sub 2003 finance

2 Canadian Federation of Students

Canadian Federation of Students

House of Commons

Standing Committee on Finance

Submission to the

September 2003

Canadian Federation of Students Page 1

INTRODUCTION

Canadians have long seen our system of post-secondary education as a vehicle for socialopportunity. Since the end of World War II,access to university and college has formedthe foundation of equality of opportunity. Theexpansion of opportunity at Canadianuniversities and colleges was a direct result ofsubstantial and sustained public investmentbeginning in the 1960s. Prior to the mid 1960saccess to education in Canada was definedalmost exclusively by gender and income.That changed because the federal governmentmade access to education a fiscal priority.

This history is a useful addendum to theCommittee’s deliberations because it is theposition of the Canadian Federation ofStudents that the federal government hasretreated from its leadership role inguaranteeing access and presiding over theretrenchment of a system of post-secondaryeducation that exacerbates rather thanmitigates social divisions. Throughout thisbrief, we will offer evidence that federal

funding cuts to post-secondary education andshortsighted policy initiatives areundermining access to education for lowincome Canadians.

In addition to reviewing the academic andstatistical literature on access and costs, wewill assess federal government policyinitiatives in the context of those currentlydenied access to college and university. Indoing so we will link the policy challenges ofaccess to education to the growing gapbetween the rich and the poor in Canada. Wewill also demonstrate how the drift awayfrom core funding toward boutique programshas undermined access. In particular we willsuggest that a massive expansion of taxcredits has supplanted the federalgovernment’s ambition to promote accessamong low income Canadians. We will alsore-iterate our concern that, in practice, theMillennium Scholarship Foundation has hadlittle or no effect on student debt. Worse yet,the Foundation has embarked on a researchproject designed to deny that tuition fees andstudent debt undermine the ability of low

Let’s be clear about the effect of unsustainable cost and the resulting debts on individual students.Wherever tuition goes down, enrolment goes up. And where does the increase in students comefrom? From those with less money. In other words, the lower the fees, the more egalitarian thesociety. The lower the fees, the more we are able to release the genius of the citizenry as a whole.And that genius, that collective unconscious is the key to a successful democracy.

John Ralston Saul


income Canadians to attend college oruniversity. In addition to being well outside ofits stated mandate, the Foundation’spolitically tainted research project calls intoquestion the federal government’scommitment to solving the long standingproblem of student debt and rising tuitionfees.

In our examination of the Canada StudentLoan Program we make several tangiblerecommendations as well as pointing the waytowards a long-term vision for studentfinancial assistance in Canada. Finally, we willexamine the federal government’s recentinitiatives in research and offerrecommendations. Our recommendations areguided by the need to protect academicfreedom against some of the perniciousconsequences of public-private partnershipsin research.

FINANCIAL BARRIERS TOPOST-SECONDARY EDUCATION

The data is clear that income rather thaninitiative is determining access to post-secondary education in Canada. Though theMillennium Scholarship Foundation andmany university presidents attempt to deny acausal link between family income and thecost of post-secondary education, the numbersare stark:

Statistics Canada’s study, Participation in Post-Secondary Education and Family Income, reportsthat those in the highest quartile of income aretwice as likely to attend university. In a laterstudy Statistics Canada controlled for ruralresidency and found that the high incomeearners in rural Canada were 5.6 times morelikely to attend university than those in thebottom income quartile. Only 18.8% of 18-21year olds from families in the lowest incomequartile, attended university between 1993and 1998, whereas 38.7% of those from thehighest income quartile attended universityduring the same time period.

Statistics Canada’s recent Youth in TransitionSurvey documented the fact that 72% of thosewho faced barriers to post-secondary

education listed financial reasons as thenumber one barrier.

A historical study undertaken by theCanadian Association of University Teachers(CAUT) entitled Access Denied shows thatpost-secondary education is less affordabletoday than at any time in the last sixty years.The report examines changes in tuition feesfrom 1857 to 2002. When fees are adjusted forinflation, undergraduate university studentstoday are paying more than at any other timein the past century.

The study measures how affordableuniversity education is today compared withprevious periods by plotting the number ofhours of work (at an average carpenter'swage) it would take to pay for one year oftuition fees. By this account, it takes morehours of work to pay for tuition fees todaythan at any time since 1940.

CAUT also demonstrates that the decline inaffordability is felt most acutely by those atthe lowest end of the spectrum. A studyentitled Out of Reach: Trends in HouseholdEducation Spending, argued that “the impact ofhigher fees [is] most discernible in terms ofexacerbating inequalities in access”. Between1991 and 1998 the real income and buyingpower of Canadians with the lowest 20% ofafter-tax income declined. Consider then thatin 1991 families in this category would have toearmark 14% of their household income topay tuition fees. By 1998 that amount hadincreased to 23%, which is actually an increaseof over 60% once coupled with the decline inbuying power. This conclusion is alsoconfirmed by Statistics Canada’s 1997Education Quarterly Review that reports a five

1982 1992 2002

Arts $1,517 $2,131 $3,561

Dentistry $1,909 $2,659 $9,245

Law $1,531 $2,136 $4,783

Medicine $1,812 $2,551 $7,681

Engineering $1,595 $2,211 $3,697

Table 1 - Average Tuition Fees 1982 - 2002 (Year 2000$)

Source: The Canadian Association of University Teachers


percent decline in median family income inthe 1990’s and a startling 21% drop in theaverage employment income of those betweenthe ages of 21 and 24 during the same period.

Studies conducted by individual universitiesexamining the effect of tuition fees on theaccessibility of professional programs havecome to similar conclusions. The Departmentof Epidemiology and Biostatistics at theUniversity of Western Ontario undertook astudy on the accessibility of Western’s medicalschool in the years immediately following thederegulation of tuition fees in Ontario. Thisstudy was conducted over a four-year periodto determine the effect of steep fee increaseson the characteristics of new students. Thestudy examined participation rates by socio-economic status and documented a dramaticdecline in participation rates from low-incomefamilies by the fourth and final year of thestudy. In the first year examined, 17.3% ofstudents in medical school came from homeswhere family income was under $40,000. Inthat year, students were paying the regulatedtuition fees of approximately $4,000. By thefourth year of the study, when tuition fees hadrisen to over $10,000, only 7.7% of studentswere from homes of family income of lessthan $40,000. As a result of deregulatedtuition fees, there was 50% decline in theparticipation of low-income students.

In the September 2, 2003 edition of theCanadian Medical Association Journal, theeditorial pages focused on access and medicalschool tuition fees. Based on recentenrolments, the authors made the case thatfewer and fewer low-income students will beable to afford medical school. The editors alsoraised the concern that high fees willexacerbate the divide in medical servicebetween rural and urban communities. Withdebt levels in excess of $100,000, students willinvariably look to lucrative urbanappointments. The editorial also attributedthe dramatic drop in medical school graduatespracticing family medicine to expectedstudent debt levels.

This evidence becomes more worrisome whenit is viewed in the context of recent data onthe growing gap between the rich and the

poor in Canada. Statistics Canada’s 2001census report showed that the income of thosein the bottom quintile remained stagnantthrough most of the 1990’s while families inthe top one tenth of income made substantialgains. These findings are corroborated byother Census data that found that those underage thirty are earning substantially less, onaverage, than they did in 1980. This statistic istroublesome on two levels: first, it means adecline in disposable income for those facingtuition fees that increased by 130% in the1990’s. Second, for those lucky enough toattend college or university this income datashows that they are likely to experiencedifficulty paying back mortgage-size loans.Thus, Canada has the most indebtedgeneration in its history facing a real declinein their income. The same study also reportsthat immigrants to Canada saw a startlingdecline in income during the 1990’s. Given thesocio-economic data outlined above it is clearthat the federal government’s rhetoric aboutan inclusive system of post-secondaryeducation is not matched by the reality ofworking Canadians. We now have a clearsocial divide when it comes to access to post-secondary education. Furthermore, most ofthe research on the issue suggests that thedivide is likely to get worse without strategicpolicy interventions from the federalgovernment.

The most recent data from Statistics Canadasubstantiates the fear that access is nowdetermined by soci-economic status. In areport released in September 2003, entitledAccess, Persistence, and Financing: First Resultsfrom the Post-Secondary Education ParticipationSurvey (PEPS), researchers document an 83%participation rate for young people (aged 18to 24) whose estimated family earningsexceeded $80,000. Those from lower socio-economic strata had progressively lowerparticipation rates. 67% of youth from familiesearning between $55,000 and $80,000 hadsome post-secondary education background,and only 55% of youth from families earningless than $55,000 had some college, university,or CEGEP experience. The study alsoaugments an earlier study which shows thatonly 19% of families earning under $30,000


per year are able to save for a child’seducation. The study estimates the mediancost of one year of post-secondary educationat $11,200. In addition to amplifying theinequities of the Registered Education SavingsProgram, this data re-enforces the necessity ofneeds based grants and a national strategy ontuition fees.

RECOMMENDATION #1 - The federalgovernment should scrap the MillenniumScholarship Foundation and theRegistered Education Savings Plans anduse the funds to implement a nationalsystem of needs-based grants.

RECOMMENDATION #2 - The federalgovernment should, in consultation withthe provinces, develop a national strategyon tuition fees that includes a Post-Secondary Education Act.

CANADA STUDENT LOANSPROGRAM

The Canada Student Loan Program (CSLP)currently serves over 360,000 studentsannually. As mentioned earlier in this brief,student debt hovers close to $25,000. Giventhe upward pressure on tuition fees, it is theview of the Canadian Federation of Studentsthat a primarily loans-based system is notsustainable. The CSLP was designed in 1964to provide a small supplement to those whocould not afford the up-front cost of a post-secondary education. From its inception, theProgram assumed relatively low up-front userfees and the existence of grants at theprovincial level. Since the early 1990’s,however, tuition fees have risen by over 130%and most provinces have eliminated theirneeds-based grants programs. In addition, ascited earlier, the real income of Canadiansunder the age of 30 has actually decreasedover the past 20 years. In this context, it isperplexing that the federal governmentcontinues to develop a loans policy withoutattempting to also manage the full scope ofissues influencing the cost and accessibility ofpost-secondary education.

. . . it is perplexing that thefederal government continues todevelop a loans policy withoutattempting to also manage thefull scope of issues influencingthe cost and accessibility of post-secondary education.

Though it has been often said that the mixedjurisdictional authority for post-secondaryeducation in Canada complicates policymaking, this fact has almost become a mantrafor government departments to avoid long-term planning for the pressure that hightuition fees put on the CSLP. The ever-increasing cost of a post-secondary educationcalls for a national strategy on tuition fees andthe establishment of a comprehensive needsbased system of national grants.

A federal strategy on the issue of access mustfurther develop Canada’s system of studentfinancial assistance so that tuition fees, livingexpenses, and all related educational costs areconsidered. Further, the federal governmentmust also acknowledge that the fear of highdebt deters thousands of qualified low incomeCanadians from attending college oruniversity. The Youth in Transition Survey citedearlier in this brief clarifies that for those atthe low end of the economic spectrum, highcost and high debt is the primary factor intheir decision not to attend univeristy orcollege. To this end, the Canadian Federationof Students rejects the call for higher loanlimits under the CSLP. Like most fast and easysolutions, increasing the amount students canborrow will offer a short-term solution at theexpense of increasing debt and depressingaccess over the long term. Senior officialswithin the CSLP acknowledge this point andwe call on the Finance Committee to rescindits call for higher loan limits.

Despite the fact that the CSLP is in need of amajor overhaul and re-orientation towardsnon-repayable student financial assistance,the Canadian Federation of Students will also


outline several measures that can beundertaken in the short-term to address theneeds of students.

A Return to Fair Policy

Between 1995 and 2000 the federalgovernment signed over authority for theCSLP to Canada’s chartered banks under therisk sharing agreements. Under thoseagreements the banks funded the principalamount of student loans in exchange for $300million in “risk sharing” payments. Theagreement also gave the banks a decisive sayin the development of public policy. Duringtheir tenure, the banks were able toundermine the basic principle of access thathad defined the CSLP since its inception in1964. At the behest of the banks the federalgovernment agreed to credit screening forstudent loan applicants and theimplementation of a punitive ten-yearprohibition on declaring bankruptcy onstudent loan debt. Credit checks have had theeffect of screening out some of those most inneed of student financial assistance. TheCanadian Federation of Students has alwayssupported measures that protect the integrityof the program from misuse and fraud.However, screening those out with a poorcredit history denies people most in need ofthe basic skills offered by university andcollege the ability to pull themselves out ofpoverty. In short, honest but unfortunatedebtors should not be denied the right toutilize the Canada Student Loans Program.

In the case of the changes to the Bankruptcyand Insolvency Act (BIA), the effects havebeen destructive and widespread. Thislegislation strips students of the very lastfinancial protection offered under the law. Theprovisions of the Bankruptcy and InsolvencyAct are designed to offer a last hope to thoseunable to cope with debt. Under the Act, anindividual must appear before a judge andpresent evidence under oath that theirfinancial disposition makes it impossible forthem to meet their obligations. However,changes introduced in the 1998 “educationbudget” deprive students of this right underthe law. It is this provision that has compelledthe Canadian Federation of Students to launch

a Charter challenge before the Supreme Courtof Canada to repeal this unjust andunconstitutional law. In addition to our legalchallenge, the Federation has also provided adetailed critique of the law to the SenateCommittee on Banking and Finance andIndustry Canada. During our appearancebefore the Senate Committee it became clearthat a consensus had emerged that the ten-year prohibition was too punitive. In addition,a panel of experts convened by IndustryCanada recommended that students beentitled to a hardship hearing within one yearof graduation and that the general prohibitionbe lowered from ten years to five years.Though the Canadian Federation of Studentsremains convinced that any prohibition is aviolation of students’ right to equality underthe law, there is a growing belief that a ten-year prohibition is grossly inappropriate.

Debt Reduction in Repayment

The Canadian Federation of Students iscalling on the federal government to honour acommitment made to students in the 1998budget. That budget committed to a DebtReduction in Repayment program (DRR)supposed to help over 12,000 students peryear. Designed to reduce unmanageable debtafter graduation, over-zealous restrictions hasmeant that less than 600 students havebenefited from the program in its first threeyears. When the program was implementedthe income tables were such that virtually noborrowers could qualify. In the 2003 budgetthe Department of Finance finallyacknowledged this problem and committed torevamping the tables. However, to date norevised tables have been presented. Inaddition, it seems that those who did notqualify under the old income tables willremain ineligible for DRR.

Another loan-related policy question for thefederal government is the issue of in-studyincome “clawback”. The 2003 federal budgetrelaxed the in-study income clawbacksomewhat, allowing students to earn up to$1,700 per year (up from $600) before 80% ofwork-related income is deducted from theirstudent loan disbursement. Recent studiessuggest that students are working an average


of 25 hours per week to cope with increasededucation-related costs. Yet the currentclawback policy functions as a disincentive towork and/or report earnings. Given theaforementioned elimination of most needs-based provincial grants, a somewhat flawedneeds-assessment mechanism, and thepotentially deleterious consequences ofrelying on private credit, it seemscounterproductive for the federal governmentto penalise students whose income issupplemented by paid work.

Finally, the public subsidies provided toprivate for-profit education enterprisesdeserve the Committee’s attention. The for-profit education industry receives more than$315 million from the federal government as adirect subsidy through the Canada StudentLoans Program. In fact, most privateeducation shops would cease operatingtomorrow if this public subsidy ended. Themajority of provinces have little or nooversight body to assess the quality andstability of private for-profit programs.Private career colleges frequently go bankruptand the taxpayer typically bears the cost ofcompensating students left in limbo. Whilehigh fees ensure high debt loads for privatecollege students, the lack of quality control atprivate institutions depreciates graduates’qualifications, future work prospects, andability to repay student loans. As analternative, the Canadian Federation ofStudents proposes that funds currentlysubsidising numerous transient privateeducation shops be transferred to the well-established public community college system.These funds would ensure that studentspreviously studying at profit-driveninstitutions would have a space at publicinstitutions, where the quality of instructionand accreditation is rarely, if ever, in question.

RECOMMENDATION #3 - The federalgovernment should maintain themaximum loan limit of the CanadaStudent Loans Program and meet unmetfinancial need with grants (seeRecommendation #1).

RECOMMENDATION #4 - The federalgovernment should repeal the ten-yearprohibition on bankruptcy for CanadaStudent Loan holders.

RECOMMENDATION #5 - The federalgovernment should remove the creditcheck requirement for Canada StudentLoans Program eligibility.

RECOMMENDATION #6 - The federalgovernment should eliminate theclawback on in-study earnings.

RECOMMENDATION #7 - The federalgovernment should end the massiveCanada Student Loan subsidy to for-profiteducation enterprises.

TAX POLICY

Since the mid 1990s, the federal governmenthas increasingly looked to tax expenditures asa substitute for directly allocated studentfinancial assistance. Federal tax expendituresfor education have grown from an estimated$566 million in 1996 to a projected $1.43billion in 20022. Some of the more significantnew measures and changes to existingeducation-oriented tax credits have included:

• 1996 to 2001: A series of increases to theeducation amount (the amount on which thefederal non-refundable education credit iscalculated) has raised the potentiallyallowable credit from $13.60 to $64 per monthof full-time studies3.

• 1997: The non-refundable education andtuition tax credits were altered so as to allowstudents to carry value forward if the creditscannot be claimed in the original year

• 1998: The introduction of a 17 percentfederal tax credit on the interest portion offederal and provincial student loan payments(changed to 16% in 2001).

Despite the size of these expenditures, theyhave failed to keep up with rapidly escalatingtuition fees and living costs. Canadianstudents are significantly financially worse off


now than they were in the late 1980s and early1990s. Moreover, evidence suggests thateducation-oriented tax expendituresdisproportionately benefit higher incomeearners, and that education tax credits as ageneral policy do little or nothing to improvethe accessibility of higher education.

The Education and Tuition Fees Non-refundable Tax Credit: The Wrong Approach

Of these various federal tax measures, thenon-refundable education and tuition fee taxcredits have been the most expensive and themost widely used. In the 2000 tax year4,2,169,360 students and parents/grandparentsof students claimed the education and tuitionamounts, costing the federal government$909,728,140 in deferred tax revenues5. Thechanges introduced in the 2001 budget willlikely raise this total even higher.

With a probable overall price tag of over $1billion for the 2001 tax year, these creditsundoubtedly appear impressive when viewedas a total amount. One would expect anexpenditure of this magnitude to deliversignificant improvements to the financial wellbeing of individual Canadian students.However, the unfortunate reality is thatchanges to federal non-refundable tuition feeand education taxcredits have actuallydone very little to offsetthe soaring tuition feesand increased livingcosts students havefaced over the lastdecade.

Figure 2 comparesaverage Ontariou n i v e r s i t yundergraduate tuitionfees to the maximumfederal non-refundableeducation tax creditsavailable to Ontariostudents in 1988, 1995 and 2001 (in 2001dollars). In 1988, an average Ontariouniversity undergraduate student paid $1,854in tuition fees and could claim or transfer upto $425 in federal education tax credits,leaving a gap of $1,426 between these tax

credits and tuition fees. By 1995 this gap hadincreased to $2,151, as tuition fees climbed to$2,737 and applicable education tax creditsrose to $587. By 2001 average tuition fees hadrisen to over $4,000 and, despite increases tothe education amount in the 2001 budget, thegap between tuition fees and federal taxcredits was nearing $2,900.

. . . changes to federal non-refundable tuition and educationtax credits have actually donevery little to offset the soaringtuition fees and increased livingcosts students have faced overthe last decade.

The gap between claimable amounts offederal tax credits and the costs facingstudents is even more dramatic. Combinedtuition fees, mandatory student fees, androom and board for an average Ontariouniversity undergraduate student climbedfrom $6,755 per year in 1988 to $10,211 in2001. While tax credits also rose during thisperiod, they did little to offset increasing

costs. The maximumfederal educationand tuition feescredit available to anaverage Ontariouniversity student in2001 amounted toonly $1,215, leavinga gap of almost$9,000 between basiceducation costs andapplicable federalnon-refundable taxcredits foreducation.

Helping Those Most Who Need Help theLeast?

Substantial disparities exist on the averageamount being claimed by income bracketthrough the education and tuition fees credit.

$587

$1,215

$2,151

$428

$2,847

$1,426

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

1988 1995 2001

Federal Tax CreditGap between tax credits and tuition fees

Figure 2 - Growth of Ontario tuition fees versusfederal tax credit increases


Individuals from the highest income bracketstend to claim more on these credits than doclaimants from the lower and middle-incomeranges. In the 2000 tax year, for example,claimants with incomes less than $60,000 ayear claimed an average of $409 worth ofeducation and tuition fee credits. Claimantsearning over $250,000 (most of whompresumably claimed this credit as atransferred amount from a child) averaged$628 on these same credits. A substantial (andrising) percentage of non-refundableeducation credits are being claimed asamounts transferred, which provides noguarantee that the full value of this credit isnecessarily being applied to education-relatedexpenses6. The Department of Financeestimates that total education creditstransferred have outstripped total creditsclaimed by students since 2001 (excludingamounts carried forward)7.

The "carry forward" measures introduced in1997 have allowed lower income students toclaim non-refundable credits that would havebeen lost to them in the past. Although this isa small improvement over the previoussystem, it contains a flaw that again skews thevalue of the credit towards those with higherincomes. Because of inflation, students whoare forced to carry forward education andtuition credits ultimately gain less value fromtheir credits than students who have enoughincome to claim them in the year they areassessed. Lower income students are thuspenalised for not having enough income toclaim the credits when they are first madeavailable. With the total carry forward ofeducation and tuition fee credits projected toreach $380 million by 2003, the cumulativeamount lost by lower income studentsthrough this depreciation could run into themillions of dollars8.

The Student Loan Interest Credit

The Student Loan Interest Credit is probablythe least useful of current federal taxexpenditures for education. Though the total"cost" of this credit was over $71 million in2000, the average amount claimed on it worksout to only $9.50 per month worth of debt andtax "relief" per claimant. Low-income earners

(less than $20,000) only received an average of$6.83 a month. As this credit is only availableon interest paid, it provides absolutely norelief to the most desperate student loanholders who are unable to keep up with theirloan payments. With average student debtloads approaching $25,000, this credit isineffective in addressing the ongoing crisis ofstudent debt.

Tax Credits Do Not Increase Access toHigher Education

On the whole, tax credits are "back-ended"measures and do little to improve access forthe most economically disadvantaged groups.Tax credits require students to pay money "upfront" in order to (maybe) have it refunded atsome point in the future. As a policy,education tax credits do nothing to addressthe initial financial obstacles that prevent lowand lower middle-income students fromattending higher education. Thus, educationtax credits are most likely to benefit those whorequire little assistance with high tuition fees.

A recent study by Harvard Universityprofessor Dr. Bridget Long found that this wasprecisely the outcome of education tax creditsintroduced in the United States: "[a]lthoughone goal of the tax credits was to increaseaccess to higher education, this study foundno evidence of increased postsecondaryenrolment among eligible students"9. Long'sstudy also found that the education tax creditmeasures introduced in the U.S. appear tohave provided state governments with anincentive to raise tuition fees at publicinstitutions10.

RECOMMENDATION #8 - The federalgovernment should cancel the educationand tuition fee tax credit for those earningover $70,000 and apply the savingsdirectly to new national system of needs-based grants.

ABORIGINAL EDUCATIONThe 2003 federal budget introduced a $12-million endowment to establish post-secondary scholarships for Aboriginal


peoples. Thescholarships will beadministered by theNational AboriginalA c h i e v e m e n tFoundation, a privatecharity that providesfunding to Aboriginalstudents for educationand training. No detailswere provided on thenumber of scholarshipsthat will be fundedthrough the endowment,nor the dollar amount ofindividual scholarships.

While new money toassist First Nationspeoples’ participation inpost-secondary education is welcome, thisone-time endowment does not constitute thetype of long-term investment that is requiredto boost access to post-secondary educationfor Aboriginal peoples. When adjusted forinflation, annual funding through Indian andNorthern Affairs Canada for Aboriginal post-secondary education actually declined byalmost $14 million between 1998 and 2002 (seeFigure 1). At the same time, rising tuition feesmean that post-secondary education is moreexpensive today than ten years ago. Reducedfunding and rising tuition fees are likely a keyfactor in the stagnation of Aboriginalenrolment in post-secondary education sincethe mid-1990s despite a growth in thepopulation.

RECOMMENDATION #9 - The federalgovernment should meet its treatyobligations with First Nations by fulfillingthe post-secondary education fundingneeds identified by the Assembly of FirstNations.

RESEARCH

The ability of public universities to fulfil theirmandate to conduct high quality research inthe public interest relies on adequate and

stable core fundingfrom the federalgovernment.Operating grants forinstitutions must be ata level to promoteboth research andteaching, instead ofstarving one tosupport the other.Federally sponsoredresearch grants shouldrecognise the validityof all peer-reviewedresearch, science orsocial science, basic orapplied.

The absence of thesecommitments from

the federal government’s research strategywill cheapen the quality and value ofCanadians’ investment in university research.Inadequate public funding will inevitablyincrease the reliance on dubious public-private partnerships that frequently detractfrom the independence of the researchconducted.

Commercialization

At its core, the motivation for thecommercialization of university research is toblur the vital distinctions between “public”and “private.” Universities and colleges inCanada have evolved to function, albeitimperfectly, as public institutions. That is,they are funded by the public’s collectiveresources via a progressive system of taxation.By definition, then, such institutions shouldserve the public interest. This public interestcan be defined through three broad functions:education, community service, and research.In particular, university research serves topursue and publicly disseminate knowledge.Industry, government, and other researchersmay take this knowledge and build upon itfor their own ends, but what characterises theuniversity’s social product is the objectivity ofthe process.

The public mandate stands in stark contrast toprivate sector interests. By definition,corporations are ultimately accountable to

1.0

1.5

2.0

2.5

3.0

3.5

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

20,000

24,000

28,000

32,000

36,000

Funding ($hundred million)

Tuition Fees ($thousand)

Enrolment

Figure 1Federal Aboriginal post-secondary education funding,tuition fees, and Aboriginal post-secondary enrolment


shareholders. The short-term solvency of thebusiness drives a preoccupation with short-term gains. This motive extends to theexpectations of partnerships in universityresearch. When business ethics are applied toscience in the institutional setting, academicfreedom is in peril. Commercially drivenabuses of academic freedom and good scienceare well documented in Canada, not only inthe high profile cases of Drs. Olivieri andHealy, but amongst lesser known cases aswell.

In spite of a growing scepticism ofcommercialization in the universitycommunity at large, the Government ofCanada and the Association of Universitiesand Colleges of Canada signed the Frameworkof Agreed Principles on Federally FundedUniversity Research in November 2002. Thedocument pledges to double research outputand triple commercialization targets atCanadian universities. Rather thanestablishing an honest point of departure foruniversity-government co-operation ondeveloping research capacity, the Framework isnothing more than a publicity stunt aimed atreassuring private investors that universitypresidents are supportive of the InnovationStrategy’s commercialization goals. TheFramework only pays lip service to the value ofnon-commercial research, and was developedin a vacuum, without broad-based universitysector input. For these reasons, the CanadianAssociation of University Teachers and the60,000 graduate students represented by theCanadian Federation of Students,representing the vast majority of universityresearchers in Canada, reject the Framework.Faculty members, students, and theCanadians whose tax dollars supportuniversities deserve a more serious strategy toincrease core funding and protect the integrityof public research.

Social Science and Humanities

The ill-informed push towards thecommercialization of publicly funded researchreinforces an unbalanced national researchagenda. Since its inception, the Social Sciencesand Humanities Research Council (SSHRC)has been poorly funded in comparison to the

other two federal granting councils, theNatural Sciences and Engineering ResearchCouncil (NSERC) and the Canadian Institutesfor Health Research (CIHR). In recent years,SSHRC’s budget has received modestincreases, but has not kept pace with thegrowing demand of graduate students andfaculty members in the social sciences andhumanities who make up more than half ofthe university-based researchers in Canada.

This inequity between granting councils isexacerbated by federal research fundingpolicy that devalues basic and SSHRC-fundedresearch because it does not necessarily fitIndustry Canada’s narrow definition of“innovation.” With the exception of the much-welcomed Canada Graduate Scholarships, allrecent federal initiatives largely exclude socialscience researchers (Canada Research Chairs,Canada Foundation for Innovation, AchievingExcellence). Yet, social research plays thesame vital role that applied research does inadvancing the lives of Canadians in theknowledge society. University research onchild poverty, globalization and HIV, or theeconomic causes of war may not yield new“innovative” products, but it does contributeto the collective body of knowledge thatassists governments, agencies, or futureresearchers to develop solutions to socialproblems.

RECOMMENDATION # 10 - The federalgovernment should double the baseannual budget of the Social Sciences andHumanities Research Council.


FOOTNOTES

1. The most spectacular example occurred inNewfoundland and Labrador in August of1998 when the Career Academy wentbankrupt leaving 1,400 students in the lurch.The government stepped in and found spacesfor most of the students at public institutionsat taxpayer expense.

The collapse of the Career Academy spawnedan inquiry by former Minster of EducationPhil Warren. The Warren Report, released in1999, was highly critical of lax accreditationand oversight of private colleges.

To take another example from the myriadavailable, Lansbridge “College” (formerlyUnexis) went bankrupt in 2000 after receivingover $100,000 in interest free loans fromIndustry Canada. This amount, of course, is inaddition to the public subsidy it receivedthrough the Canada Student loan Program.

For an example of the personal cost of career“college” bankruptcies see the following storyfrom the St. John’s Telegram, “CollegeBankruptcy Hits Student's Wallet” (October 9,2001)

2. Department of Finance Canada TaxExpenditures and Evaluations 2001.

3. The education amount has risen from $80per month to $400 a month since 1996, but theactual credit is calculated by multiplying thetotal of the education and the tuition feesamount by the lowest federal tax rate (16% for2001 and 2002, and 17% on earlier returns).

4. The most recent year for which interimstatistics are presently available.

5. Canada Customs and Revenue Agencypreliminary figures.




9. Bridget Terry Long "The Impact of FederalTax Credits for Higher Education Expenses",Prepared for the NBER Volume andConference: College Decisions: How StudentsActually Make Them and How They Could.Harvard University August 2, 2002

10. Bridget Terry Long The Impact of Federal TaxCredits for Higher Education Expenses

sub 2003 finance

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bridget terry long

rising tuition fees

federal government continues

higher education expenses

education tax credits

secondary education funding

humanities research council

tuition fees