COVID SHOCKS HIGHER EDUCATION. GOOD!

The COVID recession is having all sorts of effects on the economy, now even putting a university into creditor protection — the first in Ontario’s history. Sudbury’s Laurentian university announced Feb. 1 it was running out of cash to cover its payroll. The university will still offer programs to its students, but a financial plan will have to be put in place to satisfy creditors. Otherwise, it will go into receivership.

Not surprisingly, the faculty union came out swinging, criticizing Laurentian for a lack of fiscal transparency and the Ontario government for not bailing it out. A provincial rescue might make some sense if COVID lockdowns were the only culprit causing financial stress. but bailouts reward poor decision-making and can lead to further problems down the road. Which means any bailout should be conditional on major institutional reform. That might well involve expenditure cuts, but innovative revenue-generating programs that meet the market’s needs are also a possibility — an attractive one to governments that, short of cash given the pileup of pandemic deficits, won’t want to throw around money without good results.

Laurentian has a budget of $200 million serving about 7,000 full-time and 2,000 part-time students — an annual cost of roughly $25,000 per full-time student. In the past few decades, it expanded from its focused regional role into a comprehensive university with a barrie satellite campus and costly programs like architecture. It is one of the lowest-ranked universities in Canada with a graduation rate of only 72 per cent in 2019. (Maclean’s places it 45th out of the 49 universities it ranks).

Laurentian has been running structural deficits for several years due to high labour compensation, recent enrolment losses and debt-financed construction. For its fiscal year ending last April 30, it attributed $5 million in losses to tuition fee credit risk, a loss in ancillary fees, investment losses and a reduction in its credit line. Its vacation and employee benefit deficits doubled from 2018-19 to 2019-20 to $21 million. Its financial difficulties have already led to unpaid vacation days and suspended enrolment in 17 programs this year, including architecture.

None of this is good news. Laurentian plays an important role in northern Ontario, including educating many Indigenous students. How might it be saved? Any reform will have to address its programs and operational costs.

Although Laurentian is an extreme case, many universities in North America are facing financial pressures. Several doctoral programs, even at prestigious universities like Chicago, Pennsylvania and brown, are not taking applications this year since graduating students can’t find jobs. Canadian universities have lost many high-paying international students as a source of funding, and they may not get them back as more and more Asian students remain home in the future. Many universities are over-governed, with overhead costs accounting for a quarter of post-secondary education costs, according to Statistics Canada. each of many administrative layers creates its own committees and reports, stifling innovation with cumbersome rules and other obstacles to reform.

university and college reform should focus on reducing administration and encouraging entrepreneurship. A good example is at the university of Western Australia (UWA), whose vice-chancellor is the very entrepreneurial Amit Chakma, who from 2009-19 was president of Western university in London, Ont.

The focus of uwa’s reform is to reduce administration costs and break down bureaucratic obstacles to the introduction of more creative programs. How is it doing this? In my words, not theirs, it is eliminating the middle layer of administration — faculties — and giving greater budgetary responsibilities to schools, many of which are equivalent to departments in Canadian universities. For example, the Health Faculty no longer exists to oversee medical, nursing, dental and veterinary schools. research institutes are being elevated to schools to encourage interdisciplinary programs. business units are reducing administrative costs. In one unit of 100 employees, a fifth had administrative titles.

All this makes sense. In many universities, academic decisions would be better off decentralized, with an administrative core providing oversight. Common functions such as human resources and fundraising should be centralized to reduce costs. Faculties become unnecessary middle management. So far, the UWA has achieved $30 million in administrative cuts, identified another $28 million, and is looking for $12 million more, for a total of $70 million in savings. The real benefit is to make the institution more entrepreneurial and efficient by removing bureaucratic barriers.

As we come out of COVID, Canadian universities and colleges should adopt similar reforms. In Alberta some already are. Or are at least are going through the motions: The university of Alberta’s strategic plan to reduce the number of faculties morphed into creating a new administrative level — colleges — on top of faculties to centralize some functions. The university of Calgary, where I teach, is also developing “transdisciplinary activity centres” to co-ordinate activities and provide funding. To its credit, it aims to develop new revenue-generating programs. unlike UWA, however, it hasn’t yet focused on administrative overhang.

In fairness, universities are not entirely to blame. Federal and provincial regulations and reporting requirements have stifled innovation and force-fed university bureaucracy. Governments should deregulate business, yes, but they should also deregulate their own agencies.

As we come out of the COVID recession, universities and colleges need to take a hard look at their operations. If not, we will end up with more Laurentians down the road.