Statement made on 02 April 2008 by Senator Catherine Callbeck
Hon. Catherine S. Callbeck:
Honourable senators, this inquiry stands in the name of Senator Andreychuk but it is my understanding that she has yielded so that I may speak today and that the debate will stand in her name.
I thank Senator Hubley for initiating this inquiry and I commend her on her genuine interest in post-secondary education. As the honourable senator mentioned, it has been more than 10 years since the completion of important work of another Islander, the late Dr. Lorne Bonnell, and his Special Committee on Post-Secondary Education. In September 1997, the committee released a report entitled, A Senate Report on Post-Secondary Education in Canada.
We all know the importance of post-secondary education to the future prosperity of this country. As I have said before, university graduates who work full-time will earn about $1 million more over the course of their careers than people with only a high school education. Every year, college graduates earn $3.7 billion more than they would if they had stopped after high school. The advantages to individuals go well beyond annual income. Those with post-secondary education are healthier, have a higher quality of life and are employed in higher-paying, more-fulfilling jobs. In fact, all Canadians benefit from the work of these graduates. People with post-secondary education increase the country's productivity and economic prosperity. In addition, they contribute to 33 per cent of this country's tax base, which funds our social and other government programs.
There are many issues to be discussed under post-secondary education. Today, I will focus on federal financial support to the provinces and on the challenges facing Canada's post-secondary institutions. One of our greatest challenges is the issue of jurisdiction. The provinces have exclusive constitutional authority over education. However, because of the importance of post-secondary education to the national social and economic interest, the federal government has helped to support it since shortly after Confederation.
The government has undertaken many initiatives, including the establishment of the Royal Military College in Kingston in 1876, which opened with a class of 12 students; the provision of grants after 1910 to develop agricultural techniques and training; and the upgrading of vocational, technical and industrial education. After the Second World War, the federal government provided an annual grant of $150 for each veteran student. From 1957 until 1967, the Canada Council distributed funds for its University Capital Grants Program, and in the 1960s and 1970s, the Canadian Mortgage and Housing Corporation provided loans to help build university residences.
Beginning in 1951, the federal government established a grant program that provided funds directly to educational institutions to pay for operating costs. In 1967 under the Federal-Provincial Fiscal Arrangements Act, the federal government began a system of cost-sharing transfers to the provinces for the purpose of, among other things, the funding of post-secondary education. Over the years, that funding model has evolved but the federal government has remained a key partner with the provinces.
Since 1977, federal support for provincial activities in post-secondary education has been provided through a combination of cash transfers and the vacating of "tax room" to enhance the revenues of the provincial government. This fact has been discussed many times in this chamber, most notably through Senator Moore's inquiry on the Canada Social Transfer last spring. One of the most important parts of this process was the recognition that a tax point in one province might be worth considerably less than in another province. The funding formula was designed to take this difference into account, ensuring that provinces with weaker fiscal capacity were not penalized for the lower value of their tax points. This formula resulted in a transfer that helped provincial governments to provide post-secondary education to its population on a more equitable basis.
That cash-and-tax-transfer arrangement in various forms had been in place since 1977. However, in Budget 2007, that equality came to an end with the implementation of a new way to calculate the Canada Social Transfer. Several senators and I expressed concern at the time that the new approach would not serve the fundamental objectives of equity and fairness.
The government has shifted gears away from a funding formula that takes into consideration the fiscal capacities of the provinces to a formula based on a per capita cash transfer. Each province, regardless of its fiscal capacity, receives the same amount per capita in cash transfers. This situation has resulted in a huge windfall for Canada's two richest and largest provinces, Alberta and Ontario, and it leaves smaller provinces on a less equal footing. As Senator Moore said, the value of federal funding invested in post-secondary education in Atlantic Canada is immeasurable. I am concerned that the new per capita approach threatens the ability of some provinces to maintain quality post-secondary education for their residents. I know from personal experience the difficulties in delivering health and social services and investing in post-secondary education. With small populations, I worry that this new system will impact negatively on Prince Edward Island and the other Atlantic provinces.
Even without the negative impact of the per capita Canada Social Transfer in most provinces, Canadian universities already face various challenges in delivering quality education to their students. In 2006, more than 1 million students were enrolled in universities and colleges in Canada. That number is an increase of 31 per cent since the year 2000. According to Trends in higher education, Volume 1, published by the Association of Universities and Colleges of Canada, the AUCC estimates that by 2016 enrolment rates will increase from 9 per cent to 18 per cent. Even in light of the fact that the population of young people is beginning to decline, participation rates are still expected to increase.
With increased participation rates come other challenges, one being the added strain on universities and their faculties. Currently, there are nearly 41,000 faculty in Canadian universities. Between 1998 and 2006, the number of faculty grew by 21 per cent, while enrolment over the same time increased 37 per cent to its highest point. Student-faculty ratios continue to grow and are now higher than ever before.
Post-secondary education faces serious faculty shortages in the near future. In 2005, one third of all faculty were 55 years old or older while only 20 per cent were under the age of 40. In addition to the faculty that will need to be hired to keep up with enrolment increases, it is expected that approximately 21,000 new faculty members will need to be replaced over the next 10 years because they will retire or leave for other reasons. There will be a huge demand for both undergraduate and graduate faculty members.
We need to produce more graduates and post-graduates to meet not only this faculty shortage but also the growing demands of the general labour market. According to the AUCC, by 2016 we will need an increase of at least 35 per cent in master's and doctoral graduates to meet Canadian labour market demands. Unfortunately, we lag behind in this regard. On a per capita basis, Canada produces 50 per cent fewer master's graduates and 30 per cent fewer PhDs than the Unites States.
Research is one of faculty's key responsibilities and Canada's research capabilities will be affected if we do not have enough qualified people to fill these roles. This research is so important because, as the AUCC has stated, its results help to increase the country's productivity and economic growth; helps to improve Canada's overall health; and helps us to develop sustainable use of our environment and natural resources.
When Robert Best, Vice President, National and International Relations Branch of the Association of Universities and Colleges of Canada, appeared before the Standing Senate Committee on Social Affairs, Science and Technology in January, he stated:
Canadians' standard of living depends increasingly on our competitiveness in the global knowledge economy. To maintain and enhance the standard of living Canadians currently enjoy, we must secure our position among the world leaders in research.
Fully one third of all research in Canada is done in our universities. However, another challenge faced by these institutions is the inherent cost of performing this research. While funding may be received for the research, universities must pay the costs needed to create these opportunities in the first place, such as the costs of operating and maintaining their facilities and the cost of administration.
Currently, the federal Indirect Costs Program reimburses universities for a share of their direct costs. In 2007-08, the indirect costs reimbursement budget was $315 million, and the average reimbursement rate was 25.4 per cent. However, universities are still having a hard time with these indirect costs. In the United States, these costs are reimbursed at a rate nearly double of that in Canada. In order to compete, Canadian universities have been asking for a reimbursement rate of 40 per cent to be more competitive with our neighbours to the south. In the recent budget, $15 million was added to the Indirect Costs Program. That is a step in the right direction, but it really does not have much effect on the reimbursement rate as more is being spent on research.
Honourable senators, we need to look at the larger picture of federal investment in post-secondary education. We have to consider the challenges faced by provincial governments, by post-secondary institutions and, most of all, by students. As we know, this country's overall productivity, prosperity and sustainability rests on our ability to overcome these challenges. We must consider the importance of post-secondary education, and we must act because our prosperity and our competitiveness in the global economy depend on it.