In the 2000s, Alberta invested heavily in its universities. In the 2020s, that's about to change

Alberta's Advanced Education minister has informed universities in the province to spend less money and expect to get less money from the government in the future.

Starting in April, provincial grants will be tied to new performance measures, in what Demetrios Nicolaides described as a "total transformation in government funding to our post-secondary institutions."

This comes on the heels of the UCP government's lifting of the tuition freeze that had been adopted by the NDP government before it.

All this is necessary, Nicolaides has said, in order to tame Alberta's massive budget deficits and "improve the financial state of our province before it's too late."

The government has further justified its cuts by pointing out that Alberta universities rely more on provincial funding and less on tuition than comparable institutions in the rest of Canada.

That's true. But it's not the whole story.

Alberta, indeed, spends more than most provinces, on a per-student basis, when it comes to universities. But it also has a lower participation rate, which drags up our per-student cost, compared with the rest of the country. In theory, Alberta has the capacity to educate more people at a lower cost, per-person.

The run-up in spending didn't come recently, either. Like many things in Alberta, it came during the largesse of the 2000s, when oil and gas prices ran high and government spending matched. Throughout the 2010s, however, provincial funding to universities has been relatively flat, in real-dollar terms.

Here's how it breaks down.

Provincial funding in Alberta vs. the rest of Canada

Nicolaides is right when he points out that Alberta funds its universities more so than other provinces.

Universities and degree-granting colleges in Alberta received $2.18 billion in provincial funding in 2017-18, the most recent year for which detailed data is available from Statistics Canada.

That accounted for 47 per cent of their total revenue.

Only in Quebec and Newfoundland did universities rely more on provincial funding.

As a result, Alberta universities also rely less on tuition and fees to pay for their operations.

Student-paid fees accounted for just 19 per cent of total revenue in this province, compared with 28 per cent at universities across Canada.

This trend has been many years in the making.

The 2000s vs. the 2010s

Looking back almost two decades, Alberta was roughly on pace with the rest of the country when it came to funding growth for universities.

Then, in 2004, funding in this province took off.

In the span of the next five years, annual government spending on universities nearly doubled.

Part of this was due to Grant MacEwan and Mount Royal converting from colleges to universities, but that explains only a fraction of the increase.

You still see a "huge run-up in funding in the late 2000s" when you look at provincial funding on a per-student basis, notes Alex Usher, president of Higher Education Strategy Associates, a post-secondary consulting firm.

"This is mostly capital expenditures, from that brief period of astounding generosity where the provincial government just decided that the University of Alberta (in particular) should be the biggest building site this side of Beijing," Usher writes in an analysis of Alberta's post-secondary spending history.

Annual provincial funding to universities peaked in 2009-10, then declined for the next four years, before starting to trend upward again. Still, it remains well above the rest of the country.

Alberta's per-student expenditures were five per cent above the national average in 2000, Usher notes. By 2017-18, that had grown to 48 per cent.

Meanwhile, the difference in student-paid fees was going in the opposite direction.

What students pay

A decade ago, university students in Alberta were paying more for their education than the Canadian average.

But tuition and other compulsory fees have been trending downward in this province, in inflation-adjusted terms.

At the same time, they've been going up in the rest of the country.

This year, the average Canadian undergraduate can expect to pay about $6,900 to attend a university in Alberta, versus the national average of nearly $7,400.

Those figures are soon to change, however, as several universities in Alberta have already announced plans to hike tuition in response to the new provincial budget.

Nicolaides has said his aim is for tuition and fees to eventually account for 25 per cent of university revenue in Alberta (up from the rate of 19 per cent mentioned earlier.)

But those increases will only partially offset the planned reductions in government funding. Nicolaides has also signalled that spending cuts will be necessary, and has advised universities start by freezing spending on things like travel.

That's one area, however, where Alberta universities spend the least.

Where the money goes

As we've seen, there are some significant differences in where universities in different provinces get their money.

The differences are smaller in terms of where they spend their money.

Let's start with travel. It's a small budget item, but it was highlighted by the minister, so it's worth looking at.

Nationwide, travel expenses account for just two per cent of university expenditures.

There's some small variation from province to province, with Manitoba universities spending the most, at 2.6 per cent, in the most recent year for which data is available. Alberta spent the least, at 1.8 per cent.

In every province, the majority of university expenditures went to salaries and benefits for faculty and other staff.

There is some variation, with staff compensation ranging as low as 52.3 per cent of university expenses in Saskatchewan and as high as 60 per cent in New Brunswick and British Columbia.

Alberta was at 57.9 per cent, which is just slightly higher than the national average of 57.7 per cent.

The next highest expense type in Alberta was buildings, land and land improvements, which ate up 8.9 per cent of $4.52 billion in university spending in 2017-18. Scholarships, bursaries and other awards rang in at 5.4 per cent, followed by materials and supplies at 4.1 per cent. The line items get smaller and smaller from there.

We will learn exactly where universities choose to cut spending in the coming months and years — and what the effects will be on post-secondary education.

'It's going to be a tricky few years'

In his analysis of Alberta's post-secondary system, Usher concluded it is a "relatively rich one" compared with other provinces.

This, he wrote, is "primarily because the [Progressive] Conservative government of Ed Stelmach decided higher education was a good way to invest the hydrocarbon windfall and no subsequent government (until now) chose to reverse the policy."

"Despite all this extra money, participation rates still lag the rest of the country; one consequence of this is that on a per student basis Alberta looks especially generous," he added.

For all its extra spending, what Alberta has received in return is "not negligible," Usher says.

He notes that both the University of Alberta and the University of Calgary have been ranked among the top 200 universities in the world, "something very few jurisdictions of [Alberta's] size can say (on a per-capita basis, only Massachusetts, Switzerland and the Netherlands can top it)."

But that could change, he warns, now that the Alberta government has signalled its intention to bring post-secondary finances in this province more in line with the rest of the country.

"Cuts on a scale sufficient to make Alberta look like 'the rest of Canada' put all of this at risk, and do nothing to help alleviate the key problem of low participation rates, either," he wrote.

"It's going to be a tricky few years."