September 17, 2019 – The Ontario government’s plan to make 60 percent of its transfers to colleges and universities based on results could revolutionize the way higher education is funded, even if the details remain sketchy, says a new report from the C.D. Howe Institute.
In “Funding for Results in Higher Education”, author Alex Usher looks at other Performance Based Funding (PBF) plans around the world, and notes that Canada is playing catch-up with many American states as well as European countries such as Denmark, the United Kingdom, France, Finland, Norway, and the Netherlands, who already use these funding models extensively.
Ontario’s higher education funding is currently based on enrolment, with a tiny proportion – less than 2 percent – results-based.
Usher goes on to assess the details of the Ontario proposal – which would create the largest PBF system in North America – and finds that funding would be based on a number of well-defined indicators such as graduation rates, graduation employment and earnings, as well as some that have never been used in this way before, notably skills and competencies, a measure which will assess literacy, numeracy and problem solving skills.
However, he notes that a number of the indicators remain poorly defined, which may lead to challenges with measurement. In addition, the mechanism for disbursing funds could be a source of controversy as the preference for an approach based on individual targets rather than a more traditional envelope-based system – where every institution gets a share of the pot based on their results. As this approach could leave unallocated money on the table if institutions don’t hit their targets, it leaves the door open for criticism that the program is a stealth cut to institutional grants. Usher argues more clarification is needed from the province on these points.
“Apart from the audacious size of the proposed PBF details,” says Usher “There are three other elements of particular interest. First is the general nature of the 10 proposed indicators that comprise the PBF system: unlike most U.S. PBF systems, only one of the 10 Ontario indicators has to do with student completion. Both in its size and breadth of indicators, the plan is more European than U.S. in appearance. Second, several of the indicators are genuinely innovative in the sense of never having being tried anywhere. In some cases, this is welcome; in others it appears as if the government has simply not done its homework. Third, and perhaps most importantly, the actual allocation mechanism that would distribute the money appears never to have been used elsewhere.”
For more information contact: Alex Usher, President, Higher Education Strategy Associations; or David Blackwood, Communications Officer, C.D. Howe Institute, phone 416-865-1904 ext. 9997, email: dblackwood@cdhowe.org
The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada's most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review