ACCESS TO POSTSECONDARY EDUCATION: A C O M P A R A T I V E STUDY OF BRITISH C O L U M B I A A N D ONTARIO. By Jacy S.H. Lee B.A. Hons. (Law) University of Sheffield, U.K. , 1981 L L . M . University of Cambridge, U.K. , 1984 M.T.S. Regent College (affiliated with UBC), Canada, 1992 M.P. A. University of Victoria, 1994 A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF EDUCATION In THE F A C U L T Y OF G R A D U A T E STUDIES (Educational Leadership and Policy) THE UNIVERSITY OF BRITISH C O L U M B I A December, 2005 @ Jacy Lee, 2005 ABSTRACT The purpose of this study was to better understand government policies concerning access to postsecondary education in Ontario and British Columbia. The five questions guiding this study are: 1) What are the key postsecondary education access policies? 2) How does the policy environment influence postsecondary education policies? 3) What policy trends are associated with the government priorities or seat expansion, affordability and research and development? 4) What is the relationship between government's postsecondary funding policies and the economic environment? and 5) How do policies affect provincial postsecondary funding, enrolment, participation, tuition fees, and investment in research and development? The study provides a policy narrative of key postsecondary education access policies and analyses the key forces affecting these policies in the two provinces. The three key postsecondary education access policy areas include increasing capacity through seat and institutional expansion; enhancing affordability of postsecondary education to students through tuition fee regulation and student financial assistance; and expanding research and development. Policies in the two provinces have tended to be similar. Key factors that have affected policies include the historical development of postsecondary education, the socio-cultural values and expectations of the population; policy discussions among dominant stakeholders; the political ideology of the government party; and federal-provincial relations. This study also compares the policy trends and postsecondary education outcomes in both provinces for each of the above three policy areas. Major policy trends in capacity expansion include faster seat growth in the college sector than in the university sector; growing emphasis on meeting economic and labour demands, evolution of hybrid public institutions offering new applied degree programs, and emergence of private degree granting institutions. Key factors ii contributing to these policy trends include the belief that economic prosperity is linked with postsecondary education, severe limitations on public spending for postsecondary education especially during difficult economic times, and the historical binary structure of postsecondary education that contributed to shaping the emerging postsecondary landscape. There is apparently no consistent relationship between postsecondary funding trends and the economic environment in either province. As well, there are significant differences in funding trends between Ontario and BC. The study concludes with recommendations for policy makers and for future researchers. TABLE OF CONTENTS ABSTRACT ii TABLE OF CONTENTS iv LIST OF TABLES vi LIST OF FIGURES ix ACKNOWLEDGEMENTS xii CHAPTER ONE: INTRODUCTION TO THE RESEARCH STUDY 1 Background 1 Purpose and Objective 8 Research Questions 9 Scope and Definitions 10 Research Design 13 Chapter Preview 15 CHAPTER TWO: LITERATURE REVIEW 17 Value of Education 17 Postsecondary Financing 26 Cost-Sharing and Accessibility 37 CHAPTER THREE: FEDERAL CONTRIBUTIONS TO POSTSECONDARY EDUCATION 46 Historical Background 49 Research and Development 66 Financial Assistance and Tax Credits to Individuals 71 Conclusion 75 CHAPTER FOUR: ONTARIO 79 Access Policies and the Political Environment 83 Fiscal Policy Related to Access I l l Impacts on Postsecondary Education Access 130 Summary of Key Findings 153 CHAPTER FIVE: BRITISH COLUMBIA 159 Access Policies and the Political Environment 166 Fiscal Policy Related to Access 198 iv Impacts on Postsecondary Education Access 219 Summary of Key Findings 246 C H A P T E R SIX: C O M P A R I S O N OF O N T A R I O A N D BRITISH C O L U M B I A 253 Key Access Policies and the Policy Environment 253 Funding Policies and the Economic Environment 267 Impacts on Postsecondary Education and Trends 276 Concluding Remarks 298 C H A P T E R S E V E N : S U M M A R Y , L I M I T A T I O N S A N D R E C O M M E N D A T I O N S . . 304 Summary of Key Findings 305 Limitations 313 Recommendations 315 Concluding Remarks 319 R E F E R E N C E S 321 LIST OF T A B L E S Table 3.1: Federal Funding for Postsecondary Education Sector Research (NSERC and SSHRC) in Constant Dollars (1971 -2004) 68 Table 3.2: Federal Contributions to Sponsored Research (1971 /72 to 2001 /02) 69 Table 3.3: Need-Based Assistance to Students by Funding Source in Constant Dollars (1990/91 - 2002/02) 73 Table 3.4: Net Loans, Remissions and Grants in Constant Dollars (1990/91 -2002/03) 73 Table 3.5: Federal Government Tax Expenditures Related to Postsecondary Education (1994 - 2004) 75 Table 4.1: Some Key Economic Indicators (1985/86 - 1990/91) 114 Table 4.2: Expenditure - Budget Plan 1985/86 to 1990/91 115 Table 4.3: Some Key Economic Indicators (1991/92 - 1995/96) 119 Table 4.4: Expenditure - Budget Plan 1991/92 to 1995/96 121 Table 4.5: Some Key Economic Indicators (1996/97 - 2003/04) 125 Table 4.6: Expenditure - Budget Plan 1996/97 - 2003/04 128 Table 4.7: College and University FTE Enrolment Increases 132 Table 4.8: First Year University Applicants and Registrants (1989/90 - 2003/04) 133 Table 4.9: First Year College Applicants and Registrants (1998/99 - 2002/03) 134 Table 4.10: Average Tuition and Average Income in Ontario in Current Dollars (1988/89-2003/04) 139 Table 4.11: Per Cent Tuition Fees to Operating and Total Expenditures of Colleges and Universities (1985/86 - 2001/02) 141 Table 4.12: Ontario Student Assistance, Scholarships and Bursaries (1987/88-2002/03) 144 Table 4.13: Natural Science and Engineering R & D Expenditures Spent on the Higher Education Sector by Funders (1985 - 2002) 146 vi Table 4.14: Provincial and Federal Grants as Percentage of Operating Expenditures of Colleges and Universities (1985/86 - 2001/02) 150 Table 4.15: Other Sources as Per Cent of Operating Expenditures (1985/86-2001/02) 151 Table 5.1: Some Key Economic Indicators (1986/87 - 1991/92) 200 Table 5.2: Expenditure - Budget Plan 1986/87 to 1991/92 202 Table 5.3: Some Key Economic Indicators (1992/93 - 2001/02) 207 Table 5.4: Expenditure - Budget Plan 1992/93 - 1996/97 (1 s t NDP Mandate) 208 Table 5.5: Expenditure - Budget Plan 1997/98 - 2001/02 (2 n d NDP Mandate) 209 Table 5.6: Some Key Economic Indicators (2002/03 - 2004/05) 215 Table 5.7: Expenditure - Budget Plan 2002/03 - 2007/08 216 Table 5.8: College and University FTE Enrolment Increases 222 Table 5.9: Funded versus Actual FTEs for Universities and Colleges (1988/89-2001/02) 224 Table 5.10: BC High School Applicants (Fall 1995 - Fall 2004) 225 Table 5.11: Admission Targets and Cut-off Points for New Entry Students (Fall 2004)..226 Table 5.12: Average Tuition Fees for Universities, Colleges and Institutes (1992/93 -1996/97) 230 Table 5.13: Per Cent Tuition Fees to Operating and Total Expenditures of Colleges and Universities (1985/86 - 2001/02) 232 Table 5.14: Average Total Aid and Average Annual Loan Awards 234 Table 5.15: Natural Science and Engineering R & D Expenditures Spent on the Higher Education Sector by Funders (1985 - 2002) 237 Table 5.16: Provincial and Federal Grants as Percentage of Operating Expenditures of Colleges and Universities (1985/86 - 2001/02) 242 Table 5.17: Other Sources as Per Cent of Operating Expenditures (1985/86-2001/02) 243 Table 6.1: FTE Growth in BC and Ontario (1988/89 - 2002/03) 254 Table 6.2: Per Cent Change in College and University Provincial Grants and Economic Growth in Ontario (1987/88 - 2002/03) 271 Table 6.3: Federal Transfer Payments for Postsecondary Education (1993/94 - 2001/02) 273 Table 6.4: Per Cent Change in College and University Provincial Grants and Economic Growth in B C (1987/88 - 2002/03) 274 Table 6.5: Per Cent Spending of Postsecondary, K - 12, Health and other Social Services Programs to Total Provincial Spending at the CRF level in BC and Ontario (1986/87 - 2003/04) 275 Table 6.6: Year-to-Year Per Cent Change in University and College FTE Enrolment (1989/90-2002/03) 286 Table 6.7: High School Applicants and Registrants in BC and Ontario (1994/95 - 2003/04) 288 Table 6.8: Per Cent Tuition to Average Income in BC and Ontario (1989/90-2002/03) 296 Table 6.9: Ratio of Ontario to BC Gross Domestic Expenditures on Research (1985/86-2002/03) 297 viii L I S T O F F I G U R E S Figure 3.1: Federal Cash Transfers and PSE Total Expenditures in Current Dollars (1967/68 - 1976/77) 58 Figure 3.2: Federal Cash Transfers and PSE Total Expenditures in Current Dollars (1977/78 = 1995/96) 64 Figure 4.1: Operating Grants from the Province in Constant Dollars (1987/88- 1990/91) 117 Figure 4.2: Operating Grants from Province per Full-Time Equivalent Student (1986/87- 1990/91) 118 Figure 4.3: Operating Grants from the Province in Constant Dollars (1991/92- 1995/96) 123 Figure 4.4: Operating Grants from Province per Full-Time Equivalent Student (1991/92- 1995/96) 124 Figure 4.5: Operating Grants from the Province in Constant Dollars (1996/97-2002/03) 129 Figure 4.6: Operating Grants from Province per Full-Time Equivalent Student (1996/97-2002/03) 130 Figure 4.7: Full-Time Equivalent University and College Enrolments (1985/86-2002/03) 131 Figure 4.8: Average Mark of Registered Secondary School Applicants (1985/86-2003/04) 135 Figure 4.9: Participation Rate in Ontario (1985/86 - 2002/03) 137 Figure 4.10: Operating Expenditures of Colleges and Universities in Constant Dollars (1985/86 - 2001/02) 147 Figure 4.11: University and College Operating Expenditures per FTE in Constant Dollars (1985/86 - 2001/02) 148 Figure 4.12: Postsecondary Operating Expenditures in Constant Dollars (1985/86-2001/02) 149 Figure 5.1: Provincial Grants in Constant Dollars (1995/96 - 2001/02) 188 ix Figure 5.2: Operating Grants from the Province in Constant Dollars (1986/87- 1991/92) 204 Figure 5.3: Operating Grants from the Province per Full-Time Equivalent Student (1986/87- 1991/92) 205 Figure 5.4: Operating Grants from the Province in Constant Dollars (1992/93-2001/02) 210 Figure 5.5: Provincial Grants per Funded FTEs (1992/93-2001 /02) 212 Figure 5.6: Operating Grants from the Province in Constant Dollars (2002/03-2004/05) 218 Figure 5.7: Operating Grants from the Province per Full-Time Equivalent Student (2002/03-2004/05) 219 Figure 5.8: Full-Time Equivalent University and College Enrolments (1988/89-2003/04) 220 Figure 5.9: Funded and Actual FTEs (1989/90 - 2003/04) 223 Figure 5.10: Participation Rate in British Columbia (1988/89 - 2004/05) 227 Figure 5.11: Average Undergraduate Tuition Fees by Province (2004/05) 231 Figure 5.12: Operating Expenditures of Colleges and Universities in Constant Dollars (1985/86 - 2001/02) 239 Figure 5.13: University and College Operating Expenditures per FTE in Constant Dollars (1988/89- 2001/02) 240 Figure 5.14: Postsecondary Operating Expenditures in Constant Dollars (1988/89-2001/02) 241 Figure 6.1: Provincial Operating Grants of Colleges and Universities (1990/91 -2002/03) 269 Figure 6.2: Provincial Operating Grant per FTE by College and University (1990/91 -2002/03) 270 Figure 6.3: Per Cent Provincial Grant to Operating Expenditures of Colleges and Universities (1985/86 - 2001/02) 277 Figure 6.4: Per Cent Tuition Fee Revenue to Operating Expenditures of Colleges and Universities (1985/86 - 2001/02) 278 x Figure 6.5: Per Cent Other Source Revenues to Operating Expenditures of Colleges and Universities (1985/86 - 2001/02) 279 Figure 6.6: Per Cent Federal Grant to Operating Expenditures of Colleges and Universities (1985/86 - 2001/02) 280 Figure 6.7: Operating Expenditures of Postsecondary Education in BC and Ontario (1988/89 - 2001/02) 281 Figure 6.8: Postsecondary Operating Expenditures per FTE in BC and Ontario (1988/89 - 2001/02) 283 Figure 6.9: University and College FTE Enrolments (1988/89 - 2002/03) 285 Figure 6.10: Number of High School Applicants and Registrants (1994/95-2003/04) 289 Figure 6.11: Number of Graduates and Full-time Enrolment at Universities in BC and Ontario (1992/93 - 2001/02) 290 Figure 6.12: Participation Rates - Total Population (1988/89 - 2002/03) 292 Figure 6.13: Participation Rate - Population 15-24 years (1989/90 - 2003/04) 294 Figure 6.14: University Tuition Rates in BC and Ontario in Constant Dollars (1989/90-2003/04) 295 A C K N O W L E D G E M E N T S I thank my committee members, Dr. Kjell Rubenson (Chair), Dr. Donald Fisher, and Dr. Tom Sork for their guidance, insightful feedback and helpful suggestions as I muddled through this study. I am grateful to Dr. Fisher and Dr. Rubenson for the opportunity to work on the AIHEP project which helped to clarify my thinking concerning this study. I especially thank Dr. Rubenson for his pedagogy, clarity of mind, encouragement and support. My appreciation is extended to my family, especially my father and mother, who always encouraged me to be a learner, the 1997 EdD cohort, and my friends, especially Randy and Chris. CHAPTER ONE: INTRODUCTION TO THE RESEARCH STUDY The aim of this study is to develop an understanding of government policies for postsecondary education access in Ontario and British Columbia between 1985 and 2004. This study will provide a policy narrative of key postsecondary education access policies through a documentary review and will explore the key forces driving these policies in the two provinces. It is assumed that the choice of policy direction in both provinces tends to reflect the perspective of the government in power as it seeks to fulfill its goal of governing well. However, what a government deems good public policy is value laden (Cripps, 2002). This study seeks to unravel the story about how decisions are made in terms of the key factors that influenced them. Emphasis is placed on the role of the federal government as well as fiscal, economic, political and historical-social factors. This study also compares the emerging policy trends in both provinces and analyzes the similarities and differences between them in terms of factors within the policy environment that contribute to these trends. Finally, this study compares the trends and outcomes in both provinces with regard to postsecondary education. Background Access to postsecondary education has been a consistent priority for governments in Canada. Today there are approximately 75 universities and 300 colleges and institutes that are publicly funded in Canada. Together they provide over 600,000 full-time university seats and over 400,000 college seats annually. They also provide over 600,000 part-time university spaces and over 85,000 part-time college spaces. The history of Canadian postsecondary education is marked by growth—sometimes slow and sometimes rapid. The first period of significant growth in postsecondary education occurred after the Second World War with the return of war veterans. Between 1940/41 and 1947/48 enrolment grew from 65,000 full-time students to 84,000. By 1 1954/55 there were 68,000 students enrolled in 159 institutions offering university level programs, including 92 classical colleges in Quebec. Most of these institutions were small with fewer than 100 students. The most significant growth occurred between 1956/57 and 1970/71 owing to the doctrine of economic nationalism, which posits that a university education provides an almost certain path to national economic growth and individual prosperity.1 Full-time enrolment rose from approximately 106,000 to 476,000 students—an increase of 349 per cent. When the world * 2 was hit by recession in the early 1970s, the doctrine was seriously questioned. After this recession, from the mid-1970s to the mid-1980s, postsecondary education began to move toward training as it became more relevant to the requirements of modern trades and professions (Brown et al., 1997). Enrolment in colleges during this period exceeded that of universities by a wider margin than during the previous period. University-industry linkages also emerged for the first time. Between 1971/72 and 1985/86, postsecondary full-time enrolment increased by 59 per cent. By the mid-1980s there was once again a new consensus that identified postsecondary education as the key to future economic prosperity. The consensus was on both the left and the right of the political spectrum (Drucker, 1993). This idea characterized "post-Fordism" (or left modernizers, a model of national economic development in contrast to neo-Fordism or New Right) as associated with a move away from mass production to specialized "niche" products, which resulted in massive corporate or workplace restructuring. Postsecondary enrolment 1 The Royal Commission on Canada's Economic Prospects (Canada, 1956, p. 112) endorsed the value of universities as follows: "What is being suggested in essence is that a deliberate and sustained effort be made to raise the quality and standards of Canadian universities to among the highest prevailing anywhere in the world. It is perhaps not going too far to suggest that no other single course of action would be so likely to have such an important fundamental effect upon the long-term economic prospect for Canada". 2 The breakup of Bretton Woods in 1971 - 1973 was followed by international currency instability, OPEC price increases (and the resulting emergence of petro and Eurodollar markets), satiated markets for Fordist production in North America, falling productivity in Fordist industries, rising wages, and increased international competition. 2 continued to grow in Canada throughout the mid-1980s and 1990s. During this period, the major increase in enrolments was in the college or "non-university" sector. One factor behind this increase was the decision by governments to shift funds to institutions that had lower per student costs (Green & Hayward, 1997, p. 8). The non-university or college sector refers to technical, vocational or community colleges that offer a variety of certificate, diploma and associate degree programs, and, more recently in some provinces, applied degree programs. Under-funding of postsecondary education became a "pre-occupation" (Commission of Inquiry on Canadian University Education, 1991, p. 19) on Canadian campuses in the 1990s as governments decided to reduce funding to postsecondary education when faced with growing deficits and a saturation of public tolerance levels for high taxation, as well as increasing competition from health care, the environment and other areas for a greater share of public spending (West, 1993). One consequence of the squeeze on postsecondary education funding was the action by institutions to diversify their funding sources. These actions have included entrepreneurial ventures, private sector partnerships, making students pay a greater share of the costs through higher tuition fees, and soliciting gifts from individuals, foundations and corporations (Green & Hayward, 1997). A World Bank report in 1994 suggested that 30 per cent of institutional revenues should come from non-governmental sources. Jamieson and Pedersen (1997) indicate that the primary dependence on government funding rendered the institutions particularly vulnerable when governments focused on accountability and effectiveness. By building their mechanisms for funding support around measurable short-term objectives, universities in Canada were constrained by governments-of-the-day. Many of the difficulties are the result of the fact that in Canada "the federal role in 3 higher education is somewhat veiled" (Jamieson & Pedersen, 1997, p. 155). The federal role is summarized as follows: . . . the provinces have primary jurisdiction over postsecondary education, with little direct involvement at the national level. Direct participation by the federal government in the funding of universities is largely limited to project-based awards through national granting councils, which sponsor research in the arts and humanities, social sciences, science and engineering, and medicine. The government of Canada also underwrites federal student loan programs and, through various agencies, oversees international agreements and academic exchanges. On the whole, however, the federal government presence is that of a "silent partner" in Canadian higher education, with the bulk of its support coming through transfer payments to the provinces for funding of colleges and universities as well as programs in extended health care and other medical services. The provincial governments receiving these funds hold discretionary power as to their apportionment among the designated recipients, and it is quite clear where postsecondary education will rank in competition for public attention with the immediately perceptible needs in health and medical services. (Jamieson & Pedersen, 1997, pp. 155-156) Nevertheless, the federal government's role in steering the direction in which postsecondary education evolves should not be underestimated. The significant decrease in Canada Health and Social Transfer payments announced in the 1995 federal budget had significant implications for provinces. The dramatic reduction in funding to provinces at a time when they were coping with large provincial deficits meant that funding reductions had to be passed on to postsecondary institutions. The federal government is also continuously searching for new ways of controlling expenditures on higher education. In recent years, the federal government has increased its support for research and development including new funding to cover the overhead costs of research through payment of indirect costs, to attract knowledge workers from other countries through the Canada Research Chairs and to support research infrastructure through the Canada Fund for Innovation. The federal government also increased funding to thenational granting councils for research and infrastructure (Jones, in press). Another challenge for governments throughout the 1990s and into the 2000s has been regulating tuition fee levels. Some provinces set the maximum tuition fees allowable and allow 4 institutions flexibility in setting fees for individual programs so long as they do not exceed the maximum fee levels. Through this policy, governments ensure accessibility and affordability. Institutions have continued to lobby for fee differentiation by program and in recent years have been permitted free reign according to market conditions including supply and demand and earning potential of graduates, to set tuition fees for selected professional programs such as law, medicine and dentistry. A 2004 National Physician Survey shows fees for medicine increased from an annual provincial average of $4,977 in 1997/98 to $14,544 in 2003/04. Some evidence suggests that fee increases are driving away low-income candidates and could intensify the existing doctor shortage (Schmidt, 2005). In recent years, substantive tuition fee increases have occurred in provinces under New Right government policies. Examples of these provinces include Nova Scotia, New Brunswick and Alberta. Jones (in press) suggests that these large increases raise the question of how much longer postsecondary education can continue to be viewed as a public entity. To be accessible, postsecondary education should be affordable. Given the recent hikes in tuition fees at the undergraduate, graduate and professional levels, the affordability of postsecondary education in Canada is questionable. Generally speaking, student loan thresholds have not been adjusted to address rising tuition fees and living expenses. Rather than increasing federal transfer payments for postsecondary education to provinces, the federal government elected to respond to the fee increases by creating the Canada Millennium Scholarship Foundation to provide students with modest awards that supplement student loans. The Foundation provides both need-based and merit-based awards that are non-repayable. Perhaps at the root of much of the problem is the strained relationship between the federal and provincial governments. Canada's decentralized federation and division of powers 5 does not encourage systematic and coordinated planning and spending arrangements between the two levels of government. The ultimate losers are the students, as they become the ultimate payers of any unfunded costs. According to Jones (in press, p. 11): there were no wholesale moves to restructure or substantively reform higher education in any Canadian province [over the last two decades and] . . . in many respects the approach of all governments was to simply stabilize or reduce the level of per-capita student grants in order to create greater efficiency, encourage increased levels of accessibility, and provide new targeted funds to encourage institutions to address particular priorities. The mass-ification of higher education in Canada was largely accomplished through the establishment of a network of relatively homogenous, secular universities and new non-university, government-regulated institutions that varied by province in terms of their form and mandate (Skolnik, 1986). Many colleges became actively involved in specialized training programs sponsored either by the Government of Canada or by private industry (Jones, in press). In more recent years, this homogeneity has broken down. While government involvement in the past has been justified on the grounds of social economy, today the rationale for supporting postsecondary education has shifted to economic growth. In an effort to ensure that postsecondary education creates economic growth, that programs are relevant to the needs of the labour market, and that research can be commercialized, provincial governments have created or contributed to the emergence of new special purpose universities and other educational institutions that challenge the traditional binary (i.e., university versus non-Education has long been viewed by social scientists as the solution to many social challenges including productivity, inequality, economic growth, health status, overpopulation, political participation, criminal behaviour and welfare dependence (Haveman & Wolfe, 1984). In essence, education was seen as a means to promote economic growth and social justice. As Johnstone (1993, p. 3) puts it: "Higher education is considered throughout the world to be the key to both individual and societal aspirations. For individuals, education beyond the secondary level is assumed to be the way to social esteem, better paying jobs, expanded life options, intellectual stimulation— and frequently a good time in the pursuit of any or all of the above. For societies, higher education is assumed to be the key to technology, productivity, and the other ingredients of international competitiveness and economic growth. Higher education also shapes and preserves the values that define a culture. And it is believed to be a major engine of social justice, equal opportunity, and democracy". 6 university) postsecondary education system and also provided research matching funding which may increasingly be targeted. Beginning in the mid-1990s, there were mixed sentiments regarding the value of vocational/college and general university education. Concerning vocationalism, the Financial Post Daily (Francis, 1998) reports that a poll commissioned by the Ontario government found Ontario residents overwhelmingly valued skills and apprenticeships at a college or vocational school more than they valued a university degree. On the other hand, an emphasis on broader skills was being advocated by the Conference Board of Canada (1996) including creativity, problem solving, the ability to innovate, the ability to communicate, a knowledge of diverse cultures and languages, the ability to work in shifting teams, and leadership. These skills were apparently shifting the demand for labour toward university graduates, including Arts students. What emerged from this confusion was an acceptance that a mix of both vocational and academic skills was required in the workplace. In Ontario and British Columbia, new hybrid institutions have emerged that offer applied degree programs. Pressure to meet labour market requirements has led to a convergence of traditional university and college programs. The convergence is first evidenced by the offering of programs in the same discipline at both colleges and universities at different competency levels. Secondly, no longer do students have to attend a university to be awarded a degree. It was not uncommon for students, after completing a university degree and failing to find employment, to attend a college to learn a skill that matched a labour demand. The election of governments with New Right ideologies in a number of provinces in recent years has contributed to further changes in the postsecondary education arena. The removal of public universities' monopoly over degree-granting by simplifying regulatory 7 processes for out-of-province and private institutions, combined with industry linkages, have facilitated the operation of market principles not only outside but within the walls of public postsecondary institutions. Also, pressure to innovate and commercialize research has resulted in market driven academic entrepreneurialism. There have been a number of major works on understanding education policy-making (Kogan, 1975, 1978; Cameron, 1991; Bowe, Ball & Gold, 1992; Cripps, 2002) that will not be revisited here. Instead of being concerned with whose values are being validated in policy, this investigation is concerned with the policy context or policy environment, in particular the key factors that contributed to the various access policies and policy trends between 1985 and 2004. Naturally, to do this for the whole of Canada would be a mammoth task for this thesis. Accordingly, this study covers two provinces only. Purpose and Objective The purpose of this thesis is to better understand the relationship between policy environments and key access policies, including funding policies and policy trends, as well as the effect of these policies on postsecondary education in Ontario and British Columbia. Postsecondary education in these two provinces has undergone changes including: system designs, in particular the balance between traditional and new hybrid institutions and between taxpayer funded and non-taxpayer funded postsecondary institutions; programming, in particular a shift to meet labour market requirements or to an applied, natural science, technology and engineering focus; the perception of postsecondary education as a private good and a push toward cost-sharing, particularly evidenced by skyrocketing tuition fees and greater emphasis on market mechanisms; an emphasis on market driven research and development at postsecondary institutions with research capacity; and declining provincial funding patterns as evidenced by the 8 declining percentage of provincial grants to operating expenditures of postsecondary institutions and the emergence of private degree-granting institutions. The main objective of this study is to understand what factors are driving the changes and how they influence access policies and observed policy trends. Brief narratives of key access policies of Ontario and British Columbia and an examination of the effects of these policies on postsecondary performance in terms of outcomes and trends are included in this study. However, there is no assertion of a causal relationship between these policies and the outcomes. The study also includes a comparison of the postsecondary education outcomes in Ontario and British Columbia. Research Questions The research questions guiding this study are: 1. What are the key postsecondary education access policies? 2. How does the policy environment influence postsecondary education access policies? 3. What policy trends are associated with the government priorities of seat expansion, affordability, and research and development? 4. What is the relationship between government's postsecondary funding policies and the economic environment? 5. How do the key policies affect postsecondary education including provincial postsecondary funding, enrolment, participation, tuition fee and investment in research and development? During the investigation, attention was also given to the following policy issues: vocationalism, system planning and managerial accountability, cost trends in postsecondary education, and alternative sources of funding for postsecondary institutions. 9 Scope and Definitions Access has been defined in a number of different ways. As summarized by Rounce (2004, pp. 1-2): The term access, narrowly defined, is used to refer to participation in any type of postsecondary education. Most of the earlier Canadian research has been focused on the narrow definition of access, examining university undergraduate degree programmes and college diploma programmes together to gain a picture of who attended postsecondary institutions and who did not. Others, such as Doherty-Delorme and Shaker (2002), have used a much broader definition of accessibility, understanding it as "...(including affordability and opportunity).. .the freedom to obtain and make use of a postsecondary education". More recent research has begun to acknowledge and explore gradation in access, including differentiating between college and university attendance, university undergraduate, professional, and graduate degrees, institutional choices, and affordability (especially Statistics Canada research reports written by Butlin, 1999; Zhao & de Broucker, 2002; Corak et al, 2003; and Finnie & Laporte, 2003, among others). There are gaps in the access literature however... Rounce (2004) goes on to list research that has a specific focus such as university (as opposed to college) attendance, the attendance of younger people as opposed to adults interested in lifelong learning, and the different backgrounds of people who choose postsecondary participation. For purposes of this study, access to postsecondary education is broadly defined to include seat availability and affordability. Assuming that students are of the view that the benefits of postsecondary education outweigh the costs, they are only actually attending i f 1) there are postsecondary seats to accommodate them; 2) they possess the marks and meet other criteria for admission; and 3) they have the means of paying for the associated costs (Finnie, 2004). Participation rates and enrolment levels demonstrate seat availability. Average marks of entrants and the number of turnaways (persons who wish to participate in postsecondary education but were not admitted) are also indicators of access. Indicators of affordability include tuition fee rates and student financial assistance. 10 Policy has been defined as the operational statements of values - "statements of prescriptive intent", "the authoritative allocation of values", "programmatic utterances" (Kogan, 1975, p. 55). For this investigation, policy is reflected in policy texts including legislation, regulation, service plans, Throne Speeches, government brochures, documents, directives, statements and correspondence. Policies include funding decisions at the central policy-making level as reflected in Budget Speeches and Budget documents. In this investigation, the concern is to explore these policies in terms of their relationship to the policy environment. Where possible, this investigation includes the identification of policy clashes and mismatches between contending policy discourses. For this study, a policy trend is a term loosely used to characterize a trend or direction in which policy areas have moved or shifted or a prevailing policy preference taken by recent governments. Government is defined broadly to include policy decision makers at the cabinet and ministry levels (no differentiation will be drawn between decisions made by cabinet, by a minister, or by a senior bureaucrat with delegated authority from the minister). Postsecondary education is defined as the sum of all publicly funded institutions providing programs beyond the secondary level. This investigation does not include an analysis of the involvement of different parties and implementation processes. How public institutions and potential postsecondary students interpret, implement, conform or contradict these policies is outside the scope of this investigation. The term "impacts on postsecondary education" is used loosely to characterize the state of postsecondary education. After identifying and discussing postsecondary education policies, it would be logical to assess the impact of these policies on postsecondary education in terms of whether accessibility has been achieved. However, a change in a postsecondary education 11 system is complicated and also difficult to attribute to a change in government policies. Accordingly, there is no assertion that the observed trends and outcomes of postsecondary education are a result of identified government policies. For the purposes of this study, postsecondary education outcomes include provincial postsecondary funding, enrolment, participation, tuition fees, and investment in research and development. The rationale for choosing British Columbia as one of the two jurisdictions is obvious, given the investigator's familiarity with postsecondary education policy and funding through work at the Ministry of Advanced Education and Ministry of Finance. More importantly, BC's policy context includes: regimes under three political parties, economic conditions that ranged from poor to good, government transparency and accountability that includes the publication of service plans with resource allocation and performance indicators by ministry, and a growing public postsecondary education system. Ontario is selected because it is the largest province with the largest configuration of postsecondary institutions and the highest number of students enrolled. Ontario's policy context, like British Columbia's, includes regimes under three different political parties during the selected timeframe. Also, information on Ontario is relatively readily available. Finally, Ontario has similarities and differences that make for interesting comparison. For example, unlike BC, Ontario has a different college system that does not offer university transfer programs. The timeframe covered by this study is the years 1985 to 2004. The mid-1980s saw the start of a new era of fiscal conservatism and is an appropriate place to begin the study. As well, the length of the period allows for trend analysis and is manageable for the purposes of this thesis. Owing to issues of data availability, the discussion is limited to 2002 in some areas. 12 Research Design The research design aims at constructing profiles of Ontario and British Columbia that highlight the relationships between policy environments, access and funding policies, and the impacts on postsecondary education (including trends and outcomes). To this end, the research employs a comparative, multiple, nested case study design (Merriam, 1998). In constructing the profiles, reliance is placed on documentary and policy analysis. The documentary database includes government and commission reports, Hansard, legislation, policy statements, periodicals, news releases, pamphlets, speeches, annual budget documents, and fiscal and economic reports. The first level of analysis involves the identification of relevant documents that explicate access policies. As Merriam (1998, p. 69) indicates, "data is nothing more than ordinary bits and pieces of information found in the environment [and] whether or not a bit of information becomes data in a research study depends solely on the interest and perspective of the investigator". The next step in the analysis is organizing the selected data chronologically in order to reconstruct the policy context and examine the relationships by each key policy. This step also makes possible the examination of policy trends and the combination of factors within the policy environment that may facilitate the policy trends. Similarly, postsecondary education outcomes are organized by the time period examined for plausible connections to a policy or by factors within the policy environment. To ensure finding relevant materials, the search began with examining available writings on similar subject areas, contacting experts working in the area for leads and using bibliographies of their works to trace other works. Other approaches included general searches 13 of websites of various government ministries/departments and agencies in the postsecondary education sector4, as well as searches in various libraries.5 Finally, the opportunity to be part of a network of scholars, including my thesis supervisor, who does similar work under the sponsorship of the Alliance for International Higher Education Policy Studies (AIHEP), made additional resources available. A main systematic difficulty occurred when trying to locate relevant historical material from the mid-1980s to the early 1990s, as most websites only hold documents dating back approximately five years at the most. Even when these materials were located, another difficulty was determining if any relationship existed between a policy and the activities of interest groups. With respect to quantitative data, one difficulty was the unavailability and the lack of continuity of data. This in turn created difficulties in the comparability of data over the selected time period. The unavailability of financial and enrolment data relate more to the most current data as opposed to historical data, which were readily available. Also, data from different sources sometimes were not comparable because of differences in methodologies and hence could not be used to fill in data gaps for certain years for the purposes of trend analysis. There has been a deliberate attempt to use the same source wherever possible. Having worked in the BC Ministry of Advanced Education between 1994/95 and 1998/99 and then in the Ministry of Finance between 1998/99 and 2005/06, the investigator has had the 4 These include: the Canadian Association of University Business Officers (CAUBO), the Association of Universities and Colleges of Canada (AUCC), the University Presidents Council (TUPC), the British Columbia Council of Admissions and Transfer (BCCAT), the Council of Ontario Universities (COU), the Association of Colleges of Applied Arts and Technology of Ontario (ACAATO) , the Council of Ministers of Education Canada (CMEC) and Statistics Canada. 5 Libraries include: University of British Columbia, University of Victoria, B C Stats Library and the Legislative Library in Victoria. The Legislative Library is a depository of all government publications and holds many historical government publications that are not available on the internet. BC Stats in Victoria also holds a large number of statistical resources and reduced the incidence of purchasing data that was not available for free from Statistics Canada. 14 opportunity to not only participate in government policy processes but also to informally hear about other peoples' perspectives and experiences and apply them to this investigation. Chapter Preview This thesis is divided into seven chapters. The second chapter contains a literature review concerning the value of education, postsecondary financing, and issues related to decreasing government funding such as marketisation, entrepreneurial managerialism, rising costs of postsecondary education, the relationship between postsecondary education and the state, and alternative funding sources. It also contains a literature review concerning cost-sharing, in particular, shifting the responsibility for the cost of postsecondary education from government to students and parents and the implications for financial aid and participation in postsecondary education. The third chapter describes federal contributions to postsecondary education in Canada. While postsecondary education is under provincial jurisdiction, the federal government has played a significant role in the development of postsecondary education in all provinces and continues to influence provincial policies indirectly in various ways. This chapter forms part of the background to the research study and sets the context for a discussion in the latter chapters of how federal policies affect provincial access policies, policy trends, and postsecondary education outcomes. Chapters 4 and 5 contain analyses of several aspects of postsecondary education policy in Ontario and British Columbia. These aspects include the relationship between access policies and the policy environment; the policy trends associated with the key access policies; the relationship between funding policies and the economic environment; and the impact access policies have on postsecondary education. Each chapter presents a chronological narrative of 15 key policies, which facilitates an examination of policy trends over the period under investigation, as well as policy impacts including enrolment and participation. The sixth chapter contains a comparison between Ontario and BC based on the analysis conducted in Chapters 4 and 5. It briefly summarizes the key access policies and policy trends, and discusses key factors within the policy environment that contribute to policy decisions. It also provides a comparison of postsecondary education outcomes in Ontario and British Columbia including postsecondary funding, enrolment, participation, tuition fees, and investment in research and development. Finally, it concludes with observations about issues yet to be resolved. The final chapter summarizes key findings, briefly discusses the limitations of this investigation, and offers recommendations for government action and future research. 16 CHAPTER TWO: LITERATURE REVIEW This chapter contains a literature review on topics concerning the value of education, postsecondary financing, and topics related to decreasing government funding (such as marketization, entrepreneurial managerialism, rising costs of postsecondary education, the relationship between postsecondary education and the state, and alternative funding sources). Also included is a literature review on cost-sharing in postsecondary education, specifically shifting the burden from government to students and parents, and impacts on financial aid schemes and student participation. Value of Education The recognition of education as the key to national economic growth and social justice is premised on a number of theories—the earliest postwar theory being the doctrine of economic nationalism. Economic nationalism is premised on the belief that the social progress of workers and their families is advanced through the pursuit of national economic growth. It posits that the state has both the power and responsibility to deliver prosperity, security and opportunity, and that it can deliver economic security through full employment, educational opportunity, social welfare and occupational mobility. The doctrine's first key assumption is that having talented people, regardless of their socio-economic circumstances, allocated to the most important and technically demanding jobs will advance economic efficiency. The second is that as these talented people come from all social classes and move up the social ladder, traditional social class barriers will break down. Formal education therefore acts like a sieve to select a pool of intelligent people who will bring about technological innovation and industrial growth. The doctrine further assumes that as the majority of jobs will require more skills, eventually everyone will become middle class as 17 machines take over unskilled and semi-skilled jobs. Accordingly, education should be extended to everyone (Clark, 1962; Kerr et al., 1973). The defects in the doctrine were exposed during the global recession of the early 1970s. The expectation that all jobs will eventually become middle-class jobs did not materialize. While middle-class jobs had expanded as predicted, working class jobs did not disappear. Wages rose in the West and multinational corporations brought mass production of goods across national borders in search of the cheap labour and tax incentives that were available in developing countries. The belief that national governments could deliver prosperity, opportunity and security was called into question. Furthermore, on the social justice front, social class barriers remained in place because social background remained a significant factor in determining one's opportunities. The reproduction of privilege continued (Brown et al., 1997). The breakdown of economic nationalism, however, had no negative impact on the belief in the value of education. While the education system was being blamed for social and economic problems, consensus emerged in the late 1980s and early 1990s on both the left and right of the political spectrum that education was the key to future economic prosperity. This consensus was based on the idea that in a global economy, the competitive advantage of a nation is determined by the quality of its education and training systems, as judged by international standards (Carnevale & Porro, 1994). Given that economic growth and employment can be affected by forces beyond the control of national governments in a global economy, national governments may be powerless at preventing unemployment or declining living standards. However, governments are able to upgrade the quality of their human resources or reform their industrial relations policies to create a competitive advantage through production of new technology. This, in turn, may attract new foreign investments leading to new employment 18 (Thurow, 1993; ILO, 1995). Economic prosperity now depends on nations and enterprises being able to use their human resources to provide "value added" goods and services by finding new sources of productivity and investment. Opportunities to do this are most likely to be found in companies that offer "customized" goods and services in microelectronics, telecommunications, biotechnology, financial services, consulting, advertising, markets and the media. Brown and Lauder (1992, 1997) characterize this as the global knowledge war. They also demonstrate that while there is a consensus on both sides of the political spectrum, there are fundamental differences in the way governments are responding to the global knowledge war, and these responses have profoundly different implications. They distinguish between two typical models of national economic development: neo-Fordist (New Right) and post-Fordist (left modernizers). Given that the right and the left have different interpretations of the causes of problems within education and training, they prescribe different solutions. For example, the New Right perceives that the cause of slow economic growth is extensive and unwarranted interference by the state. A solution therefore lies in re-imposing the disciplines of the market, including the creation of a mixed economy of public and private educational institutions that will compete and provide choice. Critics of the New Right argue that the marketization of education will reproduce privilege because not all social groups enter the educational market on an equal footing (Collins, 1979; Brown, 1990, 1995). A covert system of educational selection, characterized by ethnic segregation and the polarization of social classes and resources, would be an outcome. Wasting the talents of working class citizens would result in a lower overall level of talent and skill and would therefore reduce the quality of the workforce (Brown & Lauder, 1997). 19 The New Right also argues that because individuals now have to pay substantially for their education, they will choose programs and courses that will meet labour market demands and greater efficiency in the allocation of skilled labour will be the end result. Moreover, employers should help bear some training costs and should have a role in determining the types of training offered. However, Streeck (1989, 1992) argues that under the free labour contract environment of liberal capitalist societies, skills become a collective good in the eyes of employers. For fear of losing their investment, employers are unlikely to invest heavily in training existing or potential employees. A chronic skill shortage would result unless the state intervenes to ensure that adequate training occurs. For left modernizers, the route to prosperity is through the creation of a magnet economy capable of attracting high-skill, high-wage employment within the global economy. In contrast to market capitalism, the modernizers' account of how to stimulate economic development focuses on producer capitalism in which low-cost, long-term investment is linked to the development of human capital (Brown & Lauder, 1997). Providing a floor of protective rights, entitlements and conditions for workers in the context of the global auction is both socially and economically desirable. A high-skill, high-wage economy can only be built by fostering a new high-trust partnership between government, employers and workers. The state's role then becomes a strategic trader (Krugman, 1993) to guide industrial development and provide the infrastructure for economic development (which includes a highly educated workforce, transportation, telecommunications, and research and development). In a just society then, all individuals would have access to an education that will qualify them for employment. Brown and Lauder (1997) agree with left modernizers that the education system required for a high wage, high technology economy must produce: 20 .. .an overall high level of educational achievement... [to] promote equality of opportunity in its strongest form i.e., equality of results, for not only would skilled occupations expand in a sophisticated economy, but a wider range of talents and abilities than was the case in bureaucratically organized forms of work would be required (Brown & Lauder, 1997, p. 390). However, Brown and Lauder (1997) also argue that the modernizers' assumption that social inequalities will somehow be removed by a high-wage magnet economy is flawed. State intervention is required to create social justice and economic efficiency, and specifically to ensure that genuinely equal opportunities are available to all (Brown & Lauder, 1997). Occupational projections for a number of countries throughout the 1990s suggest that a strong demand for highly-skilled professional, technical, administrative and managerial occupations was present along with a weakening demand for relatively low-skilled agricultural and manufacturing labour. The demand for such skills is a result of globalization and, not surprisingly, pouring more funds into education by governments was seen as a necessity i f economies and societies were to benefit from globalization's effects (OECD, 1996, 1997). The increased demand for educated labour has been confirmed in several studies including Gallie and White (1993) and Lidley and Wilson (1995) in the United Kingdom, and Block (1990) in the United States. Yet no generally accepted empirical study confirms that human capital accumulation results in high returns on economic growth in developed countries (Islam, 1995; Barro, 2001). A recent study demonstrates that human capital indicators based on literacy scores have a positive and significant effect on the transitory path, and in the long run, on levels of GDP per capita and on labour productivity (Coulombe et al., 2004). Nonetheless, there is a large body of literature questioning the new consensus. According to Brown et al. (1997), it is very difficult to demonstrate a causal relationship between education and economic productivity for at least two reasons. The first is that the link 21 between education and productivity is imbued with issues of power, most evident in the phenomenon of credential inflation. Credential inflation has been described as a mechanism that works alongside the screening process to cope with excess educational credentials when awarding a job (Collins, 1979). Contrary to popular belief that an employee's rate of productivity increases proportionately with his or her credential, credential inflation is used by the higher social economic groups to preserve and reproduce privilege (Brown et al., 1997). Taking this argument further, the demand for education or credentials may be a function of pressure from the middle class seeking to secure their children's future. In order to win the votes from the middle class, even right wing governments whose ideology would reject expansion of public postsecondary education have promoted expansion. Brown et al. (1997) postulates that the excess supply of credentialed workers for a limited number of jobs could eventually result in a fall-out between governments and a growing group of highly educated workers who are unable to realize their occupational ambitions. The second reason is that changes in demand for skills are as much a social as a technical issue, subject to vested interests and social conflict. The demise of the doctrine of economic nationalism was accompanied by a shift from a bureaucratic paradigm as the model of organizational efficiency to flexible paradigms, which emphasize the need for employees to have good personal and social skills, together with any required technical skills (Atkinson, 1985). The definition of skills is subject to vested interests, as evidenced by calls from employers for greater involvement in determining postsecondary curricula so that students will be equipped with skills in business awareness, communication and self-management. These demands are subjected to growing conflict between the education system and employer organizations as a result of the meeting between these two different spheres (Bowles & 22 Gintis, 1976). For example, group work emphasized by employers is foreign to the education system, which emphasizes individual ability and awards grades on an individual basis. Assuming that the middle class child already has the necessary personal and social skills required by employers, any formal teaching of personal and social skills has been represented as "compensatory" education (Brown, 1995). The definition of skills has also changed significantly in the context of gender as more women pursue postsecondary education and enter the labour market. While the changing definition of skills is an apparent advantage for women, Blackmore (1997) notes that it can also be a double-edged sword because their skills could be co-opted for corporate profit-making rather than as a means of furthering the qualities associated with caring and human development.6 Assuming that education is the key to future economic prosperity, is vocational or general education more appropriate? While a strong trend toward vocationalism has accompanied the development of secondary and higher education over the past twenty-five years (Otterwill & Wall, 2000), there is much widespread agreement that a high quality general education is more appropriate to conditions of rapid technological changes. On the other hand, Ashton and Sung (1997) argue that a necessary condition for economic prosperity in the 21 s t century is a relationship between education and work that is so tight that the education system is almost totally subordinate to economic utility. Many may dismiss this as a path on which traditional universities might choose to travel for the sake of their survival. However, much will depend on factors at play in the future. Also, private universities may partially fulfill this condition, particularly if these institutions are fully funded by private industrial corporations. 6 The two are not mutually exclusive and it is not intended to imply that caring and human development are solely women's roles. 23 Accepting that there is a relationship between education and productivity, whether education can spur economic prosperity alone is the question posed and answered by Levin and Kelley (1997), using the United States as a case study. Their conclusion is that education is potentially effective in accomplishing much of what is claimed for it. Yet, that effectiveness crucially depends on the existence of complementary inputs. In the absence of complementary inputs, education is not likely to be as potent as the promises of its advocates. Unfortunately, both policy makers and economists who focus on education are largely ignoring the complementary inputs that determine the effectiveness of education. One complementary input required for education to improve productivity is the existence of employment opportunities for more productive workers. On the other hand, Aronowitz and De Fazio (1997) argue that technological changes today will lead to deskilling and an even higher level of unemployment than witnessed in the past. They argue that knowledge rather than traditional skill is the main productive force in the economy as a result of technological complexity. While deskilling may be occurring in the areas observed by Aronowitz and De Fazio (1997), upskilling and reskilling are also occurring at the same time around the globe. Further research on changes in the structure of work would be important not only because of its potential impact on class structures in post-industrial societies (Esping-Andersen, 1994) but also for the purpose of informing public policy on education. Education has other societal benefits apart from economic benefits. Education is also seen as essential for democracy to work. The link between education and democracy is based on Dewey's theory that a democracy is primarily a mode of associated living, a conjoint communicated experience (Dewey, 1916). Hence the common comprehensive school where students from all social backgrounds, ethnicities, and abilities interact and develop tolerance and 24 mutual respect for differing points of view is essential to democracy. Lauder (1997) states that the requirements of an education within a democracy include a higher overall level of student achievement in order to participate in a democratic society and an open, non-selective system of education that promotes equality of results. On the other hand, a market system of education is characterized by low wages and low technology because choice within a market system will increase the advantage of the privileged and, as a result, will reduce the overall standard of education. Thus, a market system cannot meet the educational needs of good citizenry in a democratic society. On societal benefits Baum and Payea (2005, p. 7) summarize their findings as follows: Higher levels of education also correspond to lower levels of unemployment and poverty, so in addition to contributing more tax revenues than others do, adults with higher levels of education are less likely to depend on social safety-net programs, generating decreased demand on public budgets. College graduates have lower smoking rates, more positive perceptions of personal health, and lower incarceration rates than individuals who have not graduated from college. Higher levels of education are correlated with higher levels of civic participation, including volunteer work, voting and blood donation. Education also has private benefits. Numerous studies demonstrate that an individual with higher education will have a higher future income stream equivalent to an average annual return of more than 12 per cent (Boothby, 2002; Vaillancourt, 1997; Vaillancourt & Bordeau-Primeau, 2002). Studies have also found that individuals with postsecondary education are less likely to experience periods of unemployment (Allen, 1998), and more likely to read and attend cultural events and other leisure activities (Bowen, 1977). Recognition of education's benefits at the individual level drives public demand for higher education in Canada. This demand is not falling on deaf ears at the national level, even though education is a provincial responsibility. During the 2004 federal election campaign, the platforms of the major political parties included some attention to investment in research and 25 access to higher education. On the other hand, there has been a lack of evidence on the magnitude of education's social effects. Early empirical studies focused on the correlation, rather than the causal impact, of education. Generally speaking, the measured social returns of education have not been as high as the private returns. At the provincial level, most governments consider health to be their number one priority, with education in second place. In British Columbia funding for health care now consumes more than 40 per cent of total government spending and continues to increase annually. Many worry that this situation is unsustainable and that ways must be found to manage these costs. The situation with postsecondary education is similar but on a much smaller scale. Although postsecondary education costs are increasing as a result of increasing demand like health costs, the student volume and per student cost are much lower than the patient volume and per patient cost in the health sector. Postsecondary Financing Throughout the world, postsecondary education has been increasingly troubled by rapidly rising costs that appear to be outrunning available resources. Until the 1960s, only a small fraction of the population attended postsecondary education, which was mainly supported by public funds. North American trends indicate that postsecondary education funding have not increased proportionately to enrolment and that its share of the state's budget has waned because of increased competition for state funds from priority areas such as health care and K - 12 education (McKeown-Park, 2001). Nussbaum (2003) found that the level of university funding per full-time student in California declined during periods of recession and budget deficits. As for colleges, the level of funding per student has declined over time. The State Council of Higher Education for Virginia White Paper also indicates that the vulnerability of postsecondary 26 education funding is heightened when the government's priority has been to balance the budget and/or to reduce taxes (SCHEV, 2003). Altbach and Davies (1999) state that current approaches to higher education funding emphasize the need for "users" to pay for the cost of instruction because policy makers increasingly view higher education as something that benefits the individual rather than as a public good. This new thinking, combined with constrictions on public expenditures in many countries led to severe financial problems for postsecondary education. Academic institutions have tried to deal with these financial constraints through financial aid programs, privatization and higher tuition. They observe that in many parts of the world, including most of the major industrialized nations, conditions of study have deteriorated as a consequence of financial constraints. Enrolments have risen, but resources, including faculty, have not kept up with needs. As a result, academic infrastructures, including libraries and laboratories, are starved of funds and less is spent on basic research. The view that education is capable of raising revenues from other sources is one reason that has been cited for the decline in the real value of government support for public postsecondary education (Breneman, 1997). Another reason for the decline is that the human capital concept in the public domain has resulted in a shift from the education sector being viewed as a public good toward it being seen as a mixed good with both private and public elements. Williams (1990) points to a dissonance in the way the role of postsecondary education is regarded. One view is that universities are "service institutions" that serve the wider interests of society and the economy. This view underlies heavy government subsidization that resulted in the expansion of postsecondary education in recent decades. The second view, that universities are commercial enterprises servicing the benefits of individuals, underlies the 27 rationale towards cost recovery and higher tuition fees. Nonetheless, the turn to alternative funding sources is a logical and practical attempt to diversify the financial base of institutions. According to Albrecht and Ziderman (1992), other reasons for the mismatch of resources with expansion are the policy constraints on postsecondary institutions—namely access policies. Access policies have prevented institutions from responding to financial issues in an effective manner, as they bar institutions from seeking alternative sources of income and place limitations on how institutions may allocate funds. Access policies can take several forms: "automatic" admission for students who pass their secondary school examinations to targets, enrolment targets set by government, and government specification of desired enrolment in certain fields (e.g. in nursing and engineering programs in response to manpower planning policy). Policies of financial restriction include limiting or freezing student fees on economic and/or political grounds. Restrictions on internal fund allocation include requiring approvals for change in staffing patterns and can prevent an institution from redeploying resources to achieve efficiency gains. Policy restrictions on institutions may not be the same in all countries but institutions across countries are currently making similar moves toward seeking alternative funding sources. There are probably many more factors that explain the reduction in government funding for postsecondary education. Easton's (1965) political systems framework is useful for considering the variety of forces, factors and decisions leading up to the budgetary outcome. The framework is composed of environmental factors (external factors such as demographics, socio-economic variables that shape inputs), inputs (e.g. societal needs and demands shaped by environmental factors), the political system (e.g. legislative, executive and judicial branches of government), outputs (e.g. the policy outputs resulting from the political system when responding to the inputs) and feedback (e.g. public opinion on certain policy decisions). The 28 environmental factors shape inputs that flow into the political system, which in turn produces outputs. Feedback on these outputs then loops back into the political system as a form of inputs. Lyddon, Fonte and Miller (1986) modify Easton's framework to include historical, political and economic factors as part of the environmental factors. In addition, the political system is the "state organizational filter" and comprises the state's socio-economic context (e.g. key players in the state budget process, postsecondary education governance structures, and state regulatory patterns such as statutes and administrative rules). Wildavsky (1986) observes that if politics is regarded as the conflict over whose preferences prevail in the determination of policy, the budget is the evidence of the outcomes of this struggle. Hansen's (1983) has been accurate in his prognosis two decades ago that further declines in funding are more likely than a restoration to 1960s and 1970s levels, and that postsecondary institutions will have to adapt to this new reality. Ziderman and Albrecht (1995) also argue that while it is necessary to mobilize non-government sources, there are limited possibilities for funding and the state will continue to be the major funding source. They suggest that public institutions should generate approximately 30 per cent of total recurrent expenditures from non-government sources. Reduced dependence on public financing, reduced vulnerability to budget fluctuations and heightened responses to market signals would result. In response to changes in government funding policies, some universities in Europe and the United States have become more self-reliant and been called "entrepreneurial universities" (Clark 1998, 2000, 2001). In Canada, there has been a greater reliance on tuition fee revenues. For example, in Ontario, tuition fees cover approximately 45 per cent of the actual university cost (EKOS, 2005). Ziderman and Albrecht (1995) note that apart from diversifying revenues, institutions must become more productive and efficient. In Europe, Neave and Van Vught (1991) observe 29 that the drive towards efficiency in postsecondary education started as early as the 1970s and 1980s. They suggest that: Increasing pressure upon higher education to become more efficient is evident in many countries. Establishments are expected to turn out more graduates but at less cost. The number of drop-outs and the average length of time required to graduate are supposedly to decrease while at the same time, institutions are urged to absorb more students in order to expand yet further the higher education system. (Neave & Van Vught, 1991, p. 242) Sharma (2004) indicates that the Australian higher education's interest in performance dates back to the 1960s but, as recently as 2002, there has been a focus away from input controls to monitoring outputs and outcomes. This development was fuelled by interest in quality assurance mechanisms. He notes that Australians are moving towards performance-based funding just as Americans appear to be dismantling it. In North America, performance-based funding was introduced at a system-wide level but targeted at specific areas such as access to graduate studies in the 1990s. Today, most of these systems are either defunct or being wound down, partially because of the negative economic conditions facing the region in the beginning of 2002. Ziderman and Albrecht (1995) also note that emphasis should be placed on ensuring that government's funding mechanisms provide incentives for institutions to operate efficiently and to make the most effective use of scarce resources. They warn that such a reform will require a fundamental shift in the relationship between the government and institutions of higher education. Taking the perspective that government planning creates inefficiencies, they argue that institutions should be left free to manage themselves without much government intervention. Today, the use of financial incentives has proliferated. Ehrenberg (2003 p.22) indicates that the evolution of public higher education institutions will be determined by the financial incentives that their state budget allocation process provides. Using the example of the SUNY schools in New York State, where they get financial rewards for generating external research funding and 30 for enrolling upper class and graduate students among others, he laments that the model does not encourage the development of high quality lower-level undergraduate education. He concludes that developing funding allocation models that do not provide incentives for participants to try to "game the system: is very difficult (p.22). One explanation for declining government intervention and a return to market disciplines is related to Public Choice Theory combined with New Right ideology (Brown et al., 1997). Public Choice Theory was an attempt to explain the Western economic crisis of the past twenty years and how it might be solved.7 Its premise is that the democratic process has enabled pressure groups to assert their interests over the economic interests of the state in exchange for middle class votes. The result is increased government expenditure and debt. In the 1950s and 1960s, Liberals viewed the state as the neutral funder and regulator of education that would allocate resources fairly and ensure equality of opportunity for all. By the early 1970s, it became clear that state educational policies designed to ensure equality of opportunity had failed. The neo-Marxist educators (Althusser, 1972; Bowles & Gintis, 1976) argue that the state was not neutral but a promoter of class inequalities in society and an instrument of oppression. Shortly after, a group of scholars argued that the capitalist state was constrained by the democratic process, which imposes limits to inequalities that would be tolerated in a democratic society (Dale, 1982; Carnoy and Levin, 1985). Feminist and anti-racist groups were soon arguing that the processes of socialization and selection, similar to those operating against the working class, were operating against female students and students of colour (Troyna, 1992; Arnot & Weiler, 7 Brown et al.'s (1997) criticisms of this theory include that it wrongly assumes that the economic crisis has been caused by a set of conditions peculiar to the postwar period of economic nationalism; it fails to see the exercise of power as intrinsic to the state, education, and the economy, and defines it in terms of insulation from the market place; it does not take into account that social classes do not come to the market as equals and therefore market systems are likely to exacerbate educational inequalities; it has an impoverished view of democracy and hence the role of education in promoting democracy; and its underlying assumption that individuals are self-seeking and lured by wealth and status ignores the possibility that teachers are motivated by professional ideals. 31 1993). These criticisms eventually led to the formulation of the Public Choice Theory. Its view on education is that expenditures have by-passed market sanctions to accommodate higher salaries for middle-class teachers. Accordingly, educational expenditures can be contained by deregulation or the imposition of market discipline. Public Choice Theory's support for introducing market mechanisms into the education system has appeal among New Right governments. Giddens (1998) offers another explanation for governments moving away from direct regulation as the adoption of the Third Way reforms to the welfare state, particularly by the Blair government in the United Kingdom. Gidden's idea of a risk society is one where the transition away from direct regulation and transfer occurs, .. .not because of an ideological or pre-emptive fondness for the market. Rather the transition occurs because more of our social and individual fates, and therefore, more of our capacity to manage risk, deal with open-ended and indeterminate processes which are by their very nature harder to regulate ex ante or harder to cover by direct social provision. We live in an age of personalization and individualization which is, in large part, premised on the growing importance of knowledge for most life-contexts. This growing reflexivity means that the state cannot fully control whether higher education becomes a public or a private good for either its users or its beneficiaries; but the state can take steps to ensure that opportunities to pursue knowledge and learning are as socially inclusive as possible (Wellen, 2004, p. 70). Neave and Van Vught (1991) write about changes in the processes of institutional management by the late 1980s, including the emergence of entrepreneurial managerialism or managerial professionalism, the upsurge of conditional contracting between governments and institutions to enhance market responsiveness, the growth of evaluations to ensure quality and accountability resulting in the introduction of performance measurement, and the dominance of government master-planning. Budget squeezes occur more acutely where the autonomy of institutions is allowed. A review of several countries reveals that while there appears to be a visible withdrawal of government from detailed oversight and control over internal funding and 32 management decisions, there is a significant relocation of power (i.e. stepping back to steer institutions from a distance using remote control). Still, the suspicion remains .. .that behind the facade of an autonomy widely proclaimed, the traditional strategy of detailed planning and control is perhaps as active as ever it was. Indeed, in the course of analysing the trends across many of the country case studies, we are strengthened in the conviction that the renunciation by governments of established interventionist approaches is at best only partial for at the same time they are also engaged in devising procedures and instruments no less constraining upon higher education. From this we are forced to conclude that the alternative strategy - that of self-regulation - has yet to be wholeheartedly embraced by governments. For although many claim to have increased the autonomy of higher education, yet they still cleave to central steering. (Neave & Van Vught 1991, p. 250) Dale (1997) argues that far from being weakened, state control has actually been strengthened despite shifts away from "state control" towards "privatization" and "decentralization", which are the common responses to problems facing postsecondary education systems. The argument is however premised on the assumption that the state remains the primary funder of education and is therefore very much in the driver's seat. By decentralization and privatization, he means that the state has moved from having to carry out the work of coordination itself to determining the governance of education (i.e. where the work will be done and by whom). He argues that this devolution and detachment demonstrates a strengthening, not a weakening, of state control. The state may have limited its capacity to act but not its power to enforce. Dale (1997) also suggests that the broad pattern of state withdrawal has been motivated by a wish to reduce public expenditure, limit the extent of provider capture, encourage possessive individualism, and improve the efficiency and responsiveness of the education system. He also bemoans the fact that the state's withdrawal from the state-education relationship is detrimental to ensuring the perpetuation of education's public good qualities, which the state alone can guarantee. 33 Three major measures that have been suggested as potential solutions for the financing pressures of postsecondary education are: recovering costs by charging higher fees, mobilizing donations and endowments from alumni and the private sector, and selling services to business and industry. A World Bank report (1994) suggests that the resources of public postsecondary education can be increased through student fees, since students generally come from higher socio-economic backgrounds and can expect significantly greater lifetime earnings as a result of attending postsecondary education. As part of the attempt to increase cost recovery from students, differential fees are levied based on students' academic marks, places of residence and choices of program. A strategy used in China charges higher tuition fees to students with lower entrance scores than to regular students who meet entrance requirements. Poland requires students who fail a course to retake it and pay the full cost of instruction. Hungary penalizes students who do not obtain high marks by requiring them to pay fees. Tiered tuition for residents, non-residents and international students is relatively common at North American universities (Wasser & Picken, 1998). As a result of influences from the market economy, institutions are setting fees that vary on the basis of both the value of a student's degree (reflected by income upon graduation) and the actual costs of a program to the institution (Siegfried & Round, 1997). Becker (1997), however, cautions that as long as government continues planning for the number of seats instead of freeing institutions to set their own fees and spaces, differential fees will not lead to improved instruction. There is some empirical evidence that suggests the change in tuition costs negatively The Canadian Federation of Students (2002) maintains that the World Bank is a strong advocate of private funding for postsecondary education (and are opposed to publicly funded postsecondary institutions). They also claim that in jurisdictions that have followed the lead of the World Bank in viewing education as a private good (as opposed to a public good), the quality of postsecondary education has been adversely affected. Johnstone (2003) points out that there seems to be no escape from the conclusion that higher education in the future will need vast additional resources. The only alternative to more of the burden being shifted to parents and students is a large tax increase. 34 affects the enrolment rates of individuals from families of low socio-economic status (but not higher income students) and shifts their enrolment to institutions with lower status, which tend to have lower fee structures (Kane, 1995; McPherson & Schapiro, 1997). Some scholars argue that the cost of education is a key element in determining whether a state can achieve equality of educational opportunity (McPherson & Schapiro, 1997). Miller and Pincus (1997), who are in favour of the market allocation of goods and services over a planned allocation organized by bureaucrats, also argue that i f government decides to permit a greater scope for market forces in postsecondary education, it must not refrain from policy intervention. A policy-free market place, they argue, would not be equitable or efficient. Two generally accepted instruments for policy intervention are a public subsidy for those individuals who are most likely to under-invest in postsecondary education and a loan program for bright students who would otherwise be unable to obtain a loan to finance their costs (including foregone revenue while at school). According to this argument, income-contingent loans would be an effective policy tool (Chapman, 1997), but tax credits would be of limited value to those from lower-income groups (MacPherson & Schapiro, 1997). Diversifying the financial base of postsecondary institutions by mobilizing donations and endowments is generally associated with the construction of new facilities, the endowment of professorial chairs, the provision of scholarships for needy students, and donations of scientific equipment, books and art. There is a great deal of literature concerning the diversification of revenues by increased donations from industries and the sale of services to industries. In the United Kingdom, Williams (1992) describes broad patterns of financial change that reduced government funding for universities and encouraged faculty to bring in additional revenue to fund their units. Arguably the effect of seeking alternative funding from industry and commerce 35 could result in fewer students in arts, humanities and social sciences and a higher degree of support for specific vocational training, science and engineering. In Europe, Clark (1993) characterizes entrepreneurship as a mark of innovative European universities whose strategies successfully diversify institutional revenues but create conflicts between faculty and administration over values and governance. In Australia, the work of Smyth (1995) and Marginson (1993, 1997) elaborates on marketization of institutions and faculty. That marketization of education is the answer for raising standards has not been empirically proven. Part of the difficulty of researching the effects of the market is that it is hard to generalize, as identifiable educational markets have their own peculiar socio-economic and historical contexts that uniquely impact their outcomes (Bowe, Ball and Gold, 1992). Nevertheless, Albrecht and Ziderman, (1992) believe that marketization will result in: 1) higher responsiveness to student demand by institutions, which presumably would reflect relative earnings and shortages in the labour market; 2) better utilization and effective use of resources by students who, because they have to pay, will make better educational decisions; and 3) higher efficiency and productivity on the part of institutions because they have to compete for students. However, a market-oriented, student demand driven system may not be practicable in states where labour markets are highly distorted. A student-responsive system may be achieved without moving toward a high cost recovery and high fee model. Albrecht and Ziderman, (1992) believe that the use of vouchers or subsidized loans to students would stimulate the same kind of competition among institutions. The shifts are happening also in Canada. The Commission of Inquiry on Canadian University Education (1991) observed then that a preoccupation with underfunding pervaded every campus and that the effect was extremely negative. West (1994) perceives the 36 underfunding as inevitable in times of growing deficits, high taxation and the increasing competition among the health, environment and other lobbies for a greater share of public spending. Buchbinder and Newson (1990), Buchbinder and Rajagopal (1993), and Currie and Newson (1998) all describe diminished government funding and the beginning of marketization, commercialization and corporatization. The shift toward commercialization has many concerned about losing sight of the basic role of universities in a democratic society (Turk, 2000). Currie and Newson (1998) examine the effects of globalization on the life of faculty members including the replacement of academic freedom by corporate managerialism (which focuses on accountability and performance measures and efficiency), the replacement of knowledge for knowledge's sake with the commodification of knowledge (e.g. selling higher education to overseas students as a means to increase revenue), and a user pay model for every university service and product. Slaughter and Leslie (1997) found that Canada was relatively shielded from the effects of commercialization in 1995. Tudiver (1999) postulates various reasons for this including the resistance of Canadian professors through unionized collective bargaining, fewer opportunities in Canada for serious corporate involvement, and comparatively higher state support for institutions that insulates them from market pressures. Cost-Sharing and Accessibility Traditionally, postsecondary education was free for many qualified students in many European countries. Free postsecondary education was based on several rationales including: 1) high returns to society from an educated population; 2) tuition could adversely impact social equality and social benefits because it may discourage the participation of students from low-income families; 3) the costs of student maintenance are high and already beyond the capacity of 37 many families; and 4) the immediate beneficiaries of free higher education were mainly from the middle class strata and therefore were influential in lobbying for free education (Marcucci & Johnstone, 2003). In more recent years, there has been a shift from free higher education to the beneficiaries of education sharing in its costs. Cost-sharing, as developed and elaborated by Johnstone (1986, 1993, 2003a, 2003b, 2004, 2005a), posits that the costs of higher education are borne by governments (or taxpayers), parents, students, and philanthropists. It was a response to rising costs of postsecondary education and the squeeze by governments on public funding that initially occurred in the 1980s and carried through to the 21 s t century. Many scholars, including Woodhall (2002), Vossenstyne (2002, 2004), Ziderman and Albrecht (1995), and Ziderman (2002) have provided rationales for the shift in bearing the costs of postsecondary education. Johnstone (2003b) surmises that there are three principal causes. The first cause is the sheer increase in demand for postsecondary education owing to attendance by students outside the traditional 18 - 24 age cohort and increased secondary school completion rates. As a result of increasing demand, increasing per student costs, and a decline in available public revenue resulting from the difficulty of taxation, and competition from other (sometimes more compelling) public needs, postsecondary institutions are suffering from a "severe and worsening austerity" (Johnstone, 2003b, p. 3). Taxation is difficult because privatization and globalization have "eliminated these largely visible and easy-to-collect taxes, and the alternatives - example, taxes on income, retail sales, property, and the sales of luxury goods - are visible, unpopular, expensive, relatively easy to avoid, and technically (in addition to politically) difficult to collect" (Johnstone, 2003b, p. 3). 38 The second cause is the need for equity. Whether postsecondary education is subsidized or not makes no difference to the enrolment behaviour of students from upper and middle class families. If tuition collected could partially fund means-tested grants and loan subsidies for students who would otherwise not attend postsecondary education owing to higher tuition, cost-sharing could enhance accessibility for lower-income students. The third rationale for cost-sharing argues that tuition would bring some of the virtues of the market into postsecondary education including efficiency, student and societal responsiveness, and discouragement of academic malingering by students. The charging of tuition fees is a critical component in any cost-sharing strategy and increasingly salient to offset decreasing government investment in postsecondary education. The tuition fee policy issue is: the division of the burden of higher education's instructional costs between the student and his/her family and government, or taxpayer, as well as the accompanying financial assistance policies/programs that are adopted to ensure that the implementation of tuition fees does not negatively impact access to higher education for students from lower socio-economic backgrounds. Thus, the policies by which tuition fees are established impact on higher education accessibility and the implications to equity and social justice. (Marcucci & Johnstone, 2003, p. 1) The authority to set tuition fees at public postsecondary institutions is vested in different entities in different countries. The Board of Governors generally have the mandate to set tuition fees in Canadian universities and colleges. However in some provinces, the provincial government set limits on the tuition fee levels or caps on the tuition fee increases. The increasingly accepted policy stance that a portion of tuition fee revenues is appropriately borne by the student presents the need for ways to allow much of this share to be deferred to the future, when the individual has entered the workforce and is able to repay a portion of the costs. As a result, more and more countries are turning to student loan programs 39 as a way to allow students to bear a portion of the costs of postsecondary education (Johnstone, 2005b). In more recent years, some governments have begun to use tuition-based financing systems to respond to concerns that high tuition would reduce accessibility for students from low-income families, as well as limit student choices regarding the types and lengths of programs they select and decisions concerning graduate work. One example is the use of Income-Contingent Repayment (ICR) schemes, which basically make a loan to students that covers the costs of their postsecondary education and is repayable based on each student's level of income after graduation. This scheme has been adopted in Australia, New Zealand, Sweden, South Africa, Scotland, and will be adopted in the rest of the United Kingdom in 2006. Apart from the deferred tuition policies that are closely linked to the ICR schemes, Marcucci and Johnstone (2003) differentiate between upfront tuition policies and dual track tuition policies. Upfront tuition is paid by students based on their parents' ability to pay and on the assumption that parents have a responsibility to cover some portion of their children's education. Dual track tuition policies allow institutions to offer tuition-free as well as fee-paying student spaces according to criteria set by government. Generally, students with high scores qualify for free places while students with lower scores pay fees. The percentage of fee-paying places can be limited by government policy. There has been much discussion by Canadian scholars (Wellen, 2004; West, 1997; Finnie & Schwartz, 1996; Finnie, 2001) but ICR has not been fully adopted in Canada. There is a great deal of opposition from the Canadian Federation of Students (CFS, 2002). Finnie (2001) advocates an ICR system accompanied by an expanded student loans system with increased borrowing limits. He asserts that the proposal would revitalize the Canadian postsecondary education system that is inadequately funded and benefit students from middle and lower income 40 families. Finnie's proposal was based on the social contract notion that all principal parties should share in providing increased contributions to the postsecondary education system. The Canadian Federation of Students (2002, p. 5) argue among other things, that Finnie's model "fails to recognize that many students from middle and lower income backgrounds may simply choose to avoid the risky venture of saddling themselves with excessive debt". As noted by Finnie (2001), many Canadian provinces eliminated grants for postsecondary students in the early 1990s and replaced them with expanded loan programs. Many commentators including Bob Rae (2005) in his review report have called for the reinstatement and expansion of grants to remove financial barriers to postsecondary education for low-income students. According to Finnie (2001), a grants system is not good public policy for several reasons. Firstly, government spending on a loan system will go much further because the money is paid back in most cases and can be recycled to provide a greater number of individuals with assistance, thus improving access to postsecondary education. Secondly, grants are awards to students who are not necessarily needy and who may move on to high-earning jobs and have the ability to repay at least a part of a loan. To address the second issue, Rae (2005) recommends grants only to students in need for the first four years of study at an Ontario university or college of applied arts and technology. A subsequent proposal by Finnie, Usher and Vossenstyne (2004) entails a revamped architecture of the Canadian student financial assistance system. The flaws in the current system include: tax credits represent too large a share of student aid and are poorly targeted; assistance limits are inadequate; expectations of parental contributions in many cases are inaccurate leaving children of non-paying parents penalized; loan remission is inefficient; and the system does not get assistance to those who need it the most and supports many who do not need it. Their 41 suggested fix includes: an improved methodology to calculate students' postsecondary education costs (tuition fees, equipment, supplies and living expenses); formulae to assess a student's contribution based on employment earnings and parental support; provision of the first $5,000 in assistance as a loan and the rest as a grant in order to concentrate grants to students that have higher costs or lower family income. The alternative is an income contingent repayment system. Any change to student financial assistance in Canada requires collaborative efforts between federal and provincial governments, which have not been initiated at this time. The shift from free education to cost-sharing was not without resistance, especially in countries with dominant ideologies that view postsecondary education as a social entitlement. Johnstone (2003b, 2004) indicates that the resistance to cost-sharing is supported by three different bases. From a technical basis, cost-sharing does not work in less industrialized countries that do not have means-tested grant and loan systems for students. From a strategic viewpoint, the acceptance of cost-sharing would disadvantage postsecondary education relative to competing claims on public revenue. Hence, its proponents argue that the presumption that postsecondary education has the ability to supplement its public revenue is misleading. The ideological basis draws on a range of views including a distrust of market principles, private ownership of capital, and globalization. It also draws on variations of neo-Marxism and Socialism, in particular the view that postsecondary education is an instrument for the inter-generational perpetuation of status and power. Accordingly, the ideological resistance basis objects to reliance on tuition because it further opens the door to the marketization of postsecondary education and diminishes the importance of learning for socio-cultural reasons. In short, postsecondary education should be free from all market pressures and free to all students (Johnstone, 2004). 42 While one of the arguments against free tuition is its regressiveness, in that it benefits students from middle and upper middle socio-economic classes, there is a counter argument that increasing tuition rates also has a negative impact on enrolment rates. There is a long standing pattern that individuals from high-income families are more likely to attend university than individuals from low-income families (Zhao & de Broucker, 2001; Corak, Lipps & Zhao, 2003). Interestingly, researchers including Corak, Lipps and Zhao (2003) have found that the participation gap between students from the highest and lowest income families has in fact narrowed during the 1980s and 1990s. Studies also suggest that participation rates are higher for individuals with highly educated parents and lower for individuals from families with lower parental education (Finnie, Laporte & Lascelles, 2004; de Broucker & Lavalles, 1998). Little is known empirically about the impact of cost-sharing (and higher tuition) on postsecondary education accessibility and the enrolment behaviour of students or about the effectiveness of programs such as means-tested grants and loans (Marcucci & Johnstone, 2003). Research in this area has been inconclusive so far. At a macro level, some research in Australia, Canada, China, New Zealand, the United States and the United Kingdom (Andrews, 1999; L i & Min, not dated; La Rocque, 2003; Junor & Usher, 2002; Heller, 1999) suggest that demand for postsecondary education does not change in the face of price increases. However, in some of these countries there may be a change in the proportion of students enrolled from different socio-economic groups (La Rocque, 2003; Chapman & Ryan, 2003; Corak, Lipps & Zhao, 2003, and Drolet, 2005). In Ontario where tuition fee increases were the largest, Frenette (2005) found that enrolment rose among Ontario students whose parents held a professional degree and among those whose parents had no postsecondary qualification. Interestingly, a decline in enrolment was found among students whose parents had postsecondary qualification below the graduate or 43 professional level. Kwong et al. (2002) examined the participation of Canadian medical school enrollees and found that the proportion of students from lower income families declined in Ontario between 1997 and 2000, a period of dramatic increases in tuition fees for medical programs. King et al. (2004) found an increase in the proportion of students from high income families and a decline of students from families of lower income between 2000 and 2003 in five Ontario law schools. The Irish Department of Education and Science reported in 2003 that the introduction of the free fees initiative in 1995 had little or no impact on promoting equity and broadening access for the lowest socio-economic group. More research is required in this area in order to inform postsecondary education policy-making. According to Johnstone (2003b), the question most commonly identified with accessibility to postsecondary education is the degree to which factors that screen or select students are considered politically or ideologically acceptable or unacceptable in any given socio-cultural context. Key factors that make students acceptable include innate intelligence, talent or interest. Johnstone (2003b) indicates that in virtually every country there is a substantial underlying association between low participation and factors that lead to students being deemed to be unacceptable. These factors include low income or low social status of the parents, region, race, religion, ethnicity or gender. The true causation of low participation is complex. Accordingly, an investigation of the relationship between cost-sharing and accessibility must examine: ...the effect of greater higher education costs passed on to students and families on: the decision to apply to, and matriculate in, any institution of higher education; the decision to apply to, or matriculate in, a particular form (for example, a university or a less selective non-university) or a particular program (for example, medicine, law, engineering or humanities) in higher or postsecondary education; the likelihood of degree completion; the likelihood of going on to more advanced (and more prestigious and/or remunerative) levels of higher education. (Johnstone, 2003b, p. 20) 44 Johnstone (2003b) also points out factors in the United States that blunt the impact of higher tuition fees on participation rates. These factors include the great number of open-access two-year colleges close to students' homes; the transferability to 4-year college programs located close to students' homes; the peculiar degree-by-credit accumulation or modular system that makes credits transferable to less expensive colleges; an abundance of part-time employment for students; and the general availability of needs-based grants. The sharp rise in tuition or other expenses (such as cost of living) can be assumed to limit accessibility in jurisdictions where these factors are not present. To Johnstone, however, the trend toward greater cost-sharing is inevitable. He concludes: Higher education needs to continue to claim public resources - and more of them. But it also seems incumbent on those who can influence public policy to work toward the construction both of less costly forms of higher education, and also toward the kinds of financial assistance and loan programs that can combine significant cost recovery with protection to those whose participation in higher education is most at risk from the inevitable need to share in the costs. (Johnstone, 2003b, p. 22) The aim of this study is to develop an understanding of government policies for postsecondary education access in Ontario and British Columbia. While the literature review provides a general context for the study, a review of federal government contributions to postsecondary education will provide the context for provincial postsecondary education access policies. The next section looks at the role that the federal government has played and continues to play in postsecondary education in Canada. 45 CHAPTER THREE: FEDERAL CONTRIBUTIONS TO POSTSECONDARY EDUCATION This chapter is specifically dedicated to examine federal government contributions to postsecondary education for the following reasons. First, the federal government has played such an important role in the development of postsecondary education in Canada that any discussion of postsecondary education would be incomplete without recognizing Ottawa's past and present contributions. As Jones (in press, p. 4) states: Canada may be the only nation in the developed world that has never had a national university or higher education act, or even a government minister assigned responsibility for higher education. The federal government does play an important role in higher education policy, but it is a role that has evolved through the dance of federal-provincial relations to the frequently discordant tune of Canada's constitutional debate. Secondly, while postsecondary education is outside of federal jurisdiction, the federal government's funding policies have occasionally been a key factor influencing postsecondary education funding at the provincial level. Last but not least, the federal government's contributions also affect access to postsecondary education as well as research and development. Therefore, a discussion of federal contributions provides the context for better understanding the impact these contributions have had on provincial policies. This chapter provides a historical account of the federal transfer payments for postsecondary education, and current contributions through research grants and financial assistance to individuals including student loans, grants, loan remissions, scholarships and tax credits. Given that education is under the jurisdiction of provincial governments, pleas for economic, labour, and more recently, social development have masked pleas for federal 46 contributions to postsecondary education.9 On October 19, 2004, the Association of Universities and Colleges of Canada (AUCC) (2004, p. 2) stated in a submission to the House of Commons: In recent months, Parliamentarians of every political persuasion have taken the opportunity to address the issues they view as fundamental to our society. What does it mean to be a Canadian? What is the role of the federal government in meeting the aspirations of our citizens? The Prime Minister has chosen to focus on a number of priorities during his mandate, and it is important to note that universities make vital direct and indirect contributions to these priorities, from health care and early childhood development to the state of our cities and communities, from the needs of our aboriginal communities to Canada's place in the world. Perhaps most importantly, a highly educated population and internationally competitive university research efforts are essential to wealth creation in a knowledge economy. In turn, wealth creation is vital to improving and sustaining our health care system, our social programs, and the quality of life in our cities and communities. Currently, the federal government's role in postsecondary education is focused on five major areas. First, it provides unconditional grants to provincial governments to help finance postsecondary education, as well as tax points for provinces within an integrated federal-provincial tax system. The tax points component was initiated in 1977 when the federal government reduced its personal and corporate income tax rates, thus allowing provincial and territorial governments to raise their tax rates by the same amount. As a result, revenue that would have flowed to the Government of Canada began to flow directly to provincial and territorial governments. In this case, the federal government does not have control over how Given postsecondary history and the deeper pockets of the federal government, the A U C C and its predecessor have always urged greater federal involvement in postsecondary education. In a 2003 address, the A U C C (2003, p. 3) indicated that: "Canadian universities cannot continue to meet growing demands and enhance quality without new investments in capacity and a new partnership among the provincial and federal governments. It's time for governments, working together, to explore new options, such as a federal/provincial fund that could be used to expand universities' capacity. Such a fund could invest in areas including faculty growth; physical or technological infrastructure; libraries; or enhanced student support services, depending on and determined by the needs of individual provinces. This fund would allow universities to obtain the human and physical resources they will need to meet new and growing demands - including more graduate students and faculty, new classrooms, labs and libraries, and renewed technological and physical resources to bring our campuses up to modern international standards. With revitalized and expanded capacity, universities can more actively encourage access for all, not only those who enter university directly from high school, but also part-time students, adults who want to return to higher education or non-traditional students from low-income families, Aboriginal Canadians and individuals with disabilities". 47 governments choose to spend these transferred funds. Secondly, it provides grants directly to faculty members for research projects. Research funds are disbursed by federal granting councils on a competitive basis and awarded in accordance with federal criteria, which include individual merit and national interests. Thirdly, the federal government provides capital funding on a shared-cost basis for infrastructure projects related to research and development. One example is the Canada Foundation for Innovation, the largest capital funding initiative. Fourthly, it provides grants, loans and scholarships for students to assist them in meeting the costs of postsecondary education. Finally, in more recent years, Ottawa has provided tax credits to students and parents to encourage them to save for their education or to pay off debt accumulated during postsecondary studies. The initial contributions of the federal government in the early 1900s can be described as small steps made gingerly to avoid overstepping its constitutional bounds. Its early intrusions into postsecondary education were limited to its constitutional responsibility for the national economy and manpower training. The earliest federal grants were provided directly to either provincial governments or individuals. Transfers to individuals include need-based funding (e.g., student loans, grants and tax measures related to loans) and universal funding (e.g., merit scholarships and saving grants). Because of the federal government's much deeper pockets, the university community lobbied Ottawa for funding instead of the provinces. However, any federal attempt to fund universities directly was vehemently opposed by the provinces, in particular Quebec. By the early 1980s, the federal government sought to limit the growth of these transfers after the provinces had continually thwarted its attempts to inject federal influence and accountability into postsecondary education. In the early 2000s, the federal government stepped up transfers to 48 individuals while the level of funding to institutions through provinces did not significantly change. Historical Background This section describes the federal government's early involvement in postsecondary education, including events leading to the provision of per capita grants to universities starting in 1956, and the series of transfer payment programs that followed. The first of these federal transfer programs was the Federal Provincial Fiscal Arrangement (FPFA). From 1967 to 1976, the FPFA integrated all pre-1967 federal support for postsecondary education into one payment (except university research and student loans). The second was the Established Program Financing (EPF) program, which operated from 1977 to 1994. The EPF further integrated federal contributions by combining postsecondary education and health funding into one block transfer. As part of its fiscal restraint platform, the federal government established the Canada Health and Social Transfer (CHST) during 1995 to 2004 to replace the EPF and the Canada Assistance Plan. The latter had provided funding for social assistance and services. Prior to 1967, the federal government provided specific postsecondary education funding. However, after 1967, it favoured a block funding approach as a departure from funding by identified program areas, and began cutting back its transfer payments. The cutbacks were a result of fiscal and economic restraints as well as the behaviour of provincial governments, as the provinces zealously protected their jurisdiction over postsecondary education and treated federal transfer payments as general revenue to be used as they pleased. As of 2004, the federal government appears to have gone back to a more specific funding approach, as seen by the unbundling of the CHST into the Canada Health Transfer (CHT) for health programs and the Canada Social Transfer (CST) for postsecondary education and social services. The CHT was 49 created as a result of rising public concern with health care issues. It remains to be seen if the CST will be further unbundled to separately fund postsecondary education and social assistance. Until 1910, the federal government played a minimal role in postsecondary education. Beginning with the Royal Commission on Industrial Training and Technical Education in 1910, a series of federal initiatives provided direct assistance to agriculture, technical and vocational training through capital grants and student financial support (Dennison & Gallagher, 1986). In 1913, the federal government initiated the Agricultural Aid Act and its successor, the Agricultural Instruction Act, the first ever shared cost programs that made $10 million available to the provinces to be allocated on a per capita basis for the support of instruction in agriculture. Increased federal funding for postsecondary education probably began with the Rowell-Sirois Report by the Royal Commission on Dominion Provincial Relations (Canada, 1940). It became apparent from the Commission's work that while postsecondary education was not under federal jurisdiction, provinces should receive some federal grants for their universities. These grants would be continued over a period of several years in order to preserve high academic standards. Prior to the release of this report, the federal government introduced the Youth Training Act in 1939, providing conditional grants to the provinces for student assistance such as loans and grants. By 1944, all provinces except Newfoundland (which did not join the Canadian federation until 1949) had signed onto the Dominion-Provincial Student Aid Program (Cameron, 1991). Owing to high unemployment in the 1950s, the Diefenbaker government introduced the Technical and Vocational Assistance Act, 1960. This legislation focused on training for workers to meet technological and industrial changes, and provided funding under a cost-sharing agreement with provinces. In 1967, changes were introduced in the Adult Occupational Training Act, and the Canada Manpower Training Program. This program purchased training courses 50 operated by the provinces or the private sector, and paid a living allowance to trainees. The program also transferred funds to provinces to construct public institutions offering trade education. Statistics Canada data indicates that between 1961/62 and 1971/72, the federal government provided a total of $1.5 billion dollars in transfers to the provinces for this purpose.10 The data also suggest that when federal contributions increased, provincial grants decreased and vice versa. Federal contribution as a percentage of colleges' operating expenditures was 28 per cent in 1956/57, increasing to 42 per cent in 1963/64. Provincial grants to colleges were 68 per cent in 1956/57, but by 1963/64, they had decreased to 53 per cent. Conversely, when federal contributions declined to 12 per cent in 1970/71, provincial contributions climbed back up to 70 per cent. The federal government's direct relationship with universities began soon after the Second World War. Through its 1945 Veterans Rehabilitation Act, the federal government provided funding to universities in the form of tuition fees for all qualified veterans enrolling at a university and an additional grant of $150 per veteran. The legislation was the outcome of a plan worked out with the National Conference of Canadian Universities (NCCU). 1 1 In 1951, the federal government moved to provide more direct grants to universities as a result of two key factors, the first being NCCU' s lobbying. When funding for the veterans started to decrease as a result of decreasing veteran's enrolment, the N C C U created a finance 1 0 Furthermore, between 1972/73 and 1976/77, the federal government's annual contribution exceeded 70 per cent of all expenditures on manpower training programs and vocational and occupational training in Canada. The total expenditures in 1976/77 were $955 million (Statistics Canada). The relationship between the N C C U and the federal government had been cultivated when they worked together on a policy related to exemptions from active military service. Secure in their special relationship, the universities repeatedly lobbied the federal government for funding. This lobbying probably occurred for two reasons: the federal government had unlimited taxing powers, and to fence away provincial control and maintain the autonomy of universities. This period also coincided with a period of dramatic growth in government revenues. The total revenues accrued to all government sectors in Canada rose from about $4 billion in 1950 to $11 billion in 1961, and to $23 billion in 1968 (Provincial Economic Accounts). 51 committee comprising university presidents to meet with Prime Minister St. Laurent periodically in order to make a case for federal funding for universities. The second was the recommendation of the Royal Commission on National Development in the Arts, Letters and Sciences, established in 1949 and chaired by Vincent Massey, then the Chancellor of the University of Toronto. The Massey Commission Report (Canada, 1951) advocated federal government patronage of a wide range of cultural activities and gained recognition as a document of utmost importance in the cultural history of Canada. In addition, the Massey Commission recommended that the federal government make annual contributions to support the work of the universities (Cameron, 1991). This recommendation had the support of J.W. Pickersgill, the Prime Minister's principal secretary. Accordingly, the federal government provided $7.1 million in federal grants to universities, allocated among provinces by population at 50 cents per capita.12 At the same time, the Prime Minister announced $50 million in funding for university capital construction. In 1956, with assistance from a number of studies (the most prominent being Dr. E.F. Sheffield's projection of university enrolment and associated costs) the N C C U successfully effected the doubling of federal grants to $1.00 per capita population. The N C C U held a conference at which the primary agenda was how to respond to the crisis of numbers and dollars. Dr. Sheffield (1955) projected that the full-time university enrolment would double between 1954/55 and 1964/65, increasing from 68,000 to 130,000. There was no capacity to absorb this increase unless more investment was made in postsecondary education. If the N C C U ' s plan was to send the message to government that more funding was required, it succeeded. At the conclusion of the conference, convinced that there was an impending crisis of numbers and dollars, Prime Minister St. Laurent announced the doubling of operating grants to 1 2 Funding on a per capita population basis underfunds provinces that attract many out-of-province students. Therefore funding per capita student has been argued by some provinces to be more equitable. 52 universities. These grants were initiated in 1951/52 and were subsequently increased to $1.50 per capita population in 1958/59 and to $2.00 in 1962/63.13 Quebec, however, objected to these grants and eventually withdrew from the Dominion-Provincial Student Aid Program that it signed in 1940. Universities in Quebec were compensated by increased provincial grants that made up a major portion of foregone federal revenue. At the time of the 1956 announcements, Quebec still had an issue with the constitutional legitimacy of federal grants to universities. To circumvent Quebec's objection, these grants were paid to the N C C U for subsequent distribution to its member universities. In order to play this intermediary role, N C C U created a new body called the Canadian Universities Foundation. Nonetheless, the Government of Quebec refused to go along. Quebec's grant allocations were deposited into a special bank account (Cameron, 1991).14 The federal government also provided funding assistance for the development of facilities and equipment. During the depression years, little had been spent on capital construction. As a result, universities dealt with the surge in veteran enrolment by renting space and borrowing equipment. With the anticipated enrolment explosion in the 1960's, there was great need for new facilities and equipment. At the 1956 N C C U conference, the federal government also 1 3 The federal government was clear that these grants were for maintaining high quality staff and working conditions, and not to increase existing facilities. The federal government became a principal source of additional funds sustaining university growth and expansion. This period saw an increase in faculty numbers and faculty salaries. Between 1956/57 and 1959/60, median faculty salaries increased about four times faster than inflation over the same period (Cameron, 1991). During that same period, full-time university enrolment increased from 79,000 to 102,000, an increase of 29 per cent. 14 While the Quebec government attempted to make up the foregone revenue, it could not keep up with the increases from the federal government. In the meantime, its universities became increasingly disadvantaged. Compared to the universities in other provinces, all of which were accepting federal grants, Quebec universities were paying their faculty less money, charging higher tuition and incurring large budget deficits. The tide turned with the demise of Premier Duplessis, who championed this opposition to federal funding. In 1959, the federal and the Quebec governments worked out a scheme whereby the federal government increased its tax abatement for corporate taxpayers by 1 per cent so that Quebec could raise its tax revenue by the equivalent amount. Any shortfall to Quebec would be made good by an equalization transfer. The scheme made the foundation for future federal transfers to all provinces. 53 announced Canada Council grants for capital construction. By the end of 1959/60, $84 million of the total $100 million earmarked for this purpose had been committed. Furthermore, the federal government amended the National Housing Act in 1960 to enable the Central Mortgage and Housing Corporation (now Canada Mortgage and Housing Corporation) to make low interest loans to universities for the construction of student residences. Through this initiative, not only was the federal government seen to be responding to the student housing problem, but also to an unemployment problem by stimulating the construction industry. By the end of 1964, universities benefiting from subsidized interest rates developed housing for more than 22,000 students, or 12 per cent of the full-time student population (Cameron, 1991). The fastest period of postsecondary education growth occurred between 1955/56 and 1970/71. This period coincided with rapidly growing provincial grants, ranging from 15 per cent to 50 per cent per year of annual increase, because of public demand for access to postsecondary education and demographics. During this period, federal grants as a percentage of university operating expenditures decreased from 18 per cent in 1955/56 to 12 per cent in 1970/71. Provincial grants to universities on the other hand, increased from 48 per cent to 67 per cent of operating expenditures over that same period. Toward the end of this period, the federal government backed out of its direct involvement with universities. Regardless of various commissions15 continuing to supply a cogent rationale for stepping up federal contributions to postsecondary education, the federal One such report was the Hall Report by the Royal Commission on Health Services (Canada, 1964). The Hall report recommended massive expansion of training for health care professionals, including physicians, and called for national financial assistance to provinces for carrying out the recommendation. Another was the Economic Council's Second Annual Review (1965) that argued in favour of federal government funding for postsecondary education because of the economic benefits of education. A third was the Bladen Report (1965) by a commission on university finance appointed by N C C U supported by a grant from the Ford Foundation and an equal contribution by Canadian businessmen. It recommended a significant increase in federal support of universities (Cameron, 1991). 54 government introduced the Federal-Provincial Fiscal Arrangements Act in 1967, probably in reaction to mounting provincial opposition.16 Federal Provincial Fiscal Arrangements (FPFA) The 1967 Federal Provincial Fiscal Arrangements (FPFA) introduced a new era for federal funding.17 The act integrated all existing federal support, except for university research and student loans, with a new revenue sharing and equalization arrangement to fund manpower training for adults already in the labour force. It eliminated federal per capita grants to universities with contracting out provisions with Quebec, as well as other conditional and capital facilities grants. The arrangement involved a generous transfer of taxing capacity to the provinces to cover the full cost of postsecondary education. Because of the unequal taxing capacities between the two levels of government, Ottawa would make further cash transfers to provinces when necessary. These additional funds would bring the sum of each provincial transfer up to 50 per cent of the total operating expenditures of all postsecondary institutions in that province. The FPFA also provided a floor of $15 per capita that escalated annually relative to the total national expenditure of postsecondary institutions. The provinces were elated—not only did they regain their constitutional jurisdiction over postsecondary education but they were also assured of substantial resources for their postsecondary institutions. 1 6 More galvanized provincial protest was seen with the Health Resources Fund created pursuant to the Hall Commission Report. While the design of the grants achieved the desired goal of expanded training for health professionals, it thwarted provincial plans and skewed priorities toward more expensive medical programs. Another reason for provincial protests was that after the projects were completed and federal funding was terminated, the provinces would be left to pay the continuing costs of maintenance and replacement of expensive facilities (Cameron, 1991). 1 7 The 1967 legislation defines postsecondary education as every course of study that requires at least junior matriculation for admission, lasts at least 24 weeks, and is certified as a postsecondary course. Between 1967/68 and 1976/77, other federal cash transfer payments included: Old Age and Blind Pensions, Disabled Persons Allowance, taxation agreements, the Canada Assistance Plan, the Trans-Canada Highway, health grants, contributions under the Hospital Insurance and Diagnostic Services Act, the Health Resources Fund, Medicare, the Official Languages Act and the Crop Insurance Act. 55 The FPFA epitomized Quebec's victory in its struggle with the federal government for constitutional jurisdiction over postsecondary education. It also embodied freedom for all provinces to guide the development of postsecondary education within their boundaries without interference from the federal government. Further, the act provided provincial governments with the opportunity to control university policy and establish integrated postsecondary education systems. The universities, however, were not elated, as there was no question that they were now provincially funded public institutions having to conform to provincial policies and were also parts of a coordinated provincial system. In the area of research, the federal government continued to provide funding through grants and contracts directly to individual scholars, not to institutions. The interest in research was part of the "Sputnik effect", whereby North American and European countries poured funds into research and development because they felt that they were lagging behind the Soviet Union in technological development (Psacharopoulos, 1993). The fiscal arrangement put in place in 1967 was intended to expire in 1972. The goal of the arrangement was for the federal government transfer to pay for all university expenditures. As it turned out, actual university expenditures exceeded revenues from the equalized transfer of tax points. Instead of federal transfers paying the full costs, the arrangement was turning out to be a cost-sharing scheme (almost 50/50) from the point of view of provincial governments. For the federal government, the scheme was turning out to be very expensive, as university expenditures soared and the relative amount of transferred tax points diminished. Both levels of government began looking for alternatives to the existing arrangement. The provinces, under the auspices of the Council of Ministers of Education, commissioned the Study of Postsecondary Finance in 1970. The study was headed by Peitchinis, and aimed to find 56 a common provincial position for the purpose of negotiating a revised scheme with the federal government. In July 1971, Hon. E.J. Benson, then the federal Minister of Finance, announced that the 1967 to 1972 fiscal arrangement would be extended for two more years to 1974, with federal transfers limited to a maximum annual increase of 15 per cent.18 During the interim two-year period, an inter-federal-provincial task force would work on finding a more satisfactory alternative. The establishment of this task force was probably a response to Peitchinis' (1971) criticism of the two levels of government. He states: There is no evidence in the historical record of any consistency in government policy relating to universities. Both the federal government and the governments of the provinces appear to have responded to events and pressures as they arose, and at such times usually responded with hostility formulated programmes, without any apparent consideration of the implications for the institutions and for federal-provincial relations (1971, p. 415-416, quoted in Cameron, 1991, p. 209). Nonetheless, the federal-provincial task force failed to find an acceptable alternative. As a result, the 15 per cent cap was extended for another three years to 1977. This inability to agree is symptomatic of the widely divergent views of the federal government and its provincial counterparts. While the federal government wanted to adhere to the constitutional division of powers, it wanted some authority to dictate conditions for the funds it provided. The provincial governments, on the other hand, wanted the federal government to award a large amount of tax dollars proportional to the recognized importance of postsecondary education to the national agenda, but without interference on how the funding should be used. 1 8 The revised fiscal arrangement appears to have been a compromise. The 15 per cent is in line with Peitchinis' conclusion that universities would require increases in operating funds at the rate of about 17 per cent annually in the next five years (1970/71 to 1975/76), and at the rate of 14 per cent annually in the following five years (1976/77 to 1980/81). The threshold enabled the federal government to cap its expenditures. In view of the soaring costs of postsecondary education it was inevitable that Peitchinis would contemplate ways to cap or reduce the projected cost increases. It would take another ten years before the federal government used restraint measures, but provincial governments were already starting to chip away at the university operating expenditures by reducing their funding levels.. 57 According to the legislation, cash and tax transfers during that period would be approximately 50 per cent of total operating expenditures for postsecondary education. Figure 3.1 indicates the federal cash transfer, the postsecondary total expenditures and the percentage of federal cash transfer to the postsecondary total expenditures between 1967/68 and 1976/77. During this period, the cash portion of the federal transfers ranged from 6 to 20 per cent of total postsecondary education expenditures. Figure 3.1: Federal Cash Transfers and PSE Total Expenditures in Current Dollars and Percentage of Federal Cash Transfers to PSE Total Expenditures (1967/68 - 1976/77). SMillion 4,500 J f l 25% 20% 15% + 10% + 5% 0% 1967/68 1968/69 1969/70 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77 F l Transfer Payments ($M) ] PSE Exp ($M) •% Transfer Payment/PSE Exp Sources: Statistics Canada. C A N S I M Tables 478-0004 and 478-0007 and Provincial Economic Accounts Catalogue 13-213. For the duration of the FPFA legislation, the full-time student population grew by 74 per cent from 346,000 in 1967/68 to 604,000 in 1976/77. Statistics Canada data also indicates that over this period, federal grants decreased from 15 per cent of total postsecondary expenditures in 1967/68 to 10 per cent in 1976/77. Over this period, provincial grants increased from 62 per cent of total postsecondary expenditures in 1967/68 to 74 per cent in 1976/77. 58 Established Program Financing (EPF) In June 1976, the federal government introduced the new 1977 Federal Provincial Fiscal Arrangements and Established Programs Financing Act. This Act authorized the federal government to make fiscal equalization payments and establish programs financing transfers. The federal government adopted a block transfer approach because the previous FPFA was becoming very expensive. As before, the federal government would make fiscal equalization payments to any province whose revenues, after equalization, suffered a year-over-year decline because of poor economic conditions. The new Established Programs Financing (EPF), an unconditional block transfer, covered not only postsecondary education but also two other established programs: Medicare and hospital insurance. To calculate the annual block transfer entitlement of each province, the average level of federal transfers to all provinces for 1975/76, or $212.65 per capita, would be indexed to the Gross National Product's annual increase and then multiplied by the current population of each province. The provincial block would be paid half in cash and half in a transfer of tax room. For this purpose, the federal government reduced the rate of its personal income tax by 8.143 per cent, which, when added to the 4.357 per cent transferred in 1967, brought the accumulated total to 12.5 per cent. The one per cent corporate tax room transferred to Quebec in 1960, and other provinces in 1967, continued as well. The FPFA also provided protection against a decline in personal income tax revenues directly caused by the 1972 federal income tax reform, for which provinces could not adjust in the same taxation year by compensating provinces for any revenue loss as a result of the reform (Cameron, 1991). The block transfer approach makes accountability for postsecondary funding less attainable by the federal government. The federal government's decision to move to a block 59 transfer approach was based on two erroneous assumptions. The first was that provinces would not reallocate provincial spending away from these established programs. For administrative purposes, the federal government arbitrarily assigned 67.9 per cent of the cash payments for health and the remaining 32.1 per cent for postsecondary education without requiring that provinces allocate funding in that proportion.19 As it turned out, provinces reduced provincial spending by an amount corresponding to any increase in the value of federal transfers. Gunther and Van Loon (1981, p. 162) indicate that "it appears the provinces saw the new program as being more of a format for making federal contributions directly to their Consolidated Revenue Funds". The second assumption, made without provincial commitment, was that the federal government, as suggested by the OECD report, would participate along with provinces in the consideration and development of postsecondary policies of national significance via a transformed Council of Ministers of Education, Canada (CMEC) forum.20 C M E C denied any intent to reform itself. While federal ministers and officials were invited to meetings, their attendance was limited to specific items and discussions. Faced with the realization that the large EPF transfers did not serve any explicit federal purpose, the federal government started to look for ways to inject some federal influence or to otherwise reduce the transfers. Owing to a commitment that allowed the scheme to remain The federal government assumed that as the EPF transfer grew, provincial spending on postsecondary education would grow proportionately. 20 The external examiners from O E C D (1976, p. 98) recommended that C M E C be transformed "into a national forum for the working out of educational policies so that the federal government may be involved in a systematic and open manner in discussions of educational policy that transcend provincial boundaries". The OECD's (1976, p. 102) review also commented: "The further development of Canadian educational policy is therefore clearly approaching a danger zone, in which more is at risk than simply the quantity of finance available. The virtues of an essentially pragmatic educational policy will be tested in the extreme. If those responsible for educational policy are not promptly able to base the development of school and education on a firm goal-oriented footing, then they risk being pushed to the side in the general political competition for resources". 60 unchanged for at least five years and a requirement to give three years' notice of any proposed changes, the federal government did not introduce any changes until 1982. In 1982/83 Canada was in economic depression and, as part of its restraint plan, announced its decision to limit the growth of transfer payments by making certain changes.21 These included making equal contributions to all provinces beginning April 1, 1982 and discontinuing the 1972 revenue guarantee program. The federal government also announced that new federal-provincial arrangements for the financing of postsecondary education and human resources development would be devised in consultation with the provinces for incorporation in new legislation by March 31, 1983. The reasons for discontinuing the 1972 revenue guarantee included: the original purpose of the program had disappeared; provinces treated this compensation as part of their general revenue and not as transfers to be used specifically for health care or postsecondary education; and economic circumstances that called for fiscal restraint (Canada, 1981a). Several reports provided the arguments to make the changes the federal government had wanted to make for some time. The first report, by the Parliamentary Task Force on Federal-Provincial Fiscal Arrangements chaired by Hon. Herb Breau, was released in 1981. It provided the argument for making EPF payments equal on a per capita basis for all provinces. The explicit reason for this was to eliminate the existing advantage held by the wealthiest provinces. The report also supported the need for "some form of indirect accountability for intergovernmental transfers" (Canada, 1981b, p. 5), given that federal ministers must be accountable to Parliament for the use of transferred funds. However, in recognition of education as falling under provincial jurisdiction, the report rejected any federal legislation for national 2 1 The unemployment rate rose in that year to 11 per cent from 7.3 per cent in the previous year. It would hover around the 11 per cent mark for the next three years. 61 postsecondary education standards. The report also recommended that the two components of EPF be separated and earmarked in order to prohibit their use for other purposes. This earmarking would also enable the Secretary of State to report annually to Parliament on the effectiveness of transfer funds in meeting the country's economic objectives as well as other goals. The second major report was from the Task Force on Labour Market Development chaired by Dr. David Dodge, who was in the Faculty of Economics at Queen's University at the time. Based on projections of economic conditions and labour market requirements, the Task Force (Canada, 1981c) concluded that public spending on postsecondary education was adequate, and might even be reduced to free up resources for other purposes. This view seems to confirm that the provinces were reallocating transfer payments for other purposes—one of the contested issues between the two levels of government. If a province recorded federal transfer payments as part of general revenues without earmarking it for any specified spending, it was not possible to trace what those federal dollars were used for. The third report was by the Parliamentary Task Force on Employment Opportunities for the 1980s, which was chaired by the Honourable Warren Allmand. The report (Canada, 198Id) took the position that the federal government should attempt to reallocate resources toward programs offering the greatest employment opportunities in the 1980s. The Task Force on Labour Market Development report (Canada, 1981c) had recommended that, within the postsecondary education sector, resources should be reallocated from universities to other skill training programs offered by colleges. Also within the university sector, resources should be allocated away from general arts, education and public administration programs toward science, engineering and business administration programs. 62 Should the federal government be involved in the details of postsecondary education programs? Since the disposition of the workforce and its relationship with the economy is a federal concern, the types of programs provided to the workforce are arguably federal concerns. Some parliamentarians took the view that the federal government should use funding as a means to dictate the types of postsecondary education programs that are offered. The NCCU' s position was that postsecondary education generates economic growth, and is thus a national concern. This position appears to be at the centre of the disagreement between the federal and provincial governments. The federal government chose to steer away from stipulations for funding, and revised the block transfer arrangements instead. Its stated objectives for the revisions were to maintain an adequate level of federal support for public health and postsecondary education programs and to achieve a degree of restraint in the growth of transfers to provinces that applies broadly to federal expenditures and is essential to a successful economic strategy (Canada, 1981a). From the discontinuation of revenue guarantees, estimated federal savings ranged from $818 million in 1982/83 to $1,336 million in 1986/87. From making equal per capital payments to provinces, estimated federal savings averaged $75 million per year. What the federal government saved, the provincial governments lost. The EPF scheme was not replaced until 1996/97. Between 1982/83 and 1995/96, however, the federal government made modifications to the EPF to change the value of transfers. In 1983/84, the postsecondary education portion of the EPF was limited to 6 per cent and 5 per cent growth respectively for the 1983/84 and 1984/85 fiscal years, under the 6 and 5 anti-inflation program. When the Canada Health Act (CHA) was passed in 1984 amalgamating the Hospital Insurance and Diagnostic Services Act and theMedical Care Act, the EPF act was 63 renamed the Federal-Provincial Fiscal Arrangements and Federal Postsecondary Education and Health Contributions Act?2 Figure 3.2 shows that EPF transfers initially increased until the federal government began to cap EPF transfer growth in 1982/83. As these caps were imposed, the cash transfer payments covered a decreasing share of total postsecondary education costs. Towards the end of the EPF era, the EPF constituted less than 10 per cent of total federal cash transfers to provinces. This appears consistent with the federal government's view that investment in postsecondary education was adequate and could be diverted to other areas, as suggested by the Task Force on Labour Market Development report (Canada, 1981c). The lowest point was 1991/92, when GDP growth was under 1 per cent and unemployment was approximately 11 per cent. Figure 3.2: Federal Cash Transfers and PSE Total Expenditures in Current Dollars (1977/78 = 1995/96). SMillions Sources: Statistics Canada. CANSIM Tables 478-0004 and 478-0007 and Provincial Economic Accounts Catalogue 13-213. With the new C H A , provinces were required to meet certain health provision criteria in order to qualify for full funding under the EPF. In 1986/87, EPF growth was reduced to 2 per cent annually. The 1989, 1990, 1991 and 1994 Federal Budgets announced more and more restrictions on the EPF. 64 During the EPF era, the full-time postsecondary student population grew by 54 per cent from 615,000 in 1977/78 to 964,000 in 1995/96. While the growth rate appears slower than in the previous period (of the FPFA, froml 967/68 to 1976/77), the actual increase in the number of postsecondary spaces was 349,000 over 19 years. Statistics Canada data also indicates that federal grants constituted 9 per cent of total postsecondary operating expenditures in 1977/78 and 12 per cent in 1995/96. During this period, provincial grants decreased from 75 per cent of total postsecondary expenditures in 1977/78 to 61 per cent in 1995/96. At the same time, tuition fee revenue grew from 9 per cent of operating expenditures in 1977/78 to 15 per cent in 1995/96. Canada Health and Social Transfer (CHST) In 1993, the Liberals replaced the Progressive Conservatives in Ottawa. Upon taking office, the Liberal government set out to cut the deficit, which was one of the highest among major industrialized countries. The 1995 Budget announced measures that would gradually reduce the deficit to 3 per cent of GDP in 1996/97, down from 6 per cent in 1993/94. A major part of the savings came from drastic reductions in financial transfers to provinces for income assistance, health and postsecondary education. The Budget also announced that EPF entitlements would be paid entirely in the form of forgone taxes. This shift constituted a loss of $14 billion to the provinces. Further, the Canada Assistance Plan (CAP) and the EPF would be replaced by the Canada Heath and Social Transfer block fund. The CHST was set at $26.9 billion for 1996/97 and $25.1 billion for 1997/98. Based on CHST cash transfers, in 1997/98, federal funding for all provinces' social programs would be reduced by $6.2 billion compared to 1995/96 funding levels (British Columbia, 1996). The new scheme came into effect on April 1, 1996, and continued the restraint that began in the mid 1990s by providing provinces with the same share of the CHST 65 that they had received under the Canada Assistance Plan and EPF health and postsecondary education funding combined. However the distribution of grants was now based on the distribution of population. Like the EPF, the CHST is a single block of both cash and tax transfers in support of an even larger group of programs than those that were under EPF. Added to the original EPF programs were social assistance and social services. Given that it is difficult to tease out the education portion of the CHST, an analysis of the ratio of CHST transfer payments to postsecondary education total expenditures becomes somewhat meaningless. The cash floor transfer to provinces and territories announced in 1995/96 was $ 11 billion per year, including large reductions to transfer payments which took effect in 1996/97 and 1997/98. This cash floor was eventually increased to $12.5 billion after 1997/98, $15.5 billion in 2000/01 , $16.2 billion in 2001/02, $15.9 billion in 2002/03 and $16.7 billion in 2003/04. With recent health pressures resulting from changing population demographics, the federal government increased the health portion of the CHST by $21 billion in September 2000. Effective April 1, 2004, the CHST was split into the Canada Health Transfer (CHT), which received 62 per cent of the block funding, and the Canada Social Transfer (CST), which got the remaining 38 per cent. In September 2004, the federal government increased the CHT base by $41.3 billion over ten years, starting in 2004/05. No increase to the CST base has been negotiated. Research and Development In his 1999 Budget Speech, then federal Finance Minister Paul Martin stated: Much of our economic challenge can be summarized in two words: knowledge and innovation. These are the new raw materials of the 21st century economy. They are the key to a country that can race forward when the global seas are calm, and ride out the rough weather safely when they are not. Innovation and knowledge are two sides of the same coin-the true hard currency of the future, the sources of our sustained growth (Canada, 1999, p. 19). 66 Universities are important venues for research, performing more than one-third of all research done in Canada (AUCC, 2004). Bok (1990, p. 3) indicates that "all advanced nations depend increasingly on three critical elements: new discoveries, highly trained personnel, and expert knowledge... universities are primarily responsible for supplying two of these ingredients and are a major source of the third". The federal government has been funding research performed by the postsecondary sector through its research or granting councils. Table 3.1 indicates the federal funding for research by postsecondary education sector and its year-by-year change. Federal funding is focused more on natural sciences, engineering and health/medicare than on social sciences and humanities. In constant dollar terms, federal government support for research has increased from $641 million in 1971/72 to $2.2 billion in 2004/05. The MacDonald Report (1969), commissioned by the Science Council, laid down three key principles: all university research should be covered by research granting councils to support research in all disciplines, institutional autonomy of universities should be respected, and federal grants should cover the full costs (i.e. direct and indirect costs) of university research. However, the Science Council rejected the report and opted in favour of supporting mission-oriented research and increasing cooperation between university and industry. The federal government only began funding indirect costs of research in 2003. 2 3 The 2003 Federal Budget announced the Indirect Cost of Research Program and allocated $225 million for its first three years. 67 Table 3.1: Federal Funding for Postsecondary Education Sector Research (NSERC and SSHRC) in Constant Dollars (1971 - 2004) Year Natural Sciences and Engineering (NS&E) ($M constant dollars) Social Sciences and Humanities (SS&H) ($M constant dollars) Total ($M constant dollars) NS&E/SS&H 1971 583 57 640 10 1972 556 55 611 10 1973 546 51 597 11 1974 506 53 559 10 1975 483 55 538 9 1976 481 55 536 9 1977 509 62 571 8 1978 505 68 573 7 1979 513 73 585 7 1980 579 75 654 8 1981 636 79 715 8 1982 632 84 716 8 1983 699 88 787 8 1984 761 92 853 8 1985 731 86 817 9 1986 707 90 797 8 1987 726 93 819 8 1988 773 104 877 7 1989 788 107 895 7 1990 876 122 999 7 1991 861 121 982 7 1992 870 140 1,010 6 1993 892 129 1,021 7 1994 891 124 1,015 7 1995 854 122 976 7 1996 796 113 909 7 1997 765 112 877 7 1998 823 123 946 7 1999 1,016 153 1,168 7 2000 1,160 196 1,356 6 2001 1,386 236 1,622 6 2002 1,588 229 1,817 7 2003 1,731 249 1,980 7 2004 1,902 274 2,177 7 Source: Statistics Canada. CANSIM Tables 358-0001 (Gross Expenditures) and 326-0002 (CPI). Table 3.2 indicates federal sources of income toward sponsored research total expenditures of universities for selected years, at ten-year intervals. In 1971, 70 per cent of universities' total sponsored research income ($168 million) came from federal sources. In the 1970s, the federal research funding agencies included Canada Council, the Department of Natural Health and Welfare, Environment Canada, the National Research Council, the Atomic 68 Energy Conference Board and the Medical Research Council. These agencies changed periodically as a result of government restructuring. Table 3.2: Federal Contributions to Sponsored Research (1971/72 to 2001/02). Current dollars Year Federal Funding ($M) Sponsored Research Total ($M) Per cent 1971/72 118 168 7 0 % 1981/82 358 570 6 3 % 1991/92 833 1,622 5 1 % 2001/02 1,686 3,771 4 5 % Constant 2002/03 dollars Year Federal Funding ($M) Sponsored Research Total ($M) Per cent 1971/72 566 803 7 0 % 1981/82 722 1,151 6 3 % 1991/92 1,006 1,960 5 1 % 2001/02 1,724 3,855 4 5 % Source: CAUBO. Income by Fund and by Type. All Universities. Various Years In 1981/82, federal sources totalled $358 million and constituted 63 per cent of universities sponsored research expenditures. By the 1980s, the federal government had scaled back research funding and was encouraging more partnerships between business and universities.24 Federal research funding agencies included the Social Sciences and Humanities Research Council (SSHRCC), Health and Welfare Canada and the Medical Research Council. The Science Council promoted the concept of a service university (i.e., one that would provide direct benefits to industry and government through entrepreneurial, technical, research, training and management services). While businesses embraced the concept, university scientists were concerned that it would diminish the focus on primary academic research. Nonetheless, contracts emerged that dealt with technology and knowledge transfer from universities to businesses 2 5 Despite government efforts, industrial research and development in Canada was just 1 percent of Gross National Product, compared to an average 2.5 per cent for other O E C D countries because of Canadian industry's poor research record (Tudiver, 1999, p. 145). 2 5 Apart from these contracts, there were a variety of other university-industry linkage programs. Between 1970 and 1982, Centres of Advanced Technology sponsored 15 centres (mostly on university campuses) to apply 69 Towards the mid-to-late 1990s, debates were raging around the role played by Canadian universities in innovation. As one of its restraint measures, the Liberal government in 1995 cut its funding for major federal research councils, namely SSHRCC and the Natural Sciences and Engineering Research Council of Canada (NSERCC), by 14 per cent over three years. Consequently, during a 2000 Conference called "Creating Canada's Advantage in an Information Age", Dr. Paul Davenport (2000) pointed out that council grants in Canada are less than one-third of those of their American counterparts, restricting innovation and adding to the brain drain.2 6 In recent years, the federal government made it a priority to increase university research funding through a variety of mechanisms. These included providing the direct costs of research through research granting agencies, offering research infrastructure matching funding through the Canada Foundation for Innovation (CFI), and attracting, retaining and developing a corps of the very best researchers from within Canada and abroad through the Canada Research Chairs (CRC) and Canada Graduate Scholarships programs. These recent programs were implemented unilaterally and without consultation with provinces. As Quebec's Parliamentary Committee (Quebec, 2004) observed, these programs obliged provinces like Quebec to modify their priorities in university funding. In 2002/03, based on Statistics Canada data reported in the C A U T Almanac (CAUT, 2005), the federal government provided a total of $1.333 billion for research funding through its granting councils, with $115 million through SSHRC, $510 million through NSERC and $507 university teaching and research to high-risk industrial technologies. Another program was the Industrial Research Institutes, set up on university campuses between 1967 and 1980, to market university research to industrial firms. Industrial Research Associations was another multi-year, multifunction dollar program for industry contracts with universities with research expertise. 2 6 Paul Davenport is President and Vice-Chancel lor o f the University o f Western Ontario. H i s research in economics has centered on the theory of economic growth, analysis o f the productivity slow-down in Canada over the past two decades, and federal-provincial fiscal arrangements. He is also an advocate for the values o f higher education, with a particular commitment to maintaining excellence in university teaching and research. 70 million through CIHR. It also provided $372 million through CFI and $109 million through CRC. Financial Assistance and Tax Credits to Individuals The Canada Student Loan Program (CSLP) was created in 1964.27 Since its inception, the program has supplemented financial resources available to eligible students from other sources to assist in their pursuit of postsecondary education. Between 1964 and 1995, financial institutions provided loans to postsecondary students who were approved to receive financial assistance. Financial institutions also administered the loan repayment process. In return, the federal government guaranteed each Canada Student Loan that was issued, by reimbursing the financial institution any portion of the loan repayment that went into default and by paying interest charges until six months after the student's graduation. The program also provided each participating province with fiscal compensation equal to its share of expenditures i f it had its own student loan program in place. For a non-participating province, its fiscal compensation would be its per capita share of the actual expenditures in the participating provinces. In 1995, several important alterations were made to the CSLP, reflecting the changing needs of parties involved in the loan process. The federal government developed a formalized "risk-shared" agreement with several financial institutions, whereby the institution would assume responsibility for the possible risk of defaulted loans in return for a fixed payment from the federal government. During this period, the weekly federal loan amount was increased to a To whom do governments provide students loans? To this question, Finnie (2004, p. 1) answers: "The fundamental reason is that many students need money to pay for their postsecondary education and loans are an obvious source for that money, but private financial institutions are generally reticent to loan to students because they (or their families) may not be able to provide the necessary collateral, while their capacity to repay their loans in the post-schooling period is uncertain. Without a government-run loans system, lending to students would be limited, there would be a general under-investment in postsecondary education, and access would be restricted particularly for individuals from lower income families. To serve both economic efficiency and equity goals, therefore, governments around the world operate loan systems". 71 maximum of $ 165. On July 31, 2000, the risk-shared arrangement between the federal government and participating financial institutions came to an end. The federal government now directly finances all new loans issued on or after August 1, 2000. The administration of Canada Student Loans has become the responsibility of the National Student Loans Service Centre (NSLSC). There are two divisions of the NSLSC, one to manage loans for students attending public institutions and one to administer loans for students attending private institutions.29 In 2003 dollars, the average loan in 1990/91 was approximately $4,100 per student per year, which was increased to $5,400 per student per year in 2002/03. With respect to remissions and loans, the average loan per student was $1,900 in 1990/91 and $2,100 in 2002/03. For comparison, the average Canadian tuition fee for an undergraduate Arts degree increased from $1,800 in 1990/91 to $3,800 in 2002/03.30 Cost of living estimated in 2001/02 varied from $500 a year, i f living with parents, to $8,000 a year, i f living away with dependants (Junor and Usher, 2004). Table 3.3 indicates the total need-based assistance (TNBA) funded by federal and provincial governments and grants, as well as the percentage of T N B A provided by the federal government. The percentage of T N B A funded by the federal government increased from 42 per cent in 1990/91 to 56 per cent in 2002/03. 2 8 Further improvements have been called for, including increasing the transparency of the program through further harmonization and integration between the federal and participating provinces, reviewing the needs assessment criteria with the immediate objective of increasing the $600 threshold on scholarship, and increasing the loan limit of $ 165 a week set in 1994 (AUCC, 2002). 2 9 A student's borrowing limit was $50 a week in the early 1980s, $100 per week in 1983, $105 per week in 1984 and $165 per week in 1995 (Finnie et al, 1996). Among other issues, the limits have been criticized for being too low. Another change eliminated the grant component altogether but increased the loan threshold to $275 per week. 3 0 The average college tuition fee was $646 in 1990/91, $1,316 in 2002/03 and $1,443 in 2003/04 (Junor & Usher, 2004). 72 Table 3.3: Need-Based Assistance to Students by Funding Source in Constant Dollars (1990/91 -2002/02). Year Total Need-Based Assistance ($) Provinces ($) C S L P ($) Foundation ($) CSLP+Found/Total 1990-91 2,060,666,324 1,199,166,799 861,499,525 0 4 2 % 1991-92 2,401,037,483 1,412,716,391 988,321,092 0 4 1 % 1992-93 2,673,468,547 1,640,578,796 1,032,889,751 0 3 9 % 1993-94 3,090,310,319 1,904,285,313 1,186,025,006 0 3 8 % 1994-95 3,456,576,871 2,002,379,427 1,454,197,444 0 4 2 % 1995-96 3,705,481,525 2,060,199,294 1,645,282,231 0 4 4 % 1996-97 4,169,511,318 2,334,083,311 1,835,428,008 0 4 4 % 1997-98 4,022,299,883 2,227,097,101 1,795,202,782 0 4 5 % 1998-99 3,825,474,915 1,988,333,344 1,837,141,571 0 4 8 % 1999/00 3,500,990,181 1,401,698,213 1,799,186,456 300,105,512 6 0 % 2000-01 3,406,195,215 1,350,183,402 1,745,876,912 310,134,902 6 0 % 2001-02 3,349,967,494 1,353,229,712 1,693,212,495 303,525,288 6 0 % 2002-03 3,221,422,356 1,419,518,396 1,507,164,931 294,739,029 5 6 % Source: Canada Student Loans Programs Annual Reports; Provincial Student Assistance Programs; Canada Millennium Scholarship Foundation Annual Reports The total need-based assistance includes net loans, remissions and grants provided to students. The breakdown is shown in Table 3.4. Net loans have increased by 61 per cent between 1990/91 and 2002/03. Non-repayable remissions and grants increased by 46 per cent over this period. Therefore the percentage of net loans to total need-based assistance has increased. Table 3.4: Net Loans, Remissions and Grants in Constant Dollars (1990/91 - 2002/03). Year Net Loans ($) Remission ($) Grants ($) Total Non-Repayable ($) Non-Repayable/Net Loans Net Loans/Total 1990-91 1,397,413,955 55,370,531 607,881,838 663,252,368 4 7 % 6 8 % 1991-92 1,631,062,176 50,890,473 719,084,834 769,975,307 4 7 % 6 8 % 1992-93 1,813,049,558 33,808,514 826,610,475 860,418,989 4 7 % 6 8 % 1993-94 2,584,440,807 45,938,136 459,931,376 505,869,512 2 0 % 8 4 % 1994-95 2,928,041,690 93,516,966 435,018,214 528,535,181 18% 8 5 % 1995-96 3,170,033,483 121,577,754 413,870,288 535,448,042 1 7 % 8 6 % 1996-97 3,512,349,905 238,300,971 418,860,442 657,161,413 1 9 % 8 4 % 1997-98 3,247,861,885 383,643,447 390,794,550 774,437,997 2 4 % 8 1 % 1998-99 3,051,988,583 371,676,516 401,809,816 773,486,332 2 5 % 8 0 % 1999/00 2,237,174,281 789,649,603 474,166,296 1,263,815,900 5 6 % 6 4 % 2000-01 2,337,151,572 436,489,975 632,553,668 1,069,043,644 4 6 % 6 9 % 2001-02 2,416,918,520 247,799,530 685,249,443 933,048,973 3 9 % 7 2 % 2002-03 2,253,608,772 244,075,979 723,737,605 967,813,584 4 3 % 7 0 % Source: Canada Student Loans Programs Annual Reports; Provincial Student Assistance Programs; Canada Millennium Scholarship Foundation Annual Reports 73 The Canada Millennium Scholarship Foundation was created in 1998 to increase access to postsecondary education by granting scholarships to students who are in financial need and who demonstrate merit. The Foundation was created with a $2.5 billion endowment to administer these scholarships for a period of ten years, starting in 2000. The Foundation provides the following awards: bursaries averaging $3,000 to postsecondary education students based on financial need; annual millennium entrance excellence awards valued at $4,000 or $5,000 depending on the type of award, to students beginning postsecondary studies for the first time and who demonstrate exceptional merit; and annual in-course excellence awards valued at $4,000 or $5,000 depending on the type of award, to upper year postsecondary students.31 Since the mid-1990s, the trend in federal financing policies has been to shift from funding institutions directly to funding individuals through various programs. Apart from CSLP and the Canada Millennium Scholarship Program, the federal government has initiated a number of tax measures directed at individuals. These include tuition tax credits, education tax credits, tax credit for student loan interest, RESPs, and tax-free RRSP withdrawals to upgrade skills. Table 3.5 indicates total federal government tax expenditures to postsecondary education by type of expenditure. Between 1990 and 2003, there was a significant increase in the use of tax credit incentives to encourage participation in postsecondary education. 3 1 The Foundation also undertook a research program into the determinants of access to higher education and the effects of current student financial assistance programs on students' behaviour. 74 Table 3.5: Federal Government Tax Expenditures Related to Postsecondary Education (1994 -2004). SMillions 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Education Credit 43 42 54 52 51 52 63 88 135 143 134 231 239 255 265 Tuition Fee Credit 188 186 189 210 222 229 242 273 293 325 316 268 265 275 295 Transfer of Education/Tuition Credits 149 161 201 228 245 252 300 341 377 364 359 467 469 485 505 Student Loan Interest Credit 0 0 0 0 0 0 0 0 52 65 64 64 63 62 62 Exemption of Scholarship Income 12 10 12 8 7 7 7 6 7 7 30 25 25 25 25 Carry-Forward 0 0 0 0 0 0 0 0 11 82 156 278 346 405 420 Tax-free R E S P status 0 0 0 0 0 0 40 36 34 44 86 82 107 130 165 Total 391 399 456 499 526 539 652 744 909 1,029 1,145 1,414 1,515 1,637 1,737 Source: Government of Canada's Department of Finance Tax Expenditures & Evaluations 2002 (extracted from Junor & Usher, 2004) Conclusion Throughout the development of postsecondary education in Canada, the federal government instituted a variety of financing policies aimed at preparing a highly trained workforce in the interest of national economic growth. While it is difficult to isolate the role these policies played in increasing access to postsecondary education, it is evident that individuals and institutions have benefited from funds provided by the federal government. The federal government's role in postsecondary education has changed over time. From confederation days up to the early 1960s, the federal government was actively involved in postsecondary education through its manpower training initiatives including student loans, capital development, vocational and apprenticeship training, and educating war veterans. However, as provincial governments matured, they increasingly saw federal initiatives as intrusions into their jurisdictional responsibility over postsecondary education. The success of provincial governments at resisting federal influence has resulted in the following trends or consequences. The first is increasing acceptance that responsibility over postsecondary education belongs to provinces. This acceptance is accompanied by reductions in transfer payments for postsecondary education during particularly difficult economic times. The second trend is the adoption of unconditional block funding by the federal government and non-specificity regarding 75 the use of these funds. However, with the new Canada Health Transfer, the federal government targeted funding for priorities such as reducing wait times for medical treatment and encouraging provinces to be accountable in reporting health outcomes. The third trend is a shift in federal initiatives from funding institutions directly to funding individuals through federal loans, scholarships, research, and capital and tax incentives, where the federal government could more effectively influence programs to achieve federally desired outcomes. It may not have been an intended outcome of this policy, but tax incentives and direct funding assistance to individuals have made both public and private education more accessible. The fourth trend is the use of matching funds, such as requirements for provinces, institutions, or the private sector to match funding of research or capital infrastructure costs. This mechanism has obliged provinces to modify their funding priorities in order to leverage federal funds, thus succumbing to federal influence. However, ironically, while there is resistance to federal influence, there is a desire of universities and more recently, of provinces, for more federal funding. With respect to universities, as the N C C U did in the past, the Association of Universities and Colleges of Canada urged the federal government to play a major role in funding postsecondary institutions, such as making contributions to aid in faculty growth as well as to capital and technological infrastructure (AUCC, 2003). Similarly, the Rae Report (2005) called on the Ontario government to negotiate with Ottawa for an increase in postsecondary funding. The report stated: Federal Social Transfer funding for postsecondary education and other social programs stands at a lower level today, in nominal terms, than it did ten years ago. The end of Established Programs Financing and its replacement by the less generous Canada Social Transfer has meant that the federal government has been avoiding its responsibilities towards higher education. There is no dedicated federal transfer to the provinces for universities and colleges. There should be (Rae, 2005, p. 18-19). 76 In response to the Rae Report, Ontario's Budget 2005 announced that Ontario would work with the federal government to restore funding to postsecondary education. There is no doubt that provinces will continue to argue in favour of unconditional federal transfer payments, however they may compromise on accountability for federal investment by renewing institutions to maximize returns on that investment. The consultation paper by Quebec's Parliamentary Committee on Education for the Quality, Accessibility and Funding of Universities indicates: One way to assert the importance of higher education in the development of a knowledge based society might be to re-examine the federal government's involvement in funding university teaching and research, an issue that Quebec universities share with their counterparts in the rest of Canada. The federal government's involvement in the field of education as a whole could also be reviewed in light of the proposals of the Commission on Fiscal Imbalance. To optimize the return of the resources invested in universities, one might think that federal transfer payments should be unconditional, or at least be aligned with the Quebec government's orientation on university funding. Without reiterating all the technical analyses of the evolution, sharing and use of federal transfers, one has to question the means of renewing higher education, particularly when federal funding is involved (Quebec, 2004, p. 32). Alternatively, the federal government, i f it should decide to increase funding for postsecondary education, can choose to deal directly with individuals rather than provinces, thus bypassing the traditional federal transfer payment vehicle. As Junor and Usher (2004, p. 272) observe: In the year up to 1994, institutions received about 87 per cent of all transfers in respect of postsecondary education. Following the introduction of the Canada Health and Social Transfer (CHST) and - later in the 1990s - the large increase in tax expenditure for postsecondary education, the balance began to shift so that transfers to institutions now account for only 78 per cent of total expenditures. This is not a paradigmatic shift by any means, but it does represent a general trend toward a form of fiscal federalism where the Government of Canada deals directly with individuals on issues such as education rather than deal with provinces. 77 The next chapter provides a narrative of key postsecondary education access policies of Ontario, discussion of the policy environment associated with key policies and policy trends, and the impact of these policies on postsecondary education in Ontario. 78 C H A P T E R F O U R : O N T A R I O Ontario, like many jurisdictions today, recognizes that postsecondary education has a central role to play within the modern knowledge economy by fostering prosperity, growth, development, modernization and renewal in society. The 2004 Ontario Budget indicates that building a high-skill, high-wage economy in Ontario will require higher education programs that are second to none. Ontario currently has 18 publicly funded universities and 24 public colleges (including two French language colleges). Each university has degree-granting authority under the Degree Granting Act, 1983, and operates independently of other institutions.32 Unlike British Columbia, where community colleges offer university transfer programs, Ontario's 24 Colleges of Applied Arts and Technology (CAATs), created during the mid- to late-1960s, do not have university transfer functions. Colleges were explicitly designed to be occupational in orientation, with an emphasis on upgrades and general adult education, and primarily serving the needs of Canada's labour market. CAATs generally offer career-oriented programs leading to diplomas or certificates, or to official certifications in skilled trades, which are regulated by professional associations. In recent years, however, the traditional distinction between Ontario's universities and colleges—degree-granting versus non-degree-granting institutions—has blurred. The Postsecondary Education Choice and Excellence Act, 2000 enabled Ontario's CAATs for the 3 2 In addition to public universities, there are approximately 17 private institutions (all of which are bible colleges or small religious-affiliated institutions) that have been granted restricted degree-granting authority by the Legislative Assembly of Ontario. 3 3 The Private Career Colleges Act sets out minimum requirements for private non-degree colleges. Private colleges offering vocational programs must be registered under the Act. Those colleges offering non-vocational (e.g. driving instruction for non-commercial vehicles, speed reading, and tax preparation) programs are not required to register and are outside the scrutiny of the Ministry of Training, Colleges and Universities. There are over 450 registered private career colleges, the majority of them focus on courses that prepare students for clearly defined occupations. 79 first time to apply for ministerial consent to offer applied baccalaureate degree programs to students. As of July 2005, 44 applied degree programs in colleges across the province have been approved. Furthermore, the Ontario government has made arrangements with universities to offer parallel programs which may grant an individual student both college and university credentials. The once homogenous C A A T sector is also moving towards differentiation as some colleges are now designated as Institutes of Technology and Advanced Learning.3 4 In February 2003, the Ontario government announced this new designation for colleges provided they meet specified criteria such as having the capacity to bring degree level programs to their local communities. Ontario's postsecondary education system has evolved significantly since 1945, when there were only three publicly supported universities, a variety of denominational private colleges and a small number of specialized institutes associated with technical, professional or occupational training. During that time, the Progressive Conservative government (in power 1945 - 1985) carried the old tradition of John A . MacDonald's Canadian conservatism, adopting the view that active government participation in the economic development of the country was appropriate as long as it is consistent with fostering business enterprise and general economic expansion (Rea, 1987). The emergence of the "new service state" under the Progressive Conservatives can be traced to the beginning of large-scale state support for mass education in the 1940s and 1950s (White, 1985). The PC government invested in the rapid expansion of postsecondary education in response to demographic and social forces at play after the Second World War, which included economic resurgence and a significant rise in birth rates. As the industrial base 3 4 Sheridan, Humber and Conestoga Colleges have been designated as Institutes of Technology and Advanced Learning. 3 5 University of Toronto, Queen's University and University of Western Ontario. 80 continued to diversify, the government established Lakehead Technical Institute in 1946 and Ryerson Institute of Technology in 1948 (Jones, 1997). By the 1950s, McMaster, Ottawa and Carleton Universities were added. The rapid expansion of Ontario's postsecondary education system during the 1950s and 1960s was a result of several factors. The first factor was the boom in demand for participation in postsecondary education by young high school graduates. By 1955, baby boom children were flooding elementary schools at such a rate that the expansion of the primary and secondary school system spilled over into the postsecondary sector during the 1960s. The ideology of the Progressive Conservative during that time reflected Dewey's (1897) belief that the school provides the form of community life most effective in assisting the child to share in the inherited resources of the race, and to use his/her own powers for social ends. The second factor was a buoyant economy that generated a growing demand for trained and skilled labour, and stirred public support for more postsecondary institutions. The end of the Second World War brought an economic boom to Ontario and a period of sustained growth that lasted until the mid-1970s with the manufacturing sector peaking in the early 1950s. A shift to the service sector followed, and by the late 1970s Ontario had moved from a blue-collar labour force to a majority of the workforce being white-collar office workers and clerks. During the postwar period, Ontario's population doubled from approximately 4.1 million people in 1946 to more than 8.2 million in 1976 (White, 1985). By the mid to late 1970s, the expansion of postsecondary education had slowed down. Reasons for this contraction include: a marked reduction in federal government support provided under Established Programs Financing (EPF) for health and education expenditures starting in 1977; an economic recession in the 1970s that questioned the notion that economic investment promotes economic growth resulting in a drop in demand for postsecondary spaces; and a concern for continued large budget deficits leading to government's focus on system rationalization of the postsecondary education. 81 The third factor is the federal government initiatives that made financial support available for capital development in vocational-technical areas. The federal Technical and Vocational Training Assistance Act, 1960 permitted the federal government to enter into an agreement not exceeding six years with any province to contribute 75 per cent of the cost of new buildings and equipment (to a limit based on provincial population and thereafter 50 per cent of the cost). It was during this period that 20 CAATs were created as part of the government's plan to expand postsecondary education, establishing two distinct postsecondary sectors in Ontario. The decision to create distinct student spaces in technological institutes was strongly influenced by the Committee of Presidents. Bertram (1986) summarized the influence of this group as follows: Above all, it was the presidents of Ontario's universities who seem to have most influenced the shape of the colleges. The recurrent themes in their reports were that colleges should not interfere with the unique position of universities in that only they should do degree-level work, and that new colleges should be created in such a way as to preserve the perceived superiority of Ontario's educational system as compared with the United States, and by implication, other Canadian provinces (quoted in Dennison & Gallagher, 1986, p. 34). Intermediary governing bodies in Ontario played an important advisory role in both the college and university sectors. The initial intermediary body for universities was the Committee on University Affairs. This committee was succeeded by the Ontario Council on University Affairs (OCUA), which served from 1974 to 1996, when it was dismantled by the Progressive Conservative government. Today, university presidents in Ontario belong to the Council of Ontario Universities, a body advocating university interests. In the college sector, the intermediary role was performed by the Ontario Council of Regents for Colleges of Applied Arts and Technology, which was established in 1965. This body has since been transformed into the College Compensation and Appointments Council, whose mandate includes: advice and strategic 82 planning; college boards appointments and other governance issues; collective bargaining and human resource management; and other roles and responsibilities assigned by the Minister responsible for postsecondary education. The Association of Colleges and Applied Arts and Technology of Ontario (ACAATO) is the advocacy, communication and marketing arm of C A A T s . 3 7 The uninterrupted 43-year rule of the Progressive Conservatives in Ontario provided the political environment for a smooth and accelerated expansion of universities and CAATs. Since 1985, however, public administration in Ontario has changed stripes frequently, starting with the Liberals under David Peterson (1985 - 1990),38 followed by the New Democratic Party (NDP) under Bob Rae (1990 - 1995), the Progressive Conservatives under Mike Harris (1995 - 2002) and again under Ernie Eves (April 2002 - October 2003), and then the Liberals again under Dalton McGuinty (October 2003 - present). Access Policies and the Political Environment From the mid-1980s through to the present, postsecondary access policies in Ontario have been underpinned by a perceived link between education and economic development. Therefore, regardless of the government's political stripe, access to postsecondary education has been its continuing priority. Government's postsecondary access policies have consistently included several elements: the number and type of institutions, number of seats, types of programs, level of operating grants to postsecondary education, categories of special purpose funds, research and development, tuition fee rates, student financial assistance, participation of 3 7 The Rae Report (2005) advocated the establishment of a new Council on Higher Education with responsibility for both colleges and universities and the following mandate: advice on performance measures; collection of critical benchmark data; monitoring, evaluating and reporting on quality and system performance; leading a renewed focus on teaching and excellence; developing strategic research agency; and providing advice as requested. 3 8 During William Davis' leadership, Ontario had weathered the economic recessions of the later 1970s and early 1980s intact, and Ontarians were comfortable with Davis. When he resigned in 1984, Frank Miller, perceived as a "right-wing populist", became the leader of the PCs, and for various reasons, the PC Dynasty ended soon after Miller called an election on May 2, 1985 (White, 1985). 83 under-represented groups, and alternative sources of funding including partnerships with private businesses and industries. While the policies of different Ontario governments have contained most of the above elements, their policy directions have differed depending on their respective political ideologies. At least three key points should be emphasized. First, while both the Left (NDP) and Right (Tory and, to some extent, Liberal) view education as key to economic prosperity, the Left views human capital as the engine that drives economic development, and the Right views talent as a "condition" that supports economic prosperity. Second, while the Left sees the role of the state as a strategic guide to economic development, the Right views the role of government as a purveyor of market conditions that foster economic growth. Third, while Leftist policies focus on removing barriers for disadvantaged groups to reduce talent wastage, the Right would provide assistance to the disadvantaged only because it would be the right thing to do. Hence, the policy directions and approaches of the Left and Right differ. For example, Tory and Liberal governments would make use of market principles like choice and competition, or supply and demand, more frequently than the NDP. Regarding policy discussions, the Liberal and NDP governments are more likely than the Tories to consult broadly with the postsecondary and other sectors through commissions, committees or task forces. The Tory government commissioned the Advisory Panel on Future Directions for Postsecondary Education and the Investing in Students Task Force, but did not always consult the postsecondary sector. For example, the Postsecondary Choice and Excellence Act, 2000 was introduced and passed without broad consultation. On the other hand, the McGuinty administration commissioned the Postsecondary Education Review shortly after it took office in late 2003. Finally, while all governments share common objectives to increase 84 access, policy directions have not always been consistent (not only between administrations but also within the same administration). The following section presents a chronological narrative of major postsecondary education access policies from 1985 to the present, including the political and policy context of each policy. The description and analysis illustrates the relationship between postsecondary education access policies and the political environment, including political economy, government priorities and policy discussions. Access and Funding Policies Under the Liberals In 1985, David Peterson, leader of the Liberal Party, ran an aggressive election campaign and won only 48 seats, four less than the Progressive Conservatives. However, the Liberals and New Democrats formed an alliance with the Liberal-NDP Accord, and on 18 June 1985, defeated Frank Miller's new Tory government by a vote of 72 to 52. Peterson was asked to form a government the following day. Under the Accord, the NDP did not get any representation in Peterson's cabinet and merely agreed to support Peterson's government in return for two key commitments. These were to implement certain common campaign proposals (e.g. rent review, environmental regulation, extra billing in health care and public accessibility to government— within a framework of fiscal responsibility), and not to call an election for two years (White, 1998). After the Accord lapsed in 1987, Peterson called an election and this time received an overwhelming majority of 95 out of 130 seats. The NDP won 19 seats and the PCs, under the new leadership of Larry Gross, won 16. Courchene and Telmer (1998) say that the Liberal government brought in a new socioeconomic era referred to as Ontario's "quiet revolution", which was triggered by the Liberal-NDP Accord. White (1998) explains that the growth in social services spending from 85 8.75 per cent of total spending in 1982/83 to 9.74 per cent in 1986/87 was a result, in part, of an economic boom during the regime and an oversized bureaucracy inherited by the Liberals, which would have made any attempts to curb spending increases difficult. The inability of the Liberal party to conceptualize and implement its vision for the future of Ontario after the 1987 election is a further reason for this growth. Peterson had two passions: national unity and international economic competitiveness. The Peterson administration was committed to increasing access to postsecondary education because of education's strong connection with economic development. Its economic policy agenda was aimed at achieving competitiveness internationally by focusing on human capital and high technology. During this time, students of economic development were agreeing that the education and training of the labour force for the high technology "new economy" (and the retraining of old economy workers) was one of government's key roles for the future. The Peterson regime established the new Ministry of Skills Development to consolidate federal-provincial programs and other skills related initiatives launched by the PC government. The ministry was created as a result of a concern that the federal government was becoming too influential in the institutional matters of the CAATs. Ken Dryden, a former Youth Commissioner, sums up the rationale for the Liberal government's interest in education as follows: The rapidly accelerating pace of change will require people to have more adaptable skills and attitudes, to be better able to deal with change. Increased use of technology will mean less physical labour but the need for greater conceptual and numeracy, analytical and problem-solving skills (quoted in Ontario, 1987, p. 4). In line with this rationale, Peterson's key postsecondary access policies included a funding formula change to achieve accessibility to postsecondary education, strengthening science and technology within the province, and transferability. Throughout its mandate, the 86 Peterson government chose not to implement any major structural changes or initiatives, but intervened directly only when required.39 As stated in Budget 1986 (Ontario, 1986), it preferred to offer incentives to organizations to encourage innovation and entrepreneurship. Funding Formula The funding formula policy was a means for government to offer incentives to increase accessibility to postsecondary education while maintaining quality (Ontario, 1987). The Bovey Commission Report (Commission on the Future Development of the Universities of Ontario, 1984) advocated use of the funding formula as a tool for government to achieve its public policy objectives, and pointed out the disincentives that the existing funding formula was creating for Ontario universities to increase their student intake.40 Universities that increased enrolment at higher rates than others received a larger share of available resources and could potentially cause their fellow institutions to lose some of their shares. This created a situation of funding instability for institutions not only for those who lost their market share of students, but also for those who successfully increased their market share. The Bovey report (Commission on the Future Development of the Universities of Ontario, 1984) E.g. C A A T s labour relations were contentious; provincial strikes occurred in 1984 and again in 1989. Two commissions were established: The Report of the Advisor to the Minister of Colleges and Universities on the Governance of the Colleges of Applied Arts and Technology (1985); and The Report of the Colleges Collective Bargaining Commission (1988). The former, also called the Pitman Report, recommended making changes to the structural arrangement of the C A A T s and establishing an advisory council on the colleges. In response, the Liberal government redefined the role of the existing Council of Regents (Cameron & Royce, 1996). 4 0 In the 1960s, the funding formula for universities was tied to what were known as basic income units (BIUs). These units were weighted for each student based on a course's level of difficulty and subject category. These were then compiled for all students across each university to arrive at the total number of BIUs for the entire university. The government then announced a dollar value for each BIU and also determined what tuition fees might be charged, and then subtracted that total amount from the grant income for that university. In the 1970s, there was a change in the BIU allocation mechanism. Instead of announcing the dollar value of a BIU, the government announced the total amount of dollars granted to the university system as a whole. The Ontario Council on University Affairs, acting as a buffer between the government and universities, was responsible for distributing these funds. However, more students at a university did not necessarily mean more money for that institution. There was a fixed amount of dollars, and more students in the system meant a lowered BIU value (Buchbinder & Rajagopal, 1993). 87 recommended substantial changes to the funding formula to enhance the quality, stability and adaptability of universities, as well as increased support for research and providing incentives or disincentives for enrolment in specific program areas. While the Liberal government did not openly accept the report, Royce (1997) argues, the funding formula policy changes can be traced back to several of the Bovey Commission's recommendations. One change included the introduction of new corridor funding and targeted funding envelopes. Corridor funding has two main features. The first is that institutions would be allowed a corridor of insensitivity of plus or minus 4 per cent to enrolment changes. The second is that research intensive institutions receiving federal research grants of greater than 10 per cent of operating income on a rolling three-year average would be allowed an additional plus or minus 2 per cent corridor, and those with grants greater than 15 per cent would receive an additional plus or minus 2 per cent, for a total of plus or minus 8 per cent. Consistent with the government's desire to provide accessibility to postsecondary education, Budget 1985 increased the basic operating grant for Universities and C A A T S by 4 per cent for 1986/87 and allocated a total of $80 million in an Excellence Fund for the purchase of state of the art teaching equipment and capital repairs. Probably influenced by the NDP, Budget 1985 also focused on financial barriers to students, holding tuition fee increases to 4 per cent and increasing funding for the Ontario Student Assistance Program (OSAP) by 8 per cent to $145 million in 1986/87. Budget 1987 provided another $25 million increase to OSAP and introduced a new interest relief plan for those who have difficulty repaying student loans. In 1987/88, another base funding increase of 11.5 per cent was announced for universities, along with a special allocation of $60 million for CAATs. In Budget 1988, the overall colleges and universities budget increased by only 7.5 per cent and the government announced the 88 establishment of a supplementary Accessibility Fund to accommodate the demand for greater access and higher enrolment. This increase totaled $38 million in 1988/89 and $88 million in 1989/90. Innovation, Research and Development Traditionally, Ontario's strategy under the PCs was to provide tax-based incentives for research and development. Probably influenced by the NDP as well, the Liberals' 1986 Budget announced a Technology Fund of $1 billion for the next decade and set aside $100 million in that year's budget as an initial contribution. The fund was to be used to support a wide variety of initiatives and joint ventures in an attempt to outperform major competitors in new technology, and was to be directed by a council not yet then established. Eventually the Premier's Council on Technology was given that responsibility. The Liberal government commissioned the Premier's Council on Technology to make recommendations on how to steer Ontario toward the forefront of economic leadership and technological innovation. Its Report of the Premier's Council, Competing in the New Global Economy (Premier's Council on Technology, 1988) contained many recommendations that were eventually implemented.41 Key recommendations included in the report were: establishing Centres of Excellence; providing a stimulus to investment in industrial research and development; assisting smaller manufacturing firms to hire staff who could commercialize advanced technology and put it to work in factories; and using Ontario's own buying power to strengthen high-technology companies by awarding research contracts to those with potential to become competitive suppliers of selected goods purchased by the province and its agencies. In 4 1 Some key findings of the report included: Ontario was uncompetitive in a number of high growth and emerging industries such as biotechnology; its education and training systems were not up to the level of competitors; the science and technology infrastructure of universities and government laboratories were not focused on industrial priorities; and more resources were required to build the human capital infrastructure. 89 essence, the report emphasized meeting labour market needs and increasing market-oriented research and development, using public resources where possible, to achieve these goals. In the same year that the report was released, Budget 1988 announced a national strategy on research and development and established seven Centres of Excellence to conduct advanced research and to stimulate industrial research and development.42 By that time, $275 million of the Technology Fund had been committed to programs and specific projects to be undertaken by business, universities, colleges and labour. Programs under the Technology Fund included a $25 million Technology Personnel Program to help smaller firms hire up to 1,000 new engineering and technical staff to put advanced technology to work in Ontario industries. There were no specified funds offered to universities for graduating more researchers or graduate students in the science or engineering fields. Instead, there was an emphasis on vocational and skills training evidenced in part by a provision of $4 million to the Ministry of Skills Development for a new Technicians and Technologists Skills Updating Program. Lifelong Learning and Transferability of Credits Given that the Liberal government had an interest in retraining, it was only a matter of time before attention was drawn again to the fact that university and college systems in Ontario were distinct, discreet, not integrated and hindered accessibility. By the late 1980s, lifelong learning was an accepted reality, and the report, People and Skills in the New Global Economy (Premier's Council, 1990), recommended that postsecondary education in Ontario should be viewed as a continuum that allows for lifelong learning opportunities. The report called for a The Centres of Excellence are affiliated with universities and have complex contractual relationships with government and the affiliated university. The Mulroney Government used a similar model on a national basis. The NDP and Tory governments that followed renewed funding for these Centres of Excellence (CE). However, the Tories reduced the number of C E from seven to four. To stimulate industrial research on the recommendation of the Premier's Council on Technology, a new Research and Development Super Allowance was introduced to provide an extra 25 per cent deduction for large firms and 35 per cent for small businesses for R & D expenditures. 90 coordinating council to deal with credit transfer arrangements to facilitate transferability and continuity across the system, including admission requirements, program standards, and degree requirements. During this time, C A A T leaders were calling on universities to accept transfers of C A A T students, but universities were not very receptive to this idea. There were also students wanting to transfer from universities to CAATs. As a result, CAATs began offering post-degree programs that supplemented undergraduate programs with career-oriented training. However, the C A A T system was not without its challenges, including: similarly titled programs across the system that did not yield the same skills; a decline in emphasis on generic and transferable skills such as problem solving, critical thinking, basic literacy and numeracy, and computer literacy; a lack of preparatory programs for functionally illiterate students and high school dropouts; a lack of flexibility for adult part-time learners; and high drop out rates. In 1988, the Ministry of Colleges and Universities asked the Council of Regents to review and develop a vision for CAATs for 2000. Its report, Vision 2000, was released in 1990 and implemented by the next administration. Access and Funding Policy Under the New Democrats In 1990, Bob Rae's New Democratic Party won 56.9 per cent of the legislature's 130 seats but a mere 37.6 per cent of the popular vote. This win came as a surprise to everyone, including Bob Rae and the NDP, who were used to being backbenchers. The NDP's election platform was Agenda for People, which was eleven pages long and included various forms of tax relief, a government surplus and the public "driver-owned" automobile insurance that the Rae government abandoned after one year in office.4 3 White (1998) postulates that voters elected the NDP for its promise to listen to Ontarians, and not for what is its Agenda for People election platform. As David Reville puts it, the essence of the NDP campaign message was, "Peterson listens to the fat cats, he doesn't listen to you, we will listen to you" (quoted in White, 1998, p. 217). 91 As with the Liberal government before it, the NDP also saw education as a means to achieve sustainable prosperity. While it has been difficult for researchers to demonstrate a causal link between education and economic productivity, the Rae administration saw that link in Investing in Tomorrow's Jobs (Ontario, 1992b, p. 13) as follows: Technological innovation allows increases in the quality and productivity of capital, labour, energy and materials inputs. This, in turn, creates a demand for further investment in research and development. Advanced technical skills are thus central to creating an economy characterized by continuous innovation and upgrading. The interaction between technical knowledge and other factors may permit increasing returns to scale and allow innovation to raise, not just the level of output, but also its growth rate, permitting improved living standards. According to Brown and Lauder (1997), the Left focused on human capital development, rather than using market capitalism, as a means to economic prosperity. The NDP government declared "from the shop floor to the boardroom, learning is the key to success in finding new technological and organizational solutions. Innovation, made possible through education, will generate greater productivity. Our standard of living depends on it" (Ontario, 1991, p.6). The policy direction taken by the Rae administration was typical of "left modernizers" who assume that the state can actively lead the growth of a broader, more democratic economy (Brown & Lauder, 1997). Krugman (1993) sees the role of the state as a strategic trader, to guide industrial development and provide the infrastructure for economic growth, which includes a highly educated workforce, transportation, telecommunications, research and development.44 NDP budgets for consecutive years emphasized investments in training, technology and infrastructure.45 Premier Rae himself tried to work in partnership with the business community and became actively involved in a few government-business-labour partnerships designed to save troubled economic enterprises (e.g. Spruce Falls pulp mill, the Algoma Steel in Northern Ontario and the DeHavilland aircraft plant in Toronto). The Rae government also tried to implement an industrial policy framework (White, 1998). 4 5 Budget 1992 launched two funds related to the above undertaking. The first is the Jobs Ontario Capital Fund, providing $2.3 billion over five years to strengthen Ontario's infrastructure including telecommunications, the environment, public transit, and child care spaces for Jobs Ontario Training Fund participants who required child 92 The NDP assumed office at a time when Ontario was undergoing structural changes in its economy. This restructuring involved the downsizing or closure of existing companies, and the growth of new firms as new competitive advantages emerged. This structural change resulted in a demand for skill sets that included abilities to develop and apply advanced technologies. The NDP's Investing In Tomorrow's Jobs, (Ontario, 1992b) released with Budget 1992, attributed Ontario's comparatively low productivity rate at the time to lagging investment in equipment, people and technology. The NDP's 1993 Ontario Economic Outlook indicated the following: The majority of the jobs lost in recent years were in traditional clerical and processing and assembly occupations. In contrast, job growth over the medium term will shift further towards higher skill positions that require more extensive educational preparation. Employer-based training and retraining will become more important as a broader set of skills is needed to support the diffusion of complex technologies in the workplace. Also, organizations will move away from traditional hierarchies to adopt new co-operative labour/management structures that will enable employers and workers to share responsibility for restructuring and continuous improvements in productivity. For example, workplaces are focusing on teamwork, expanding the scope of employee's jobs, and broadening the decision-making process to include employees (Ontario, 1993b, p. 2). As with left modernizers, the Rae government committed to build a strong relationship of trust between government, labour and businesses.46 It acknowledged that the building of a high-skill, high-wage economy requires working with employers to implement positive economic change at the firm and sector levels,4 7 and to invest in appropriate training of the workforce.48 care. These projects would also create jobs indirectly. This Fund is in addition to Ontario's regular investments in roads, hospitals, schools, and homes for seniors and other projects. The total spent on capital renewal in 1992 is estimated at $3.9 billion and would support 75,000 jobs (Ontario, 1992a). Since 1990, the number of publicly supported childcare spaces grew by 6,500 to 53,000 in 1993. Through this fund, another 14,000 subsidized spaces would be made available by 1994 so that women could participate in the new economy. Finally, the Jobs Ontario Homes Fund provided $2.1 billion to build 20,000 new non-profit housing units over three years. One year later, Budget 1993 added Jobs Ontario Youth, investing $180 million in jobs, training, counselling and educational upgrading for youth. The following year, Budget 1994 added Jobs Ontario Summer Employment for summer training and employment for young people. 4 6 The Rae government concedes "private investment is key to the creation of secure jobs in Ontario" (Ontario, 1992a, p. 9). 4 7 For example, the Rae government proposed reforms to the Ontario Labour Relations Act which includes a suggestion for a new Organization and Adjustment Service to adapt the labour relations system to enable increased cooperation between labour and management. Left modernizers typically believe that the provision of a floor of protective entitlements and conditions for workers is desirable. 93 Consistent with the belief that a necessary condition for economic prosperity is a tight relationship between education and work (Ashton & Sung, 1997), the Rae government established the Ontario Training and Adjustment Board (OTAB) as an agency independent of government. Led by representatives from business, labour, aboriginal peoples, equity groups, educators and trainers, one of OTAB's priorities was to implement improvements in workplace and sectoral training by building bridges between postsecondary institutions and employers. Emphasized skills included literacy, numeracy, problem-solving, technology and portable or generic skills such as organization, decision-making, listening and communicating, leadership skills, and the ability to adapt to lifelong learning and change as part of one's daily routine. Budget 1992 committed $930 million for training and adjustment programs for workers. The government also encouraged employers, through incentives such as the Jobs Ontario Training Fund, to invest more resources in the training of their employees to ensure the competitiveness of their firms. One difficulty with this approach is that the business community had never envisioned itself as a partner of government and did not share its conception of the economic role of a social democratic service state (White, 1998). With respect to educational access, the government's role was to ensure that all individuals, regardless of socioeconomic status and ethnic origin, had the opportunity to gain access to an education that would prepare them for a job. Its framework for investment, Investment in Tomorrow's Jobs (Ontario, 1992b), reflects the broader concern of left modernizers regarding talent wastage of individuals from less privileged groups. It states that fairness and equity in society and the economy are not only critical goals, but are keys to For example, the Rae government established the Ontario Training and Adjustment Board. 94 developing the full economic contributions of all Ontarians. To this end, the Rae administration implemented policies to enable individuals on social assistance to access training and work experience,50 and maintained employment and pay equity programs while many government services were subjected to policies of restraint. Innovation, Research and Development The NDP government believed that increasing investment in the development and application of new technologies is integral to achieving sustainable prosperity. While providing for work-based skills training, the NDP government, like the Liberal government before it, took an active role in encouraging innovation, research, and development through university and industry linkages. Budget 1991 announced $131 million for the Technology Fund initiated by the previous government, including $81 million for programs to support leading edge research such as robotics, telecommunications and biotechnology. That budget also provided $50 million for the R & D Super Allowance to provide tax incentives for private sector research and development. In addition, to address the shortage of investment capital for new high-technology firms, Budget 1991 increased the annual funding for Innovation Ontario Corporation to approximately $21 million, and increased the annual ceiling for individual investments in high technology firms from $35,000 to $1 million. The Rae administration also renewed the Centres of Excellence, originally created under the Liberals, for a second five-year term in 1992. There To this end, the Rae administration introduced programs such as employment and pay equity. Pay equity was one of the programs maintained while many government services were subjected to budget restraint measures. 5 0 Jobs Ontario Training Fund, a $1.1 billion program over three years, was launched in 1992. Its goal was to assist the long-term unemployed who are on social assistance by providing a one-year training credit of up to $10,000 to an employer, half of which must be used to train the new employee. The fund would create jobs for up to 100,000 individuals over three years. The Rae government reported that this fund created over 24,500 new jobs in year 1 and another 21,500 jobs in year 3. The first 10,000 workers were working as vehicle assemblers at Chrysler and Navistar, as machinists at Linamar, as tailors at John Forsyth, as research technicians and chemists at Apotex and scores of firms across Ontario (Ontario, 1993b, 1994). 95 were seven centres, which brought together university researchers and private firms to undertake joint research in emerging sectors such as telecommunications, lasers, and space research. Life Long Learning, Transferability of Credits and University Restructuring The Council of Regents' report, Vision 2000 (Ontario, 1990), reaffirmed the mandate and role of CAATs. 1 Skolnik (1995) opines that this result was hardly surprising given the sector mandate of the review and the broad participation of sectoral interests. Nonetheless, the report recommended increasing levels of co-operation between the universities and CAATs, increasing student mobility between sectors (which would require the development of a government transfer guide), and increasing the number of articulation agreements between universities and colleges. However, university/college relations were not really resolved, and Royce (1997) suggests that the issues will remain until there is a single locus of responsibility for system-wide coordination and planning with necessary resources to carry out the role effectively. As part of Budget 1991, the Rae government announced the implementation of three key recommendations in Vision 2000. These included the establishment of a College Standards and Accreditation Council to ensure quality of programs across all CAATs, prior learning assessment to evaluate prior learning and experience as credits toward postsecondary credentials, and a feasibility study to examine innovative ways for colleges and universities to offer new credentials for advanced training.52 Even though a major theme of government commissions and reports throughout the 1990s was the need for greater coordination and planning, this need was not satisfied during the Rae administration. As a result of financial constraints both within the ministry and those that 5 1 Charles Pascal, then Chair of the Council of Regents and subsequent Deputy Minister of Education for the NDP, organized the process and established a Steering Commission composed of 33 individuals including educators from colleges, schools and universities, students, employers, labour and government representatives. 5 2 Subsequent studies include College to University Transfer Study (1992) and No Dead Ends (1993). 96 were imposed on the system, opportunities were missed for improvements in planning, coordination and accountability within the university sector. For example, after establishing a University Restructuring Steering Committee in 1992 to develop long-term strategies to make the university sector more responsive to life-long learning, the Rae government shelved the report because of fiscal constraints and government reorganization.53 As well, recommendations contained in two reports by the Ontario Council on University Affairs were not implemented because of financial constraints. The first O C U A report54 recommended the establishment of an independent external agency to monitor accountability and the second, a discussion paper, recommended establishing a province-wide quality review process of undergraduate programs.55 Some improvements occurred in the area of credit transferability between universities in Ontario, but credit recognition issues continued with respect to transferability between universities and CAATs. As a result of the Baker Report in 1992, Ontario universities agreed to a general policy for credit transfer.56 Since the Ontario Council on University Affairs approved the Council of Ministers of Education (CMEC)'s Protocol on the Transferability of University Credits in 1995, Ontario universities have complied with the protocol (Royce, 1997). However, the protocol pertains specifically to the national transferability of credits among Canadian universities for first and second year courses. The University Restructuring Steering Committee was co-chaired by Dr. Bernard Shapiro, Deputy Minister of Education, and Colin Graham, then Chair of O C U A . 5 4 The Taskforce on University Accountability chaired by William Broadhurst was created after audits of three universities proved inadequate. Its report, University Accountability: A Strengthened Framework released in 1993, recommended an institutionally based accountability framework and an independent agency should be established to monitor accountability. In 1995, the NDP government approved the establishment of the Education Quality and Accountability Office, but it did not fulfil its role. 5 5 This discussion paper, Sustaining Quality in Changing Times: Funding Ontario Universities, A Discussion Paper (Ontario Council of University Affairs, 1994), was prepared in response to Minister Richard Allen's (then Minister of Colleges and Universities) request for advice on how to establish a system of program review of academic quality for universities. 5 6 Also known as the Transfer of Undergraduate Course Credits Among Ontario Universities: Report and Recommendations (Ontario Council of University Affairs, 1992), chaired by Donald Baker, then Vice-President Academic of Wilfred Laurier University. 97 During the NDP regime, a number of major changes occurred. First, there were significant increases to the budgets of colleges and universities—Budget 1991 increased the overall budgets of colleges and universities by $190 million. Secondly, changes to the Ontario Student Assistance Program (OSAP) took place, as it received a funding increase of approximately $ 11 million. However, a year later, Budget 1992 implemented a savings measure, estimated at $ 10 million, by increasing the expected weekly contribution from students who had summer employment. Budget 1993 subsequently announced reforms to OSAP to assist 177,000 students, a 76 per cent increase from 1989/90, but involved the withdrawal of grants. Thirdly, changes to system landscape occurred. In 1992, Nipissing College was accorded degree-granting status and renamed Nipissing University. A year later, Ryerson Polytechnic Institute became a polytechnic university with specific powers to grant degrees only in areas of applied knowledge and research. Access and Funding Policy Under the Progressive Conservatives White (1998) opines that if the Rae government had introduced the Social Contract in Budget 1991 instead of in Budget 1993, the 1995 election might have brought a different result. Against conventional wisdom, the Progressive Conservatives, under the leadership of Mike Harris, rose to win the 1995 election with their platform, the Common Sense Revolution (CSR). 5 7 According to Courchene and Telmer (1998), it was the 1991 NDP budget that set the stage for the CSR's great appeal to the electorate. The Harris Tories won 82 of 130 seats in the legislature with about 45 per cent of the popular vote. The 21-page platform embraced neo-conservatism and Adam Smith's theory that government that governs least governs best. 5 7 The Common Sense Revolution was written by a group of young neo-conservatives such as Alister Campbell, Tony Clement, Tom Long, Leslie Noble and Mitch Patten who also ran the 1995 election campaign (White, 1998, p. 255). The key elements included: a 30 per cent provincial personal income tax reduction over three years, eliminating the deficit, balancing the budget, creating 750,000 new jobs and a reduction in government spending. 98 The CSR emphasized smaller government, lower taxes and a small-business perspective. More jobs was the element that appealed most to the electorate, and the Tories proposed to fulfill that promise by paving the way for further private sector job creation. This would be accomplished by restoring consumer and business confidence through cutting taxes, balancing the budget, and making government more efficient and effective (Ontario, 1996a). Like other conservative governments all over the world, the Harris Tories favoured a free market economy over government involvement, with government involved only to establish optimal conditions for the operation of free markets. To that end, it acted to repeal anti-business labour law, deregulate, remove red tape, and simplify government for businesses and employers. Consistent with this ideology, the Harris Tories made privatization an option for improving service delivery and established a special Cabinet Committee on Privatization during the first year of its first mandate (Ontario, 1996a).59 In the second year of its second term in office (the last year before Premier Harris resigned), the Harris Tories made it a priority to help the most vulnerable, as it was deemed a responsible thing to do and a duty of government (Ontario, 2001a). In the spirit of the Tory welfare state, Budget 2001 funded a number of new initiatives for people with developmental disabilities, abused women and their children, children and youth in institutions, hospitals, mental health centers and correctional facilities, as well as youth involved in prostitution. The postsecondary agenda for the Tories can be found in two key policy reports. The first, New Direction II-A Blueprint for Learning in Ontario (PC Caucus, 1992), advocates a Upon taking office, the Harris administration cancelled or reduced the Liberal-NDP Accord initiatives such as welfare benefits and employment equity. 5 9 While in office, the Harris administration went beyond the CSR to restructure institutions including reorganizing the delivery of health care, restructuring the provincial and municipal financial arrangements, school board financing and amalgamation, municipal amalgamation, and creating of the Toronto megacity. 99 smaller role for government in university affairs and financing, increased partnership funding, and increased student contributions. Overall, the Harris and Eves administrations appeared to put less emphasis than the two previous governments on the link between education and economic growth. Early in their mandate, the Tories appeared to focus more on private sector companies, in particular knowledge-based and R & D firms, as the engine for economic growth. At the same time, they recognized that in order to attract these companies to Ontario, there must be competitive advantages as well as human and physical capital present. The 1997 Budget Papers state that "the ability to generate and apply new knowledge is a scarce resource. Those jurisdictions that are able to provide the highly skilled people needed to compete in knowledge-and technology-based industries will attract new investments" (Ontario, 1997, p. 172). Similarly, the 2002 Budget Speech indicated, ...because we [Ontarians] live and compete today in a global, knowledge-based economy, postsecondary education is central to our future prosperity. It plays a critical role in improving Ontario's natural advantage - our highly skilled workforce and the diversity of our population with its contacts all over the world (Ontario, 2002b, p. 21). In 1997, a policy change in the secondary school sector created an urgent need to increase postsecondary spaces to accommodate the double cohort.60 Therefore government policies focused not only on R & D but also on innovatively expanding the postsecondary education system and assisting students in overcoming financial barriers without losing sight of private industry partnerships and market principles. The second key report was Excellence, Accessibility and Responsibility, released in December 1996 by the Advisory Panel on Future Directions for Postsecondary Education and chaired by David Smith, Principal Emeritus of Queens University. The mandate of the panel 6 0 In 1997, the province announced a new four-year high school program. By 2003, the first set of graduates of the new four-year program will graduate from high school at the same time as the last cohort of graduates from the old five-year program. The Ministry of Training, Colleges and Universities estimated that 78,000 additional students would be enrolled at colleges and universities by 2005/06 as a result of the double cohort. 100 was to review government policy pertaining to postsecondary education, specifically restructuring, rationalizing, eliminating and making cuts to the system. Prior to the release of the report, the government had cut $280 million from university operating grants in 1996/97. The report recommended restoring public funding, use of envelope funding, greater accountability from governing boards of institutions, differentiation among institutions, enhanced student financial aid, tuition deregulation, stronger support for research and innovation, focused incentives for the private sector, partnerships with universities and colleges, and affirmation of a parallel system of differentiated colleges and universities. The recommendations were generally well received by the postsecondary education community and formed the basis for subsequent initiatives by the Tory government, which were targeted at achieving its desired outcomes. In response, the Tory administration provided new funding, some of it in funding envelopes, and established new types of colleges and universities.61 Targeting Innovation, Research and Development The Harris and Eves administrations firmly believed that R & D and innovation were the keys to job creation and economic growth.62 They acknowledged that the province had a strong R & D foundation on which to build and, pursuant to the Blueprint for Learning, sought out greater private support for research and development in an attempt to increase the competitiveness and productivity of universities and research institutions. Rather than continue the previous Technology Fund, the Harris administration instituted a new $3 billion ten-year, competitive-based R & D Challenge Fund to support R&D. The intent of this fund was that 6 1 The first funding envelope was linked to enrolment growth of first-year undergraduate and second-entry professional and graduate programs. The second was based on graduation and employment rates. 6 2 Budget Papers 1997 (Ontario, 1997) linked R & D to economic success as follows: successful countries generally invest more in research and development than others. The United States, Japan, Germany, France and the United Kingdom, the high-income G5 countries, invest an average of more than five times as much of their economic resources in R&D as Turkey, Mexico, Greece, Portugal and Spain, the five lowest per capita income countries in the O E C D . 101 government (together with federal funds), the private sector, and universities and research institutions would each provide one-third of research funding. This design ensured that proposed research would meet a market test, evidenced by the willingness of the private sector to contribute to it. By contributing $500 million over ten years ($50 million a year), these funds would leverage federal funding from the Canada Foundation for Innovation and other granting councils, and enable Ontario universities to compete effectively for federal grants as well. In 2000/01 the government's contribution was doubled to $100 million. In addition, the Tories also instituted seven new tax changes in 1997 to make Ontario's tax system more competitive for R & D . These measures included: the Ontario Business-Research Institute Tax Credit that provided a 20 per cent refundable tax credit for qualifying business sponsored R&D performed by eligible Ontario universities, research hospitals and other non-profit research centers ; changes to the capital and the retail sales taxes associated with research and development; changes to allow firms to deduct the costs of acquiring new technology; and eliminating Ontario's tax on royalty payments for foreign technology, such as software, to foster the commercialization of new technology (Ontario, 1997).64 Starting in 2000/01, colleges, universities and research institutes received over $30 million annually for overhead costs of provincially funded research under a new Ontario Research Performance Fund. Starting in 2001/02, two Premier's Platinum Awards for research Other tax credits include: Sound Recording Tax Credit (1999), Ontario Computer Animation and Special Effects Tax Credit (1997), Book Publishing Tax Credit (1999), Ontario Interactive Digital Media Tax Credit (1998), Ontario Research Employee Stock Option Credit (1999), Educational Technology Tax Incentive (2000) and Cooperative Education Tax Credit (1996). 6 4 To ensure that postsecondary education graduates benefit, the Ontario Co-operative Education Tax Credit was instituted in 1996 as an incentive for businesses to hire postsecondary students enrolled in leading-edge technology programs. While the R & D Challenge Fund and other tax breaks would attract world-class researchers and R & D investment, and improve the quality of teaching and research at participating postsecondary institutions in Ontario, this tax credit would provide eligible businesses with a 10 per cent tax credit for providing on-the-job training for unemployed graduates from an Ontario postsecondary institution. The Harris Tories also took measures to ensure that knowledge-based industries have access to capital through private sector financial institutions and venture capital investments via tax incentives provided to financing institutions. 102 excellence would be provided by the province each year over the next six years to help Ontario universities attract and keep world-class senior researchers. Targeting Access to Learning In response to a forecast shortage of 42,000 computer science and engineering graduates, the Tory government provided $228 million in funding over three years to establish the Access To Opportunities Program (ATOP), and create 23,000 new spaces in 1998/99. Funding of $150 million over three years for 17,000 spaces was announced in Budget 1998, and another $78 million for an additional 6,000 spaces in Budget 1999. The perceived shortage was supported by the observation that in the last ten years, one out of every three jobs in Ontario was created in the knowledge and technology-based industries. To address shortages in other areas, Budget 2001 provided $12 million over three years to help foreign trained professionals, including engineering technicians, nurses and other health care workers and teachers, find employment in Ontario. Budget 2002 provided $50 million over three years to support collaborative degree programs in nursing education and $14 million over three years for the expansion of undergraduate medical school enrolment by 160 first year spaces. In Budget 1998, the government also announced the Premier's Excellence Awards program, offering $75 million over ten years to reward excellence in graduate studies in science and technology.65 The government's commitment rose to $85 million by 2001/02 for this program. To build research infrastructure, the Tories established the Ontario Innovation Trust ($250 million) and the SuperBuild Growth Fund ($742 million) in 1999/00. Budget 2000 announced a tripling of the Ontario Innovation Fund by adding another $500 million for research 6 5 The Ontario Graduate Scholarship was also enhanced and included 500 graduate scholarships in sciences and technology. Budget 2000 also doubled funding for the Work Study Program to fund free tuition for medical students who agree to practice in rural and northern Ontario, helping to alleviate physician shortages in those areas. 103 infrastructure, including cancer research facilities. The SuperBuild Growth Fund would not only provide investments to modernize the universities and colleges but also promote cooperation between colleges and universities through collaborative programming, partnerships and transfers between them. Budget 2000 added another $286 million (for a total of $1 billion) to the SuperBuild Fund ($1.8 billion including partner contributions) to support an additional 24 capital projects at universities and colleges, and create a total of 73,000 new student spaces.66 By 2003, the SuperBuild funding had
UBC Theses and Dissertations
Access to postsecondary education : a comparative study of British Columbia and Ontario Lee, Jacy S. H. 2006
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