Thursday, August 22, 2013

Calling A Clean Pot Black

A few days ago Thomas Lukaszuk, Minister of Enterprise and Advanced Education, announced that private consultants were being called in to assist the University of Alberta in balancing its budget by 2014-2015.  Doug Goss, chair of the university’s board of governors, is confident that the financial management of the university will stand up to this external scrutiny.  Edmonton Journal columnist Paula Simons accuses the minister of micromanaging the University of Alberta’s decisions on how specifically it should spend its revenue.

I took a few moments to glance through some recent University of Alberta annual financial statements which are provided here.  Basically, I was interested in the difference between revenues and operating expenses.  My results are presented in the table below.  It shows that the University reported operating deficits (which occurred when expenses exceeded revenue) in only two years (2008 and 2009).  It should be noted that for accounting reasons these numbers do not include an accumulating debt related to maintenance costs.  As well, it does not include the University’s plan to operate with a deficit for the next three years as it implements a plan to balance its budget.  The minister is apparently unhappy with this three year plan, desires the university budget to be balanced earlier, and is spending $70,000 on external consultants to help achieve this goal.

Report Year
Revenue Minus Expenses
Revenue and expense information from recent financial statements available from the University of Alberta website.  All values are in millions of dollars.

  The two years of deficit reported in the table reflect the results of a worldwide financial crisis.  For instance, the University’s 2009 financial statement notes: “The 2009 deficiency is mainly due to investment losses.  The global economic crisis has continued to have an unfavorable impact on investment returns.”

The table suggests that the University was able to rebound from this unfavorable impact relatively quickly; its ability to adapt was due to its ability to find ‘administrative efficiencies’.  It is still doing so in light of the March budget’s surprise cut in postsecondary funding.  For example, the 2013 financial statement states: “The $25.4 million operating surplus is mainly due to savings at the unit level which have occurred as units reduce spending to assist in meeting their 2013-14 operating budget reductions.”  Given this kind of information, it is perhaps not too surprising that the chair of the board of governors is confident of the result of external scrutiny.
Of course, the provincial government has not been as successful in dealing with the financial upheaval of 2008.  As obvious in the image below, which the Calgary Herald included as part of a story on the 2013-14 provincial budget, 2008 marked the start of an unbroken string of provincial deficits.  A nice synopsis this string is provided in this story by CTV News.  The cost of recent flooding in the province will hardly help this situation. It seems to me that hiring the consultants is a case of an encrusted kettle calling a clean pot black.

Monday, August 19, 2013

Surprising Response To Suspended Programs

Since last March’s provincial budget delivered a 7% cut to Alberta’s postsecondary institutions, there have been many announcements of program suspensions at a number of schools.  Most recently, the Faculty of Arts of the University of Alberta announced plans to suspend 20 programs because of their low enrollment, making the front page of today’s Edmonton Journal.

Given the size of the budget cuts, and the fact that they took the postsecondary sector apparently without warning, the most recent announcement from the University of Alberta is not really surprising.  While the government of Alberta has declared that it will not balance its budget on the backs of students, the simple fact is that cuts to postsecondary funding will necessarily impact students, by reducing access to services, by increasing class sizes, by eliminating instructors, and by removing programs.  This is simply because the core purpose of these institutions is to educate students. The Edmonton Journal article simply provides a snapshot of each of these implications as they take shape in one faculty in one university (e.g. eliminating course sections, cutting funding for graduate student teaching assistantships, eliminating faculty positions, and of course suspending programs).  Of course, similar stories have been unfolding throughout the province in recent months.

These Faculty of Arts cuts themselves are not surprising.  However, what has surprised me a great deal is that this recent news has touched a nerve, at least in terms of activity on Twitter that uses the hashtag #abpse.  I have been following this thread for many months, and over the last few days two things have become apparent.  First, there has been an explosion of the number of tweets that use this hashtag.  Second, these tweets are coming from individuals who to my knowledge are new to this discussion.

I am not sure why the recent University of Alberta news has produced such a strong response.  Perhaps with the new term approaching, more students are paying attention to current events on campus.  Perhaps the response is because this announcement is from such a large Faculty at such a large institution.  At any rate, I believe that the reaction to the Arts news is healthy and important.

A close reading of the Edmonton Journal article also surprised me, and tweaked a growing concern.  Dean of Arts Lesley Cormack is quoted as follows: “It’s important to recognize that this is good management of programs as much as it is anything to do with budgets,” Cormack said Sunday. “It’s unfortunate that it’s had to happen as quickly as it has. But the problem is, if you do it slowly, it sort of never happens.”  Of course, it is quite sensible that programs be regularly evaluated, and possibly removed if they are no longer serving their intended needs.  However, Thomas Lukaszuk, minister of Enterprise and Advanced Education, gives the sense that ‘program evaluation’ is essentially simple economics.  According the Edmonton Journal, the Minister’s position is that “students vote with their tuition dollars and have sent a strong message to university administration”.  In short, the Minister apparently believes that the worth of a program is revealed by the number of students it attracts.

In my mind, the Minister’s position is disturbing and simplistic (but perhaps not completely surprising!).  Just because a program attracts a small number of students does not mean that it is not important.  A broader perspective than just numbers is required to properly evaluate a program’s importance.

 A look at 20th century history provides a good example of this.  At the start of WW II, pure mathematicians were few and far between (it is a complex and abstract field that does not attract multitudes of students!), and largely ignored by British and American military leaders.  However, when finally called upon by their governments, pure mathematicians made huge contributions to the outcome of the war; they were responsible (for instance) for cracking the German enigma code. Fortunately for all of us their programs weren’t cut because of budgetary constraints on low enrollment programs.