Understanding University Funding

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1 Understanding University Funding Jamie Graham Registrar and AVP, Institutional Planning Brad MacIsaac AVP Planning & Analysis, and Registrar

2 Where does Funding Come From Total Revenue Ontario $13.1B Other 20% Other Ont Funding 4% Student Fees 38% MTCU Funding 27% Federal Govt 11% Source COFO

3 Where does Funding Come From Total Revenue Toronto $3.3B Other 24% Other Ont Funding 1% Total Revenue Nipissing $79M Other 4% Other Ont Funding 5% Student Fees 35% MTCU Funding 45% Student Fees 45% MTCU Funding 20% Federal Govt 16% Source COFO Source COFO Federal Govt 5%

4 Where does Funding Come From Operating Fund Ontario $8.8B Other Ont Funding 2% Other 6% Student Fees Domestic 36% MTCU Funding 40% Student Fees Intl 10% Source COFO Ancillary Fees 6%

5 Where does Funding Come From Operating Fund Toronto $1.8B Other Ont Funding 2% Other 6% Operating Fund Laurentian $131M Other Ont Funding 2% Other 6% Student Fees 38% MTCU Funding 34% Student Fees 58% MTCU Funding 54% Source COFO Source COFO

6 Average Revenue per FTE COU calculations based on Canadian Association of University Business Officers (CAUBO) and Statistics Canada Postsecondary Information System (PSIS) data.

7 Historical Contributions to University Operating Revenues Source: OUSA, Issue Brief: Government Underfunding.

8 Government Tuition Fee Policy Program Type Arts & Science and Other Programs Maximum Allowable Fee Increase First Year Program Year Continuing Years 3.0% 3.0% Professional and Graduate Programs 5.0% 5.0% (start in or after 13/14) Institutional Average Tuition Increase Cap 3.0%

9 Undergrad Domestic Fee Comparison ( ) Arts and Science Fees: High $ 6,220 Low $ 5,880 Average $ 6,160 Commerce Fees: High $ 24,900 Low $ 6,220 Average with diff $ 10,190 Average without diff $ 7,750 Engineering Fees: High $ 13,620 Low $ 7,750 Average with diff $ 10,420 Average without diff $ 9,430

10 Graduate Domestic Fee Comparison ( ) Arts and Science Fees: High $ 10,220 Low $ 4,790 Average $ 7,880 Engineering Fees: High $ 12,860 Low $ 7,540 Average with diff $ 9,040 Average without diff $ 8,460

11 Undergrad Int l Fee Comparison ( ) Arts and Science Fees: High $ 38,460 Low $ 18,280 Average $ 22,260 Commerce Fees: High $ 42,140 Low $ 18,280 Average with diff $ 26,020 Average without diff $ 22,400 Engineering Fees: High $ 43,540 Low $ 20,750 Average with diff $ 28,520 Average without diff $ 24,800

12 Graduate Int l Fee Comparison ( ) Arts and Science Fees: High $ 24,860 Low $ 16,760 Average $ 19,010 Engineering Fees: High $ 43,540 Low $ 17,850 Average with diff $ 23,640 Average without diff $ 21,650

13 Ancillary Fees The ministry restricts the conditions under which additional fees may be imposed upon students. Compulsory ancillary fees must met certain criteria to be valid: Be non tuition related Be approved by BoG Be announced prior to collection in published fee schedule in sufficient detail Meet Inst Ancillary Fee protocol

14 Ancillary Fees Undergraduate Arts & Science, 2015 Collected by and Retained by Institution Undergraduate Compulsory Ancillary Fees Collected on Behalf of Student Govt High $805 $923 Low $224 $436 Average $584 $568 Total Highest Total $1,476 Lowest Total $800 Average Total $1,058

15 Government Grants Ontario universities are funded through an allocation model developed in 1967.» While modifications have been made over the years, changes were often layered on, without fundamentally changing the core principles or the structure of the model. The ministry publishes a manual which governs the distribution of government operating grants. It sets out funding formula, specific types of grants, which institutions are eligible, which programs are eligible, restrictions, and reporting requirements.

16 Overview of the Current Model Total Projected Funding in : $3.5 billion Core Model: Enrolment Based Funding Undergraduate Accessibility Grant $194M, (6%) Performance Funding General Quality Grant and Performance $154M (4%) Special Purpose Grants Basic Operating Grant $2,623M, (75%) Graduate Expansion Grant $122M, (3%) Medical & Nursing Related $150M, (4%) Teacher Education $61M, (2%) Access (First Gen, Bilingualism, Aboriginal, Disabilities), $100M, (3%) Institution Specific Grants, $39M, (1%) Northern Ontario Grant, $16.0M, (0.5%) Other Grants, $41M, (1%) MTCU

17 Undergraduate Funding Overview Simple Concepts Basic Operating Income Formula Fees Basic Income Unit Corridor Funding (includes growth to and is full BIU values) Growth above the corridor is funded from a fixed pool of funds allocated to the growth for the entire province and may be at a lower value than corridor funding

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19 Basic Operating Income BOI/BIU $ 5, $ 5, $ 5, $ 5, $ 5, $ 5, $ 5, $ 5,363.06

20 BIU = FTE*program weight Year 1 Year 2 Year 3 Year 4 Total BA BComm/ BEd BIT BASc & BSc & BHSc BEng & BScN

21 Calculating Government Grant Simplified Example: Bachelor of Science BOI/BIU = $5, YEAR 1 YEAR 2 4 BIU Weight = 1 BIU Weight = 2 Standard Fee = $2,362 Standard Fee = $2,362 Grant = 1* = $3,001 Grant = 2* = $8,364 Upper years are worth 2.8 times year 1

22 Funding Formula Overview March 2015 MTCU launched an open and transparent consultation on university funding reform, based on achieving the following principles: Enhanced quality and improving student experience. Support for the existing differentiation process. Financial sustainability. Increased transparency and accountability. The scope of the consultation is the allocation of MTCU operating grants, which totaled $3.5 billion in Out-of-scope items for the consultation included tuition, collective bargaining, pension reform and adequacy of funding. The Final Consultation Report Focus on Outcomes, Centre on Students: Perspectives on Evolving Ontario s University Funding Model was released December This report outlined the results of the consultation and advice to the system about moving forward on a new funding model.

23 Why Change? The current model is focused on one activity (enrolment) and does not meaningfully reflect other significant institutional activities, research or student outcomes, or teaching quality. Although some grants are insensitive to enrolment, it does not have a dedicated revenue stabilizer for universities that may face declining enrolment. It is complex more complex than is necessary to provide predictable, equitable funding. Investments and incremental funding supports are often embedded in a number of different grants making it difficult to assess equity and effectiveness. It is based on a total revenue approach, which has become outdated. Removal of archaic features, such as formula fees (proxies for tuition revenue), would simplify the model, and improve transparency and accountability.

24 Key Strengths of Current Model Credible with the institutions it serves Predictable funding; responsive to changes in enrolment and program mix; and reflects sector accepted proxy for differences in program cost. Has been an effective tool in supporting the access agenda. It includes performance based funding. It includes funding for government priorities:» Students with Disabilities» First Generation Students» Aboriginal Students» French Language Education Itprovides funding for sector wide initiatives (such as credit transfer, Ontario Online Initiative, etc.)

25 Challenges with Current Model It s complex more complex than is necessary to provide predictable enrolment and performance based funding.» Investments and incremental funding supports are often embedded in a number of different grants making it difficult to assess equity and effectiveness. While some components of the funding model are not updated to reflect actual enrolments (for example, the Basic Operating Grant). Thecurrent model does not have a dedicated revenue stabilizer for universities that may face declining enrolment. Primarily focused on one activity (enrolment) and does not meaningfully reflect other significant institutional activities (e.g. research) or outcomes. Differences in Per Student Funding Levels: Range of funding provided per student across institutions and programs reflects a combination of institutional decisions, as well as government decisions, that got crystalized over time.

26 Challenges of Current Model The total revenue approach is no longer meaningful post tuition deregulation. Removal of archaic features, such as formula fees, would simplify the model, improve transparency and accountability Tuition Fee Policy Environment: From 1960s to mid 1990s, formula fees were a reasonable proxy for tuition revenues and allowed the Ministry to run a total revenue model for the university sector. When tuition was deregulated in 1996, institutions were allowed to set tuition levels. This resulted in a wide variation in the tuition levels charged for the same program across the system.» The government provides the same level of grant funding for students in any given program even if the tuition levels vary for example, University of Toronto charges $30,710 in tuition for first year law students, while the University of Ottawa charges $8,000, while both schools get the same amount of grant funding.

27 What MTCU has Learned Quality and Student Experience Perception exists that teaching quality needs improvement, but little consensus on whether this is quantifiable, or what should be done to address it. Debate exists on how best to improve labour market preparedness for undergraduate students (learning outcomes vs. discipline-specific knowledge). Enrolment and success of at-risk students should be the focus of accessibility initiatives, while maintaining general enrolment growth. Financial Sustainability The current funding model will contribute to vulnerability of institutions with declining enrolment, but reallocations may not fully address financial challenges. Universities are managing operating budgets through enrolment growth, economies of scale and teaching efficiencies. Differentiation There is increasing acknowledgement of the benefits of moving away from one-size-fits-all approach to university funding The Strategic Mandate Agreements are broadly recognized as the Ministry s tool to enhance differentiation. System acknowledges the government s stewardship role, but is uncertain of the Ministry s coordination and implementation capacity. Transparency and Accountability A large volume of data on universities exists, but is not all transparent, validated, and made relevant to the public Increased transparency in some key metrics may be an effective and efficient strategy to advance policy goals.

28 Preliminary Model Directions Based on consultation feedback and some initial direction from government. A reformed funding model should: Apply an outcome based policy lens for all investments. Move away from a one size fits all funding model by utilizing the SMA process or other levers to support similar types of universities with similar funding approaches. Move forward on an enhanced data and reporting strategy. It is expected that the model will remain distributive. Reallocation of funding within the system will be considered where significant progress on policy objectives is possible. A multi year phase in approach, or transition support may be required in order to maintain stability within the system.

29 Performance Based Funding A large number of jurisdictions are looking at performance based funding with a view to create funding allocations that strike a balance between funding inputs (key cost drivers) as well as improving outcomes.» Asoftheend of 2013, 22 US states had some form of performance funding in place, 7 states were in the process of introducing a form of performance funding, and 10 states were initiating discussions.» Based on current funding tied to performance and outcomes, Ontario is comparable to or ahead of many other North American jurisdictions. Performance Funding Range 0-2% of Overall Funding Arizona (<1%) Illinois (<1%) Washington (<1%) Massachusetts (<1%) Oklahoma (approximately 1%, will grow as future funding growth to be tied to performance) South Dakota (1%) North Carolina (up to 2%) Performance Funding Range 2-5% of Overall Funding Missouri (2-3%) Pennsylvania (2.4%) Michigan (3%) Ontario (4%) New Mexico (5%) Ohio College System (5%) Minnesota (5%) Montana (5%) Performance Funding Range Greater Than 5% of Overall Funding Indiana (6% in 2014, will increase to 7% in 2015) Arkansas (5% in , growing in 5% increments per year to max at 25% of funding in ) Nevada (5% in 2015, growing to 20% by 2018) Texas (10%) Alabama (15%) Colorado (25%) Louisiana (25%) Ohio University System (100% based on course completion, with degree completion component being phased in) North Dakota (transitioning to 100% of funding tied to credits completed) Tennessee (100%) Mississippi (100%)

30 Performance Based Funding Two grants in the University Funding Model, are intended to support accountability and incent focus on performance and outcomes (total of $154 million).» General Quality Grant: Allocates $131 million to universities that successfully report on their Multi year Accountability Agreements (MYAA), which includes performance indicators related to access, quality and accountability. MYAAs were created to increase focus and transparency regarding class size, student satisfaction and retention. Once a satisfactory MYAA report is received, the funding is released. Each institution s allocation is determined by the share of program weighted enrolments.» Performance Funding: Allocates $23 million to universities where key performance indicators exceed system benchmark. Key Performance Indicators used to determine funding are: Graduation rate; Employment rate six months after graduation; and Employment rate two years aftergraduation. This is the only truly outcomes based funding component of the current university funding model.

31 COU s concerns with model current funding weights for some programs are much lower than actual costs for example, in studio-based programs. funding level for each BIU in basic operating grants is lower than other universities funding level for each BIU. differentiated or narrow range of programs create difficulties for sustainability, since funding weights for these programs are relatively low and their mix of programs does not allow funding and cost cross-subsidization that is possible in other universities. funding model should be adapted to provide greater support for French-language, Aboriginal education, and to recognize regional relevance model does not recognize escalating cost due to inflation funding model should be adapted to provide greater support for research excellence and graduate education.

32 OCUFA concerns with model The model provides no mechanism for ensuring that the amount of funding each institution receives is adequate to deliver high-quality education. Currently, the funding formula is distributing a shrinking pool of public funds At its heart, performance funding proposes to improve quality by taking funding away from struggling institutions precisely when they need it most.

33 QUESTIONS?

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