Academia Inc.

Scrambling to make ends meet, universities are turning themselves into sleek new profit machines

VICTOR DWYER November 24 1997

Academia Inc.

Scrambling to make ends meet, universities are turning themselves into sleek new profit machines

VICTOR DWYER November 24 1997

Academia Inc.

Scrambling to make ends meet, universities are turning themselves into sleek new profit machines


Tom Keenan had an idea. And like any good idea, this one was fresh, innovative—and a little bit gutsy. In the spring of 1996, Calgary’s dean of continuing education hired a consultant to scan the help wanted ads of such firms as Canadian Pacific Railway and Trans-Canada PipeLines, and to create a shortlist of the high-tech skills those firms were demanding. He then paid the companies a visit and made them an unusual offer: the University of Calgary would produce the trained employees they needed— with a nine-month certificate course in software technology—if the firms would promise graduates a minimum three months of paid employment. When the first 10 firms jumped at the offer, Keenan placed an ad of his own. Running on the front page of the Calgary Herald, it sought applicants for “an exciting computer training program” with “a curriculum designed in co-operation with industry.” The price tag: $10,750, or about four times the cost of a year’s tuition in more traditional programs. Within days, the first of 82 applicants, looking to snag one of 23 spots, sent their letters of application to Keenan’s office.

But the dean’s job was not yet complete. His next stop: the Northland Plaza branch of the Royal Bank of Canada. Provide each of my students with a loan for the full cost of tuition, he told the manager, and the university will bring you clients well positioned to pay it back. The bank jumped at the offer—and Keenan headed off to make two more deals. First, he convinced IBM to give him $50,000 in return for becoming the lab’s major partner. Then, armed with the promise of a quarter-million dollars in new tuition, he knocked on the door of university president Terry White and asked for the formal go-ahead to put that money towards “a computer facility to die for.” White gave him the green light, and this past August, Calgary graduated its inaugural class in object-oriented software technology. “These days,” says a clearly satisfied Keenan, “no one is going to look after the Canadian university except the university itself. Those not prepared to pick up the ball, and run like mad, will not survive.”

Or at least not in the manner to which they were once accustomed. Battered by deep cuts from both federal and provincial governments, Canada’s universities are getting by on roughly a quarter to a third less public funding than just five years ago. Scrambling to make ends meet, they are doing all they can to fill those public gaps with private dollars— scanning the marketplace, listening closely to their customers, and mercilessly reassessing the products they produce. Determined to get an edge on the competition, many are also forging rock-solid corporate connections: renaming faculties and schools in honor of those with money to give, channelling newfound resources into high-profile programs, and reshaping research to fit the needs of private industry. Meanwhile, as government handouts have withered, what was once considered a public right is looking more and more like a consumer product, and an extremely pricey one. On average, tuition at Canadian universities has risen 134 per cent in 10 years, including 12 per cent this fall alone. At several schools, students are now footing close to a third of the cost of running Canada’s universities.

Faced with those massive changes, many on campus are beginning to question whether, in the race to make ends meet, universities are moving too far, too fast. While almost no one defends the shopworn image of the cloistered ivory tower, many are even more disquieted by its transformation into what they see as Academia Incorporated. ‘There’s a feeling the balance is tipping, that we are becoming too dependent on the whims of unelected people with deep pockets,” says Vivian Hoffmann, the Alma Mater Society’s director of finance at the University of British Columbia. Among the disturbing trends that she and others see developing: a widening fiscal gap between less practical, arts-oriented disciplines and more business-friendly faculties; and a parallel chasm between well-established, research-intensive universities and smaller, regional, teaching-focused schools.

At the same time, a growing chorus of critics point to what they say is a distortion of the research agenda—a slow but steady turning away from basic, curiosity-driven questions, in the quest to pose ones that private industry finds relevant. And everywhere, students are wondering where the tuition spiral will end, and how graduates will deal with massive debts. “The cost of the whole thing is really becoming an obsession for many of those at university—and of course, for younger people hoping to apply,” says Brad Lavigne, chairman of the Canadian Federation of Students. “In a comparatively short span, governments have effectively off-loaded much of the financial burden of postsecondary education onto the backs of private individuals.”

But whatever their differences, voices on all sides are in firm agreement on one undeniable fact: a university system once generously funded by the public purse is now a system in crisis. In the past two years alone, Ottawa has cut a stunning $7 billion from postsecondary education, health and social services—onefifth of its total spending on such programs. Ontario’s universities, home to 40 per cent of students, suffered a double blow last year, when the government of Premier Mike Harris chopped an additional $400 million from budgets—an extra 15-per-cent reduction. With federal and provincial cuts combined, Quebec has seen funding slip by almost a quarter since 1993. And this year, Manitoba and the four Atlantic provinces all weathered cuts.

At campuses across the country, the fallout has been real. University of Toronto president Robert Prichard points to “larger classes, less personalized evaluation of students, and a steady deterioration of the physical plant.” In a scant two years, rector René Simard has cut approximately 800 positions from both faculty and nonteaching ranks at the Université de Montréal, a stunning 20 per cent. “It has not been easy,” says Simard. “But neither has it been avoidable.” Since 1992, Calgary has eliminated one-third of its librarians, and recently froze its collection budget for five years. “Governments are stretching us like elastics,” says Ross Paul, president of Laurentian University in Sudbury, Ont. “You can’t keep pulling us tighter and tighter—unless, of course, you expect universities to snap.”

Or dramatically change how they go about their business. And changing it, they are At the simplest level, that can mean rolling up their shirtsleeves and engaging in what many administrators once regarded with a combination of uninterest and disdain: the hustle for private donations. Last year, McGill wrapped up the largest private capital campaign ever undertaken by a Canadian university, tapping staff, students, alumni and corporate connections to haul in $208 million over three years. While smaller than McGill’s, other recent campaigns have brought in amounts unthinkable just a few years ago: $90 million at the University of Alberta in Edmonton, $63 million at Victoria, $45 million at Saskatchewan.

Now, all eyes are on the University of Toronto, which this fall upped the ante considerably with a $400-million drive. The Campaign, as it has been dubbed, has already pulled in close to $300 million in a two-year, silent phase, nearly tripling the amount of the budget currently coming from private support. While its $720-million endowment is still a far cry from the $4 billion of Princeton or Yale, it is unprecedented among Canadian schools. And Toronto’s goal of $1 billion by the year 2000 will put it within spitting distance of such prestigious American state universities as Michigan and Pennsylvania. Prichard, for one, makes no apologies for that new outward focus. “The challenge for us is not to maintain a balance between public and private support,” says Prichard. “It is to assemble the resources we need to compete.”

In the race to stay ahead, Toronto has also put together a well-heeled—and well-connected—fund-raising committee, which it trooped out for public display last month in three-page, full-color newspaper ads. Heading the 24-member “dream team” is AÍ Flood, chairman and CEO of CIBC. Also on board: Bank of Montreal president Anthony Comper, Trevor Eyton of The Edper Group, and Imasco director Murray Koffler. While Prichard describes that lineup as “the envy of any public philanthropic endeavor in any field in Canada,” some students don’t like what they see. “The message,” says Stephannie Roy, chairwoman of the National Graduate Council of the Canadian Federation of Students, “is that we can repair the damage of public cuts by cozying up to the wealthy and the powerful.”

What Roy fears more than anything, it seems, is the dream team’s success. Now a PhD student at the Ontario Institute for Studies in Education at the University of Toronto, she did her master’s degree at Lakehead University in Thunder Bay, Ont., a school she describes as “far away from the centres of economic power, and without the clout of a Toronto.” As universities scramble g to shore up their revenues with § private gifts, predicts Roy, Canada f will move towards a two-tiered unio versity system, in which the tiers £ grow ever more distinct. ‘We will § have these great bastions of edus cation building from strength to strength,” says Roy, “and a second string of universities left trying, in vain, to catch up.” Certainly, venerable schools like Toronto appear

well positioned to play the game: when Ontario’s 17 universities launched a scholarship drive last fall, with all gifts matched by the province, the University of Toronto raised $86 million. Lakehead, with one-seventh the students, raised $3.2 million.

In fact, many critics argue that a growing dependence on private giving is already dividing individual campuses into have and have-not faculties. Over the past few years, Western, York, Toronto and UBC have all renamed their business schools in honor of generous donors. And a tour of some campuses has lately begun to feel more like a stroll through an industrial park. Opened last spring, the Walter C. Koerner Library at the University of British Columbia, for example, is home to the Placer Dome Canada Floor, the Imperial Oil Charitable Foundation Floor, the Bank of Nova Scotia Wing, and the B.C.

Hydro Student Computer Lab. “When presidents went fund-raising 10 years ago, they asked for donations,” says Peter George, president of McMaster

University and known in academic circles for his ability to swing a deal. “When I go in now, I say, ‘I am not looking for handouts. I’m here with a menu of interesting campus opportunities, and the chance for you to invest in them.’ ”

Even those who have led successful funding drives concede that the growing dependence on private gifts is skewing academic priorities. As he celebrates Saskatchewan’s recent $45-million campaign—including a $5-million gift to the faculty of commerce from the Potash Corp. of Saskatchewan—president George Ivany says, “It has been remarkably hard to find commitment to the arts and humanities.” The university owns a set of four rare 17thcentury Amati violins worth $1 million each. But Saskatchewan’s music department was unable to convince a single major donor to put money towards an endowed quartet to play the instruments. “That,” says Ivany, “is the counterpoint to the new corporate generosity towards commerce and engineering.”

As donors put their stamp on academic priorities, many critics say there is an even more insidious result of the new dependence on private dollars: a significant change in the focus and direction of university research. Between 1994 and 1996, Ottawa sliced funding to the major research granting councils, in medicine, scienees and the humanities, by up to 14 per cent. In the wake of such deep cuts, academics increasingly find themselves pushing the frontiers of knowledge in partnership with those hoping to turn a buck. “When you propose new research to your peers, everyone may be excited by its uniqueness, by the curiosity you have shown,” says Jack Gauldie, chairman of the pathology department at McMaster University in Hamilton. “But these days, the question always arises: What is the application?’ That attitude is quite different from 10 or even five years ago.”

Is Canada moving towards a two-tiered university system ?

Gauldie talks openly about his willingness “to take my dog-andpony show anywhere,” in the search for corporate sponsors— mostly drug companies—for his 109 faculty members, whose research has potential applications for everything from breast cancer to asthma. “The more basic the question you ask,” says Gauldie, “the more difficulty you have convincing them it is a question worth asking.” And while he says there is a definite synergy between his department’s goals and those of industry, he is blunt about the longterm price. ‘To have an economy genuinely driven by ideas, you need freethinkers,” says Gauldie. “Canada may end up with highly trained researchers who will be able to turn a blue wheel red. But are we training anyone capable of inventing a new wheel?” That may be a valid question. But for those charged with running Canada’s universities, the grim reality is that their aging buildings, deteriorating laboratories and outdated libraries are in desperate need of money. The pressure is especially acute because the market for top-flight researchers is a global one. And more than ever, the playing field is tilting away from Canada. Over the past two decades, the research and teaching budgets of publicly funded American universities have grown by an average of $1,060 per student, in constant dollars. By contrast, Canadian universities have seen revenues shrink by just over twice that amount. And the gap is widening: in the past two years, 44 of the 50 American states have increased appropriations for higher education, by an average of 10 per cent. “Contrast that with what has happened in Canada, and most acutely in Ontario,” says James Downey, president of the University of Waterloo, “and you have cause for alarm.”

And the makings of a new kind of brain drain. While U.S. universities have long been able to outbid Canadian schools for promising young talent, Downey says the problem is becoming acute among the scholarly ranks Canada can least afford to lose. “More and more, it is the people in mid-career, those ready to take off in a big way,” says Downey, “who are showing the greatest impatience.”

Among their chief complaints: “a crumbling research infrastructure” in Canada, and U.S. salaries that routinely far outpace those in Canada. In the hope of refurbishing and expanding Waterloo’s highly successful computer science and computer engineering programs, Downey has been quietly conferring with local industries that need the research expertise—and graduates—Waterloo can provide. “Somebody has to be concerned with the quality of our product and our institution,” says Downey.

“If governments are not going to fund us adequately, we have no choice but to look outward.”

In the race to pay the bills, scholars are also increasingly forging partnerships with industry to turn university laboratories into bottom-line profit centres. Over the past year, the University of Alberta in Edmonton brought in $4.2 million in licensing revenues, a fourfold increase from one year earlier. Among the products helping to pay the bills: a diseaseand drought-resistant variety of canola and diagnostic kits for ovarian and prostate cancer. ‘The majority of that money,” says president Rod Fraser, “will go back to the faculty, the department and the laboratory for further research activity.”

And as schools like Waterloo and Alberta rush to fill the vacuum left by funding cuts, governments are actively working to propel universities even more firmly into the arms of business. This past July, in a stated effort to focus “not just on how much we spend, but on the results achieved,” the province of Alberta awarded its first financial bonuses to colleges and universities that excelled according to a handful of “key performance indicators.” Among them: the amount of the university budget raised from nongovernment sources, and the size of revenues generated by each school’s research facilities.

Just as its deep cuts were making their way through the system last spring, Ontario announced the ambitious new Research and Development Challenge Fund, which will pump $500 million into the research coffers of the province’s 17 universities over the next 10 years. But there are two important stipulations. While that money “will support research in many fields,” the focus, according to government documents, “will be primarily on natural sciences, engineering, math, health sciences and environmental sciences.” What is more, to qualify for their share of that public funding, universities must rustle up an equal amount of private investment.

Meanwhile, Ottawa has set the research community abuzz with a call for proposals to the new Canadian Foundation for Innovation. Starting next February, the CFI will pump a breathtaking $800 million primarily into university and hospital research over five years. But here, too, the fine print is revealing. The foundation defines research as “relating to: science, health, engineering or the environment.” And not a penny will be released until applicants prove that 60 per cent of costs will be footed by private interests. As well, the foundation’s board will include the captains of industry and their representatives. Says Claire Polster, a professor of educational sociology at the University of Regina: “The government is effectively telling business, ‘Here’s $800 million of public money. Feel free to tell academics how they can spend it.’ ”

However the money is divvied up, it is certain to exacerbate the differences between established, research-intensive universities and others. To the likely victors, that is just good economics. “If Canada wants bang for its buck, it makes no sense to encourage major new research at teaching universities,” says Gerhard Gerber, McMaster’s vice-president of research and international affairs. But others are clearly miffed. “While any new money is good for the system, it is obvious that the major research schools will get the lion’s share,” says Ken Ozmon, president of Saint Mary’s University in Halifax. “I don’t necessarily think it is going to improve the quality of education generally.”

‘Some universities will flourish, some will disappear

As private interests reshape academe, market pressures are also quickly eroding the notion that higher education is a public right, for which the price tag should be kept to a minimum. In 1980, Ottawa and the provinces put up $6.44 for each dollar collected from students. By this fall, that figure had plunged to just $2.97. At a handful of schools—including Saint Mary’s, York, Windsor and Winnipeg—tuition now makes up 40 per cent of revenues, compared to a Canadian average of just 13 per cent in the early 1980s. One result: 385,000 students have been forced to take loans this school year, an increase of 44,000 over three years. The average amount graduates owe has skyrocketed, from $8,700 in 1990 to an estimated $25,000 by next spring. Says Mark Veerkamp, external affairs officer for the Student’s Society at Simon Fraser University in Burnaby, B.C.: “Student debt is exploding—exploding in students’ faces.”

And all indications are that the explosions are about to get bigger, louder and far more blinding.

In his most recent budget, federal Finance Minister Paul Martin— whose department bankrolls 60 per cent of student loans in all provinces but Quebec, which runs its own program—invited “interested provinces” to approach him about creating a socalled income-related repayment plan for student loans. Such a scheme would link the pace of repayment to future income—and, in theory, make even a massive debt manageable over time. In fact, it was not the first time Ottawa had floated such a plan: a version was included in its 1995 social policy review, and then abruptly shelved after students staged noisy demonstrations across the country.

While some provinces, most notably British Columbia, Alberta and New Brunswick, have soundly rejected any move towards such a scheme, Nova Scotia Education Minister Robert Harrison told Maclean’s he has “been talking to Ottawa about a package that could include it as one element” along with federal loan forgiveness and other options. In Ontario, Toronto president Prichard, who also heads the Council of Ontario Universities, says that group has been meeting about the issue with federal and provincial officials almost weekly this fall. And according to several sources, the Ontario ministry of education is preparing a cabinet submission on income-related repayment. “My guess,” says McMaster president George, “is that we will see it in place by the fall of 1998.”

If so, many predict that dramatically higher fees will not be far behind. In 1995, the government of Mike Harris was elected on a platform that included the deregulation of tuition. After two years of delay, it now appears Harris is poised to deliver on that promise. The current performance contract of deputy minister of education Veronica Lacey, revealed by an inside source during the provincial teachers’ strike in October, requires her to “ensure that students pay a reasonable share of the cost of their education” and “address regulatory issues, including tuition fees.” To student leaders, the writing is on the wall: Ontario schools, which have already jacked up fees 40 per cent since Harris came to power, will soon be allowed to charge whatever the market will bear.

And many are eager to do just that. ‘What is the alternative?” asks Waterloo’s Downey. “Continuing to cut our way to mediocrity?” He predicts the cost of most programs would change only marginally, and proposes his own school’s highly regarded engineering program as one that could charge more if freed to do so. And he is the first to admit that such a scheme would compound current differences between universities. “Competition,” says Downey, “would encourage all of us to play to our strengths and think twice about our weaknesses.”

Should the floodgates break in Ontario, almost everyone agrees the pressure would build for other provinces to give universities far greater freedom in how they operate and what they charge. “Not all universities would like it, but on one level it would be good,” says Saint Mary’s Ozmon. “And one thing is certain: being forced to provide high quality at the best possible cost would differentiate us faster than any of the other changes happening out there.” In Montreal, where rector Simard has now weathered four years of deep cuts and three years of a government-imposed tuition freeze, the idea is one he says he could warm to. “At this point, I don’t care whether tuition is free or covers 100 per cent of my costs,” says Simard. “But I have to have money if I am going to keep a university running.”

Carrying it into the future, of course, will require more money still. This fall, Calgary’s Keenan welcomed his second class of 23 students in object-oriented software technology. And with his new comg puter lab paid for, much of the 2 quarter-million dollars they g are paying for the privilege g will be plowed into a second § facility. To many, Keenan’s ex| ample is a beacon, pointing the i way to a new kind of higher ed“ ucation, open to the demands of the world at its doors. “In the old template, universities were all things to all people,” says Peter Godsoe, chairman of the Bank of Nova Scotia and chancellor of Western. “Now, they will have to refocus, and compete where they can best compete.”

For those who cannot? “Some will survive and flourish,” predicts Godsoe. “Some will reconfigure, some will disappear.” This week, ScotiaBank will host a Toronto conference called Ensuring Excellence: Summit on the Future of Ontario Universities, at which 100 businesspeople, academics, politicians and students will attempt to hash out the difficult issues facing higher education. ‘We will be discussing the challenges,” says Godsoe. “How do you deregulate? How do you solve the funding problems?” Godsoe’s meeting comes just one day after another forum, sponsored by Human Resources and Development Canada, is scheduled to wrap up in Ottawa. There, federal and provincial officials will meet with students, as well as representatives from the major banks, the Canadian Association of University Teachers and the Association of Universities and Colleges of Canada. And, says student leader Lavigne, the focus will be on similar, thorny issues: We will ask hard questions about what governments plan to do about debt reduction,” says Lavigne. We want to know what will be the limits to tuition fees that have gone out of control.”

With so many questions facing higher education, people on all sides can agree on one thing: getting the answers right is critical. “None of these challenges are easy,” says Laurentian president Paul, whose primarily undergraduate university is currently setting up a nonprofit private company for applied research in mining and environmental cleanup. “Yes, you have to sharpen your profile, focus on your strengths. Yes, you have to look where you can for scarce dollars. But when the chips are down, a university is about more than bottom lines and making deals and job training.” Adds Paul: “Any university that allows the numbers game to run its agenda is not, I think, deserving of the name.” Perhaps not, but as universities scramble to refit themselves for a new era, it is clear that numbers will be a major part of the story. □