t u t i o n s to learn to be more e f f i c i e n t i n converting resources into educational benefits. (Carnegie Council, 1980:416) i n s t i t u t i o n s know l i t t l e about the r e l a t i o n s h i p between th e i r expenditures and t h e i r educational outcomes, and i t i s easy to d r i f t into the comfortable b e l i e f that increased expenditures w i l l automatically produce commensurately greater outcomes. Under these conditions, the unit costs of operating. . . u n i v e r s i t i e s are set more largely by the amount of money i n s t i t u t i o n s are able to raise per unit of service rendered than by the inherent technical requirements of conducting t h e i r work. (Bowen, 1980:15) and The conclusions from the several attempts to correlate i n s t i t u t i o n a l expenditures with educational performances are highly tentative... nevertheless some modest references are s u f f i c i e n t l y plausible to put the burden of proof on those who would dispute them. (Bowen, 1980:166) Bowen's findings about the r e l a t i o n between educational cost and outcomes include the following: 1) i n s t i t u t i o n a l affluence i s probably correlated with educational outcomes i n the sense that, with many exceptions, affluent i n s t i t u t i o n s appear to generate greater outcomes than impecunious i n s t i t u t i o n s ; 2) the c o e f f i c i e n t s of c o r r e l a t i o n between unit cost and outcomes are not very impressive. The variance among i n s t i t u t i o n s i s substantial. Clearly some i n s t i t u t i o n s of lower cost perform as well as or 39 better than other i n s t i t u t i o n s of higher cost and these cost differences are i n many cases substantial; 3) i t seems l i k e l y (though not proven) that increase i n expenditures per student unit are c o s t - e f f i c i e n t though seemingly small, when the benefits are consid-ered as accruing over the l i f e t i m e of the students. Small percentage increases i n benefits may well j u s t i f y substantial expenditures. (Bowen, 1980:116) His conclusions on these findings are important for an intermediary's evaluative function: These conclusions, even though tentative, are of the utmost si g n i f i c a n c e . They imply that many affluent i n s t i t u t i o n s could perform as well, or nearly as well, with less money or that many i n s t i t u t i o n s could achieve greater r e s u l t s with the same money. They imply also that increases i n affluence do not automatically r e s u l t i n improvements i n performance, as i s so often claimed. Yet, they do suggest that on the average, but with many exceptions, money does make a difference. As the Carnegie Commission concluded... "To suggest that differences i n expenditures per student are largely explained by variatio n s i n the r e l a t i v e capacities of colleges and u n i v e r s i t i e s to at t r a c t income i s not to deny that r e l a t i v e l y high expenditures for students are l i k e l y to be associated with comparatively high q u a l i t y . . .But t h i s does not necessarily mean that cost differences among i n s t i t u t i o n s - or among p a r t i c u l a r programs within i n s t i t u t i o n s - invariably r e f l e c t differences i n qua l i t y . " (Bowen, 1980:167) There are obligations on the part of the university and of the intermediary to relate outcomes to cost. The university's management i s responsible for the decisions which w i l l r e s u l t in producing the optimal outcomes that are commensurate with the costs. The intermediary's task i s to examine the o v e r a l l quality of these management decisions i n making i t s evaluation of the f i n a n c i a l resources required to implement the decisions. Information about outcomes "expressed i n terms of more or less" are e s s e n t i a l for an independent examination of the f i n a n c i a l 40 issues. Unfortunately for intermediaries, Bowen's general conclusion about educational outcomes does not bode well for obtaining such information. He states: At present i n s t i t u t i o n s know very l i t t l e about t h e i r results and next to nothing about the e f f e c t s of changes i n t h e i r procedures and methods on the r e s u l t s . (Bowen, 1980:169) Guidelines In answer to the question "what should higher education cost?" Bowen1s findings are inconclusive. The great variance between expenditure and resource a l l o c a t i o n i n u n i v e r s i t i e s i s so large and r e l a t i o n s between expenditure and outcomes so tenuous that there i s not much guidance offered by Bowen's work on t h i s question. Within the higher education system there are few, i f any, indicators which relate expenditures and benefits in terms of public i n t e r e s t (Bowen, 1980:20). This finding raises a serious problem for any intermediary charged with advising government on the f i n a n c i a l requirements of a university system. Bowen's conclusions reinforce the observations, discussed e a r l i e r , of Dobell and Zussman regarding the absence of c r i t e r i a for determining public choice. On t h i s point, however, the intermediary does not bear the primary r e s p o n s i b i l i t y to act - for that duty belongs to government. In order to advise government on the more s p e c i f i c matter of the f i n a n c i a l requirements of the u n i v e r s i t i e s the implication here i s that the intermediary must r e l y on the i n t e g r i t y and competence of the university managers and j u d i -ciously examine the general qu a l i t y of t h e i r decision-making. 41 SUMMARY OF THE IMPLICATIONS FOR AN INTERMEDIARY University financing operates i n a manner which determines the way i n which the u n i v e r s i t i e s perform t h e i r r o l e . The works of Garvin and Bowen demonstrate that u n i v e r s i t i e s maximize t h e i r i n d i v i d u a l u t i l i t y functions supported by the operation of revenue generation a c t i v i t i e s . This r e s u l t s i n each i n s t i t u t i o n being obliged to make f i n a n c i a l decisions i n l i g h t of the benefits which may accrue to i t as an i n s t i t u t i o n rather than as a member of a system of u n i v e r s i t i e s . Operating as discrete units, u n i v e r s i t i e s raise a l l the money they can and spend a l l they r a i s e . Two implications for an intermediary follow. F i r s t , constraints on university expenditure can only be r e a l i s t i c a l l y expected to emanate from decisions made external to the i n s t i -tutions, namely by the government or the intermediary or both. Second, the onus i s on the u n i v e r s i t i e s to substantiate claims for increased revenues and these requests ought to be based i n terms of demonstrably favourable e f f e c t s on i n s t i t u t i o n a l performance. The foregoing studies on u n i v e r s i t y f i n a n c i a l behaviour have disclosed f i v e points: (i) no apparent cost norms ex i s t for u n i v e r s i t i e s and great d i v e r s i t y i n costs e x i s t s ; ( i i ) no normal pattern of funding a l l o c a t i o n s within u n i v e r s i t i e s e x i s t s ; ( i i i ) no precise and objective d e f i n i t i o n of university "need" can be made; (iv) no d e f i n i t i v e knowledge exists about the e f f e c t s of resource a l l o c a t i o n decisions on educational 42 outcomes; (v) no g u i d e l i n e s are c u r r e n t l y a v a i l a b l e to determine what u n i v e r s i t i e s ought to c o s t . Three i m p l i c a t i o n s f o l l o w . F i r s t , an i n t e r m e d i a r y cannot r e l y upon any g e n e r a l l y accepted e m p i r i c a l models f o r determining the f i n a n c i a l requirements of the u n i v e r s i t i e s . Second, an i n t e r m e d i a r y should focus on the a n a l y s i s of b e n e f i t s r a t h e r than a s s e r t e d needs when a s s e s s i n g f i n a n c i a l requests of the u n i v e r s i t i e s . T h i r d , i n the absence of s o l i d i n f o r m a t i o n on e d u c a t i o n a l outcomes and g u i d e l i n e s on c o s t , an i n t e r m e d i a r y should c o n s i d e r the q u a l i t y of u n i v e r s i t y decision-making about resource a l l o c a t i o n . 43 Chapter Three CONCEPTS AND ANALYSIS Having reviewed the pertinent l i t e r a t u r e on the role and experiences of intermediaries i n general, and before examining the actual experiences of the intermediary (the Un i v e r s i t i e s Council), the focus of attention s h i f t s to a preparatory step: namely, the task of constructing simple, descriptive models which may help to i d e n t i f y some of the elements recognized to be present i n the int e r a c t i o n between government, u n i v e r s i t i e s , and intermediary i n t h i s Province. Put i n abstract terms, t h i s study i s part of a more general enquiry into the question: How are the interactions between the major e n t i t i e s i n a small univ e r s i t y system affected when an intermediary body i s interposed? In order to est a b l i s h reasonable boundaries for the study, i t i s f i r s t necessary to outline a possible representation of the network of interactions i n the university system i t s e l f . From an h i e r a r c h i c a l perspective the interactions i n the system can be seen to occur at various l e v e l s . At the f i r s t l e v e l are the major participants (the c o l l e c t i v e s , described by upper case l e t t e r s below). Broadly defined these include: 1. The Government of B r i t i s h Columbia [the G] - i t s e l f a member of a federal system of government - which i s represented by the p o l i t i c a l party, or c o a l i t i o n , c o n t r o l l i n g at the time a majority of members i n the elected L e g i s l a t i v e Assembly. For convenience, the late Mr. W.A.C. Bennett's administration i s 44 i d e n t i f i e d as G-^ , Mr. D. Barrett's administration as G 2, and the present Mr. William Bennett's administration as G^. Within each government (as a c o l l e c t i v e ) one can also distinguish interactions occurring at the l e v e l of the Premier, of the Cabinet, of the Ministers d i r e c t l y involved with university a f f a i r s , and with M i n i s t r i e s i n d i r e c t l y affected. S i m i l a r l y , the notion of le v e l s of i n t e r a c t i o n can be extended to include the o f f i c i a l s according to t h e i r rank. For convenience, these various other levels of i n t e r a c t i o n may be stipulated i n lower case l e t t e r s , such as g^ and g 2 . Simply to i l l u s t r a t e the concept, i n the sketches below the Government of B r i t i s h Columbia i s denoted as: G, g^, g 2, 9 " 3 ' * ' 9 " n * 2 . The next major e n t i t i e s are the three public u n i v e r s i t i e s : the University of B r i t i s h Columbia [U], Simon Fraser University [S], and the University of V i c t o r i a [V]. Each of these i n s t i t u t i o n s derives i t s powers to function from statute enacted by the L e g i s l a t i v e Assembly, and each has a symbiotic relationship with the Assembly. Considering the university - as a c o l l e c t i v e - to be at the f i r s t l e v e l (uppercase l e t t e r s ) , interactions occurring at the l e v e l of the Board of Governors, the Senate, the President, the Faculty, and the Students could a l l be appropriately designated i n lower case l e t t e r s . The University of B r i t i s h Columbia might then be denoted as: U, u^, , . . - u n f Simon Fraser University as S, s^, s 2 , s 3 * , , s n ' a n c i the University of V i c t o r i a as, V,v^, v 2 , v 3 . . . v n . 3 . The f i f t h major entity i n the system i s the intermediary, the U n i v e r s i t i e s Council of B r i t i s h Columbia [C] . Created on 45 the i n i t i a t i v e of the government (G 2), the Council derives i t s powers from statute enacted by the L e g i s l a t i v e Assembly, and, l i k e the u n i v e r s i t i e s , i t too has a symbiotic rel a t i o n s h i p with the Assembly. If the Council as a c o l l e c t i v e at l e v e l one i s denoted by C, then the Chairman might be i d e n t i f i e d as at c^, the other Members as c 2 , and o f f i c i a l s as c^. The Council might then be denoted as: C, c-^ , c 2 , c^.'. .c . The f u l l i n t e r a c t i v e network of the system might then be displayed either as i n Sketch One or Sketch Two. The e s s e n t i a l difference between these two administrative designs i s that the d i r e c t l i n e s of communication between the government G and the three u n i v e r s i t i e s , U, S, and V are kept open i n Sketch One, but are closed (or muted) i n Sketch Two—Where designated communications are routed only through the intermediary C. The significance of t h i s difference i s that in Sketch One each university has two avenues open for the exchange of ideas with elements of the governmental entity (even though the subject matter may be, nominally, assigned to the custody of the intermediary). However, i n Sketch Two, there i s only one o f f i c i a l l i n e of communication open to the u n i v e r s i t i e s , namely, through the intermediary C: t h i s would apply when the subject matter has been nominally assigned to the domain of the intermediary. 46 Government [G, glt g 2 , g 3 — g R ] Intermediary - UCBC [C, ^ 2 ' ^ 3"**^n^ UBC [U, u l f u 2 , u 3...u n] SFU [ S, ^ ^ 2 ' ^3"**^n^ UVIC [V, v x , v 2 , v 3 . . . v n ] SKETCH ONE Government  [G, g x , g 2 / g 3«•.g n] Intermediary - UCBC [Cf ' " ' i ' "^ 2' ^"3***^n^ UBC [U, u 1 # u 2 , u 3 .u ] n SFU [S t i s 2 , ^ 3 s ] n UVIC [V, v x , v 2 , v 3 ,v ] n SKETCH TWO 47 Using Sketch One as a descriptive model to i l l u s t r a t e possible i n t e r a c t i v e e f f e c t s , i t i s i n s t r u c t i v e to pose the question: How would the interactions between G and the three e n t i t i t e s U, S, and V, be affected by the i n t e r p o s i t i o n of C? In the absence of C, the u n i v e r s i t i e s would negotiate d i r e c t l y and b i l a t e r a l l y (or t r i - l a t e r a l l y ) with G. Insofar as G encouraged negotiations to proceed through various govern-mental channels (the g's), each university - at both the upper and lower case l e t t e r s ' l e v e l s - would presumably endeavour to find means to persuade the government to respond to a l l or most of the university's expectations. If the governmental responses were judged to be inadequate, the addition of an intermediary might provide a forum i n which the u n i v e r s i t i e s could expect better outcomes from t h e i r representations: insofar as the intermediary f a i l e d to perform to t h e i r expectations, the u n i v e r s i t i e s could revert to t h e i r e a r l i e r practices and seek to inte r a c t d i r e c t l y with the government through some access-i b l e l e v e l . Having no statutory authority with which to control the spending p o l i c i e s of the self-governing u n i v e r s i t i e s , the government, G, i n the absence of an intermediary could only exercise a c o n t r o l l i n g influence through the annual grants supplied for operating and c a p i t a l purposes. By the creation of an intermediary with statutory powers to influence the size and d i r e c t i o n of university disbursements, the government might expect to have a forum i n which i t s r e f l e c t i o n s might be heeded. And, of course, should the intermediary be 48 unresponsive to i t s wishes, the government could resume interactions through other channels. After the creation of the intermediary, C, the new e n t i t y would f i n d i t s e l f charged with c e r t a i n regulatory, synthesizing, and mediating tasks to perform but always subject to a state of uncertainty that could arise from several e v e n t u a l i t i e s . F i r s t l y , i f a well-entrenched, competent intermediary chose to adopt a q u a s i - j u d i c i a l role i n the system, i t could attempt to do so by exercising i t s limited statutory powers i n a heavy-handed fashion. This would mean, i n e f f e c t , withdrawing a proportionate degree of independence-of-action from the u n i v e r s i t i e s . Although such a posture might f i t the taste of one government, successive governments might prefer to have an intermediary that r e l i e d more on persuasion (light-handed administration). From the u n i v e r s i t i e s ' perspective, a q u a s i - j u d i c i a l body, which could evidently control some aspects of t h e i r performance but had no authority to d i r e c t the actions ( p a r t i c u l a r l y f i n a n c i a l ) of the government, could well appear to be a one-sided intrusion into the u n i v e r s i t y system. Secondly, perceptions and expections change over time; governments and the occupants of p i v o t a l positions change. I t may be assumed, therefore, that as time passes there would be some wavering i n the willingness of the major e n t i t i e s to continue to accept formal understandings consummated at an e a r l i e r date, or to p e r s i s t i n carrying out p o l i c i e s for which support was lagging. 49 T h i r d l y , i f any of the major e n t i t i e s was d i s s a t i s f i e d with the decisions, or responses of C, the dissaffected party (or parties) might seek to circumvent or modify the offending outcomes by returning to pre-intermediary forms of i n t e r a c t i o n . The l i n e s of communication i n Sketch One between G and U, S and V remain open, even though C has been inserted as an intermediary. Fourthly, another cause of uncertainty could be the perceived c a p a b i l i t y of the intermediary to process information and to perform evaluative/adjudicatory functions. Should the intermediary be judged by any of the other major e n t i t i e s to be weak i n these important decision-making areas, a further incentive to discount the judgements of C would e x i s t . Uncertainties a r i s i n g from these and other eventualities could compound the d i f f i c u l t i e s of an intermediary seeking to perform a l a s t i n g c a t a l y t i c r o l e . As displayed i n Sketch One (which largely represents the actual state of a f f a i r s ) , the intermediary i s an expendable en t i t y whose usefulness to the other major e n t i t i e s ( i t s raison d'etre) i s constantly being re-evaluated i n the l i g h t of t h e i r current expectations. From a decision-making viewpoint, the survival of the intermediary would depend upon i t s a b i l i t y to devise strategies which would, for the most part, ensure the general acceptance of C's chosen role and decisions by a s i g n i f i c a n t proportion of the major e n t i t i e s i n the system. The l i f e - t e r m expectancy of such an intermediary might, then, be long or short depending upon events, some of which would be well beyond i t s own control. As a way of r e i f y i n g the notion of a 1 s i g n i f i c a n t proportion 1, Dr. Perry has suggested that rudimentary indicator representing the degree of support (or acceptance) for the intermediary's (C's) role and decisions might be created by using a simple weighted vote procedure. Let G have 3 votes, and the three u n i v e r s i t i e s , U, S, and V, have 1 vote each. The following combinations then c l e a r l y reveal the v u l n e r a b i l i t y of the intermediary. Votes Supporting C Votes Opposing C NET G U s V TOTAL G U s V TOTAL SUPPORT Situation I 3 1 1. 1 6 0 0 0 0 0 +6 II 3 1 1 0 5 0 0 0 -1 -1 +4 " III 3 1 0 0 4 0 0 -1 -1 -2 + 2 " IV 3 0 0 0 3 0 -1 -1 -1 -3 0 " V 0 0 0 0 0 -3 -1 -1 -1 -6 -6 VI 0 0 0 1 1 -3 -1 -1 0 -5 -4 VII 0 0 1 1 2 -3 -1 0 0 -4 -2 " VIII 0 1 1 1 3 -3 0 0 0 -3 0 This rough tabulation shows that, to have a ' s i g n i f i c a n t proportion' of the major e n t i t i e s constantly accepting i t s decisions and roles , the intermediary must always have the support of the government-in-power, [the G] , and of at least one, and preferably two of the u n i v e r s i t i e s . The intermediary, i n such circumstances, would not have much room to manoeuvre, and i t would be p a r t i c u l a r l y vulnerable to abrupt, or inconsistent, changes i n i t i a t e d by the heaviest voting e n t i t y (the G) . Unless supported i n i t s dissent by the G, an i n d i v i d u a l university would not d e s t a b i l i z e the intermediary's r e l a t i v e s i t u a t i o n . But the position of the 51 intermediary would become troublesome i f two, or a l l three of the u n i v e r s i t i e s are d i s s a t i s f i e d . The intermediary i s shown to be i n an awkward, and presumably vulnerable p o s i t i o n , i n the hypothetical situations numbers VI and VII. Irrespective of whether i t i s the G or any one of U, S, or V which takes the i n i t i a t i v e to produce the combinations shown in these situations, the net majority of the Council i s reduced to a negative. I t would be impracticable for the Council to proceed along i t s originally-intended l i n e of action i n such situ a t i o n s . F i n a l l y , to conclude t h i s section, Sketch Two portrays a more r i g i d form of administrative design. Once created, such an intermediary, C, would stand astride the flow of information (under i t s domain) passing between the government and the u n i v e r s i t i e s . While probably d i f f i c u l t to enforce as a p r a c t i c a l matter, a l l substantive i n t e r a c t i o n would have to involve the intermediary. In some respects, Sketch Two could be said to represent a small step towards the State of C a l i f o r n i a ' s university system, with i t s University of C a l i f o r n i a Board of Regents. Because the Sketch Two model does not describe the p r e v a i l i n g circumstances i n B r i t i s h Columbia i t i s not discussed further. THE EMERGENCE OF THE UNIVERSITIES COUNCIL OF BRITISH COLUMBIA With the transformation of V i c t o r i a College into a f u l l y -5 2 fledged university i n 1963, the university system i n t h i s province reached i t s present stature with three public univer-s i t i e s . During the ' s i x t i e s communications between the univer-s i t i e s and the P r o v i n c i a l Government [G^] flowed back and forth with the affected m i n i s t r i e s and, p a r t i c u l a r l y , the then Department of Education (later to be c a l l e d the Ministry of Education). What might be considered a miniature forerunner of the Univ e r s i t i e s Council existed i n the shape of an ad hoc Fin a n c i a l Advisory Board. This Board had the sole task of divi d i n g the annual p r o v i n c i a l grant among the three u n i v e r s i t i e s . A separate body, the Academic Board, had a nominal role to play i n the c o l l e c t i o n and dissemination of information about academic standards and to advise on the orderly development of u n i v e r s i t i e s . With the passage of time, the Academic Board became completely absorbed with the newly-emerging regional colleges. Although the u n i v e r s i t i e s made an annual budget presenta-ti o n through the Department of Education, basic decisions concerning the l e v e l of f i n a n c i a l support to be supplied for university purposes were made by the Minister of Finance; usually i n the l i g h t of broader considerations before the government. While funds granted for general operating purposes continued to increase during the late ' s i x t i e s , the univer-s i t i e s - also experiencing growth - considered themselves inadequately financed, e s p e c i a l l y i n respect of t h e i r c a p i t a l requirements. From the perspective of a coordinated academic 53 development, the p r e v a i l i n g mode of decision-making increasingly came under c r i t i c i s m from the u n i v e r s i t i e s ( p a r t i -c u l a r l y the University of B r i t i s h Columbia). And one university president admitted "after an i n i t i a l feeble e f f o r t at coopera-t i o n , the u n i v e r s i t i e s have r e a l l y ignored the Academic Board." (McTaggart-Cowan; 1969:4) By 1968, the P r o v i n c i a l Government (G^) was prepared to have the subject of government-university re l a t i o n s examined by an independent t r i b u n a l . Created by the Minister of Education, the Advisory Committee on Inter-University Relations f i l e d i t s recommendations (the Perry Report) with the Minister of Education i n 1969. Apparently s a t i s f i e d that the u n i v e r s i t i e s ' pressure for reform had been largely appeased by the action taken to permit t h e i r representations for changes to be thoughtfully evaluated, the Government (G^) decided not to publish the Advisory Committee's report, nor to implement i t s recommendations - which favoured the innovation of an appropriate intermediary body. This move permitted the Government (G-^ ) and p a r t i c u l a r l y the Premier - who also held the p o r t f o l i o of Finance Minister -to carry on as before with the decision-making procedures a f f e c t i n g university finances. The New Democratic Party, Her Majesty's Loyal Opposition, took the view that the Perry Report must be c r i t i c a l of the Government (G^); otherwise the Report would have been published. Several years passed, then, i n the e l e c t i o n of 1972, the New Democratic Party became the Government (G„). The 54 newly-elected Minister of Education promptly released the Perry Report and, over succeeding months, the Government (G2) conducted i t s own review of the l e g i s l a t i o n governing the u n i v e r s i t i e s . In 1974, a revised univ e r s i t y statute incorporated the establishment of an intermediary: the U n i v e r s i t i e s Council of B r i t i s h Columbia (C). In seeking to understand the intended role of t h i s new intermediary, information was s o l i c i t e d (by interviews) from Ministry o f f i c i a l s and other individuals who had been entrusted with the d r a f t i n g of the l e g i s l a t i o n . The drafters did not receive e x p l i c i t d i r e c t i v e s from the new government (G 2)• Instead, the drafters took for t h e i r main objective the concept of a buffer between the government and the u n i v e r s i t i e s . Such a buffer would be expected to accomplish the coordination of unive r s i t y development and, i n p a r t i c u l a r , the prevention of unnecessary duplication. The drafters' perception was that the u n i v e r s i t i e s were vying competitively to enter into new academic areas. There was l i t t l e evidence that the u n i v e r s i t i e s conceived themselves as part of a system. Indeed, there were competitive i n s t i t u t i o n a l views. The oldest, well-established unive r s i t y sought to shoulder a preponderance of the mandate to respond to the advancing needs of higher education. Recalling the e a r l i e r discussion about administrative design, Sketch Three i s included at t h i s point to suggest a possible representation of what the drafters might have expected such a sketch to look l i k e in 1972/73. The dotted l i n e s between the government (G), and the 55 u n i v e r s i t i e s (U) , (S) , and (V) , s i g n i f y that the d i r e c t l i n e s of communication remain open, but insofar as binding decisions i n the s p e c i f i c areas assigned to the intermediary, (C) , are concerned, the proper i n t e r a c t i v e channels are the continuous li n e s l i n k i n g the government and the u n i v e r s i t i e s with the intermediary. [C] [U] r G i — n i 1 [S] [V] SKETCH THREE The U n i v e r s i t i e s Council of B r i t i s h Columbia became operative i n 1974. Soon afterwards, the Social Credit Party returned to power and a new government, (G^) , assumed control of higher education. I t i s to selective events i n the l a t e r period, the years 1974 to 1982, that the study now turns. 56 Chapter Four ANALYSIS OF COUNCIL'S ROLE IN THE DEVELOPMENT OF THE ANNUAL OPERATING FUNDING RECOMMENDATION FOR THE UNIVERSITY SYSTEM THE REQUEST FOR FUNDS As an intermediary i n government-university r e l a t i o n s , the Uni v e r s i t i e s Council has certa i n statutory r e s p o n s i b i l i t i e s respecting the financing of u n i v e r s i t i e s . In general terms, the University Act empowers Council ...to inquire into the f i n a n c i a l requirements of u n i v e r s i t i e s and advise the minister of the sums of money required for the support and development of each univer s i t y and u n i v e r s i t i e s generally, (section 69r) This power of inquiry into university finances i s more s p e c i f i c a l l y defined i n the Act to cover both operating and c a p i t a l aspects (Section 69p) . The Council also has powers r e l a t i n g to the operating finances of educational i n s t i t u t i o n s other than u n i v e r s i t i e s that the crown may designate (Section 69t). The Council has additional r e s p o n s i b i l i t y for making recommendations for c a p i t a l funding of university i n s t i t u t i o n s as stipulated within the Educational I n s t i t u t i o n C a pital Finance Act. Matters of c a p i t a l finance for a l l i n s t i t u t i o n s and the operating finance for s p e c i a l l y designated i n s t i t u t i o n s are excluded from t h i s study. The focus of t h i s section i s an examination of the Council's a c t i v i t i e s with respect to the operating funding of B.C.'s three public u n i v e r s i t i e s : the University of B r i t i s h Columbia, the University of V i c t o r i a and Simon Fraser 57 University i n the period 1974 to 1982. This section analyses the methods by which the Council discharges i t s statutory r e s p o n s i b i l i t y : to receive, review and coordinate the budget requests presented to i t annually by the u n i v e r s i t i e s or presented at any other time at the request of the U n i v e r s i t i e s Council; to transmit i t s recommendations, together with the o r i g i n a l proposals from the u n i v e r s i t i e s to the Minister. (Section 69f) By examining the way(s) i n which the Council develops i t s annual funding recommendations with respect to the general purpose operating grant of the u n i v e r s i t i e s , t h i s chapter i d e n t i f i e s Council's problems i n taking these decisions. Prior to 1964 when the University of B r i t i s h Columbia was the only p u b l i c l y supported university i n the Province the procedure for determining the annual operating grant was r e l a t i v e l y simple and has been described as involving " d i r e c t discussion about grants between the university and a government ministry, and t h i s negotiation s e t t l e s both the amount of the grant and, of course, the a l l o c a t i o n " (Perry, 1969:16). Indeed even with the subsequent establishment of two additional u n i v e r s i t i e s , V i c t o r i a and Simon Fraser, the procedure amounted to l i t t l e more than informal discussion between the unive r s i t y Presidents and the Ministry of Education or Premier or both, with no extensive budget submission being required of the u n i v e r s i t i e s . Perry has pointed out some important features of the government-university r e l a t i o n s p r i o r to the i n t e r p o s i t i o n of the intermediary which are relevant to t h i s examination of the 58 Council's development of funding recommendations. He notes that: One of the main causes of dissension between (sic) the three public u n i v e r s i t i e s has been due, i n part, to a lack of agreement as to what the ground rules were, or ought to be, governing f i n a n c i a l support from the public sector. (Perry, 1969:45) In so far as the intermediary plays a role i n a s s i s t i n g the government i n the determination of the l e v e l of f i n a n c i a l support for u n i v e r s i t i e s , i t too has an obligation to the extent practicable within i t s statutory mandate to make i t s c r i t e r i a i n these matters c l e a r l y understood. Perry states further that: i t i s obvious that on one c r i t i c a l point - that i n which the P r o v i n c i a l Government u n i l a t e r a l l y decides the l e v e l of f i n a n c i a l support - the u n i v e r s i t i e s and the P r o v i n c i a l Government are, and may well remain, i n c o n f l i c t . . . (Perry, 1969:5) He adds, however, that: t h i s area of disagreement might be narrowed i f certain p r i n c i p l e s for budgeting, a l l o c a t i n g and dispensing funds were accepted. (Perry, 1969:6) On t h i s matter of devising acceptable c r i t e r i a or p r i n c i p l e s for f i n a n c i a l decision making, Council's performance w i l l be examined l a t e r . The j u s t i f i c a t i o n for imposing t h i s obligation to act on p r i n c i p l e i s also l a i d out by Perry, who states: Prudent management i s . . . d i f f i c u l t i f the u n i v e r s i t i e s do not have some f i n a n c i a l basis for planning t h e i r operations. I t i s important, then, that the extent to which the u n i v e r s i t i e s may r e l y on government grants should be largely understood. (Perry, 1969:7) This point has obvious implications not only for an intermediary but also for government. Perry concludes that the P r o v i n c i a l Government should s t r i v e to give e f f e c t i v e assurances that at least a minimal l e v e l of support for 59 operating purposes of the u n i v e r s i t i e s would be forthcoming. (Perry, 1969:51) The record of the intermediary and the government i n t h i s regard i s examined i n the following sections. THE COUNCIL'S APPROACH In the development of i t s annual funding recommendations to government concerning the u n i v e r s i t i e s ' operating grant the Council wrestles with the pre-eminent question whether these i n s t i t u t i o n s are reasonably financed i n current circumstances. In responding to t h i s question Council has attempted to design methods of v a l i d a t i n g the expenditure base of each university. This quest has vexed Council throughout i t s existence. Indeed i t s i n a b i l i t y to resolve t h i s matter to i t s own s a t i s f a c t i o n i s also a serious concern to government and, i n p a r t i c u l a r , to Treasury Board to whom Council's advice i s transmitted, with elaboration, by the Ministry. Council has acknowledged and described i t s d i f f i c u l t i e s i n t h i s area i n i t s statements accompanying each funding recommendation. Council perceived a problem i n analyzing the u n i v e r s i t i e s ' submissions r i g h t at the s t a r t of i t s operations in late 1974 and early 1975. Because of the coincidence of the timing of Council's start-up and the university budget submissions to government i n late 1974, Council did not have much time to prepare a recommendation for the 1975-76 operating grant. Consequently i t r e l i e d on the u n i v e r s i t i e s to provide a detailed analysis of s p e c i f i c budget areas. I t was clear to Council even from i t s i n i t i a l , understandably s u p e r f i c i a l , 60 review that a problem existed i n r e l a t i o n to the base l e v e l of univ e r s i t y funding: Council r e a l i z e s that open-ended escalation of costs of the university system must be understood and brought under control. Council expects to carry out a series of studies a r i s i n g from i t s need for f u l l understanding of the problems and opportunities facing u n i v e r s i t i e s i n B.C. which w i l l provide a basis for better analysis and control of these costs. (Council document 1) Council's early ideas for the pursuit of these goals included the r a t i o n a l i z a t i o n of university budget reporting procedures and the tentative proposition of a three year operating budget framework. In the i n i t i a l years, however, Council adopted a basic approach for the development of i t s subsequent funding recommendations by accepting the current year's base budget of each university as the s t a r t i n g point for assessing future requirements. Adjudication focused p r i n c i p a l l y on incremental additions to selected categories of expenditure i n the budget bases submitted by the u n i v e r s i t i e s . Examples of the selected categories which received recurring cost increments i n Council's recommendations included: s a l a r i e s , supplies and services, enrolment increases and new programs. This approach, with s l i g h t v a r i a t i o n s , continued r e l a t i v e l y unchanged for a l l the recommendations i n the period under review, that i s , for f i s c a l years 1975-76 to 1981-82 i n c l u s i v e . As a supplementary exercise i n formulating i t s 1981-82 funding recommendation, Council attempted to validate the expenditure budget bases i n e a r l i e r u n i v e r s i t y submissions by comparing them with audited actual l e v e l s and used these "validated" expense bases as reference points from which to i d e n t i f y incremental require-61 ments. In adjudicating the incremental additions to the base budget as submitted i n the u n i v e r s i t i e s ' requests, Council refers to independent sources of information, p a r t i c u l a r l y price l e v e l i n f l a t i o n a r y rate adjustments, for example i n the categories of faculty s a l a r i e s and university supplies and services. However, i t i s clear that Council has employed a r e l a t i v e l y simple incremental approach i n the development of i t s funding recommendations. BASIC PROBLEMS ASSOCIATED WITH COUNCIL'S APPROACH TO THE DEVELOPMENT OF ITS FUNDING RECOMMENDATIONS The single major source of f i n a n c i a l information upon which Council draws in the development of i t s funding recom-mendations i s the formal submission i n which each university requests operating funds for the next f i s c a l year. As noted e a r l i e r , p r i o r to the establishment of the Council, the discussions which took place between the p r o v i n c i a l government and i t s u n i v e r s i t i e s did not involve detailed budget submis-sions by the u n i v e r s i t i e s . In order for Council to discharge i t s mandate to act as the minister's advisor on the f i n a n c i a l requirements of the u n i v e r s i t i e s i t became necessary to commence a more detailed examination of univ e r s i t y expenditures and funding requests. Indeed Council i s empowered to require the u n i v e r s i t i e s to provide i t with information. The Council also may "require a university to es t a b l i s h the accounting and information systems that the U n i v e r s i t i e s Council considers necessary for the proper conduct of the business a f f a i r s of the 62 uni v e r s i t y " (University Act, section 69k). To be exercised properly , these powers must be based on an a n a l y t i c a l frame-work to be- applied to the u n i v e r s i t i e s ' f i n a n c i a l operations. In the early years of i t s a c t i v i t i e s , Council began by re l y i n g on detailed analysis of s p e c i f i c areas of f i n a n c i a l data provided by the u n i v e r s i t i e s ; more recently, i t has attempted to develop a common format for the submission of budget request information for the purpose of applying i t s own a n a l y t i c a l models to such a comparable information base. Respecting the budget requests of the u n i v e r s i t i e s , Council's consultants, Price Waterhouse, retained to a s s i s t i n f i n a n c i a l analysis, noted i n 1975 that: The requests for operating funds which the three univer-s i t i e s have submitted to Council have been presented primarily on an incremental basis. That i s , the submis-sions s t a r t with the approved budgets for the base year 1975/76 and concentrate on presenting and explaining the additional funds that w i l l be required for operations to be included i n the budget were developed d i f f e r e d among the three u n i v e r s i t i e s . (Council document 2) The Consultant added that: further improvements can be made i n the methods of preparation and presentation of the budgets for the three u n i v e r s i t i e s which would a s s i s t both the control of operations by the administration within the u n i v e r s i t i e s and the assessment of t h e i r budget submissions by the Council. In p a r t i c u l a r , we believe that a more complete format for the preparation of the submissions should be developed which would be compatible with the budgeting processes of the u n i v e r s i t i e s , with the object of f a c i l i t a t i n g t h e i r assessment by the U n i v e r s i t i e s Council. (Council document 2) With the budget submissions of the u n i v e r s i t i e s lacking a comparable format the Council was unable to i d e n t i f y common c r i t e r i a and a common methodology to assess the submissions. Despite ongoing consultation with the u n i v e r s i t i e s to develop a 63 mutually s a t i s f a c t o r y format, the related problems of presenta-t i o n and assessment remained unresolved. In January 1979 the consultant again commented that the u n i v e r s i t i e s ' submissions were "based on an incomplete 'model' of the incremental approach i n that savings from the base are not necessarily i d e n t i f i e d , though new programs and enhancements to existing programs are". He noted as well that the submissions are presented "without any clear methodology for t h e i r review and appraisal by UCBC". (Council document 12) For t h e i r part, the u n i v e r s i t i e s have developed detailed budget preparation processes as a basis for t h e i r submissions to the Council (these processes are described i n Appendix B) . Council's concern, however, i s not focussed on the procedures each university has developed to s t r i k e i t s budget and derive i t s request. Rather Council's paramount in t e r e s t l i e s i n understanding the assumptions, the p r i o r i t i e s and the options which the u n i v e r s i t i e s have acted upon i n the derivation of t h e i r requests. The crux of the problem i s that t h i s under-standing i s not read i l y apparent from the current submissions of the u n i v e r s i t i e s . . To date Council has not been able to develop the a n a l y t i c a l means to reach the degree of under-standing of these matters to f e e l confident of the v a l i d i t y of the budget base of the u n i v e r s i t i e s . Council does not have a sa t i s f a c t o r y independent perception of university f i n a n c i a l requirements based upon any general set of benchmark cost functions. Because i t could not s a t i s f y i t s e l f on t h i s point, Council i n 1977-78 adopted an a r b i t r a r y measure designed to 64 have the u n i v e r s i t i e s re-examine t h e i r budget base for the purpose of e f f e c t i n g better u t i l i z a t i o n of resources. Council described i t s dilemma i n these words: The Council has not been i n a pos i t i o n to analyze thoroughly the expenditure base on which the u n i v e r s i t i e s ' budget requests were b u i l t . The u n i v e r s i t i e s themselves, as well as the Council, have generally assumed that t h i s base r e f l e c t e d the e f f i c i e n t u t i l i z a t i o n of funds made available i n past years. I t i s probable, however, that i n th i s instance, as i n the case of any enterprise, a careful study of present methods and practises would i d e n t i f y opportunities for the improvement i n the effectiveness with which resources are applied. Consequently the Council has concluded that i t s funding proposal should r e f l e c t a decrease of 1% i n the l e v e l of expenditures of the current year to provide a target for improvement...The means by which t h i s objective i s achieved c l e a r l y must be determined by each university i n l i g h t of i t s own si t u a t i o n . Nevertheless, the Council i s concerned that there are opportunities that should be evaluated. (Council document 5) This measure was taken again i n subsequent years but i s c l e a r l y only an interim and piece-meal answer because ar b i t r a r y reduc-tions cannot be reasonably defended i f extended i n d e f i n i t e l y . In the following year's recommendation, 1978/79, Council enunciated i n general terms the nature of the c r i t e r i a i t was seeking to develop and to apply to i t s review of the u n i v e r s i -t i e s ' submissions. Council said i t sought to take into account "the need for the u n i v e r s i t i e s to demonstrate i n quantitative terms that they are operating i n the most e f f e c t i v e manner, with the funds already available to them" (Council document 6). Council indicated, however, that i n terms of the improved use of resources which i t believed was obtainable, the u n i v e r s i t i e s had not demonstrated i n q u a l i t a t i v e terms suitable measures taken to reach t h i s objective. Hence, l i t t l e progress had been made i n Council's view, to enable i t to analyze the 65 u n i v e r s i t i e s ' budgets i n a way which would serve as a base for a funding recommendation other than using an incremental approach. In 1978/79 Council "regrets that i t was s t i l l unable for t h i s budget submission to make i t s estimates other than on an incremental base". Its p o s i t i o n remains unchanged: The Council i s firmly of the opinion that a better approach to measurement must be found, not only to ensure that our u n i v e r s i t i e s are receiving adequate p r o v i n c i a l support, but to ensure that each one of our u n i v e r s i t i e s receives i t s appropriate share of the t o t a l p r o v i n c i a l support. (Council document 6) This l a s t point c a r r i e s with i t an implied r e l a t i o n between the assessment of the u n i v e r s i t i e s ' submissions and the subsequent a l l o c a t i o n of the operating grant. The problem which faces Council i n t h i s connection w i l l be discussed i n the next chapter on a l l o c a t i o n decisions but can be succinctly described as follows: because the Council i s unable to validate to i t s complete s a t i s f a c t i o n each university's budget base, i t s recommendation for the global t o t a l of operating funds for the three u n i v e r s i t i e s can not be d i r e c t l y disaggregated into an appropriate a l l o c a t i o n to each i n d i v i d u a l u n i versity. This circumstance re s u l t s i n an a l l o c a t i o n methodology which i s l i t e r a l l y divorced from the budget review underlying the o r i g i n a l funding recommendation. Council's d i f f i c u l t y i n v a l i d a t i n g the expenditure bases of the u n i v e r s i t i e s i s also a source of concern to the Ministry and the Government, p a r t i c u l a r l y during periods of f i n a n c i a l stress. In years past when government f i n a n c i a l r e s t r a i n t was less generally apparent, p a r t i c u l a r l y i n the halcyon days of the 66 ' s i x t i e s and early 'seventies when university budget requests were robust but acceded to by government, i t was presumably taken for granted that the Boards of Governors e f f e c t i v e l y discharged t h e i r mandate to oversee expenditures. Indeed i n t h i s province the Boards' powers i n t h i s regard are broad and e x p l i c i t : Subject to the powers of the U n i v e r s i t i e s Council, the management, administration and control of the property, revenue, business and a f f a i r s of the university are vested i n the board, and without l i m i t i n g the foregoing or the general powers conferred on or vested i n the board by t h i s Act, the board has power...to receive from the president and analyse and adopt with or without modifications, the budgets for operating and c a p i t a l expenditure for the un i v e r s i t y . (University Act, section 27) Council has r e l i e d on each Board to perform i t s duty i n t h i s regard but i t finds that such reliance alone i s becoming increasingly untenable i n the face of mounting pressures from government, i n p a r t i c u l a r from Treasury Board, for demonstrable proof that sound budget management prevails at the u n i v e r s i t i e s . In the current view of Treasury Board the r e s t r a i n t issue i s predominant i n a l l areas of budget analysis. Simply stated, t h i s circumstance prevails because the rate of government expenditure i s said to be increasing faster than the rate of revenue generation. This r e s u l t s i n the requirement to examine annually the contents of every budget base to validate both the p r i o r i t i e s of the programs and t h e i r costs. E s s e n t i a l l y the Treasury Board i s looking for evidence that such examination has occurred and, consequently, that attention has been given to the r e s t r a i n t issue. The fundamental budget approach of the present government i s that there exists i n each sector a 67 minimum l e v e l of service with an associated minimal operational budget below which i t does not make sense to fund anything. Government f i n a n c i a l r e s t r a i n t requires that that l e v e l be determined as a base upon which increased expenditures may be subsequently i d e n t i f i e d , j u s t i f i e d and ranked i n p r i o r i t y for possible funding (oral presentation of Treasury Board o f f i c i a l ) . Working within t h i s approach the Treasury Board seeks to s a t i s f y i t s e l f that the base has been validated by looking for the following types of evidence: the exploration of revenue options and the related r i s k s and exposure of each option; the assessment of management capacity i n the way f i n a n c i a l choices are made; the decision making for programs including consideration of c r i t e r i a , p r i o r i t i e s and impact on costs, etc. To impress upon the min i s t r i e s the seriousness with which the Treasury Board treats t h i s matter and i t s determination to be s a t i s f i e d that the issue of r e s t r a i n t i s being addressed, the 1981-82 estimates for the ministry responsible for u n i v e r s i t i e s were approved with appended conditions designed to produce the foregoing types of "evidence". In r e l a t i o n to the focus of t h i s study, the following request from Treasury Board to the Minister formally i l l u s t r a t e s the government's po s i t i o n : Complete an investigation into budget preparation at the three u n i v e r s i t i e s , t h e i r reporting requirements to the Un i v e r s i t i e s Council of B r i t i s h Columbia, and the effectiveness thereof. Prepare a recommended plan for indicated improvements and for poten t i a l for a multi-year adaptation within the In s t i t u t i o n s toward the p r i n c i p l e s of Zero Base Budgeting. Included i n t h i s work, i s to be an analysis of component expenditure and revenue sources at each University, with comparative indices for the rest of Canada. (Council document 16) 68 To date the Ministry has been attempting to comply with Treasury Board's i n s t r u c t i o n . In terms of Council's advice to the Ministry, however, i t i s clear that past measures, such as the a r b i t r a r y deduction of 1% from the base and approaches such as a h i s t o r i c a l comparison between budget leve l s and actual expenditure lev e l s to v e r i f y the reasonableness of a univer-s i t y ' s budget base, do not provide s u f f i c i e n t evidence of the type sought by Treasury Board. I f not being presently answered, the Board's i n q u i r i e s are serving to define further the relevant budget information needs of both the Board and Council. Some basic objectives are becoming apparent to Council i n r e l a t i o n to these budget information needs. The annual operating estimates document, i n ou t l i n i n g the operating requirements of each university and the level s of funding requested from governmental and non-governmental sources, should: (i) provide accountability for the funding previously made available; i d e n t i f y trends i n the a l l o c a t i o n of resources in response to changing demands for services; ( i i ) ensure that the information provided for the three i n s t i t u t i o n s i s as comparable as possible and that the l e v e l of d e t a i l i s a proper interpretation of trends; and, ( i i i ) provide a framework to f a c i l i t a t e the in t e r n a l planning and decision making about resource a l l o c a t i o n s at each university when f i n a l i z i n g i t s i n s t i t u t i o n a l operating budget (Council document 2 2 ) . Council i s currently considering how to re-design the i n s t i t u t i o n a l submission document i n these general d i r e c t i o n s . 69 While the Treasury Board requirements are coming into clearer focus for Council, i t i s important to note that the Treasury Board does hot assume r e s p o n s i b i l i t y for p o l i c y making i n higher education. I t i s to the government i t s e l f and, s p e c i f i c a l l y , to the Ministry of U n i v e r s i t i e s , Science and Communications that Council must look for p o l i c y guidance. In t h i s regard the government has been somewhat s i l e n t , possibly i n recognition of the t r a d i t i o n a l autonomy which i s afforded to u n i v e r s i t i e s i n t h i s part of the world. Post-secondary education issues generally do not form a very s a l i e n t feature of government's agenda. In the B r i t i s h Columbia higher education sector the government's recent attention has been focussed more on the development of the community college system and the establishment of newer non-traditional educa-t i o n a l organizations such as the Open Learning I n s t i t u t e and the Knowledge Network of the West. With some minor exceptions, such as the creation of the David Thompson University Centre to replace Notre Dame University and the establishment of T r i n i t y Western College as a limited degree granting i n s t i t u t i o n , the government and the p r o v i n c i a l l e g i s l a t u r e have not devoted much of t h e i r attention to university a c t i v i t i e s . That i s not to say that the government has abdicated r e s p o n s i b i l i t y i n t h i s area. The government view i s that i t s p o l i c y i n these matters has been i m p l i c i t i n the types and l e v e l of funding which i t has provided to the u n i v e r s i t i e s , for example: During the l a s t few years, we (the government) have i n s t i t u t e d a debenture funding system for major c a p i t a l a c q u i s i t i o n s , beginning with buildings and extending now to major equipment. In the early years of such a system, 70 the costs of debt servicing are comparatively small, but on a percentage basis they r i s e very rapidly. Another recent change has been a government decision to earmark certai n funds for the support of university e f f o r t s i n areas which are of p r i o r i t y to the government higher than may be f e l t within the u n i v e r s i t i e s themselves. The government regards these earmarked funds as part of university funding, even though the u n i v e r s i t i e s may be reluctant to do so. (Council document 17) Special funds for the expansion of medical and engineering education constitute examples of such p o l i c y decisions of government. The government view i s that, i n terms of appro-pri a t e comparison with cost of l i v i n g increases, i t has funded the u n i v e r s i t i e s at a r e l a t i v e l y higher rate of increase and that these increases are a representation of the w i l l of the government to support the u n i v e r s i t i e s . (Council document 16) In 1978 the Minister requested Council, i n consultation with the u n i v e r s i t i e s and Treasury Board s t a f f , to submit a f i v e year budget for higher education. The Minister recognized some d i r e c t implications of such an exercise: I t w i l l give the Government an opportunity to look ahead in the educational f i e l d i n a way that has not been possible heretofore. In turn, the Government may be i n a posi t i o n to give a longer range outlook on i t s own a b i l i t y to make f i n a n c i a l commitments to post-secondary education. There are two important factors which w i l l need to be considered i n making judgements about budget requirements for the next f i v e years. The f i r s t i s the proportion of income to be derived form non-governmental sources, p a r t i c u l a r l y student fees. The second i s the role that each i n s t i t u t i o n w i l l play i n the o v e r a l l program for the province. (Council document 9) Such an approach was not new to Council for, i n October 1976, i t s second annual report stated: Having now had the experience of two consecutive annual budgets, i t i s the opinion of Council that, at least i n general terms, university budgeting should be on a three year basis. Year one would show a detailed analysis of 71 f i n a n c i a l resources the u n i v e r s i t i e s f e e l they require, while years two and three would give a less precise picture of the f i s c a l requirements. The acceptance of t h i s p r i n c i p l e by the Government would s i g n i f i c a n t l y enhance the quality of long range planning and the opportunity for increased e f f i c i e n c y of operations i n the u n i v e r s i t i e s . (Council document 4) In response to t h i s s p e c i f i c request, the Council consulted with the u n i v e r s i t i e s and reported to the Minister that the cooperation of the i n s t i t u t i o n s had been secured for t h i s task. As a f i r s t step i n the development of the forecast Council suggested that: . . . i t would be useful to discuss the s p e c i f i c information which w i l l be required, and the assumptions regarding government p o l i c y which should be included. We are concerned that Council be able to o f f e r guidance to the u n i v e r s i t i e s i n terms of which assumptions regarding higher education p o l i c y may be most r e a l i s t i c a l l y b u i l t into t h e i r forecasts (assumptions, for instance, regarding unive r s i t y p a r t i c i p a t i o n rates). (Council document 11) .For reasons which are not well understood at Council, but appear i n part to r e l a t e to a lack of government response to Council's suggestion, t h i s undertaking was subsequently abandoned. The issue of planning w i l l be subsequently discussed i n Chapter six. It i s f a i r to observe that with respect to formally enunciated statements of p o l i c y i n matters of u n i v e r s i t y finance the Government record i s not copious. The Government's general p o s i t i o n appears to be that i t supports the univer-s i t i e s as generously as i t can i n l i g h t of competing demands on the public purse and i n return i t expects these i n s t i t u t i o n s to meet the evolving needs of society which, i n selected areas, w i l l be defined by the government. In large measure, however, both the subject of needs and the methods of s a t i s f y i n g them 72 w i l l be regarded as the preserve of the u n i v e r s i t i e s : the government seeks only to be assured that the public money consumed by the u n i v e r s i t i e s i n the process i s expended e f f e c t i v e l y and e f f i c i e n t l y ; i n other words that the u n i v e r s i t i e s are held appropriately accountable. The government r e l i e s i n the f i r s t instance upon the advice and opinion of i t s chief advisor, the Un i v e r s i t i e s Council. In taking t h i s view the government has avoided a d i r i g i s t e approach encompassing s p e c i f i c p o l i c y statements. This circum-stance has allowed the u n i v e r s i t i e s wide la t i t u d e i n the di r e c t i o n and magnitude of t h e i r a c t i v i t i e s and, as they have proclaimed i n t h e i r mission statements, they have responded i n good f a i t h to meet s o c i e t a l needs i n terms of new and expanded academic endeavours but therefore require increased funding. Thus, while the absence of government d i r e c t i o n permits the u n i v e r s i t i e s a freedom i n development, i n order for such development to continue a steady and increasing supply of funding i s required. A l t e r n a t i v e l y when funding i s constrained a problem arises for the u n i v e r s i t i e s and the Council i n determining how to structure academic a c t i v i t i e s to ensure compliance, where appropriate, with t h e i r paymaster's wishes i n the absence of s p e c i f i c Government p o l i c y . The question which the u n i v e r s i t i e s and Council can legitimately ask i s to what degree the u n i v e r s i t i e s can expect public support? It appears that a "policy-free" approach worked s a t i s f a c -t o r i l y as long as the government revenues permitted appropria-tions to expand i n l i n e with the annual increases requested by 73 the u n i v e r s i t i e s and supported by the intermediary. Conversely, when the Government experiences revenue constraints i t i s forced to a l t e r i t s approach, to intervene and to search for increased information about expenditures i n order to f a c i l i t a t e i t s assessment of appropriate funding for university education r e l a t i v e to other p r i o r i t i e s . In such a s i t u a t i o n the Council has been i n some measure hampered i n i t s attempts to respond to government by the lack of p r o v i n c i a l d i r e c t i o n . The issue of enrolments i s a case i n point. In a l e t t e r to Council Chairman, the Deputy-Minister has stated The Ministry does not regard the t o t a l number of univer-s i t y students, or the number of degrees granted per year, as a figure of merit for our u n i v e r s i t i e s or as a measure of t h e i r value to our Province. I t i s better to have a smaller number of better q u a l i f i e d and respected graduates than a larger number with more dubious q u a l i f i c a t i o n s . (Council document 17) The Minister, the Honorable P.L. McGeer, i n an o r a l presenta-tion at Council's 1981 annual outlook conference, affirmed the general tenor of these remarks which were considered by a senior Canadian unive r s i t y educator, Dr. John Barfoot MacDonald, to be a singularly important statement of government po l i c y , tantamount to saying that a c c e s s i b i l i t y to university education no longer represented a primary objective of government f i n a n c i a l support i n B.C. If indeed government holds t h i s view as a s a l i e n t feature of i t s support for u n i v e r s i t i e s i t portends major implications for u n i v e r s i t y and Council operations. Presently i t i s the i m p l i c i t p o s i t i o n of each university to provide a place for every q u a l i f i e d student applicant and to l i m i t the e s t a b l i s h -74 ment of enrolment quotas to those schools, such as medicine, where ext r a o r d i n a r i l y high costs and other factors p r o h i b i t open enrolment. Indeed a l l new program proposals submitted by u n i v e r s i t i e s for approval of Council are to a large extent j u s t i f i e d on the basis of student demand. On the other hand, however, the University Act i n describing the functions and duties of a university i s s i l e n t on the matter of enrolment places. This i s not the case i n other j u r i s d i c t i o n s , the United Kingdom or neighbouring Washington state, where enrolment targets are agreed upon by government, intermediary and university. The need for some clear understanding of government's views on enrolment numbers i s important because i t i s t h i s component, which i s currently the most s i g n i f i c a n t factor i n determining i n s t r u c t i o n a l expenditures. In B.C. the u n i v e r s i t i e s predicate t h e i r budget requests largely upon enrolment patterns. Council considers t h i s factor i n i t s annual funding recommendation and allocates the general purpose operating grant on an enrolment driven basis. In terms of the l e v e l of f i n a n c i a l support for the univer-s i t i e s a set of circumstances has developed i n B.C. i n which, as Perry forecast i n 1969, the government and the u n i v e r s i t i e s are i n c o n f l i c t . This disagreement i s recorded i n the following table ( p a r t i c u l a r l y i n column G). 75 B.C. UNIVERSITIES OPERATING GRANT ($000) A Fiscal Year B Universities Request C UCBC Recommenc3ation D E F G Difference Government Difference Difference % B/C Grant % E/C % E/B 1975 1976 1977 1978 1979 1980 1981 •76 •77 •78 •79 •80 •81 •82 $161,689 208,083 213,502 220,880 234,742 254,415 283,210 $155,650 192,652 194,235 202,498 218,924 242,255 270,513 -3.73 -7.42 -9.02 -8.32 -6.74 -4.78 -4.48 $150,200 170,400 184,500 200,578 217,226 239,612 271,713 - 3.50 -11.56 - 5.01 - 0.95 - 0.78 - 1.09 + 0.44 - 7.11 -18.11 -13.58 - 9.19 - 7.46 - 5.82 - 4.06 As the period of disagreement lengthens, the margin of budget tolerance by which the u n i v e r s i t i e s can reallocate i n t e r n a l expenditures or e f f e c t improved use of resources to accommodate less than requested levels of funding diminishes to the point at which academic a c t i v i t i e s may have to be c u r t a i l e d . The u n i v e r s i t i e s are then l e f t with the task of v e r i f y i n g e x i s t i n g program p r i o r i t i e s . The government i n these circumstances has not given any clear understanding of the "extent to which the u n i v e r s i t i e s may r e l y on government grants". (Perry 1969:7) In the absence of such an understanding, the intermediary faces the problem of determining what i s a reasonable and defensible l e v e l of funding for u n i v e r s i t i e s . This i s p a r t i c u l a r l y vexing i n l i g h t of Bowen's view that the nature of legitimate academic a c t i v i t y i s v i r t u a l l y l i m i t l e s s and i s bound only by the amount of money available to support i t . It i s clear that decisions on these matters w i l l have to be informed by judgements which i n turn can only be p a r t i a l l y , 76 and not necessarily s i g n i f i c a n t l y , based on empirical informa-t i o n . Summed up, two major problems have resulted from the Council's approach to the development of the annual funding recommendation. F i r s t , the Council has not been able to s a t i s f y i t s e l f f u l l y of the v a l i d i t y of the budget bases of the three univer-s i t i e s . The Council has not been able to develop singly, nor in consultation with the u n i v e r s i t i e s , a s a t i s f a c t o r y format for the presentation of university budget information. This problem has arisen because a s a t i s f a c t o r y a n a l y t i c a l framework for budget review has not been determined. Hence Perry's c a l l for some defined p r i n c i p l e s of budgeting i n order to narrow areas of disagreement between the u n i v e r s i t i e s and the govern-ment has not been answered by Council. Council has not been able to develop an independent perception of university finances. The absence of government po l i c y about the extent to which u n i v e r s i t i e s may r e l y on government grants has compli-cated Council's task of formulating an annual recommendation on the general purpose operating grant for u n i v e r s i t i e s . Second, the i n a b i l i t y of Council to validate to i t s s a t i s f a c t i o n the budget base of each university has resulted i n the development of an annual funding recommendation set i n the context of the university sector as a whole (that i s , dealing with the aggregate of the u n i v e r s i t i e s ' requests). This recom-mendation subsequently has not been employed as the instrument to a l l o c a t e the p r o v i n c i a l operating grant to i n d i v i d u a l u n i v e r s i t i e s . 77 Chapter Five ANALYSIS OF COUNCIL'S ROLE IN THE ALLOCATION OF THE ANNUAL PROVINCIAL OPERATING GRANTS The University Act empowers Council to ...receive, a l l o c a t e and d i s t r i b u t e operating grants and grants designated by the Minister, but a university i s not required to use operating grants allocated to a university for any p a r t i c u l a r aspects of i t s operations, (section 69f) In actual practice the Council does not receive the u n i v e r s i t i e s ' operating grants i n the sense of taking custody of the funds; nor does i t d i s t r i b u t e the funds, for the Ministry issues the cheques d i r e c t l y to the u n i v e r s i t i e s . Council does, however, alloca t e the grants and the determination of the a l l o c a t i o n process remains a major contentious issue. I t may f a i r l y be said that, i n large measure, the a l l o c a t i o n exercise has been made more troublesome as a r e s u l t of Council's i n a b i l i t y i n the f i r s t instance to devise a wholly s a t i s f a c t o r y procedure for the determination of the request l e v e l of operating grant funding for the un i v e r s i t i e s c o l l e c t i v e l y . Presumably, i f Council, i n the determination of the funding required for the system, had devised a working method of a r r i v i n g at the l e v e l of operating funds required by each un i v e r s i t y , the a l l o c a t i o n of the amount subsequently made available by the government i n response to Council's funding recommendation could proceed i n a straightforward fashion. As the e a r l i e r discussion indicates, however, such a f u l l y s a t i s f a c t o r y method of establishing the 78 f i n a n c i a l requirements of the u n i v e r s i t i e s has not yet been developed by Council. THE COUNCIL'S APPROACH In making i t s a l l o c a t i o n decisions, Council has followed a d i f f e r e n t set of procedures from those employed i n aggregating the u n i v e r s i t i e s ' budget requests. In perspective, i t must be noted that Council inherited a h i s t o r i c a l practice of a l l o c a t i o n which was characterized by a formula cum negotiation and has been described thus: ...the grant used to be divided by a f i n a n c i a l Advisory Board to the Minister of Education. In 1970-71 and 1971-72, UBC and UVic proposed grant decisions to the Board which were based on a formula approach. The Board modified the proposed d i v i s i o n s but retained the recommended formula as the s t a r t i n g point for the grant d i v i s i o n s . In subsequent years the three u n i v e r s i t i e s negotiated amongst themselves on the grant d i v i s i o n using the formula as the s t a r t i n g point for discussion. The res u l t s of these negotiations were then conveyed to the Advisory Board which i n turn reviewed and endorsed them and passed on i t s recommendations to the Minister of Education. (Council document 3) In A p r i l 1976 the University of V i c t o r i a expressed concern that there i s evidence that the U n i v e r s i t i e s Council i s departing from the use of a r a t i o n a l basis of grant d i v i s i o n which was based upon c r i t e r i a which had been agreed to by the u n i v e r s i t i e s . (Council document 3) The c r i t e r i a i n question included the formula components and t h e i r founding p r i n c i p l e s . * Dr. Petch also noted i n the same l e t t e r that: One of the objections to the formula which was used i s that any special factors which require recognition outside the formula must be made at the expense of one or more of the other u n i v e r s i t i e s . (Council document 3) *For d e t a i l s of the formula components and the p r i n c i p l e s upon which the formula was based see appendix D. 79 This fact i s an axiom which can be broadened i n scope to include the t o t a l grant insofar as any adjustments to the al l o c a t i o n to one university have a d i r e c t l y perceptible impact on the al l o c a t i o n s to the other two i n s t i t u t i o n s . This i s a factor which contributes to the making of adversarial circum-stances i n the issue of grant a l l o c a t i o n decision making. In a larger system such as that of the United Kingdom or Ontario with a great many i n s t i t u t i o n s , differences i n one i n s t i t u -tion's a l l o c a t i o n cannot be d i r e c t l y perceived to have a d i r e c t e f f e c t on any other i n s t i t u t i o n ' s share. In 1978 the Council decided to review the a l l o c a t i o n issue. In i t s a l l o c a t i o n report of that year Council set forth the following objectives for t h i s review: After some agreement has been reached on what should be the future differences i n roles and programs of B r i t i s h Columbia u n i v e r s i t i e s , further measures can be i n s t i t u t e d to r e f i n e the a l l o c a t i o n process. During the 1978-79 year, the Council required the assistance, cooperation and agreement of the u n i v e r s i t i e s i n studying the appropriate academic services to be delivered by each university and in devising a suitable formula to r e f l e c t an equitable a l l o c a t i o n of the p r o v i n c i a l operating grant. (Council document 8) The study of the academic programs to be provided by each university was not pursued and t h i s matter w i l l be discussed in the next chapter. Council did i n i t i a t e , however, the development of an a l l o c a t i o n formula. P r i o r to taking t h i s decision the Council b a s i c a l l y had allocated the p r o v i n c i a l operating grant to each university using an incremental approach based upon the h i s t o r i c a l pattern of the grant a l l o c a t i o n . Council was, however, c l e a r l y uncomfortable with t h i s s i m p l i s t i c procedure because i t was not 80 s a t i s f i e d that i t would enable the r e a l i z a t i o n of i t s stated general goals on the a l l o c a t i o n process: In a l l o c a t i n g the P r o v i n c i a l Grant among the three u n i v e r s i t i e s , the Council seeks the maximum benefit to the public of B r i t i s h Columbia a r i s i n g from the use of the grant. Ideally, each university should receive the f i n a n c i a l support which w i l l enable i t to function capably in providing appropriate teaching, research and community services. (Council document 8) In 1978, i n order to a s s i s t i t i n analysing the issues associated with the a l l o c a t i o n decisions, Council retained a consultant, Mr. B. Hansen, to define an approach to the subject. S p e c i f i c a l l y the consultant was asked: to recommend measures and methodology to the U n i v e r s i t i e s Council of B r i t i s h Columbia to a s s i s t i n i t s determination of recommendations for appropriate funding of u n i v e r s i t i e s i n B r i t i s h Columbia both as to system need and the equitable d i s t r i b u t i o n of government funds made available. (Council document 7) Council obviously recognized the desirable and l o g i c a l connection between determining the l e v e l of funding and the a l l o c a t i o n of the funding. Regarding the matter of funding leve l s of the u n i v e r s i t i e s the consultant concluded that, i f the Ontario weighting system was applied to univ e r s i t y student enrolment i n B.C., UBC had been s i g n i f i c a n t l y underfunded r e l a t i v e to the University of V i c t o r i a and Simon Fraser University. Notwithstanding the r e l a t i v e levels among the B.C. u n i v e r s i t i e s he also concluded that: even allowing for h i s t o r i c a l r e l ationships, roles of i n s t i t u t i o n s , number of u n i v e r s i t i e s , range of program o f f e r i n g , the present alignment of B.C. u n i v e r s i t i e s with respect to funding per unit of approximately weighted enrolment i s substantially out of l i n e (in the d i r e c t i o n of higher funding i n B.C.). (Council document 7) Although previously Council had c r i t i c i z e d UBC on the 81 grounds that that university had spent a disproportionate amount of money on academic sa l a r i e s to the detriment of l i b r a r y , physical plant and other non-salary expenditure items, Council's 1978-79 a l l o c a t i o n decision coincided with the consultant's finding as follows: It i s the opinion of the Council, having regard to the nature and extent of the services currently provided by the u n i v e r s i t i e s , that the University of B r i t i s h Columbia merits a somewhat larger share of the operating grant than would be provided by incremental funding based on the h i s t o r i c a l pattern of the grant a l l o c a t i o n . The 1978-79 grant a l l o c a t i o n r e f l e c t s a move to a l l e v i a t e t h i s imbalance. (Council document 8) This departure from incremental funding caused concern at the smaller u n i v e r s i t i e s and probably enhanced for them the attractions of developing a formula basis for the a l l o c a t i o n which might increase the p r e d i c t a b i l i t y of t h e i r i n d i v i d u a l grants. On the method of developing such a formula the consultant acknowledged that differences i n funding occurred because of the assumption of past roles and, therefore, the c r u c i a l questions related to the nature of future differences i n roles and programs of the B.C. u n i v e r s i t i e s and to how they should be d i f f e r e n t i a l l y funded. (Council document 7) In responding to these questions the consultant defined four major tasks: 1) to define the mission and roles of the u n i v e r s i t i e s ; 2) to define and assemble appropriate information for both the determination of the university system's needs and the provision of accountability i n the expenditure of government funds; 82 3) to design the a l l o c a t i o n methodology per se; and, 4) to develop an annual reporting format for comparable revenue and expenditure information. (Council document 10) The Council proceeded on a l l four matters but i t s p r i o r i t y focussed on the t h i r d ; that i s , the design of an a l l o c a t i o n methodology. A task force was established involving Council s t a f f and university representatives. As a preliminary exercise a set of guiding p r i n c i p l e s was developed. A formula for the a l l o c a t i o n of the operating grant was then devised i n r e l a t i o n to the p r i n c i p l e s * . Council adopted the formula on the basis of a three year t r i a l period; that i s , to be applied for the f i s c a l years 1979-80 to 1981-82 in c l u s i v e on the understanding that continuous review of the formula would occur during the period of i t s applica t i o n . The fundamental tenet underlying the formula i s that over the longer run "the d o l l a r s w i l l follow the students;" that i s , i t i s largely enrolment driven. The formula was revised i n the f i r s t year i n order to correct some inconsistencies and changes due to enrolment reporting. These changes did not s i g n i f i c a n t l y a f f e c t the r e l a t i v e funding l e v e l s of the u n i v e r s i t i e s i n 1979-80 and the o r i g i n a l p r i n c i p l e s were s t i l l s a t i s f i e d by the revised formula. In e f f e c t , the a l l o c a t i o n formula could be described as a f o r c e d - f i t formula insofar as i n the f i r s t instance i t s *For d e t a i l s of the p r i n c i p l e s and t h e i r r e l a t i o n to the formula see appendix D. 83 application resulted i n levels of funding nearly i d e n t i c a l to those of the l a s t year p r i o r to i t s implementation. Indeed one university has stated that: An i m p l i c i t p r i n c i p l e guiding the deliberation of the Task Force was that the h i s t o r i c a l funding l e v e l r e l a t i o n s h i p among the u n i v e r s i t i e s . . . should not be s i g n i f i c a n t l y altered by the introduction of a formula. (Council document 19) This desire to maintain h i s t o r i c a l r e lationships* can be explained not so much by a b e l i e f that the e x i s t i n g l e v e l s were f a i r or equitable but by the p o l i t i c a l agreement of the u n i v e r s i t i e s that the most recent l e v e l approximates the minimal acceptable amount of funding that each university i s prepared to accept i n d i v i d u a l l y and c o l l e c t i v e l y i n the context of the o v e r a l l a v a i l a b i l i t y of p r o v i n c i a l funds. This explanation i s supported by the fact that while the agreement i n respect of the application of the formula included a minor portion (5%) to be di s t r i b u t e d at Council's d i s c r e t i o n the u n i v e r s i t i e s strongly argued that i n the f i r s t year of the formula's application the formula be used to d i s t r i b u t e the entire available amount. The u n i v e r s i t i e s could calculate the a l l o c a t i o n on that basis and that c a l c u l a t i o n showed a re s u l t nearly i d e n t i c a l to the immediately previous year's a l l o c a t i o n . Council acquiesced and allocated the grant on that basis. On t h i s point of discretionary judgement further comments w i l l follow. With the completion of the agreed, three-year application *For a" ten year overview of these funding relationships see appendix E. 84 of the a l l o c a t i o n formula i n 1981-82, Council, i n consultation with the u n i v e r s i t i e s , i n i t i a t e d a review of the matter. That review has not been completed. The main features and c r i t i -cisms of the formula's implementation have, however, been enunciated i n t h i s study. From t h i s context the role of the Council can be reasonably defined. The f i r s t point to be observed i s that the implementation of the formula ensured that at least 95% of the p r o v i n c i a l operating grant would be allocated to the u n i v e r s i t i e s on the basis of an agreed algorithm* which i s e s s e n t i a l l y based on student numbers, or enrolment driven. The remaining portion (5%) constitutes the l i m i t s of Council's a b i l i t y to exercise discretionary judgement i n the a l l o c a t i o n . This factor, i f used e n t i r e l y , represents a large enough amount of money to e f f e c t s i g n i f i c a n t impacts on the u n i v e r s i t i e s : i t i s large enough to a l t e r the e f f e c t s of the enrolment patterns exercised in the algorithm. How has Council chosen to exercise t h i s discretion? I t i s f a i r to say that Council has refrained from taking any d i s c r e -tionary decisions without the agreement of the u n i v e r s i t i e s and even then by l i m i t i n g the area to approximately 1 to 1%% of the t o t a l operating grant. B a s i c a l l y two matters were treated: assistance i n the development of new and emergent academic programs and support of s p e c i f i c areas of academic excellence in the form of programs of d i s t i n c t i o n . In the former case Council reviewed and approved proposals submitted by the * For an explanation of the algorithm see appendix F. 85 u n i v e r s i t i e s for designated funding for a s p e c i f i c period of time. This procedure was i n s t i t u t e d i n order to a s s i s t the university administrations i n protecting money for new academic i n i t i a t i v e s . Although these a c t i v i t i e s were approved by Senates and Boards of Governors, the Presidents f e l t that, without Council emphasis (one might c a l l t h i s the " f o i l " role of the Council: that i s , to accept r e s p o n s i b i l i t y for unpopular decisions), they would have d i f f i c u l t y i n maintaining funding for them within the i n s t i t u t i o n a l budget process. The small amounts designated Programs of D i s t i n c t i o n represented a M i n i s t e r i a l and Council i n i t i a t i v e which won university approval. A small amount of money (up to h of 1% of the t o t a l operating grant) was designated by mutual consent of Council and the u n i v e r s i t i e s for enhancement of areas of p a r t i c u l a r academic excellence and of s p e c i f i c relevance to B r i t i s h Columbia*. Like the funding of new and emergent programs, i t i s again f e l t by the university administrations that the Council's emphasis i s required to protect such funding within the i n s t i t u t i o n a l budget a l l o c a t i o n process. Unlike the new and emergent programs, however, i t i s allocated on the basis of the formula. Council r e l i e s upon the academic judgement of each university for the use of these funds within the i n s t i t u t i o n . While Council receives a post-facto description of the use of such funds, i t attempts no formal evaluation of the various uses to which the money i s put. * For the formal terms of reference of Programs of D i s t i n c t i o n see appendix G. 86 These two areas then have represented almost the t o t a l spectrum of Council's exercise of discretionary decisions i n a l l o c a t i n g the p r o v i n c i a l operating grant by the a l l o c a t i o n formula*. In percentage terms the amount of money involved i s less than three percent of the t o t a l operating grants made available by government. F i n a l l y , the discretionary nature of the decisions has been constrained by Council's decision to seek unive r s i t y agreement i n both cases. In passing, i t should be noted that during the period 1974 to 1982, the practice has grown up of designating operating funds to cover the projected additional costs a r i s i n g from the introduction of newly-approved programs (new and emerging). On the few occasions when the Council has shown a willingness to approve a new program only i n p r i n c i p l e - that i s , without a funding commitment - there has been a reluctance on the university's part to proceed with such programs. Although not an invariant s i t u a t i o n , the exercise of an approval-in-p r i n c i p l e without funding has become almost the equivalent of a r e j e c t i o n i n those cases where the university has requested concurrently both approval and funding. And by declining to proceed with such new programs i n the absence of guaranteed * For 1981-82 the p r o v i n c i a l operating grant marginally exceeded Council's recommendation. Accordingly Council i n i t s a l l o c a t i o n of that year's grant devised a system development fund concept which sp e c i f i e d p a r t i c u l a r purposes which Council f e l t such "additional" monies ought to be put. While Council made i t s a l l o c a t i o n on t h i s basis, i t could, however, only suggest to each university that i t apply i t s share of these funds along these l i n e s when i t made i t s own i n t e r n a l a l l o c a t i o n . This discretionary decision by Council i s exceptional for i t arose i n the anomalous circumstances of receiving a larger grant than requested. 87 funding, the dissaffected university i n a sense s h i f t s the burden of r e s p o n s i b i l i t y for the f a i l u r e to perform over to the Council - at least i n the f i r s t instance, l a t e r , by inference, over to the government i f funding i s not supplied. It i s clear that by accepting the a l l o c a t i o n formula Council e s s e n t i a l l y agreed to d i s t r i b u t e the vast bulk of the p r o v i n c i a l operating grant on two main bases: the f i r s t , and by far the most important basis, i s the past funding l e v e l (this was ensured by adopting enrolment as the dr i v i n g force and by making previous enrolment lev e l s the predominant enrolment factor i n the algorithm); and the second i s the basic philosophy that s h i f t s i n resources w i l l follow s h i f t s i n enrolment, i . e . d o l l a r s follow students. The f i r s t basis can be defended on two grounds. I t presented the minimum acceptable to the u n i v e r s i t i e s . Simply stated, without such consensus Council had no reasonable basis to allocate the funds other than some a r b i t r a r y incrementalist approach. This was not desirable because i t was open to the university c r i t i c i s m that i t lacked both a r a t i o n a l basis and an element of p r e d i c t a b i l i t y i n the funding. It also i s agreed that any r a d i c a l change from one year to the next i s unacceptable because i t creates unmanageable conditions for the affected i n s t i t u t i o n s . The formula, driven as i t i s by enrolment, i s not susceptible to great variations from year to year because current enrolments are r e l a t i v e l y stable at the university l e v e l . The second base i s defensible on the grounds that the 88 p r o v i n c i a l grant i s primarily intended to pay i n s t r u c t i o n a l costs of educating B.C. students. The reactions of the u n i v e r s i t i e s to the three year t r i a l of the a l l o c a t i o n formula are relevant to Council's problem of a l l o c a t i n g the grant. The two newer u n i v e r s i t i e s favour retention of the basic formula: both have gained more in terms of t h e i r r e l a t i v e share of the grant than the oldest univer-s i t y . More importantly, with the retention of the formula, the sustained trend i n enrolment growth which i s projected stands to gain them an even greater share i n future. Accordingly, the focus of t h e i r concerns l i e s elsewhere, as i n the words of . Simon Fraser University: The fundamental problem appears not to be with the present formula a l l o c a t i o n mechanism but rather with the f a i l u r e of the p r o v i n c i a l operating grants to compensate for i n f l a t i o n , enrolment growth and the changing program mix of students... (Council document 18) and, What i s c l e a r l y required i s recognition by the p r o v i n c i a l government of the need to at least maintain i f not increase the constant d o l l a r discretionary p r o v i n c i a l grant per weighted f u l l - t i m e equivalent student. (Council document 18) On t h i s point UBC concurs: The President stated that there were weaknesses i n the present formula. However, i f the money from the government were s u f f i c i e n t l y large, even with the weaknesses i n the present formula, the University would probably not be as unhappy as i t was today. (Council document 13) The smaller u n i v e r s i t i e s also agree that the present formula has improved the i n s t i t u t i o n s ' a b i l i t y to plan. In SFU's view: The use of a formula for the past three years represented 89 the f i r s t attempt to bring a degree of s t a b i l i t y and p r e d i c t a b i l i t y , as well as equity, into the process for al l o c a t i n g p r o v i n c i a l operating grants. In large measure, the present formula has achieved these objectives, and as a valuable by-product, has enhanced the f i n a n c i a l planning process of each university. (Council document 19) The University of V i c t o r i a concurs: One of the most compelling reasons from the university's point of view for retaining a formula i s the assistance i t provides i n forward planning. This i s p a r t i c u l a r l y important when the government i s unwilling, or unable, to give commitments about future years' funding. (Council document 20) The essence of the p r e d i c t a b i l i t y which the formula affords the u n i v e r s i t i e s relates to the fact that each i n s t i t u t i o n can predict f a i r l y accurately i t s share of the p r o v i n c i a l operating grant for at least one year i n advance. The university can then estimate the percentage increase i n the t o t a l operating grant and arr i v e at a d o l l a r figure of the amount of p r o v i n c i a l operating funds i t would l i k e l y receive i n the following year. Accordingly i t can then plan with greater confidence an i n s t i t u t i o n a l budget. I t i s important to note, however, that any planning role that Council may undertake i s not p a r t i c u l a r l y enhanced by the formula - a point to be discussed l a t e r . The largest i n s t i t u t i o n , the University of B r i t i s h Columbia, however, i s less enamoured of the formula by i t s experience. While i t too, along with i t s s i s t e r i n s t i t u t i o n s , has gained some s t a b i l i t y and p r e d i c t a b i l i t y i n i t s grant, the fact i s that UBC's share has decreased and, furthermore, the enrolment indicators d r i v i n g the formula portend further diminution of that share. UBC claims with supporting evidence 90 that the formula has e s s e n t i a l l y resulted i n i n s t i t u t i o n a l shares which are highly correlated to fu l l - t i m e equivalent enrolment. This fact, UBC contends, i s es p e c i a l l y punitive to an i n s t i t u t i o n which bears the greatest number of high cost graduate and professional programs, and the mechanics of the formula only takes into p a r t i a l account the enrolment i n such programs, i . e . the weighted f u l l - t i m e equivalent student component of the formula. A l l three u n i v e r s i t i e s have a concern about a formula component, the SFU trimester constant, which was incorporated to take into consideration higher operating costs generally associated with a trimester operation. The consensus of the u n i v e r s i t i e s c a l l e d for a cost study of the matter to v e r i f y the s u i t a b i l i t y of the constant. This study has not yet been undertaken; an e a r l i e r study by a firm of chartered accountants reported that trimester operations were more co s t l y . BASIC PROBLEMS ASSOCIATED WITH COUNCIL'S APPROACH TO THE ALLOCATION OF THE PROVINCIAL OPERATING GRANT The record shows, therefore, that the formula as an a l l o c a t i o n mechanism yielded a minimally acceptable d i v i s i o n of the operating grant i n the f i r s t year of i t s application but f a i l e d to carry the consensus through the three year period of i t s use. In the t h i r d year the largest i n s t i t u t i o n was losing i n i t s r e l a t i v e share of the grant which, combined with the declining grant/FTE r a t i o (in constant d o l l a r s ) , caused 91 dissension over the formula's continuance. Council recognized the need for f l e x i b i l i t y and accordingly made provision for an annual review of the formula and retained an a b i l i t y to alloc a t e a discretionary amount of up to 5% of the grant. Council was, however, unsuccessful i n discovering methods, i f they existed, to make adjustments within t h i s f i v e percent margin on some defensible basis - which would possibly have maintained a consensus i n favour of the continuation of the formula mechanism. It should be noted here that Council has not pursued i t s 1978 resolution which was re-affirmed by one of i t s f i n a n c i a l consultants to determine more d e f i n i t i v e l y the future differences i n roles and programs among the three u n i v e r s i t i e s . Such differences could conceivably i n part serve as a basis for a l l o c a t i n g resources. Perry had foreseen the d i f f i c u l t y an intermediary would experience i n coming to grips with a f a i r a l l o c a t i o n process i n the absence of an understanding concerning a minimal l e v e l of government support: One of the main causes of dissension between (sic) the three public u n i v e r s i t i e s has been due, i n part, to a lack of agreement as to what the ground rules were, or ought to be, governing f i n a n c i a l support from the public sector. And we think that the task of any new intermediary would be much more manageable i f there were general guidelines. (Perry, 1969:45) As noted e a r l i e r such guidelines have not been forthcoming from government. Currently, the s a l i e n t circumstances i n which Council finds i t s e l f i n a l l o c a t i n g the p r o v i n c i a l operating grant can 92 be summarized as including: 1) a statutory r e s p o n s i b i l i t y to allocate the p r o v i n c i a l operating grant; 2) an unsatisfactory method of determining a recommended funding l e v e l for u n i v e r s i t i e s which i s not useful i n serving as a basis for the subsequent a l l o c a t i o n decisions; 3) a d i s s o l u t i o n of any consensus among the u n i v e r s i t i e s respecting a methodology which would y i e l d a minimally acceptable a l l o c a t i o n r e s u l t for the 1982-83 f i s c a l year and beyond; 4) a lack of government guidelines respecting a p r a c t i c a l basis of f i n a n c i a l support for u n i v e r s i t i e s ; 5) the absence of a clear perspective of the roles and programs to be undertaken by each univer s i t y i n c o n t r i -buting toward a r a t i o n a l system of higher education. 93 Chapter Six CONCLUSIONS What problems, i f any, has the U n i v e r s i t i e s Council encountered i n i t s f i n a n c i a l decision-making r o l e , and what might be done about such problems? An approach to these questions might be commenced by considering the r h e t o r i c a l question: In what si t u a t i o n s , that i s , on what occasions and under what circumstances, has the Council experienced d i f f i c u l t i e s i n executing i t s f i n a n c i a l decision-making role? In response, i t might be said that the study has brought to l i g h t several e x p l i c i t and i m p l i c i t s ituations. I m p l i c i t l y , the Council has learned through experience that i t s f i n a n c i a l role i s , of course, circumscribed by the b u i l t - i n constraints a f f e c t i n g i t s general role as an intermediary. Even through the Council may reach a d e f i n i t i v e , impartial judgement about a f i n a n c i a l question referred to i t , and might wish to implement such a judgement, as i n a l l matters brought to an intermediary, the Council has learned that i t would hardly be prudent to do so unless i t had the steady support of a s i g n i f i c a n t proportion of the affected p a r t i e s . The analysis has suggested that the Council, as a p r a c t i c a l matter, probably has to have the steady support of the p r o v i n c i a l government and at least one, i f not two, of the u n i v e r s i t i e s to be sure that i t s decisions w i l l hold. As one senior Canadian government 94 o f f i c i a l has explained i t must be recognized that such bodies (intermediaries), whether enshrined i n l e g i s l a t i o n or created by order-in-council, whether possessed t e c h n i c a l l y of executive authority or limited to an advisory r o l e , have no public base of authority and power. What has been created by government i s i n existence at the pleasure of government. It may be more or less independent and i t may be highly i n f l u e n t i a l , but i t cannot be absolutely authoritative. (Sibley, 1982:11) In order to secure a s u f f i c i e n t majority (as i t were) the Council conceivably might have to advocate a decision which f e l l short of i t s own best judgement. Is t h i s a genuine problem? And has i t occurred i n the f i n a n c i a l decision-making sense? The study shows only one experience where i t might be said that the Council had, or came close to having, second thoughts about i t s own judgement (the 1978 case involving a consultant's recommendations). It i s i n the area of the formulation of a best judgement that the study has shown that some i d e n t i f i a b l e d i f f i c u l t i e s can a r i s e . From a f i n a n c i a l decision-making point of view, the study has shown that the most d i f f i c u l t problems encountered by the Council have arisen i n i t s performance of two tasks: one the formal submission of the budget spending estimates (the request for funds), and the other, the subsequent d i s t r i b u t i o n of the available operating funds. Although each university prepares i t s own set of spending estimates as an i n d i v i d u a l i n s t i t u t i o n (and c e r t a i n l y not as a j o i n t undertaking), a l l the u n i v e r s i t i e s have, i n e f f e c t , i n s i s t e d i n defining the mode of a l l o c a t i o n of whatever funds 95 are eventually appropriated for general operating purposes by the Legislature. So there i s a j o i n t a l l o c a t i o n approach but a singular pre-determination of needs. The Council finds i t s e l f forced to evaluate the i n d i v i d u a l university requests and to formulate i t s own judgement about the t o t a l system's request that ought to be recommended to the Government. This task i n i t s e l f has caused concern - over the methods employed - to both Council and the Government. But then, t h i s judgement about needs i s set to one side when the a l l o c a t i o n task i s performed. The d i s t r i b u t i o n of the available funds i s made within i t s own set of agreed c r i t e r i a . The lack of a close linkage between these related tasks (determination of need and a l l o c a t i o n of funds) continues to vex the Council. In addition, as of the end of f i s c a l year 1981/82, Council faced two new complicating factors: the early signals of a vastly changed - and constrained - f i n a n c i a l outlook and a sharp d i v i s i o n of thought among the u n i v e r s i t i e s over the proper mode of a l l o c a t i o n . So the necessity of retaining s i g n i f i c a n t support from the other major e n t i t i e s i n the system has become, almost suddenly, more d i f f i c u l t for the intermediary, the U n i v e r s i t i e s Council. The study's examination of the l i t e r a t u r e , however, suggests that these d i f f i c u l t i e s are not necessarily of Council's own making nor indeed unique to the B r i t i s h Columbia intermediary. Bowen1s findings indicate that there i s not much guidance respecting reasonable levels of funding for u n i v e r s i t i e s . 9 6 In addition, neither the government nor the u n i v e r s i t i e s i n B r i t i s h Columbia have performed wholly s a t i s f a c t o r i l y i n t h i s domain. The former has not communicated much i n the way of f i s c a l p o l i c i e s and guidelines while the l a t t e r have not been able to present t h e i r budget submissions i n ways which c l a r i f y i n s t i t u t i o n a l decision-making i n terms of academic p r i o r i t i e s . Council c l e a r l y has not been greatly successful i n persuading these parties into taking such actions. What steps might Council appropriately take to address these d i f f i c u l t i e s ? Pursuing the analyses of t h i s study any courses of action upon which Council might embark ought to observe the requirement for Council to attempt to secure s i g n i f i c a n t support for i t s decisions. I t follows, therefore, that Council ought to continue to s o l i c i t the views and cooperation of the government and the u n i v e r s i t i e s . The review of the l i t e r a t u r e , the seminal studies leading to the establishment of Council and Council's own deliberations have a l l pointed to a general acceptance of the d e s i r a b i l i t y of li n k i n g f i n a n c i a l decision-making to a planning process preferably based upon some agreed set of p r i n c i p l e s and assumptions respecting the constituent elements of the intended plan. Bearing these factors i n mind, some comments are i n order respecting a broadly defined d i r e c t i o n which i t i s suggested Council might assume to a s s i s t i t i n future f i n a n c i a l decision-making. 97 The chances of a university system emerging from a l a i s s e z - f a i r e approach by the i n s t i t u t i o n s are very small. The inherent p o l i t i c a l nature of i n s t i t u t i o n a l s u r v i v a l w i l l not permit an objective system-wide view to emerge. Some i n i t i a -t i v e i s required and i t i s reasonable for the intermediary to act i n the f i r s t instance since, as Robbins noted, both the i n s t i t u t i o n s and government are bound by th e i r vested i n t e r e s t s . A d d i t i o n a l l y , Council's current f i n a n c i a l mandate can be interpreted as including r e s p o n s i b i l i t y for the develop-ment of a system wide view or plan* for the University Act requires Council to advise on the monies required for "the support and development of each university and u n i v e r s i t i e s  generally" (section 69r, emphasis added). Council has already attempted to act i n a advisory manner in the case of the expansion of engineering education. When a l l three u n i v e r s i t i e s expressed strong i n t e r e s t i n establishing expanded engineering education programs, Council before receiving any formal proposals, i n i t i a t e d a large scale general study of engineering education i n order better to *The general meaning of "plan" of "planning" i n t h i s context has been defined by M i l l a r d : the e s s e n t i a l components of planning remain f a i r l y constant. B a s i c a l l y planning involves i d e n t i f i c a t i o n of key problems, accumulation of accurate data about these problems, analysis of t h e i r i n t e r r e l a t i o n s , extrapolation of future alternatives that might emerge from present conditions, assessment of probable consequences of introducing new variables, and the choice of the most desirable modified alternatives as basic objectives to be obtained...includes a sequential plan or plans for implementing the basic objectives and a system for p e r i o d i c a l l y re-evaluating the objectives and the means for achieving them. (Millard, 1980:79) 98 inform i t s e l f and set a context within which the various university proposals could be evaluated. As t h i s matter i s s t i l l i n the developmental stage, the results of such action by Council can not be f u l l y assessed. In any event, however, Council's study was conducted i n a n t i c i p a t i o n of the u n i v e r s i t i e s ' coming forward with competing proposals competitive, i f not s t r i c t l y i n a curriculum sense, then c e r t a i n l y i n terms of claims on resources. In order to e l i m i -nate such p o t e n t i a l l y c o s t l y , duplicative e f f o r t s by a l l three i n s t i t u t i o n s i n a single program area i t would seem reasonable to explore the p o s s i b i l i t y of developing a mission framework for the system, which would i d e n t i f y program development and determine unive r s i t y r e s p o n s i b i l i t i e s . Such investigations would be affected by the emergence of government po l i c y for unive r s i t y education. I t i s the government's in t e r e s t which must determine the appropriation of additional resources p a r t i c u l a r l y for professional programs for i n the current f i n a n c i a l circumstances the development of such programs cannot be financed through i n t e r n a l budget re a l l o c a t i o n s . The current s i t u a t i o n , dominated as i t i s by the issue of government f i s c a l r e s t r a i n t , c a l l s for planning of a special kind. As Shattock explains: The c r u c i a l danger i n t h i s s i t u a t i o n i s that planning i s abandoned or simply degenerates into a resource redeployment or withdrawal exercise, a year by year reduction i n expenditure mirroring the annual, seemingly haphazard public expenditure cuts. I t i s necessary, therefore, to es t a b l i s h a longer term strategy which serves as a framework within which the short term planning can take place. Such a strategy should not aim to be unduly complicated nor should be p a r t i c u l a r l y detailed. I t might, for example, es t a b l i s h c e r t a i n q u a l i t y factors, 99 the need to improve intake lev e l s i n cer t a i n courses, to b u i l d up stronger research schools i n cer t a i n areas, to concentrate resources more on cert a i n departments or areas of national reputation, national importance or st r a t e g i c significance to the u n i v e r s i t y . I t might e s t a b l i s h c e r t a i n planning parameters such as encouraging growth i n certain subject areas at the expense of others. I t might lay down certa i n f i n a n c i a l goals such as the reduction of energy costs or the reduction of fixed costs a r i s i n g from premises, or concern i t s e l f with the long term future of cert a i n s i t e s or buildings. I t might suggest that a cert a i n figure should somehow be saved each year i n order to encourage new academic developments or to protect certain vulnerable areas which the university wishes to preserve. The only e s s e n t i a l of such a strategy i s that i t should be r e a l i s t i c within the circumstances of the i n s t i t u t i o n and should not es t a b l i s h long term aims which the university can never r e a l i z e . If i n s t i t u t i o n s were forced to subscribe to "mission statements" as i n the United States or a statement of purposes and objectives as recommended by the Select Committee... the development of a strategy t a i l o r e d to the needs of the i n s t i t u t i o n would be that much easier. I t i s e s s e n t i a l that the short term plan should be geared to the longer term strategy because i n the new s i t u a t i o n that strategy w i l l only be r e a l i z e d through a series of opportunistic and i n themselves r e l a t i v e l y small decisions. (Shattock, 1982:207) Shattock's observations, however, are directed at the i n s t i t u t i o n a l l e v e l . The planning role of an intermediary i s related but d i f f e r e n t . The University Grants Committee i n the United Kingdom has recently commented on i t s perception of planning and the Committee's role as follows: The Committee sees i t s role i n the period ahead not as a formal planning body, but as the body most able to a s s i s t i n s t i t u t i o n s , severally and together, to react i n ways he l p f u l both for t h e i r own future and as part of a national system of higher education where r e s t r i c t e d resources must be used e f f e c t i v e l y . This w i l l only be achieved, however, by j o i n t e f f o r t s and the e s s e n t i a l role w i l l be played by each university's approval of i t s own position...Adaptation to change cannot always be a quick process, and much of what w i l l emerge w i l l be of an evolutionary kind. However, l i t t l e new development w i l l be possible unless the system can generate, even within reduced income, the resources which t h i s may require. (Shattock, 1980:197) 100 One way that the adoption of such a d i r e c t i o n might be made operational by Council would be for Council, i n consultation with the government and the u n i v e r s i t i e s , to attempt to answer three questions: 1) What programs w i l l be offered at each university? 2) What general size of enrolment ought to be planned for the major categories of programs? 3) What ranges of costs can be expected based on current i n s t i t u t i o n a l experience i n the major categories of programs? This approach responds to the report of Council's consultant i n 1978, which suggested that a d e f i n i t i o n of university mission and role be undertaken for the purpose of determining d i f f e r e n t i a l funding. Moreover, i t i s i n accordance with Council's own 1978 decision to determine what should be the future differences i n the roles and programs of B.C.'s u n i v e r s i t i e s . This task represents e s s e n t i a l l y the planning function which the Hurtubise-Rowat report and others recommend that intermediaries assume. On Council's part the answers w i l l serve to determine the funding lev e l s required by the u n i v e r s i t i e s and i n large measure s e t t l e the subsequent a l l o c a t i o n issue. On government's part the answers w i l l focus on Treasury Board's insistence for more analytically-based funding requests and w i l l also enable government to assess the consequences of reducing i t s funding to u n i v e r s i t i e s and to develop and implement p o l i c i e s for addressing p r o v i n c i a l manpower needs. On the u n i v e r s i t i e s ' part i t would permit them 101 to focus t h e i r energies on developments which have a reasonably good chance of securing funding support - i n e f f e c t i t would be an incentive for i n s t i t u t i o n a l planning. A d d i t i o n a l l y they would r e t a i n the autonomy of d i r e c t i o n of academic developments as they see f i t , even i f they modify or disregard the Council's and government's advice concerning s p e c i f i c academic dir e c t i o n s . This approach also recognizes the need i n times of scarce resources for the imposition of external constraints which cannot be reasonably expected to emanate from the i n s t i t u t i o n s . I t addresses the implication of the d i v e r s i t y of university costs by r e f r a i n i n g from setting s p e c i f i c costs by program. It could be developed to provide a rudimentary linkage between the issues of funding recommendation and grant a l l o c a t i o n . In view of the implications of the i n a b i l i t y to define objectively u n i v e r s i t y "needs" and "outcomes" issue i t could also be used to place the onus upon the i n s t i t u t i o n s to demonstrate benefits a r i s i n g from any requests for funding beyond the defined ranges of costs. With some, even incomplete, answers to these questions Council would be i n a better p o s i t i o n to pursue a c o r o l l a r y course of action, namely: that Council negotiate with the government an agreement for a minimal l e v e l of funding support for a defined set of unive r s i t y educational services. The existence of the legitimate substantive i n t e r e s t of a government which extends beyond the mere provision of funds places a r e s p o n s i b i l i t y upon government to enunciate t h i s 102 i n t e r e s t . For reasons e a r l i e r discussed, the government may be ret i c e n t to announce po l i c y i n higher education. This means an intermediary must attempt to persuade the government to act. The basic objective of such discussions with government would be to arrive at an understanding about the degree to which u n i v e r s i t i e s can r e l y upon government f i n a n c i a l support. I t i s reasonable to assume that the determination of funding lev e l s may r e s u l t i n exploration of government's s p e c i f i c i n t e r e s t for p a r t i c u l a r services to be provided by the u n i v e r s i t i e s - that i s , the conscious expression of substantive guidelines. As discussed e a r l i e r , there exists a d e f i n i t e lack of government d i r e c t i o n for the university sector i n B.C. I t i s recognized and accepted that changes i n the economic climate preclude responsible governments from promulgating p o l i c i e s which would commit them to fixed appropriations for any public sector. This r e a l i t y does not, however, excuse government from i t s r e s p o n s i b i l i t y to es t a b l i s h guidelines about the public's i n t e r e s t i n higher education services. In B r i t i s h Columbia the p r i o r i t y accorded to higher education by government has declined i f measured by constant d o l l a r s per student. A recent statement by the Deputy-Minister acknowledged in r e a l terms f i n a n c i a l support per student has dropped s i g n i f i c a n t l y over the past four or f i v e years... (and) i s about the same now as i t was i n 1972. (Council document 20) This decline i s contrasted with the comparative increases i n f i n a n c i a l support by government over the same period for colleges and i n s t i t u t e s , public schools and hospitals. The 103 u n i v e r s i t i e s are c l e a r l y an industry affected by public i n t e r e s t . There has been, however, as discussed e a r l i e r , l i t t l e guidance offered by the government about i t s views on the d e f i n i t i o n and maintenance of the public inte r e s t i n university education i n B.C. As a senior university o f f i c i a l has observed, "there appears to me to be l i t t l e or no comprehensive governmental p o l i c y that relates to the university scene" (Pedersen, 1978:1). For example, does a decrease i n the r e l a t i v e supply of income mean that the government expects some reci p r o c a l diminution of program services at u n i v e r s i t i e s ? The President of the University of Toronto has posed the question in the following terms: Just what i s the paymaster's view of the r o l e . . . univer-s i t i e s should be performing i n d i v i d u a l l y and i n concert? That sort of question has to be answered before univer-s i t i e s can respond i n operational terms. (Ham, 1981:1) Government silence on t h i s matter may r i g h t l y be viewed as an attempt to escape the consequences of i t s own actions, an understandable and not unexpected attitude, given the nature of the p o l i t i c a l process. In times of f i n a n c i a l constraint the government's p r i o r i t i e s are p a r t i c u l a r l y vulnerable to attack and are not e a s i l y p u b l i c l y defended. Hence the government's in t e r e s t i n doing so i s greatly diminished and i n an area of low p r i o r i t y , such as higher education, the need to do so i s v i r t u a l l y absent. The recognition by government of the neces-s i t y to give clearer guidance on higher education decisions has, however, been recently acknowledged i n r e l a t i o n to the proto-type intermediary - the University Grants Committee i n the United Kingdom. The Minister there recently stated 104 that i t might be more appropriate for Ministers to take more r e s p o n s i b i l i t y than they have hitherto for determining p r i o r i t i e s a f f e c t i n g the broad character of the a l l o c a t i o n of resources to the u n i v e r s i t i e s . (THES, 16 July 1982:1) The U n i v e r s i t i e s Council i s mandated to advise the govern-ment about the f i n a n c i a l requirements of the u n i v e r s i t i e s . I t i s obligated, therefore, on behalf of the u n i v e r s i t i e s , to concentrate the government's mind on the matter of public p o l i c y i n higher education. It should press the government on reasonable grounds to face up to i t s funding decisions. As Berdahl argued, i t ought to make government express i t s inter e s t as "a conscious act of state sovereignty". Accord-ingly Council might seek from government formal support for a j o i n t venture to a r t i c u l a t e the public i n t e r e s t i n univ e r s i t y education. I f , as might reasonably be expected, government's views on t h i s matter are not f u l l y formed, Council, as an objective intermediary, i n consultation with the u n i v e r s i t i e s could attempt to become involved i n the framing of the govern-ment's p o l i c y . The c r i t i c a l objectives of these discussions would be to ascertain the nature of the government's agenda for u n i v e r s i t i e s , upon which some reasonable undertakings for f i n a n c i a l support can be given, and to assure the government that i t s e x p l i c i t objectives i n higher education are being taken into account. Related to Council's discussions with government about higher education p o l i c y , a concurrent theme for development i s suggested by the current d i f f i c u l t y Council has i n providing the Treasury Board with budgetary submissions which convey 105 among other matters "a sense of the state of management practices within the u n i v e r s i t i e s " (Council document 14) . As described e a r l i e r , Council has wrestled unsuccessfully with t h i s problem at the i n s t i t u t i o n a l l e v e l . Council's objective i n t h i s matter has been described by a former chairman of i t s Business A f f a i r s Committee: to evaluate the means employed by the u n i v e r s i t y administrations to bring about the e f f e c t i v e use of resources; not to prescribe solutions of problems but to evaluate the adequacy of the responses of the administrations to the problems (oral communication). I t could perhaps be assisted i n t h i s matter by discussing with the o f f i c i a l s of Treasury Board possible indicators and acceptable proofs of these matters as developed and u t i l i z e d i n budget submissions in other areas of the public sector. As a related, p a r a l l e l exercise i t might be useful for Council to discuss with the u n i v e r s i t i e s ways of redesigning the submission of t h e i r budget requests to include a description of the p o l i c i e s , plans, assumptions and judgements on which such requests are based. The objective of t h i s exercise would be to a s s i s t the Council i n i t s discussions with the Ministry and Treasury Board to meet the legitimate i n q u i r i e s of these bodies for accountability i n the expenditure of public funds. In summary, the foregoing suggested d i r e c t i o n and actions c a l l for the U n i v e r s i t i e s Council: f i r s t , to continue to recognize the need for government and u n i v e r s i t i e s support for i t s decisions; and second, to i n i t i a t e and f a c i l i t a t e a 106 planning process for higher education i n B r i t i s h Columbia by commencing discussions with the government and u n i v e r s i t i e s on selected issues. This study has examined the conceptual c h a r a c t e r i s t i c s of both government-university relations and the nature of university costs and f i n a n c i a l behaviour. It has been suggested that these c h a r a c t e r i s t i c s have implications for the role of an intermediary body i n higher education i n making f i n a n c i a l decisions. An analysis of the i n t e r p o s i t i o n of an intermediary in government-university r e l a t i o n s was conducted which indicated that i n order for a buffer agency to be e f f e c t i v e s i g n i f i c a n t support for i t s decisions by the major e n t i t i e s i n the system must be secured. The study analyzed the U n i v e r s i t i e s Council's major decisions r e l a t i n g to i t s statutory f i n a n c i a l mandate and i d e n t i f i e d some problems associated with i t s actions. 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The Report of the  Commission on the Relations Between U n i v e r s i t i e s and  Governments. Ottawa: The University of Ottawa Press, 1970. KNIGHT, Walter D. Chairman. Revised Academic Plan 1969-1975.  University of C a l i f o r n i a , Berkeley. 1969. LESLIE, Peter M. Canadian U n i v e r s i t i e s : 1980 and Beyond. Ottawa: Association of Un i v e r s i t i e s and Colleges of Canada. 1980 MACDONALD, John B. Higher Education i n B r i t i s h Columbia and a  Plan for the Future. Vancouver: The University of B r i t i s h Columbia, 1962. 112 PERRY, G. N e i l . Chairman. Report of the Advisory Committee on Inter-University Relations. B r i t i s h Columbia Department of Education. May 1969. STATUTES OF BRITISH COLUMBIA College and Ins t i t u t e Act. RS Chapter 53. 1979. Educational I n s t i t u t i o n C apital Finance Act. RS Chapter 102. 1979. University Act. RS Chapter 419. 1979. UHLMAN, N e i l . CHANCE, William. 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PhD di s s e r t a t i o n . The University of Michigan, 1974. HOLLICK-KENYON, Tim. An Analysis of the Coordination of Community Colleges i n B r i t i s h Columbia. PhD d i s s e r t a t i o n . The University of Oregon, 1979. MCTAGGART-COWAN, P.D. The Governance of B.C.'s U n i v e r s i t i e s , June 1968. NUSSBAUMER, Margaret. The Worth Report and Developments i n Alberta's Post-Secondary P o l i c i e s and Structures 1968 to  1976. PhD d i s s e r t a t i o n . The University of Alberta, 1977. 113 PEDERSEN, K. George. The Frontier Mentality i n Educational Governance: The Case of B r i t i s h Columbia. B r i e f prepared for meeting of the B r i t i s h Columbia Council for Leadership in Education, Vancouver, March 9-11, 1978. RIVERA, A l v i n David. The Perceptions of the State Educational  Coordinating Agency i n Five Selected States. PhD di s s e r t a t i o n . The University of Colorado, 1976. SIBLEY, W.M. The Role of Intermediary Bodies i n Postsecondary Education. Paper delivered at Council of Ministers of Education, Canada Conference of Postsecondary Education Issues i n Canada for the 1980s. Toronto, October 19-22, 1982. UNIVERSITY OF VICTORIA. Formulae for Di v i s i o n of Operating Grants Amongst the Un i v e r s i t i e s of B r i t i s h Columbia. 1977. IV U n i v e r s i t i e s Council of B r i t i s h Columbia: Documents (Chronological order) 1. UCBC. Funding Recommendation 1975-76. 12 December 1974. 2. Price Waterhouse Associates. Analysis of 1976/77 Operating Budget Submissions of the Un i v e r s i t i e s of B r i t i s h Columbia. September 197 5. 3. Letter: Dr. H.E. Petch, President, University of V i c t o r i a to Dr. W.M. Armstrong, Chairman, U.C.B.C. 9 A p r i l 1976. 4. UCBC. Second Annual Report. 15 October 1976. 5. UCBC. Funding Recommendation 1977-78. 15 October 1976. 6. UCBC. Funding Recommendation 1978-79. 15 October 1977. 7. B. Hansen. Consultant. Report. 10 A p r i l 1978. 8. UCBC. A l l o c a t i o n Statement 1978-79. 11 May 1978. 9. Letter: Dr. P.L. McGeer, Minister of Education to Dr. W.C. Gibson, Chairman, U.C.B.C. 13 June 1978. 10. Letter: B. Hansen, Consultant, U.C.B.C. to G.A. Schwartz, Executive Director, U.C.B.C. 30 June 1978. 11. Letter: Dr. W.C. Gibson, Chairman, U.C.B.C. to Dr. P.L. McGeer, Minister of Education. 25 August 1978. 12. Letter: M. Austen, Price Waterhouse, Consultant, to G.A. Schwartz, Executive Director, U.C.B.C. 8 January 1979. 114 13. University of B r i t i s h Columbia. Senate Document. 10 September 1980. 14. Memorandum: D. Sandell, Senior Treasury Board Analyst to Dr. W.C. Hardwick, Deputy Minister of Education. 3 March 1980. 15. Perry, G. N e i l . Working paper: Information System. February 1981. 16. Addendum: Treasury Board to Minister of U n i v e r s i t i e s , Science and Communications. Conditions Related to Approval of 1981/82 Estimates. A p r i l 1981. 17. Letter: Dr. R.W. Stewart, Deputy Minister, U n i v e r s i t i e s Science and Communications to Dr. W.C. Gibson, Chairman, U.C.B.C. 26 June 1981. 18. Letter: Dr. S. Verdun-Jones, SFU Chairperson, Senate Committee on University Budget to Dr. W.C. Gibson, Chairman, U.C.B.C. 8 September 1981 19. Simon Fraser University. Analysis of P r o v i n c i a l Operating Grant A l l o c a t i o n Formula and Suggestions for the Future. September 1981. 20. University of V i c t o r i a . Submission to the U n i v e r s i t i e s Council of B r i t i s h Columbia on the Grant A l l o c a t i o n Formula Used During the Three Years Ending i n 1981-82. 30 October 1981. 21. Letter: Dr. R.W. Stewart, Deputy Minister, U n i v e r s i t i e s , Science and Communications to Dr. K.G. Pedersen, President, Simon Fraser University. 9 December 1981. 22. UCBC. Notes on Annual Operating Estimates Document. 1981. 115 APPENDICES 1 1 6 APPENDIX A 1979 UNIVERSITY RS CHAP. 419 UNIVERSITY ACT [Part to be proclaimed] CHAPTER 419 PART 12 Interpretat ion 6 3 . In this Pan unless the context otherwise requires, "executive director" means the executive director of the universities council appointed under section 66. 1974-100-64. Universit ies counci l 6 4 . (1) There is established a corporation to be known as the universities council with a common seal, having the rights, powers, duties and liabilities set out in this Act , and consisting of 1 I persons, one of whom shall be designated chairman, appointed, subject to subsection (5), by the Lieutenant Governor in Counci l . 17 RS C H A P . 419 UNIVERSITY 28 Euz. 2 (2) The members, other than the chairman, shall annually elect one of their number as vice chairman, to act during the illness or absence of the chairman, or during any period that the chairman is unable for any reason to discharge his duties. (3) A member, other than the chairman, shall be appointed for a term of 3 years, and may be reappointed for a second term. (4) The chairman shall be appointed for a term of 3 years and may be reappointed for a second term of 5 years and one subsequent term not exceeding 5 years. (5) The following persons shall not be appointed members or continue to hold office as a member: (a) members of Parliament; (b) members of the Legislative Assembly; (c) employees or students of the universities; (d) members of the public service in the Ministries of Education, Finance or Universities, Science and Communications; (e) persons who are not resident in the Province. (6) Unless his appointment is revoked or he dies or resigns, a member shall hold office during the term for which he is appointed and after that until his successor is appointed. (7) Six members constitute a quorum, and, in the event of an equality of votes, the chairman may cast the deciding vote. (8) Each member shall be reimbursed for reasonable travelling and out of pocket expenses necessarily incurred by him in discharging his duties, and, in addition, may be paid the remuneration for his services that the Lieutenant Governor in Council may decide. (9) Where a vacancy exists on the universities council, the Lieutenant Governor in Council may appoint a person to fill the vacancy and the person so appointed shall hold office only for the remainder of the term for which his predecessor was appointed. (10) A vacancy on the universities council does not impair the authority of the remaining members of the universities council to act. 1974-100-65. 1977-75-1: 1977-76-38: B . C . R e g . 542/79. Agent 65. (1) The universities council is, for all purposes, an agent of the Crown in right of the Province. (2) The universities council may, as agent, carry out its powers and duties under this Part in its own name and may. with the consent of the Lieutenant Governor in Council, hold property in its own name, and likewise may dispose of its property. 1974-100-66. Executive director and staff 66. (1) The Lieutenant Governor in Council shall appoint an executive director, define his duties and determine his remuneration and other terms and conditions of employment. (2) The universities council or. if authorized by it, the executive director, may appoint or employ officers and other employees the universities council considers necessary to carry on the business and operations of the universities council and may define their duties and, subject to the regulations, determine their remuneration and other terms and conditions of employment and provide a system of organization to carry out the purposes of the universities council. 18 118 1979 UNIVERSITY RS CHAP. 419 (3) The provisions of sections 6 (4) and (5). 7, 8 and 9 of the Science Council Act respecting the government, the secretariat under that Act, the officers and employees of the secretariat and a trade union apply to the government, the universities council, the officers and employees of the universities council and a trade union representing employees of the universities council, respectively. I 9 7 K - 2 X - 2 . V Company Act 67. Except as provided in this Part, the Company Act does not apply to the universities council, but the Lieutenant Governor in Council may, by order, direct that the Company Act or any provision of it applies to the universities council and that provision then applies to the universities council. 1 9 7 4 - 1 0 0 - 6 8 . Limitation of liability 68. (1) No member or employee of the universities council and no person acting under the authority of this Part or the universities council is personally liable for any loss or damage suffered by any person by reason of anything in good faith done or omitted to be done in the exercise of any power given by this Part. (2) In an action against the universities council, if it appears that the universities council acted under the authority of this Act or..any other Act, the court shall dismiss the action against the universities council. 1 9 7 4 - 1 0 0 - 6 9 . Powers 69. The universities council has power (a) to provide for the regulation and conduct of its meetings and proceedings; (b) to carry out studies or research projects related to matters within its jurisdiction; (c) to require the universities to prepare and forward to the universities council plans for the short term and long term academic development of the universities, approved by the senate and by the board before being forwarded to the universities council; (d) to advise the government of the Province respecting the establishment of new universities; (e) to approve the establishment of new faculties and new degree programs; (0 to receive, review and co-ordinate the budget requests presented to it annually by the universities or presented at any other time at the request of the universities council; to transmit its recommendations, together with the original proposals from the universities to the minister; and to receive, allocate and distribute operating grants and grants designated by the minister, but a university is not required to use operating grants allocated to a university for any particular aspect of its operations; (g) to require the universities to consult with each other on actions which might be taken to minimize unnecessary duplication of faculties and programs of study; (h) to make recommendations to the universities on any matter; 19 119 RS CHAP. 419 UNIVERSITY 28 buz. 2 (i) in consultation with the universities, to establish standards for various categories of university buildings so as to provide a basis on which the universities council may assess university requests for total capital expenditures, and, in consultation with the universities, to review these standards; (j) to require the universities to provide the universities council with any reports and other information the universities council may require to carry out its powers under this Act; (k) to require a university to establish the accounting and information systems that the universities council considers necessary for the proper conduct of the business affairs of the university; (1) to consult with the universities in an effort to co-ordinate their solicitation of money for research; (m) to receive proposals from the public respecting new programs, institutes and similar matters; (n) to consider matters respecting student aid and fees; (o) to establish evaluation procedures for departments, faculties, programs and institutes; (p) to establish the committees representative of the universities council and the universities that the universities council considers necessary or advisable, but in particular (i) a business affairs committee, the purpose of which is to advise the universities council on financial matters affecting the budgets of the universities; (ii) a program co-ordinating committee, the purpose of which is to advise the universities council on all matters relating to undergraduate programs; (iii) a graduate studies and research committee, the purpose of which is to rationalize all matters respecting postgraduate programs and research in the universities; and (iv) a capital planning and development committee, the purpose of which is to review and advise the universities council on all matters having to do with capital expenditures of or for the universities; (q) to gather and make available to the universities information relevant to university education in the Province to assist in planning and develop-ment; (r) generally, to inquire into the financial requirements of universities and advise the minister of the sums of money required for the support and development of each university and universities generally; (s) generally, to act as an intermediary between the government of the Province and the universities, and between the respective universities, for the purposes of this section; and (t) to receive, allocate and distribute operating funds to other education institutions or to programs in those other education institutions that the Lieutenant Governor in Council may designate. 1 9 7 4 - 1 0 0 - 7 0 ; 1 9 7 6 - 3 2 - 2 1 ; 1 9 7 6 - 7 - 1 3 ; 1 9 7 9 - 8 - 2 8 . 20 120 1979 UNIVERSITY RS CHAP. 4 1 9 Limitation on powers 70. Notwithstanding section 69. the universities council shall not interfere in the exercise of powers conferred on a university, its board, senate and other constituent bodies by this Act respecting (a) the formulation and adoption of academic policies and standards; (b) the establishment of standards for admission and graduation; and (c) the selection and appointment of staff. 1 9 7 4 - 1 0 0 - 7 1 . Public meetings 71. (1) The universities council shall endeavour to hold its meetings in public at locations throughout the Province in which interested members of the public will be encouraged to express their views and concerns respecting the matters under consideration by the universities council. (2) Nothing in subsection (1) shall be construed or interpreted in such a manner as to restrict the right of the universities council to conduct its proceedings in camera where, in its opinion, the public interest so requires. 1 9 7 4 - 1 0 0 - 7 2 . Agreements 72. For the purposes of this Part, the universities council may, subject to the approval of the minister, enter into agreements the universities council considers advisable with (a) Canada; (b) a municipality; (c) a regional district; (d) an agent of the Crown in right of the Province or of Canada; (e) any ministry or department of a provincial or the federal government; or (0 any person or association. 1 9 7 4 - 1 0 0 - 7 3 : 1 9 7 7 - 7 5 - 9 . Reports 73. (1) The universities council shall submit to the minister on or before October 15 in each year (a) a report respecting the operation of the universities council for the immediately preceding fiscal year; and (b) with respect to the operations of the universities, a report including (i) the draft budgets for the next fiscal year submitted by the universities to the universities council; (ii) the draft budget for the next fiscal year prepared by the universities council on behalf of the universities and submitted by the universities council to the minister: (iii) a resume setting out the financial resources provided to the universities council for the universities by the government of the Province for the current fiscal year; and (iv) a statement setting out the allocation by the universities council for the current fiscal year to each university of the financial resources provided by the government of the Province. 21 121 RS CHAP. 4 1 9 UNIVERSITY 28 E i . i z . 2 (2) The minister shall lay the report of the universities council before the Legislature within 15 days after the commencement of the first session in the following year. 1 9 7 4 - 1 0 0 - 7 4 . Inquiries 74. The universities council, or any other person authorized in writing by it for the purpose, may make the inquiries it considers advisable for the purposes of this Part and, for this purpose, it (a) may examine any person under oath: and (b) has all the power and authority of a commissioner under sections 12, 15 and 16 of the Inquiry Act. 1 9 7 4 - 1 0 0 - 7 5 . Financial administration 75. The provisions of sections 11 (2), (3) and (4). 14. 15 and 16 of the Science Council Act respecting the council under that Act apply to the universities council. 1 9 7 8 - 2 8 - 2 3 . 122 APPENDIX B D e s c r i p t i o n of U n i v e r s i t y Budget P r e p a r a t i o n Processes: UBC, SFU and UVic THE UNIVERSITY OF BRITISH COLUMBIA BUDGET PREPARATION AND CONTROL PROCESSES INTERNAL (A) Formal scheduled steps i n budgetary process The budgetary process involves a s e r i e s o f c o n s u l t a t i o n s as f o l l o w s : (1) General d i s c u s s i o n with Deans - broad o b j e c t i v e s i n keeping with UBC Mission Statement or other long term academic p l a n . (2) (a) Departmental submissions to the Dean. (b) Dean's submission to the President. (c) President's O f f i c e - interviews with Deans. (3) C o l l e c t i v e review with Deans and V i c e - P r e s i d e n t s . (4) Senate Budget Committee. (5) President's O f f i c e . (6) Finance Committee o f Board and Board o f Governors. Examination of Base P r i o r to step 2(c) above the President's O f f i c e conducts a d e t a i l e d examination o f the budget base. T h i s procedure i n v o l v e s a l i n e by l i n e review and enables us to: (a) c o r r e c t any e a r l i e r e r r o r s of c a l c u l a t i o n or judgement (b) remove o r adjust non-recurring items (c) review p o s i t i o n s where encumbent i s r e t i r i n g , terminating or has died, i n terms of whether the fu n c t i o n i s to be continued and at what l e v e l . (B) Ongoing a n a l y t i c a l a c t i v i t i e s and assessments Data r e l a t i n g to s t a f f i n g , student enrolment and costs are kept under continual review by the President's O f f i c e and are made a v a i l a b l e to the Deans and to the Senate Budget Committee. 125 - 2 -II EXTERNAL In addition to the i n t e r n a l processes used in formulating f i s c a l planning, the U n i v e r s i t y i s subject to review and examination by external agencies. These include: (a) Comparative studies among i n s t i t u t i o n s e.g. by Canadian Association of Business O f f i c e r s . (b) A c c r e d i t a t i o n bodies f o r p r o f e s s i o n a l schools l i k e A r c h i t e c t u r e , D e n t i s t r y , Engineering, Medicine and Nursing. (c) U n i v e r s i t i e s Council o f B r i t i s h Columbia review of proposed new programs and budgets. (d) Peer review o f research proposals to granting agencies provides another dimension to assessment of c a p a b i l i t i e s and q u a l i t y of f a c u l t y . A l l o f the above i n t e r n a l and external processes are d i r e c t e d to the use of the budget as a management tool f o r the optimum a l l o c a t i o n o f resources to meet continuously evolving needs. This process embodies the concepts of program budgeting, management by objectives and zero base budgeting. III MONITORING Apart from a general overview of academic matters by Senate and a s i m i l a r review o f business and f i s c a l a c t i v i t i e s by the Board of Governors, university-a f f a i r s are monitored at two l e v e l s i n the following way: (A) General (1) Academic Deans (2) Committee of Deans and Administrative Heads (B) S p e c i f i c (1) Establishment of p o l i c i e s and procedures i n c l u d i n g p o l i c y on supplementary income. (2) I n t e r n a l audit and c o n t r o l . (3) External audit annually by Auditor General. 126 - 3 -In a d d i t i o n to the above i n t e r n a l monitoring a c t i v i t i e s , the U n i v e r s i t y supplies a continuous stream of data to the U n i v e r s i t i e s Council of B r i t i s h Columbia on a l l aspects of u n i v e r s i t y a c t i v i t i e s . June 4, 1981 SIMoT.f R A S B R U N I V E R S I T Y , B U R N ^ B Y . B.C.. C A N A D A V 5 A 1S6 |.::': J 4 j ^ g F I C E O f T H E P R E S I D E N T ; 291-4641 July.-.10, 1981 Dr. Robert Stewart Deputy M i n i s t e r M i n i s t r y of U n i v e r s i t i e s , Science and Communications Parliament B u i l d i n g s V i c t o r i a , B. C. V8V 1X4 Dear Dr. Stewart: A t our meeting of A p r i l 24, 1981, which was held i n the UCBC o f f i c e to address the issues r a i s e d i n the Treasury Board's c o n d i t i o n s which were attached to the M i n i s t r y ' s budget, each of the u n i v e r s i t i e s undertook to address a number of issues r e l a t e d to measures or a c t i v i t i e s t o be i n c l u d e d i n the r e p o r t i n g system, the question of a p o s s i b l e a p p l i c a t i o n of Zero Base budgeting, and c e r t a i n matters r e l a t e d to the budgeting process employed w i t h i n the uni v e r -s i t i e s . I w i l l attempt t o speak, on each of these i n t u r n . Zero Base Budgeting and Reporting System We are, of course, w i l l i n g to p a r t i c i p a t e i n any consider-a t i o n r e l a t e d to the p o s s i b l e a p p l i c a t i o n of Zero Base budget-in g but must express some i n i t i a l r e s e r v a t i o n s i n t h i s regard, i n c l u d i n g : 1. Zero Base budgeting p r a c t i c e s have m e r i t when a p p l i e d to operations which are e s s e n t i a l l y p roduction o r i e n t e d but i t s appropriateness i n a u n i v e r s i t y environment i s questionable. Indeed, a c o n c l u s i o n of one u n i v e r s i t y which undertook an extensive assessment of Zero Base budgeting was t h a t i t was q u i t e i n a p p r o p r i a t e , p a r t i c u l a r l y i n the academic components of the i n s t i t u t i o n . 2. Any such examination would be very time consuming and would r e q u i r e the involvement of some of our most knowledgeable and busy people, e s p e c i a l l y J J L , the area of finance. 128 Dr. Robert Stewart Page 2 July 10, 1981 Given the l i m i t a t i o n s of our s t a f f i n g l e v e l s , i t i s not readily apparent to us how the demands of such an undertaking could be s a t i s f i e d i n a reasonable manner. 3. We have, before now, given b r i e f consideration to the possible application of Zero Base budget-ing but our persuasion has been that the budgetary practices which we follow are more appropriate and sensitive to the r e a l i t i e s of our i n s t i t u t i o n . I w i l l b r i e f l y address cert a i n of these budgetary considerations below. I t i s our understanding that the Treasury Board desires to see a reporting system which would provide a r e c o n c i l i a t i o n , by object, of the operating grant a l l o c a t i o n and the actual expenditure for the f i s c a l year. The u n i v e r s i t i e s and Council are currently addressing t h i s matter with the objective of attempting to include, i n the schedules supporting the 1982/83 operating request, a r e c o n c i l i a t i o n for the recently completed f i s c a l year 1980/81. I t must be noted, however, that any such r e c o n c i l i a t i o n i s reasonably complex. On the one hand, the operating grant i s , i n large measure, based.on the annualization concept whereas the f i n a n c i a l statements of the i n s t i t u t i o n which report actual expenditures i s of course not annualized. Also, for example, the f i n a n c i a l statements include non-recurring expenditures and other r e a l operating events i n a manner d i f f e r e n t than that embodied in the operating request. To repeat, such a r e c o n c i l i a t i o n i s under development but i t may also be h e l p f u l to Treasury Board personnel, i n addition, to be provided an opportunity to become more f a m i l i a r with u n i v e r s i t y budget and accounting practices. Budget Preparation Process The budget preparation process at Simon Fraser University, as at the other u n i v e r s i t i e s , i s lar g e l y dominated by the fact that we are a people intensive operation. That i s , our human resource absorbs approximately 80% of our operating funds. As such, our budget preparation process i s strongly affected by the manner i n which we control our authorized s t a f f complements, not only at the time of the budget preparation or aggregation, but throughout the f i s c a l year. Our detailed budget aggregation process i s under way by December 1 of the year preceding the upcoming f i s c a l year. Submissions are prepared at the departmental l e v e l embodying both proposed complement changes and non-staff support projections. These are related to departmental planning, programs, and objec-tives for the ensuring f i s c a l year. The budget requests are advanced up through the organizational structure to the Vice-Dr. R o b e r t S t e w a r t J u l y 10, 1981 Page 3 P r e s i d e n t and P r e s i d e n t i a l l e v e l . I n a d d i t i o n , s i m i l a r b u d g e t a r y p r o p o s a l s a r e p r e p a r e d r e l a t e d t o u n i v e r s i t y - w i d e a c t i v i t i e s o r e x p e n d i t u r e a r e a s . These r e q u e s t s a r e a n a l y z e d b o t h w i t h r e g a r d t o the m e r i t o f t h e r e q u e s t as judged by our a d m i n i s t r a t o r s and i n r e l a t i o n t o the l i m i t a t i o n o f our p r o j e c t e d f i n a n c i a l r e s o u r c e s . We seek t o c o n s o l i d a t e a p r e l i m i n a r y o p e r a t i n g budget by the month o f March, pending d e t e r m i n a t i o n o f the a c t u a l o p e r a t i n g g r a n t . Upon d e t e r m i n a -t i o n o f t h e a c t u a l o p e r a t i n g g r a n t , such m o d i f i c a t i o n s as may prove n e c e s s a r y a r e i n c o r p o r a t e d p r i o r t o s u b m i s s i o n o f the budget t o t h e Board o f Governors f o r a p p r o v a l . We a l s o seek t o o b t a i n t h a t a p p r o v a l as e a r l y as p o s s i b l e i n t h e f i s c a l y e a r i n o r d e r t h a t i n d i v i d u a l o p e r a t i n g u n i t s - may have c o n f i r m e d t o them t h e human and f i n a n c i a l c o n s t r a i n t s w i t h i n w h i c h t h e y must f u n c t i o n . O p e r a t i n g G r a n t Request The above o u t l i n e o f budget p r e p a r a t i o n p r o c e s s r e l a t e s t o the u n i v e r s i t y budget f o r t h e f i s c a l y e a r as d i s t i n c t from the p r o c e s s which ensues p r i o r t o the s u b m i s s i o n o f the o p e r a t i n g g r a n t r e q u e s t t o UCBC. The l e a d t i m e s which a t t a c h t o t h e UCBC s u b m i s s i o n a r e such t h a t i t would be q u i t e i m p r a c t i c a l t o c a l l f o r d e p a r t m e n t a l and f a c u l t y r e q u e s t s and to i n c o r p o r a t e t h e s e i n the o p e r a t i n g g r a n t r e q u e s t . The s u b m i s s i o n t o C o u n c i l i s made on August 15 and r e q u i r e s a p p r o v a l by the Board o f Governors d u r i n g the month o f J u l y . To even c o n s i d e r c a l l i n g f o r d e p a r t m e n t a l and f a c u l t y i n p u t s would n e c e s s i t a t e a s k i n g f o r t h e s e by e a r l y i n May and a t a time w h i c h , i n t h e normal y e a r , may even precede t h e i r budget a l l o c a t i o n f o r t h e c u r r e n t f i s c a l y e a r . Our approach t o t h e p r e p a r a t i o n o f t h e s u b m i s s i o n t o UCBC i s t h e r e f o r e c o m p r i s e d o f two p a r t s , each o f whi c h i s p r e p a r e d by o u r s e n i o r a d m i n i s t r a t o r s . P a r t 1 encompasses the a n n u a l i z e d budget p r o j e c t i o n , and i n c o r p o r a t e s o ur f o r e -c a s t o f s a l a r y and n o n - s a l a r y i n f l a t i o n a r y components t o g e t h e r w i t h a r e c o g n i t i o n o f changes i n academic and s u p p o r t s t a f f r e q u i r e m e n t s t o meet p r o j e c t e d e n rolment o b l i g a t i o n s . I n a d d i t i o n , any o t h e r c o n t i n u i n g o b l i g a t i o n s , such as t h e i n c r e a s i n g l y onerous r e q u i r e m e n t t o accommodate i n d i r e c t e x p e n d i t u r e s u p p o r t f o r e x t e r n a l r e s e a r c h g r a n t s , i s i n c l u d e d i n P a r t 1. P a r t 2 o f o u r s u b m i s s i o n i s s p e c i f i c a l l y i n t e n d e d t o a d d r e s s p o t e n t i a l n o n - d i s c r e t i o n a r y a l l o c a t i o n s w h i c h may be made by C o u n c i l as p a r t o f up t o the 5% o f the g l o b a l o p e r a t i n g g r a n t w h i c h has been earmarked f o r a l l o c a t i o n o u t s i d e o f t h e a l l o c a t i o n f o r m u l a . I n c l u d e d i n P a r t 2 a r e such i t e m s as new and emergent programs, programs o f d i s t i n c -t i o n , development and e n r i c h m e n t o f e x i s t i n g programs a l o n g w i t h any o t h e r s i m i l a r r e q u i r e m e n t s . I n each i n s t a n c e , a c t i o n s by Senate o r by t h e Program C o o r d i n a t i n g Committee o f C o u n c i l 131 UNIVERSITY OF VICTORIA P.O. B O X 1700, V I C T O R I A , B R I T I S H C O L U M B I A , C A N A D A VOW 2Y2 T E L E P H O N E (604) 477-6911 Office, of the President & Vice-Chance 8 July, 1981. Dr. R.W.Stewart, Deputy Minister, Ministry of Universities, Science and Cortrriunications, Parliament Buildings, Victoria. B.C. V8V LX4 ,-> Dear Dr. Stewart: As requested earlier this Spring, this letter attempts to describe the budgetary process at the University of Victoria. Before describing some of the procedural aspects of our budgeting, I thirJc i t i s important to cornnent on some more general points as follows: 1. A l l budgets are prepared on a fully annualized basis, so that there are no built-in corrrrdtments requiring increased government funding in subsequent years. Probably the easiest way to illustrate how this works is to take the example of the adding of a new clerical position to the "establishment". If i t was decided that such a position was justified and was to be f i l l e d starting on January 1st, then the f u l l annualized cost of the position, including personnel benefits, would have to be identified'in the current year's base operating budget and set aside for trie new position - notwithstanding the fact that the person would only have to be paid for three months (from January 1st to March 31st) in the current budget year. 2. The second general point I would like to make concerns our budget carry over procedures. Unlike many public organizations, there is no incentive at the University of Victoria to fully spend your budget by the end of the fiscal year - in fact just the opposite is the case. We permit the carry-over of unspent budgets into the following fiscal year for use in meeting non-recurring expenditures. By introducing this procedure we have elinxLnated the year-end spending rush. Managers are encouraged to save funds to meet anticipated needs which could not otherwise be financed through the regular budget. Re: Budget Preparation Process .. ./2 132 - 2 -Dr. p w c«-™-'=>vt 8 Ju l y , 1981 3. In the f i n a l a n a l y s i s , no budgetary system w i l l guarantee an e f f e c t i v e u t i l i z a t i o n of resources unless the people working i n the organization are committed to that ultimate o b j e c t i v e . The c r i t i c a l place at which such a comrrdtment i s e s s e n t i a l i s a t the working l e v e l i . e . w i t h i n each operating department and u n i t . Therefore, at the U n i v e r s i t y of V i c t o r i a we have developed a d e c e n t r a l i z e d system o f budgeting and f i n a n c i a l c o n t r o l . We place a high degree of r e l i a n c e upon department heads and managers to manage t h e i r u n i t s e f f e c t i v e l y and wit h i n budgetary l i m i t s . The budgeting process a t the U n i v e r s i t y of V i c t o r i a f o r a p a r t i c u l a r year s t a r t s with the preparation and submission of budget requests to the U n i v e r s i t i e s C ouncil i n e a r l y August each year. In developing our budget request we consult with Deans and other senior adrninistrative o f f i c e r s . Our experience i s that i n v o l v i n g others such as department heads and chairmen a t lower l e v e l s i n the organization a t t h i s stage of the process r e s u l t s i n the build-up of u n r e a l i s t i c budgetary expectations. At t h i s stage we i d e n t i f y areas which are experiencing growth and enrolment pressures, any i n which the opposite i s occurring, the needs of adnvinistrative and support departments and maintenance requirements f o r new b u i l d i n g s . We a l s o take i n t o account new academic programme proposals which have been approved by the Senate, the Board of Governors and the U n i v e r s i t i e s Council, and matters r a i s e d by the Senate's budget committee. This information, together with our knowledge about i n f l a t i o n a r y f a c t o r s as they apply to u n i v e r s i t i e s , i s then taken t o the Board of Governors. The Board reviews our budget proposals and decides what l e v e l of s a l a r y increases should be requested. The Board then approves our t o t a l budget submission and the l e v e l of p r o v i n c i a l grant support to be requested. The next formal stage i n the budgeting process does not u s u a l l y occur u n t i l the P r o v i n c i a l operating grant f o r the three u n i v e r s i t i e s i s known. In saying t h i s i t must be acknowledged that the budgeting process i s i n f a c t going on continuously as s t a f f i n g d e c i s i o n s and plans are made on a day-to-day b a s i s . In the main such d e c i s i o n s w i l l u s u a l l y involve the r e a l l o c a t i o n of resources, with budget increases l i m i t e d to the probable increase which w i l l be a v a i l a b l e through the grant a l l o c a t i o n formula. (As an aside, i t i s note-worthy that the current uncertainty about the future of the grant a l l o c a t i o n formula removes the one and only feature of u n i v e r s i t y funding which permits any forward f i n a n c i a l planning to occur.) Once the P r o v i n c i a l grant i s known and a l l o c a t e d amongst the u n i v e r s i t i e s we proceed to develop our act u a l budget f o r the year. This process i s i n i t i a t e d a t meetings o f our Executive C o u n c i l , which c o n s i s t s of the President, the V i c e -Presidents, the Deans and the U n i v e r s i t y L i b r a r i a n . We have f u l l and frank di s c u s s i o n s about the r e l a t i v e p r i o r i t i e s which might be assigned to such things as s a l a r y adjustments, i n f l a t i o n of non-salary costs, s t a f f i n g increases, e t c . We a l s o discuss the' need f o r t u i t i o n fee increases. As a r e s u l t of these discussions, followed by informal discussions with the Finance Committee of the Boeird of Governors, we e s t a b l i s h budget targets f o r each broad area of budgetary r e s p o n s i b i l i t y (for example f o r each Dean, f o r each Director of Administrative Services etc.,) and develop budget g u i d e l i n e s . Each i n d i v i d u a l i s then requested to submit l i n e - b y - l i n e budget proposals for a l l budgetary u n i t s w i t h i n 134 APPENDIX C Basic Formula Used for Di v i s i o n of the Annual P r o v i n c i a l Operating Grant 1970-71 to 1973-74 (a) 70% of the grant was allocated on the basis of the estimated number of weighted f u l l - t i m e equivalent students; (b) 20% of the grant was allocated on the basis of the estimated number of f u l l - t i m e equivalent students (unweighted); (c) 10% of the grant was divided equally amongst the three u n i v e r s i t i e s . A p p e n d i x D 135 1 GENERAL PRINCIPLES UNDERLYING THE ALLOCATION OF THE ANNUAL PROVINCIAL OPERATING GRZ'.NT : : :  The m e t h o d o l o g y o f a l l o c a t i o n s h o u l d r e f l e c t c o n s i d e r a t i o n o f t h e p r i n c i p l e s o u t l i n e d below. Once t h i s has been done, t h e f u n d i n g f o r m u l a i t s e l f s h o u l d : 1) A s s i s t t h e i n d i v i d u a l u n i v e r s i t i e s i n f o r e c a s t i n g i t s p r o v i n c i a l g r a n t a minimum o f two y e a r s i n a d v a n c e . 2) R e c o g n i z e e c o n o m i e s o f s c a l e i n t h e u n i v e r s i t i e s . 3) R e c o g n i z e t h a t some c o s t s v a r y w i t h t h e number o f s t u d e n t s e n r o l l e d - i e : h e a d c o u n t , number o f s t u d e n t s t o be s e r v e d , (see f o o t n o t e #2 below) 4) R e c o g n i z e t h a t some c o s t s v a r y w i t h t h e n a t u r e o f t h e a c a d e m i c programs i n w h i c h t h e s t u d e n t s a r e e n r o l l e d - i e w e i g h t i n g o f f u l l t i m e e q u i v a l e n t s ( F T E ) . 5) A l l o w t h e u n i v e r s i t i e s t i m e t o r e s p o n d t o t h e e f f e c t s o f e n r o l l m e n t d e c l i n e s . 6) R e c o g n i z e t h e m a r g i n a l c o s t s o f i n c r e a s e d e n r o l l m e n t s i n s t a g e s o v e r a p e r i o d o f y e a r s . 7) Be r e s p o n s i v e i n t h e l o n g r u n t o e n r o l l m e n t c h a n g e s and s h i f t s ; and s h o u l d , a s s u m i n g c o n s t a n t d o l l a r s , r e s u l t i n d e c l i n i n g a v e r a g e c o s t s t o t h e p r o v i n c e as e n r o l l m e n t i n c r e a s e s (and i n c r e a s e d a v e r a g e c o s t s i f e n r o l l m e n t d e c r e a s e s ) . 8) P r o v i d e t h a t t h e m a r g i n a l c o s t s t o t h e p r o v i n c e o f i n c r e a s e d e n r o l l m e n t i n c o m p a r a b l e p r o g r a m s w i l l be t h e same a t a l l u n i v e r s i t i e s . 9) R e c o g n i z e t h e h i g h e r p e r s t u d e n t c o s t s a s s o c i a t e d w i t h a t r i m e s t e r o p e r a t i o n i n w h i c h e n r o l l m e n t s a r e n o t a p p r o x i m a t e l y t h e same i n e a c h t r i m e s t e r . 10) Be s u b j e c t t o r e g u l a r r e v i e w , and i n p a r t i c u l a r , s h o u l d be r e v i s e d as a p p r o p r i a t e a s an i n s t r u m e n t o f p u b l i c p o l i c y o b j e c t i v e s - e g . by c h a n g i n g t h e w e i g h t i n g s y s t e m i n r e s p o n s e t o a no g r o w t h s i t u a t i o n , s e t t i n g an i n c r e a s e d p a r t i c i p a t i o n p e r c e n t a g e g o a l , e t c . 11) A l l o w f o r ammendments t o be p h a s e d i n i f t h e y r e s u l t i n s i g n i f i c a n t r e r . o u r c e r e a l l o c a t i o n s between t h e u n i v e r s i t i e s (see f o o t n o t e "1) 136 2 12) Provide for funds to be d i s t r i b u t e d outside the funding formula for s p e c i a l purposes based on Council's judgement. In each year, these amounts should be considered i n the l i g h t of the actual p r o v i n c i a l grant and any other s p e c i a l services -eg. new and emerging programs, (see footnote #3 below), programs of d i s t i n c t i o n , upgrading or strengthening of e x i s t i n g programs, incentives for improved u t i l i z a t i o n of resources, maintenance costs for new c a p i t a l construction, etc. 13) Recognize that in making grants for s p e c i a l purposes outside the funding formula, Council must make an e x p l i c i t statement to the u n i v e r s i t y or u n i v e r s i t i e s o u t l i n i n g p r e c i s e l y whether the funds are one time allotments or recurring, and i f recurring the length of time over which they w i l l be granted. 14) Be uncomplicated and economical to implement i n i t i a l l y and to administer annually. 15) Be seen to be equitable by the u n i v e r s i t i e s and by Council. footnotes #1 (reference item #11 above) - i n addition to the e f f e c t s of formula amendment, in the i n i t i a l years of a p p l i c a t i o n of the new formula, any s i g n i f i c a n t f l u c t u a t i o n s from the h i s t o r i c a l funding patterns between the u n i v e r s i t i e s should be considered for p a r t i c u l a r Council analysis i n order to allow for corrections in those i n i t i a l years. #2 - the issue of the e f f e c t of the growing number of part-time students w i l l be addressed as one element of costs to be considered under item #3 above. 3# - the students anticipated to be enrolled into new and emerging programs w i l l be included in the headcount and FTE c a l c u l a t i o n s and the formula w i l l provide v ^ l v ^ c r e d i t s for these units. If projected student enrollment does not materialize, the correcting factor of the two or three year "time base" w i l l adjust in future years. Under t h i s method, only incremental costs w i l l be added to the u n i v e r s i t y budget for emergent programs, as at present. 1 3 7 R e v i s e d A l l o c a t i o n F o r m u l a M e t h o d o l o g y 3 . 0 PROPOSED ALLOCATION PROCEDURE: 3.1 The proposed basis on which a minimum of 95% of each year's grant would be allocated may be summarized as follows: (a) The grant i s allocated amongst the u n i v e r s i t i e s in proportion to the number of "grant units" for each un i v e r s i t y . A detailed d e s c r i p t i o n of "grant units" i s given l a t e r , but in general they are based on actual enrollments two years e a r l i e r plus p a r t i a l provision for anticipated enrollment increases. (b) Adjustments are made to the amounts allocated on the basis of grant units in the preceding year to r e f l e c t the actual, rather than projected, enrollment increases which occurred the previous year. 3.2 Exhibit I (on page 10 ) provides a hypothetical i l l u s t r a t i o n of the proposed a l l o c a t i o n mechanism which i s described i n the following paragraphs of t h i s section of the Report. 3.3 I n i t i a l l y determine the number of weighted and 138 unweighted FTE ( F u l l - T i m e E q u i v a l e n t ) e n r o l l m e n t s two years p r i o r (Year I i n the i l l u s t r a t i o n ) to the year f o r which the o p e r a t i n g grant a l l o c a t i o n i s being made. A summary of the weig h t i n g system i s attached as Appendix B. 3.4 The weighted and unweighted p r o j e c t e d FTE enr o l l m e n t s f o r the year f o r which the grant a l l o c a t i o n i s being made (Year III) are determined. These p r o j e c t i o n s are normally reviewed i n l a t e January or e a r l y February of academic year I I and are agreed amongst the u n i v e r s i t i e s and the C o u n c i l s t a f f at t h a t time. 3.5 C a l c u l a t e the number of "enrollment u n i t s " two years e a r l i e r (Year I) and the p r o j e c t e d "enrollment u n i t s " f o r the year f o r which the grant i s being made (Year I I I ) f o r each u n i v e r s i t y as f o l l o w s : A minimum of 6000 unweighted F T E ' s each 25% o f the number of unweighted FTE's i n excess of 6000 The number of weighted FTE's These f i g u r e s are then summed f o r each u n i v e r s i t y and i n t o t a l to a r r i v e at the number of " e n r o l l m e n t u n i t s " to be employed i n the Year I I I Grant a l l o c a t i o n . 3.6 The number of "grant u n i t s " f o r Year I I I are c a l c u l a t e d f o r each u n i v e r s i t y , and i n t o t a l , by summing the f o l l o w i n g (a) The number of "enrollment u n i t s " i n Year I; F i v e p e r c e n t (5%) of the number of "Winter S e s s i o n " headcounts i n Year I (Ln the case o f U.B.C. and U. V i c . December 1st f i g u r e s are used and i n the case o f S.F.U. the average of F a l l and S p r i n g semesters i s used); (b) A t r i m e s t e r allowance to S.F.U. equal to 15% of the F.T.E. u n i t s i n c l u d e d i n Year I " e n r o l l m e n t u n i t s " (15% of 6500 "enrollment u n i t s " o f U n i v e r s i t y "B" i n E x h i b i t I equals 975 "grant u n i t s " ) ; (c) One t h i r d o f any p r o j e c t e d i n c r e a s e s i n " e n r o l l m e n t u n i t s " f o r the grant year (Year I I I ) over two ye a r s p r e v i o u s (Year I) a c t u a l " e n r o l l m e n t u n i t s . " ( T h i s c a l c u l a t i o n excludes any i n c r e a s e s i n FTE's up to a l e v e l o f 6000 FTE's). No allowance i s made f o r 139 projected enrollment decreases in the current year in order to allow time for the u n i v e r s i t i e s to respond to long-term declines. 3.7 The amount of the grant for Year III which i s avai l a b l e for d i s t r i b u t i o n on the predetermined basis i s allocated in proportion to the number of "grant units" for Year I I I . Using the i l l u s t r a t i o n in Exhibit I, the a l l o c a t i o n may be summarized as follows: University A B C Total Year i:r.I "Grant Units" A l l o c a t i o n of 95% of Number % of Total Year III Grant (000*s) 57,000 20,967 16,500 94,467 60.34% 22.19 17 . 47 $114 , 646 42 , 161 33,193 100.00% $190,000 (It should be noted that the actual a l l o c a t i o n should be made in s t r i c t proportion to the number of grant u n i t s , rather than using the approximate methods employed in t h i s report). 3.8 The a l l o c a t i o n in 3.7 above i s then adjusted annually to r e f l e c t the previous year's actual enrollments at the three u n i v e r s i t i e s , since the Year II a l l o c a t i o n would have been based, i n part, on projected enrollment data for Year II. To the extent that a u n i v e r s i t y over -(or under-) estimated i t s FTE and weighted FTE enrollments i t w i l l have received a larger (smaller) portion of the grant than would have been warranted by the actual enrollment data, i f that data had been a v a i l a b l e at the time of Year II a l l o c a t i o n . In part G of E x h i b i t I the amounts of Year II over - (or under-) a l l o c a t i o n s are determined and applied as adjustments to the Year III a l l o c a t i o n s described in 3.7 above. The e f f e c t of the adjustment i s to require a u n i v e r s i t y which has over-estimated i t s enrollment increase r e l a t i v e to those of the other u n i v e r s i t i e s to r e l i n g u i s h any excess grants 140 received as a r e s u l t . This w i l l serve as an additional incentive to ensure the accuracy of enrollment forecasts. 3.9 The proposed a l l o c a t i o n i s applicable only to future years. However, in Appendix A the procedure has been applied to the t o t a l operating grant a l l o c a t i o n s for the l a s t six years and compared with the res u l t s of the actual grant a l l o c a t i o n . 4.0 RESPONSE OF ALLOCATION PROCEDURE TO PRINCIPLES 1-9, APPENDIX D: 4.1 P r i n c i p l e 1 - "Assi s t the in d i v i d u a l u n i v e r s i t i e s in forecasting i t s p r o v i n c i a l grant a minimum of two years in advance." As explained above, each unive r s i t y receives a number of "grant units" which enables i t to forecast i t s share of future grants. The number of "grant units" i s primarily dependent upon actual enrollments experienced two years p r i o r to the year for which the operating grant i s being all o c a t e d . Thus each un i v e r s i t y i s able to forecast "grant units" two years in advance. 4.2 P r i n c i p l e 2 - "Recognize economies of scale in the u n i v e r s i t i e s . " The a l l o c a t i o n procedure views 6000 FTE's as being a reasonable minimum enrollment in the development of a u n i v e r s i t y . Beyond 6000 FTE's the c a l c u l a t i o n of "grant units" recognizes economies of scale. For enrollments greater than 6000 FTE's the procedure treats FTE's as having costs equivalent to 25% of the cost of each of the f i r s t 6000 FTE's. Thus beyond 6000 FTE's the procedure implies d e c l i n i n g average costs. 4.3 P r i n c i p l e 3 - "Recognize that some costs vary with the number of students enrolled - eg: headcount, number of students to be served." It was the view of the Task Force that t h i s factor was of si g n i f i c a n c e during the peak periods of the year. At these times additional students impose further costs which 141 i t was f e l t are primarily administrative in nature. The costs i n question represent approximately 5% of the operating budgets of the three u n i v e r s i t i e s . Thus 5% of the Winter Session headcounts are included in the c a l c u l a t i o n of "grant units". 4.4 P r i n c i p l e 4 - "Recognize that some costs vary with the nature of the academic programs in which the students are enrolled - eg. weighting of f u l l time equivalents (FTE) . " As proposed, both FTE's and weighted FTE's are used in determining the number of "grant units". The Task Force also considered the cost impact of s h i f t s in the enrollment mix. For example, i t i s l i k e l y that a 100 student increase in an academic unit which has a broad enrollment base, could be more e a s i l y accommodated within an established budget than could a 100 student increase i n another unit with a much smaller enrollment base such as in a professional program. While t h i s issue has not been resolved the a l l o c a t i o n procedure, as proposed, gives marginal "grant unit" increases after two years to the various weighting categories as follows: MARGINAL WEIGHT INCREASES 1 62.5% 1.5 70.0 2 75.0 2.5 78.6 3 81.3 4 85.0 5 87 . 5 6 '89.3 (These percentages only apply to enrollment additions above 6000 FTE's). 4.5 P r i n c i p l e 5 - "Allow the u n i v e r s i t i e s time to respond to the e f f e c t s of enrollment declines." As the proposed procedure uses enrollments from two years p r i o r to the year for which the a l l o c a t i o n i s being made, 142 a u n i v e r s i t y h as a t l e a s t two y e a r s ( t h e u s u a l p e r i o d o f t e r m a p p o i n t m e n t s ) t o a d j u s t t o d e c l i n i n g e n r o l l m e n t s i n i t s own f i n a n c i a l p l a n n i n g . F u r t h e r m o r e , no a l l o w a n c e i s made f o r p r o j e c t e d e n r o l l m e n t d e c r e a s e s i n t h e c u r r e n t a l l o c a t i o n y e a r . 4.6 P r i n c i p l e 6 - " R e c o g n i z e t h e m a r g i n a l c o s t s o f i n c r e a s e d e n r o l l m e n t s i n s t a g e s o v e r a p e r i o d o f y e a r s . " In t h e p r o p o s a l i t t a k e s two y e a r s b e f o r e t h e f u l l m a r g i n a l c o s t s o f a c t u a l e n r o l l m e n t i n c r e a s e s a r e r e c o g n i z e d . F o r a g i v e n O p e r a t i n g G r a n t a l l o c a t i o n o n l y one t h i r d o f t h e m a r g i n a l c o s t s o f p r o j e c t e d e n r o l l m e n t i n c r e a s e s o v e r t h e b a s e two y e a r s e a r l i e r a r e r e c o g n i z e d i n t h e c a l c u l a t i o n o f t h e number o f " g r a n t u n i t s . " 4.7 P r i n c i p l e 7 - "Be r e s p o n s i v e i n t h e l o n g r u n t o e n r o l l m e n t c h a n g e s and s h i f t s ; and s h o u l d , a s s u m i n g c o n s t a n t d o l l a r s , r e s u l t i n d e c l i n i n g a v e r a g e c o s t s t o t h e P r o v i n c e as e n r o l l m e n t i n c r e a s e s (and i n c r e a s e d a v e r a g e c o s t s o f e n r o l l m e n t d e c r e a s e s ) . " R e s p o n s e s r e l a t i n g t o " e n r o l l m e n t c h a n g e s and s h i f t s " a r e commented on i n t h e p r e c e d i n g p a r a g r a p h s . In summary t h e p r o p o s e d p r o c e d u r e r e a c t s t o s h i f t s between a c a d e m i c p r o g r a m s a n d / o r u n i v e r s i t i e s a s w e l l as t o i n c r e a s e s and d e c r e a s e s i n e n r o l l m e n t . As n o t e d u n d e r p a r a g r a p h 4.2 t h e p r o p o s a l r e s u l t s i n " d e c l i n i n g a v e r a g e c o s t s t o t h e P r o v i n c e a s e n r o l l m e n t i n c r e a s e s (and i n c r e a s e d a v e r a g e c o s t s i f e n r o l l m e n t d e c r e a s e s ) . " 4.8 P r i n c i p l e 8 - " P r o v i d e t h a t t h e m a r g i n a l c o s t s t o t h e P r o v i n c e o f i n c r e a s e d e n r o l l m e n t i n c o m p a r a b l e p r o g r a m s w i l l be t h e same a t a l l u n i v e r s i t i e s . " The same b a s e e n r o l l m e n t i s u s e d i n c a l c u l a t i n g " g r a n t u n i t s " f o r e a c h u n i v e r s i t y (6000 F T E ' s ) . Beyond t h i s p o i n t m a r g i n a l c o s t s a r e t h e same f o r a d d i t i o n a l s t u d e n t s i n c o m p a r a b l e p r o g r a m s a t a l l t h r e e u n i v e r s i t i e s . I t s h o u l d be n o t e d , however, t h a t a v e r a g e a b s o l u t e c o s t s p e r s t u d e n t w i l l n o t be t h e same f o r c o m p a r a b l e p r o g r a m s b e c a u s e o f t h e e c o n o m i e s o f s c a l e f a c t o r . 143 4.9 P r i n c i p l e 9 - "Recognize the higher per student costs associated with a trimester operation in which enrollments are not approximately the same in each trimester." Current r e l i a b l e data on the additional costs of a trimester system which might be u s e f u l l y applied in the B r i t i s h Columbia unive r s i t y system are unavailable at the present time. Previous studies have indicated d i f f e r e n t i a l costs "ftwu -ouch otudie-3—were" those commissioned by Simon Fraser University and the Council of Ontario U n i v e r s i t i e s ) . Provision has been made for a d d i t i o n a l recognition to be given to the S.F.U. trimester system in c a l c u l a t i n g the number of "grant unit s " . Furthermore, in i t s Recommendation 2.5, the Task Force suggests that the U n i v e r s i t i e s Council consider undertaking a review of the a d d i t i o n a l costs associated with the trimester system and a cost-benefit analysis of that option to B.C. students. It i s anticipated that the output of such a review, should i t take place, would be useful i f future revisions of the proposed a l l o c a t i o n procedure are indicated in t h i s area. 5 . 0 SPECIAL PURPOSE GRANTS": 5.1 In i t s Recommendation 2.2, on page 1, consistent with P r i n c i p l e 12, Appendix D, the Task Force indicates that not less than 95% of the annual P r o v i n c i a l Operating Grant should be allocated on a predetermined basis. The Task Force wishes to recommend the following exception: "The amount to be d i s t r i b u t e d by formula should be not less than 95% of the P r o v i n c i a l Grant. However, should the U n i v e r s i t i e s Council of B r i t i s h Columbia Special Purpose items reach a t o t a l of 5% of the P r o v i n c i a l Grant in any one year, then the U n i v e r s i t i e s Council may encroach on the 95% portion of the P r o v i n c i a l Grant to a maximum of $1 m i l l i o n in that f i s c a l year for the purpose of providing i t with a global d i s c r e t i o n a r y amount for that year." 5.2 The Task Force f u l l y agrees that these Special Purpose Funds should be d i s t r i b u t e d in accordance with Council's judgment as indicated in P r i n c i p l e 12 of Appendix D . 144 T h e T a s k F o r c e recommends t h a t t h e examples o f S p e c i a l P u r p o s e g r a n t s c o n t a i n e d i n P r i n c i p l e 12 o f A p p e n d i x D be r e p l a c e d by t h e n o n - c o m p r e h e n s i v e l i s t o f examples o f i t e m s f o r S p e c i a l P u r p o s e F u n d i n g c o n t a i n e d i n A p p e n d i x C. 5.3 F i n a l l y , t h e T a s k F o r c e e n d o r s e s P r i n c i p l e 13 o f A p p e n d i x D w h i c h s t a t e s : " R e c o g n i z e t h a t i n making g r a n t s f o r s p e c i a l p u r p o s e s o u t s i d e t h e f u n d i n g f o r m u l a , C o u n c i l must make an e x p l i c i t s t a t e m e n t t o t h e u n i v e r s i t y o r u n i v e r s i t i e s o u t l i n i n g p r e c i s e l y w h e t h e r t h e f u n d s a r e one t i m e a l l o t m e n t s o r r e c u r r i n g , and i f r e c u r r i n g t h e l e n g t h o f t i m e o v e r w h i c h t h e y w i l l be g r a n t e d . " ; and f u r t h e r r e i t e r a t e s t h e a b s o l u t e l y e s s e n t i a l r e q u i r e m e n t f o r an e x p l i c i t C o u n c i l s t a t e m e n t as t o d u r a t i o n o f t h e S p e c i a l P u r p o s e G r a n t s , i n o r d e r t o p e r m i t t h e u n i v e r s i t i e s t o p l a n t h e i r i n t e r n a l a l l o c a t i o n on a r a t i o n a l b a s i s . 6.0 IMPLEMENTATION PERIOD: 6.1 I t i s s u g g e s t e d t h a t C o u n c i l g i v e c o n s i d e r a t i o n i n t h e  e a r l y y e a r s t o a l l o c a t i n g more t h a n 95% o f t h e t o t a l  g r a n t on t h e p r e d e t e r m i n e d b a s i s . T h i s would have t h e a d v a n t a g e s o f : - s o f t e n i n g t h e a d j u s t m e n t s r e q u i r e d f o r i n d i v i d u a l i n s t i t u t i o n s t o t h e new a p p r o a c h ; and - w o u l d e n a b l e C o u n c i l t o a c q u i r e e x p e r i e n c e and e s t a b l i s h p r e c e d e n t s i n i t s d e t e r m i n a t i o n o f S p e c i a l P u r p o s e G r a n t s . APPENDIX E GENERAL PURPOSE OPERATING GRANT (see notes) ($000) YEAR OPERATING GRANT FTE ENROLMENT RESTATED IN CONSTANT 1971 DOLLARS" Total Grant* Actual Allocations Share of Allocation (7=) Share of FTE (7.) Total FTE Total Grant Grant Per FTE UBC SFU UVIC UBC SFU UVIC UBC SFU UVIC 1971-72 86,000 53,492 18,449 14,058 62.20 21.45 16.35 65.17 17.58 17.25 32,873 85,828 2,611 1972-73 93,500 58,500 19,900 15,100 62.57 21.28 16.15 65.04 18.53 16.43 31,355 88,963 2,837 1973-74 100,255 62,720 21,340 16,195 62.56 21.29 16.15 64.43 18.88 16.69 32,794 88,564 2,701 1974-75 119,140 74,081 25,824 19,234 62.18 21.68 16.14 62.71 19.43 17.86 35,668 93,811 2,630 1975-76 150,200 91,989 33,044 25,167 61.24 22.00 16.76 61.55 20.92 17.53 37,971 106,148 2,796 1976-77 170,400+ 103,921 37,739 28,741 60.99 22.15 16.87 61.49 21.60 16.92 38,506 110,291 2,864 1977-78 184,500 111,315 41,234 31,950 60.33 22.35 17.32 61.76 21.51 16.73 38,036 111,683 2,936 1978-79 200,578 122,286 44,131 34,161 60.97 22.00 17.03 60.64 22.20 17.17 37,822 112,180 2,966 1979-80 217,226 131,832 48,523 36,871 60.69 22.34 16.97 60.17 21.85 17.98 38,317 112,962 2,948 1980-81 239,612 143,324 54,318 41,970 59.81 22.67 17.52 59.17 22.59 18.26 39,428 113,938 2,890 1981-82 271,713 161,781 61,325 48,606 59.54 22.57 17.89 57.93 22.76 19.31 40,987 113,119 2, 760 Notes: *In addition to the above, specific purpose appropriations, referred to as operating grants (other), and cash c a p i t a l equipment grants, have been approved in support of the following a c t i v i t i e s : . Expansion of non-metropolitan programs (from 1976/77) . Expansion of undergraduate medical expansion (from 1977/78) . Replacement of operating equipment (from 1977/78) •Includes special $7.5 m i l l i o n supplementary warrant in connection with the Minister's 'no commitment' funding policy. "Deflated by the Vancouver CPI, 1971 = 100 146 APPENDIX F THE ALLOCATION FORMULA How the grant units are determined Enrolment two years back i n time CONTRIBUTES A l l students translated into FTEs.... 100% ABOUT 86% OF A l l students translated into WFTEs... 100% GRANT UNITS SUM Headcount Economies of Scale current year CONTRIBUTES 4,050 ABOUT 12% OF SUM GRANT UNITS The Trimester Adjustment CONTRIBUTES ABOUT 1.3% OF SFU i s given a constant 1,650 units.. 1,650 GRANT UNITS Enrolment Increase Expected 1/3 of projected increase over the current year SUM = CONTRIBUTES ABOUT 0.7% OF GRANT UNITS 100% of grant units 147 APPENDIX G PROGRAMS OF DISTINCTION At i t s meeting of May 28th, 1979, the U n i v e r s i t i e s Council passed the following motion: That the Universities Council adopt as a statement of policy on Programs of Distinction: (1) That the Universities Council, in its annual funding recommendations to the Minister of Education, will include for programs of distinction a separate line item calculated at up to % of 1% of the current year's recommended provincial operating grant. (2) That the Council shall allocate a sum of up to H of 1% of the provincial operating grant for programs of distinction. This allocation is a "special purpose grant" outside the funding formula, as defined in the Report of the Task Force on the Provincial Grant Allocation (p.8). (3) That Council endorses the concept of allocating funds for programs of distinction for a three year period, commencing with 1979-80 for which year the funding will be based on Grant Units as defined in the Report of the Task Force on the Provincial Grant Allocation. (4) That., as a general rule, a Program of Distinction will not be funded as such for more than a period of three years. Normally, continuation of the Programs of Distinction beyond the three year -period will be at the discretion of the individual university, using its operating funds or other .- :• sources. (5) That the programs will be selected on the basis, of their particular economic, social, cultural or educational benefit to British Columbia, or their potential for national or international recognition. Since such criteria may prove difficult to establish beforehand, it is recommended that: 148 (a) the universities be relied upon to select programs which they feel to have the potential for making such a contribution for excellence and which can be further developed by the universities, and to report to the Universities Council, for information purposes, at the time of selection; (b) the internal allocations made by each university be reported to the Universities Council at the time of the next operating budget submission; (c) the effect of the additional allocation on programs thus identified as programs of distinction be assessed by Council after the said three years. UCBC approved 05-28-1979 GL 

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