NOTES FOR SPEECH TO CANADA 2020 GROUP

Final Exam: The Urgent Need for a Bold Discussion About Canadas Universities

By David Naylor President University of Toronto

Ottawa, October 14, 2009

Check against delivery.

Final Exam: The Urgent Need for a Bold Discussion About Canadas Universities

Its an honour to be speaking to this distinguished and dynamic gathering. I had wondered if the reference to a final exam in the title might have brought back bad memories and scared more of you away. Happily not, I see. And of course its just a figure of speech designed to emphasize that this is not some professorial lecture I have as many questions as answers here, and Im looking forward to the discussion after we complete our dinner. Im especially delighted to see Dr Alex Himelfarb looking so happy and healthy. Mr Ambassador, welcome back. I suspect that in Italy, you havent missed Canada very much. But I shall say only that Canada has missed you.

Overview
Troubling signposts on the higher education landscape Where do our research-intensive universities stand? The business model of research-intensive universities A national strategy for post-secondary education? Broken telephone and the differentiation debate Where do we go from here?

The structure of this talk is simple, as outlined on the slide. Ill move quickly and try to avoid repeating aloud the data that you can read on the slides. Ive also set aside my related pre-occupation with the innovation economy, and focused quite narrowly on universities for this presentation.

Final Exam: The Urgent Need for a Bold Discussion About Canadas Universities

Last month the OECD released their 2009 version of an annual report entitled Education at a Glance. The number of Canadians who earn bachelors degrees is clearly below the OECD average and well behind many other nations.

The data on advanced degrees are also striking. About 1% of the population in the relevant age cohort graduate from university with a PhD or similar advanced degree, again below the OECD average, with many countries running far ahead of us. Analyses by the Institute for Competitiveness and Prosperity strongly suggest that we will lose ground economically unless these gaps are closed.

Final Exam: The Urgent Need for a Bold Discussion About Canadas Universities

Various provinces are expanding graduate enrolments, with Ontario leading the way. Where, however, is the national strategy to widen and deepen the talent pool across the country? Should we try to align federal and provincial spending in support of graduate enrolment growth, or is that constitutional tiger country?

Losing Ground

This chart compares the percentage growth in faculty and enrolment in Canadian and American public universities since 1987. The impact of this trend has become obvious: A rising ratio of students to fulltime facultyBigger classesAnd less personal interaction between university teachers and students. Not surprisingly, when the National Survey of Student Engagement is administered across North America, students at Canadian universities give their institutions significantly lower scores in a variety of dimensions than do students at US peer institutions. Yes, academic salaries have risen faster in Canada than some OECD nations. But differential salary growth accounts for only a small part of this dramatic shift in student-faculty ratios. Fundamentally, its about funding. Once upon a time, Canadas governments funded their publicly-assisted universities meaningfully better than American governments. Thats no longer the case. Overall funding per student has fallen behind in Canada from $2,000 more per student in 1980-81 to $8,000 less per student in 2006-07. That differential is biggest in Canadas largest province, and also, as youll see later, for research-intensive universities.

Final Exam: The Urgent Need for a Bold Discussion About Canadas Universities

There are other troubling sign-posts. Post-secondary enrolments are falling in Atlantic Canada. Last year, for example, President Wade MacLauchlan at UPEI advised his community that Nova Scotia universities had seen a combined first-year enrolment drop of 12.1% in a single year, while in New Brunswick first-year enrolments fell 8.3%. Ontario meanwhile faces a demographic wave that could boost demand for seats in universities and colleges by as much as 75,000 over the next decade.

Demographic Imbalance

What are we doing to foster inter-provincial mobility of students? And what exactly is the appropriate number of in-province undergraduate seats on a population-weighted basis? Let me keep looking east for a minute. I said on CBC radio a few weeks ago that, in many respects, the three Maritime provinces have an enviable system of universities. Dalhousie as a research-intensive flagship Regional comprehensive institutions with specific areas of research strength such as UPEI and UNB And, of course, a number of undergraduate-focused small universities that should be magnets for out-of-province students On that latter point, the US is known for small undergraduate colleges such as Swarthmore, Amherst, Williams, Middlebury and Wellesley all highly sought-after and highly reputable. These elite undergraduate-focused colleges in the US are privately-funded and well-endowed. Compared to Canada, however, they are also extremely expensive. Scanning Canada, these types of institutions are overwhelmingly concentrated in the Maritimes. And sadly, because of regional demographics, these excellent small colleges seem to be losing ground.

Final Exam: The Urgent Need for a Bold Discussion About Canadas Universities

Missing Persons

Not surprisingly, some Maritime institutions are looking to draw more international as well as out-of-province students. Thats a desirable trend nationally, so lets look at international student recruitment.

Education Destinations

123,901 International students (2008)

436,895 International students (2009)

In April 2009, Australia had 436,895 full-fee international students on student visas, more than three times higher than Canada. Small wonder that international education is the third largest source of overseas earnings for Australia, generating around AUS$12 billion in 2008 and supporting more than 125,000 jobs What accounts for the difference? Better weather certainly helps! But so does coordination. Australia is a federation like Canada. Unlike Canada, it has a national ministry with a higher-education mandate and a laserlike focus on building a coherent brand for overseas student recruitment.

Final Exam: The Urgent Need for a Bold Discussion About Canadas Universities

One last signpost A few years ago, the Chretien government introduced some reimbursement for the institutional costs of research. Sometimes misleadingly called overhead costs, or worse yet, indirect costs, these are real costs that all universities incur when they support research by faculty and students. In Europe these costs are reimbursed at about 48 cents on the dollar. The same is true in the UK. In the US, both NIH and NSF grants are covered with actual audited costs, which can run to 80 cents on the dollar for advanced bioscience and natural science grants, but average about 57 cents currently across all sites and disciplines.

ICR Formula in Canada

Based on the average funding received by university/college researchers from the 3 granting councils over the 3 previous years Coverage on: The first $100,000 per year = 80% The next $900,000 per year = 50% The next seven million per year = 40% The balance = up to an average rate of 20%, based on available funding

As the slide shows, the formula in Canada is perverse. The more successful the institution, the larger its loss will be in absolute terms. There is no other jurisdiction in the world that systematically penalizes success this way. Please understand that there are no meaningful economies of scale at work here. In fact, the inverse is true. Those institutions that have the biggest research budgets are most likely to be doing the types of research that have higher institutional costs. This unfunded mandate takes a serious bite out of about 20 universities coast to coast, many shown on the next slide.

Final Exam: The Urgent Need for a Bold Discussion About Canadas Universities

Perverse Incentives

Were all committed to research and proud to receive competitive federal grants, but lets not fool ourselves. The institutional costs of research have to be covered from somewhere. And that somewhere is the undergraduate classroom. Just how big is the bite at the countrys largest research institution?

Missing ICR: A Heavy Cost

University of Torontos rate of ICR coverage from the Federal Government = 19.7% 2009: U of T awarded $38.8m to cover institutional costs associated with federally sponsored research How would this compare to other common rates of coverage? European rate (48%) = $95m US average rate (57%) = $112m If U of T were in the USA, it would receive an additional $73.2m per annum to cover the institutional costs of federal research

Big enough to make life a lot better for a lot of undergraduate students. Bigger, in fact, than the pay-out from our endowment at peak in 2007.

Final Exam: The Urgent Need for a Bold Discussion About Canadas Universities

At this point, were starting to get into the mechanics of research university operations, so its a good time to shift gears. Youll probably have inferred that I believe we need to think harder about the overall plan of our post-secondary systems and raise all boats coast to coast. But unsurprisingly, I also believe we need to pay close attention to the institutions that presumably will carry a rather large load in dealing with the future needs of the innovation economy, not least graduate education. Let me start with a disclaimer. I dont believe that superior research performance means that a particular university is better than others. And I dont particularly like the word elite in relation to universities, because a big part of our role in a decent democratic society is to be springboards to equality of opportunity based on merit and motivation. Stronger research performance, however, does mean that a given university is better suited than others for educating larger numbers of research-stream graduate students and may well have advantages in some professional programs. Research universities, moreover, are also great places for academically-gifted undergraduates. They give young people exposure to some of the finest minds in the country, scholars who are redefining entire fields. And they offer a wide range of intellectual and extra-curricular opportunities for personal growth. That said, many undergraduates will do as well or even better in very different environments, including regional comprehensive and undergraduate-focused universities. Many US states weigh these realities, and try to clarify roles and responsibilities for universities. The most dramatic example is Californias three-tiered system. It features excellent community colleges, the California state campuses that offer undergraduate and professional-stream graduate degrees, and the University of California research-intensive campuses. There is carefully assured mobility across the tiers. The result of this differentiation is interesting. There are 11 publicly-assisted U Cal campuses with a strong research mandate serving a jurisdiction of 36 million people. The performance of those U Cal institutions speaks for itself. Berkeley alone has 7 Nobel laureates currently on faculty. More generally, faculty and researchers across the U Cal system have won 57 Nobel prizes, 24 since 1995, including 2 this year. In contrast, this year Canada has again been left to claim reflected glory because one of the US laureates in Medicine completed a baccalaureate in Canada and one in Physics was educated here at McGill to doctoral level before doing all his Nobel prize-winning work in the US. Its a bit depressing. The good news, however, is that we do compete very seriously on the world stage. These are this years assessments of overall science and social science publication output and impact from a neutral third party the Higher Education Evaluation and Accreditation Commission of Taiwan.

Taiwans Take

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The picture gets more interesting when we break the data down by discipline.

Ive added two universities to the usual 13 research-intensive suspects because they highlight a key point in any debate about the future of our universities. The University of Guelph and the University of Saskatchewan as pictured here are global players in agricultural science. Youll also see specialization at work within the G13 for example, the University of Waterloo competes well in engineering. Those of us who favour a more strategic and differentiated approach to university funding would strongly advocate investing in such foci of excellence wherever they are found. More recently the Times Higher Education Journal has held its annual beauty contest among global universities. Canada is holding its own.

Peer Review by 9,386 Professors

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McGill has again led Canada in overall score, sitting 18th worldwide. U of T again leads the academic reputation assessments, sitting 9th globally. And as the data on the slide indicate, the peer survey results show that many Canadian institutions are perceived to be doing very well in specific disciplines. On the other hand, as countless observers have noted, the real trend of interest is the slow but steady ascent of universities in Asia.

Asia Rising?

While the Chinese institutions dont seem to be moving very fast, let me offer two warnings. First, I think here of Maos perspective on Americas global success, about which he is reputed to have said Its too early to draw any conclusions.1 China is a very patient giant. Second, I have visited top Chinese institutions such as Beijing, Tsinghua, and Shanghai Jiao Tong. They are much smaller than most Canadian research universities, with 50% graduate enrolments. They also pick the very top undergraduates from among millions of candidates who undergo national standardized examinations at the end of high school. Those entering undergraduates in turn are put through extremely demanding programs. All students live on campus thats a requirement. The campuses are large and extremely well-equipped. And their student-faculty ratios are dramatically lower than our strongest research-intensive universities. How did this happen? Because the Chinese government has explicitly embraced differentiation of universities, pushing 10 institutions out of thousands to compete globally while supporting another 90 to be national innovators and because the major hub cities in China also use their substantial revenues to support universities.

Since preparing these notes, Ive been advised that the paraphrase is apocryphal and almost certainly derived from Chou En-lais comment on the French Revolution. Fortunately, the point stands given the proper source!
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It turns out, in fact, that those leading Chinese public universities are remarkably similar in size and graduate composition to some of the best known US private universities. So, lets come back to North America and dive deeper into the business model of research-intensive universities.

A glance at this slide shows that none of our public universities come close to the Chinese model. In fact, most of our institutions with the exception of Dalhousie and Queens, are big. They are big because they have big undergraduate enrolments. In fact, you can readily add York University and the Universities of Manitoba and Saskatchewan to this list because they also have large undergraduate enrolments. Now, lets add the US research-intensive institutions to this picture.

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Its a cluttered slide, I know, but all you need to do is glance at the left-hand side, and youll see instantly how the US private institutions set themselves apart with their massive per-student funding advantage. The top Chinese universities would fit very nicely here. Now, let me confess that U of Ts position on the far right involves some dramatic license on my part. Remember that we have three campuses. There are about 17,000 full-time equivalent students on our newer, primarily undergraduate campuses in Scarborough and Mississauga. The US public comparators involve the most graduate-intensive campus in multi-campus state systems. Thus, our original St. George campus is actually the appropriate comparator for the US universities shown here. Displaying that campus in isolation would line Toronto up very closely with several US public institutions in the right-sided cluster.2 But what matters more is the fact that theres lots of overall size alignment across the board between US publics and Canadian research-intensive universities. Smallish, biggish, or really big, there are peers in overall enrolment. Where the peers differ across the border is in the proportion of graduate students. The US schools, ceteris paribus, are more graduate intensive. And thats where we come right back to the issue of funding models. I said earlier that Canadian universities had all lost financial ground to US public universities over the last two decades. The biggest gaps, however, have emerged for our research-intensive institutions.

Institutional Revenue per FTE

This slide shows funding for the University of Toronto compared to two of the major public research universities in the USA UCLA and the University of Washingtons flagship campus in Seattle.

Intriguingly, the graduate-intensity of the St. George campus is partly dependent on the newer campuses, both because of revenue flows and because of the role of professors on those campuses who supervise graduate students on the St. George campus.
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These comparisons suggest that Canada has inadvertently created a funding model that penalizes universities in lockstep with their research-intensity and the proportion of graduate and professional education that an institution undertakes. The specific funding differences are clear. Federal funding is the biggest factor, but state appropriations in California are also dramatically higher. Encouragingly, tuitions are not a big part of the total funding differential. These findings can be generalized for all of the so-called G13 in Canada.

Institutional Revenue per FTE

Here weve done a soft-ball match-up not the top research-intensive public universities in the US, but a wider set of comprehensive public institutions that have health science faculties, or at minimum, some strength in science, technology, engineering and mathematics. Again, federal and state funding is a meaningful part of the Canadian-US gap. Before summarizing, let me pause to put a few major caveats on the table. First, faculty and staff at all of Canadas universities are well aware that these are tough economic times, and most of us feel very fortunate to be securely employed and well-compensated. Second, big or small, Canadas universities have undertaken a variety of innovative steps to compensate for budget pressures and staffing shortfalls. Third, contrary to some popular mythology, faculty members at universities across Canada have a strong commitment to undergraduate teaching. At the University of Toronto, for example, we expect top scholars to do their fair share of undergraduate teaching. Scores of endowed chair-holders, Canada Research Chairs, and major research prize-winners in Toronto can be found teaching undergraduates with verve and enthusiasm.

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Now, to summarize: The prevailing business model in Canadian universities relies unduly on underfunded undergraduates to underwrite underfunded research and underfunded or, in some provinces, unfunded graduate students. Its simply not sustainable. At this point, with dinner waiting, let me start turning the discussion back to you. Ill do so by revisiting briefly the so-called Big Five controversy of the summer and early fall. What an all-Canadian tempest in a teapot. And what a dramatic example of broken telephone.

Broken Telephone (Modern Version!)

This spring, the heads of five institutions that account for a substantial amount of the research and graduate education in Canada had a conversation with each other about the ongoing challenges facing our institutions, other research-intensive institutions, and universities coast to coast. For reasons you will now understand, our assessment of the higher education scene was unsettling. One of our number approached Macleans to set up a videoconference. I think Paul Wells and the Macleans team did a very reasonable job distilling out our concerns, and they profiled my core views accurately. But then the fun began

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Exam Question
Indicate which of the following best completes the sentence: All is fair in 1. 2. 3. 4. 5. Love War Journalism Academic politics All of the above

The media had a field day, as other university leaders came rushing forward eagerly, apparently seeing an opportunity to harpoon the big whales and get some positive publicity. Editorialists fired lightning bolts, defending their local institutions. Of course, once the dust settled, a few members of the G13 realized that, as Indira Samarasekera had said in the Globe and Mail, our concerns were very salient to at least 20 to 25 institutions coast to coast and belatedly started to speak out on the other side of the issue. Indeed, reading a transcript of the Macleans videoconference highlights the scope of the misinterpretation. First, there was no concrete proposal, rather an airing of concerns and discussion of some of the strategies that might mitigate them. (Yes, group therapy is obviously perilous with journalists in attendance!) There was strong support voiced for primarily undergraduate institutions, and an urging that we needed more of them. Some reports to the contrary notwithstanding, there was never a suggestion that other comprehensive or research-intensive universities should abandon their graduate programs and their research portfolios to become undergraduate-only institutions. I understand that university presidents are not perceived to be the sharpest tools in the academic shed, but I do not understand how colleagues or reporters could assume that five seasoned academic leaders would propose such an idiotic concept. That, however, wasnt the end of the game of broken telephone. We had aired some concerns about the politicization of research funding. We expressed sincere appreciation that growth in core research funding at the federal and provincial levels had allowed meaningful diversification of the system, and we urged that this emphasis on excellence through peer review should continue and be intensified, along with some clarification of mandates again based on adjudicated excellence. This position, amazingly, was also turned upside down in the secondary media coverage. Now we were ganging up to steal research money from smaller universities, and claiming an entitlement to funding based on size or prestige rather than competitive merit.

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It was somehow fitting that one of my favorite columnists accused us of proposing a bad idea, badly presented. Badly presented it surely was, but at least I can affirm that there was no one bad idea because we simply werent that organized!

Mums the Word

A slowly-growing list of things Canadians cant talk about 1. Universal Healthcare 2. Fiscal Federalism / Equalization 3. A Systematic Approach to Modernizing Universities

For a while, it seemed that we were about to add debate about our universities to the growing list of topics that Canadians cannot raise without outbreaks of mass hysteria. There is, however, a reasonably happy ending, or more accurately, a happy beginning to this story, because Paul Wells and the team at Macleans have indeed started a debate that is overdue. I am struck that many colleagues in leadership roles at universities across Canada, having vented their concerns, are willing to acknowledge that it would be useful to clarify who is supposed to do what, as long as all boats rise and ongoing institutional and faculty creativity isnt stifled. I think there is belated recognition that we need major research universities with a broad graduate education mandate, exciting regional innovators with foci of global excellence like the Universities of Saskatchewan and Waterloo, and undergraduate-focused institutions like Acadia or St. Francis Xavier that can become our answers to Swarthmore or Amherst. Above all, I think the debate has again highlighted some major challenges in the core financing of our nations universities.

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In closing, and here I am being mischievous, please remember that, after all the distortions and heated denunciations of the musings of the so-called Big Five this summer, something very interesting happened. The Globe and Mail ran an on-line poll that drew over 11,000 responses. The question posed in that poll is shown on the slide.

Globe & Mail Poll

August, 2009

Now, as I said earlier, the word elite in the question leaves me cold, but the results of the poll are not exactly equivocal. 63% of respondents voted in favor, a result that has about a one-in-a-million chance of being a fluke. Every majority-hungry politician in this town would love those numbers. And that, among other reasons, is why I am confident that the debate about universities in Canada is far from over. Thank you for your kind attention, and I look forward to the discussion after dinner.