Past Session:

Proceedings of the Standing Senate Committee on
National Finance

Issue 20 - Evidence

OTTAWA, Wednesday, September 26, 2001

The Standing Senate Committee on National Finance met this day at 5:47 p.m. to examine the role of government in the financing of deferred maintenance costs in Canada's post-secondary institutions.

Senator Lowell Murray (Chairman) in the Chair.

[English]

The Chairman: Honourable senators, this is our fourth and final public meeting with regard to the reference to the committee by the Senate to consider the role of government in the financing of deferred maintenance costs in Canada's post-secondary institutions. The order of reference was adopted by the Senate on June 13, 2001, and the committee is to report by October 31 next.

There are two organizations appearing before us tonight: the Canadian Alliance of Student Associations and the Canada Foundation for Innovation. We will hear from representatives of the Canadian Alliance of Student Associations first. We welcome Mr. Liam Arbuckle, National Director and Mr. Rob South, Government Relations Coordinator. I invite Mr. Arbuckle to proceed.

Mr. Liam Arbuckle, National Director, Canadian Alliance of Student Associations: I thank you for the opportunity to present to the Standing Senate Committee on National Finance on the issue of accumulated deferred maintenance costs at universities across the country.

First, I would like to say a word about the organization I represent, the Canadian Alliance of Student Associations. CASA is a non-partisan group that represents the interests of 23 university and college student governments to the federal government. CASA ensures that the interests of over 310,000 students, represented by our members, are advocated in a manner that shows professionalism, solid research, clear reasonable thought, and in a manner that reflects a spirit of cooperation. I believe these values will be seen in our presentation.

Of course, as with any major issue, it is difficult to look at deferred maintenance in isolation of the larger environment in which the problem exists. Today, I will outline for you our perspective on how so much deferred maintenance was accumulated, why it is a problem for students, and some suggested courses of action to help alleviate the problem.

Funding for university core operating budgets has been in a general state of decline across the country for the past two decades. While this funding is under the jurisdiction and control of the provinces, we must realize that reductions in federal transfer payments to the provinces have played a significant role in the decline.

In 1991, the Government of Canada transferred $2.1 billion to the provinces to help pay for post-secondary education. This figure, combined with $6.7 billion for health care and $6.1 billion for social programming equals $14.9 billion which, in effect, was what the Canada Health and Social Transfer was at that time. In the 2000-01 fiscal year, the CHST payments to the provinces were only $13.5 billion. Thus, in one decade, funding declined by $1.4 billion, and that is not even taking into account inflation. Announcements have been made to see increases in future years.

It should be noted there was a $2.8-billion increase in equalization payments during this time; yet those funds are for general expenditures in poorer provinces, not for specific social programs. This decline in funding was largely passed from the provinces to health, social and post-secondary education pro grams. Many universities dealt with the cuts in funding or increases below inflation in two ways: raising tuition and cutting expenditures.

In cutting expenditures, many universities did three things that had a profoundly negative impact on students. They cut faculty size. They increased class size. They cut spending on equipment and building maintenance.

These cuts played a large part in the formation of the $3.6 billion worth of deferred maintenance described in the recent report of the Canadian Association of University Business Officers. Other contributing factors to this problem are an aging physical plant, a rise in overall costs of universities and enrolment growth.

However, this $3.6 billion in deferred maintenance is only a number. It will only be treated as such until we understand what problems deferred maintenance cause for students across the country.

The most obvious concern resulting from accumulated deferred maintenance is safety. Unfortunately, there is no national study on the physical safety of students and professors at universities across the country. I would like the committee to know, however, at least episodically, that there is cause for concern.

In recent years, we have seen buildings condemned at the University of Saskatchewan during final exams and puddles from leaky roofs accumulate on the floors of Dalhousie University, last winter, a ceiling tile fell on a student's head in the middle of a lecture at McGill University. All these safety problems were avoidable with proper maintenance.

Next on CASA's list of concerns is the negative impact deferred maintenance has on the quality of education a university student receives. Many classrooms are unable to use modern teaching tools because they have not received the necessary upgrade in technological infrastructure. The situation is worse in many labs in which students are expected to experience hands-on learning. It is not possible to learn modern research techniques if a laboratory cannot handle the use of modern equipment.

This lack of proper infrastructure in laboratories can also affect the ability of students to gain meaningful work experience. If a professor does not have the research space necessary to employ lab assistants, students will be deprived of valuable resume- building opportunities.

This lack of ability to conduct proper research has a strong effect on CASA's next concern about deferred maintenance, namely, faculty retention. The quality of a student's education and the strength of a university's reputation are reliant upon the quality of the faculty at a particular university. Currently, there is strong international competition for many Canadian professors. If our research facilities do not match up, we could lose many quality professors. For example, a well-respected biologist recently left the University of British Columbia for Stanford University in the United States because UBC's ventilation system was in such disrepair that it could not keep the constant temperature her research required.

Lastly, deferred maintenance is a problem for students because of the likeliness that these costs will be passed on to students through increased tuition. Earlier in my presentation I outlined how transfer funding had decreased over the past decade, while at the same time tuition increased dramatically. In fact, over the past decade, the average tuition of an undergraduate arts student increased 126 per cent. Increases were even greater for many students in professional programs.

I do not want to dwell on the tuition issue, but I would be remiss in my duties if I do not make it clear to this committee that CASA believes there are serious concerns about the affordability of post-secondary education in this country. I will use two different statistical examples to illustrate my point.

According to a recent Ipsos-Reid study for Alberta Learning, 44 per cent of recent Alberta high school graduates not attending a post-secondary institution cited high tuition and mandatory fees as a reason for not attending.

When tuition at the University of Western Ontario's medical school jumped from $4,844 in 1998 to $10,000 in 2000, the gross family income of the parents of an average UWO first-year medical student rose dramatically. It is now $140,000 per year as compared with $80,000 just three years ago.

Clearly, students do not want to see any more costs passed on to them. I believe we must realize there is a danger of the large bill for accumulated deferred maintenance being passed on to students. The need for action to prevent costs being passed on to students is time-sensitive.

I think I have illustrated today that universities do have a propensity to deal with budget crises by passing on costs to students. These costs will get a lot higher if the problem of deferred maintenance is not addressed soon.

The aforementioned CAUBO report states that $1.2 billion of accumulated deferred maintenance at Canadian universities is urgent. This means that if action is not taken soon, costs will only escalate.

An example the University of British Columbia illustrates this point. In 1997, at the university's Asian Centre a catastrophic failure of the central ventilation system occurred. It took 12 weeks to fix the system at a cost of $23,000. Had preventive maintenance occurred, it would have taken two days at a cost of $1,500. The question arises as to why this preventive maintenance did not occur. The answer is both simple and unfortunate. With approximately $255 million in deferred maintenance, UBC cannot afford to do all the preventive maintenance it should. Many other universities across the country are experiencing similar problems.

The sad state of affairs that the physical plants of many universities are in is an issue that has been on the back burner too long. It is an issue that has also been identified before. In 1997, the Senate Special Committee on Post-Secondary Education recommended the federal government begin negotiations with the provinces on a joint program to arrest accelerating deterioration of the physical infrastructure in libraries of colleges and universities.

CASA, like the Senate special committee believes the federal government has a strong important role in post-secondary education. Further, we feel that post-secondary education is and must continue to be a key element in the federal government's skills and learning agenda, the innovation agenda and the government's responsibility to ensure a healthy and strong economy.

To ensure that the physical plants of universities can fulfil this role we recommend two key actions. First, to address the existing problem, we recommend the federal government create a one-time funding envelope of $1.2 billion to address urgent deferred maintenance. Second, to prevent this problem from recurring, we recommend the federal government work cooperatively with the provinces to create a funding accord of $1 billion per year earmarked exclusively for increased post-secondary education funding.

I know the price tag for these actions seems high, but we must remember to view education as an investment in our economy, not as a cost.

I would like you to consider the comments of the Stéphane Garelli, the director of the internationally respected World Competitive Project. He said:

Knowledge is perhaps the most critical competitiveness factor. As countries move up the economic scale, the more they thrive on knowledge to ensure their prosperity and to compete in world markets. How knowledge is acquired and managed is each nation's responsibility. Indeed, nations do compete.

Mr. Chairman, thank you for the opportunity to present our thoughts here this evening. I look forward to answering your questions.

I would like to close my presentation with a quote from Eric Hoffer's Working and Thinking on the Waterfront:

It is the capacity for maintenance which is the best test for the vigor and stamina of a society. Any society can be galvanized for a while to build something, but the will and the skill to keep things in good repair, day in, day out are fairly rare.

Senator Moore: It is good to see Mr. South and Mr. Arbuckle again. I am pleased to say that Mr. Arbuckle is a graduate of St. Mary's University, Mr. Chairman.

The Chairman: He is a native of Amherst, Nova Scotia, and Mr. South is a graduate of the University of Calgary.

Senator Moore: I am interested in the witnesses' remarks. We have heard some of these comments and figures before from other witnesses, including CAUBO and AUCC who were here yesterday. Did the Canadian Alliance of Student Associations, when it became aware of this situation, make representations to those groups, urging them to act? How has your organization dealt with the matter?

Mr. Arbuckle: We are in constant contact with the AUCC, exchanging ideas. On this issue, we particularly agree on our similar ideas about the existing problems. That does not necessarily mean we see the same solutions to those problems, but we do identify the problems as being common to the universities and colleges and to the students.

This is the second consecutive year that our national campaign has included deferred maintenance as a topic.

Senator Moore: Have you expressed your views to those organizations?

Mr. Arbuckle: We have spoken with the AUCC. To my knowledge, we have not spoken with CAUBO.

Senator Moore: AUCC suggested to our committee that the federal government provide funds, which would be disbursed on the basis of a formula combining provincial population with each province's full-time equivalent student population. Have you seen that proposal?

Mr. Rob South, Government Relations Coordinator, Canadian Alliance of Students Associations: I saw that proposal a few days ago.

Senator Moore: Do you have a response to that or a preference?

Mr. South: As a member-driven organization, we cannot comment because our own policy committee has not had a chance to analyze that. The key point here is that we both see the same problem and we both see similar, though not identical, courses of action toward solutions. If we can find a workable solution that does not create more problems, both organizations would be happy, regardless of whose solution it is.

Senator Moore: I ask the question because AUCC says that the number of people using university facilities is a major contributing factor in the deterioration of those facilities. Going on the basis of the full-time equivalent student population, individual universities would achieve more funding than if some sort of combined figure is used. Do you have any thoughts about that? Or is that again a policy matter where you cannot comment?

Mr. Arbuckle: It is a policy matter on which we unfortunately cannot comment without going through the process.

Senator Moore: What about a personal matter like making donations to universities? There was an article in The Globe and Mail in August, as well as a report prepared by Statistics Canada entitled, "The National Survey of Giving, Volunteering and Participating." The newspaper article indicates that $5 billion was donated in the past year as charitable donations and that only 3 per cent of that - $152 million - was donated to university and research facilities.

As we hear from the various witnesses, the question that recurs is where the money will come from, besides government and corporations? How do we get individuals more involved? We know about the tax incentive to give political donations whereby a portion comes off the taxes you would otherwise be liable to pay.

Does your organization have any position with respect to making donations to universities, even if it was earmarked to a specific reserve fund for maintenance? Do you have any comment with respect to donations being accorded the same status as a political donation?

Mr. Arbuckle: I could answer that from a personal view, but I would, again, need to discuss it as a policy matter.

If such a tax break addresses the problem in a way that is equitable across the country, then we would like that sort of policy proposal. It can be worrisome that certain universities and colleges have a better set-up or infrastructure to deal with incoming donations. The ability to generate donations for projects is substantially better at some universities than others.

It is hard to get people to donate in the first place but it is even more difficult to ask them to help rebuild the Sobey's building, for example, at St. Mary's University. Donors would rather see their own names on buildings. The universities themselves would have to make some attitudinal changes to come up with innovative ways to present the option of donating to deferred maintenance as one that would benefit the donor as well as the university.

Senator Moore: We cannot keep going in this cycle. We must address the problem in a more business-like manner. I am not suggesting that the business options do not do that now, however, we should explore other incentives to get people involved. It need not be alumni. We could involve friends, relatives of those who went to the university, or concerned citizens within the community who may have gone there for a cultural or athletic event. Somehow we must get more than 3 per cent of donations flowing toward our universities if we believe that universities are so important to the evolution of our civilized society.

Mr. Arbuckle: Incentives must also be based on the fact that communities must support themselves and the institutions within them. Often that is difficult. The city of Halifax has a base population of 350,000 and has five institutions. That becomes a problem. I do not know if the solution lies in the direction of spending time trying to produce more money from donations as it is in looking for ways for the federal government to be able to help out in a systematic way on a continual basis.

Senator Stratton: I discovered tonight from our friendly senator from that part of the world that there are five institutions in Halifax. That perhaps puts Manitoba, where I am from, in a little better perspective, as we have two in Winnipeg, with a population of 650,000.

With $3.6 billion in deferred maintenance, I am rather shocked that there have been only three occurrences of physical harm coming to people.

Private fundraising aside for the moment, Manitoba has embarked on a program of $100 million over five years devoted strictly to the repair of infrastructure on the three universities and the two community colleges in the province. Do you have knowledge of that occurring in other provinces?

I agree it is a bad situation. People who work at the University of Manitoba in the operations and maintenance department tell me of whole chunks falling off of brick buildings, which is rather dangerous. Are you aware of other provinces carrying out such a program, and if not, why not?

Mr. South: Certain portions of the Superbuild fund in Ontario are allowed to go to maintenance of existing buildings. Different provinces would argue that they have chosen different models to do this. Alberta does not believe in infrastructure programs for universities. It believes it is the university's responsibility out of its core operating budgets. However, Alberta recently gave sizable increases to the operating budgets of its universities, so that province would argue that the universities are empowered to make some repairs.

Other provinces do that. The ministry that gets involved would vary according to the province. In some provinces, a public works or infrastructure ministry would provide the funding; in other provinces it would come through the education or post-secondary ministry. There is funding. However, it will not be enough to solve the problem at the level it is at right now, but there is some funding coming in from the provinces, certainly.

The Chairman: We do have the Statistics Canada study that came out the other day and it relates to the point you have raised. It points out that in the academic year 1999-2000, the three levels of government injected almost $1.1 billion more, or 15.1 per cent more, than they did in the previous academic year.

To the point you raised, it says:

The largest increase came from provincial governments, which contributed almost $6.8 billion in 1999-2000, up $800 million or 13.5 per cent from 1998-99. This funding was allocated to capital spending to address deferred maintenance on Canada's aging universities, as well as to expand capacity for future growth in student enrolment and faculty.

A little bit later, the report says that universities in most provinces allocated more money for infrastructure, that they spent a total of $430 million on buildings, a 5.7 per cent annual increase, which followed an 8.3 per cent increase the previous year.

That being said, the report adds that spending on buildings was still 17.8 per cent less than it was in 1994-95. In a word, it seems to me they are starting to play catch-up. There is a long way to go, as the witnesses have said, but they are starting to play catch-up and the money is coming, I think, in great part from the various levels of government, including the feds.

Senator Stratton: This is what I was getting at. Where are the provinces on this? I happen to be aware of what is happening in Manitoba, thankfully. What is happening across the balance of the country I think is critical.

You are requesting the federal government create $1.2-billion funding to address this urgent problem and then to create a funding accord of $1 billion per year earmarked exclusively for increased post-secondary education funding. What does that mean? Is that across the board? Is it for infrastructure alone?

Mr. South: The funding accord for the $1 billion annually is for across-the-board funding to deal with a variety of issues that we see universities facing. Deferred maintenance is one of the main concerns. In addition, a huge faculty renewal problem will be coming up in the next few years. Massive enrolment growth is being faced. Also, education expenses in a number of areas, such as purchase of books, have so outpaced inflation that they have come up with an index - called the Education Price Index, the EPI - to see how fast prices are rising for education. Education costs are growing at a more rapid rate than inflation.

In coming up with the figure of $1 billion, we looked back to the year 1991 and there was $2 billion earmarked for post-secondary education. If you take base inflation over that half decade, it would be approximately 23 to 24 per cent. That would get you up to $2.5 billion. You must factor in that we have had a massive enrolment growth over the past decade and also the growing importance of post-secondary education to the economy.

Finally - and this is one of our key points - the two numbers that we have used are bookend numbers. However, you will find 1991 to 2001 obviously was a period of cuts when the system was switched over from three separate funds to the CHST, which the finance department talked to this committee about earlier. When those cuts came, all three social areas were affected: general social programs, post-secondary education, and health care. When the government started to reinvest, we found - and it is hard to prove the numbers - that the vast majority of this reinvestment went directly back to health care and did not go back to areas such as social programs and post-secondary education.

The Chairman: That is the way it works. You understand the block-funding concept.

Mr. South: Yes, we understand the block-funding concept. We are not entirely happy with the block-funding concept.

The Chairman: No. You will agree that your complaint on that score is to the provincial governments and not to the federal government?

Mr. South: We agree that it is to the provincial governments, but we also agree that there must be an adequate level of transfers from the federal government. It helps if there are numbers to which the provinces must be held accountable, so that one can do comparisons across provinces, et cetera.

If funding is earmarked for specific funds in each province, you can see by how much each province will top up its own spending, et cetera. Comparisons and accountability for funding would be much easier, because everything is more visible to the average citizen and to university students.

The Chairman: How would you operate the funding envelope of $1.2 billion to address urgent deferred maintenance? Would that money go from the federal government to the provinces and then to the universities?

Mr. South: We believe there would have to be negotiations between the federal government and the provinces, otherwise it would cause jurisdictional issues. There could not be a direct federal to university transfer there.

The Chairman: Thank you both. We appreciate your presence and your help to this committee on this matter.

[Translation]

Senator Ferretti Barth: Witnesses have told us that universities are in such dire straits that the quality of the courses offered is compromised. Today, we were told that an eminent researcher had left a Canadian university for one in the United States because the ventilation in his work area was inadequate. I believe you stated as much in your report.

Mr. Arbuckle: That is correct.

Senator Ferretti Barth: University education is very import ant to a nation as a whole and we must remain competitive internationally. Universities represent an investment in our future and we have to preserve this part of our heritage.

With respect to infrastructure, the very essence of this bill, you put forward two recommendations, one being to urge the federal government to provide one-time funding. We could call upon the government to establish a national university infrastructure program which would give every university an opportunity to assess its needs and to request funding to restore its infrastructure.

Not all universities are experiencing the same problems and costs are not identical in all cases. If a federal infrastructure program were in place, one to which all Canadian universities had access, then each province could request funding for respective programs. Would you not agree?

[English]

The Chairman: Mr. Arbuckle, have you a comment on that intervention?

Mr. Arbuckle: It sounds good, but our proposal is that we address immediately the outlined urgency of the $1.2 billion in a one-time envelope. This is a very big problem, and we must come up with mechanisms to deal with it continually. However, the one-time funding would help resolve the current problems as quickly as possible; then, through another mechanism, which is increasing $1 billion per year for core budgets that universities could take care of at their assessed pace.

[Translation]

Senator Ferretti Barth: Let us hope that these grants will help these universities turn the corner once and for all. They have been neglected for far too long already. We need to think about setting up a program that will guard against this happening again.

Once there was an infrastructure program in place that handed out money right and left to universities. This particular problem is unique to universities. Too much time is allowed to go by because the machinery of government moves far too slowly. We need to see what can be done to reduce waiting times with a view to resolving the situation.

[English]

Mr. Arbuckle: It has reached the point now that I think even universities and colleges realize they cannot put it off any longer. It has reached the point where things are falling on people.

When the cuts to program funding occurred, it was dealt with by simply putting things off to a later date. That was the only solution - to take care of things in a couple of years. There are many universities, such as Dalhousie in Halifax, that can no longer do that. There are actually puddles in some of the hallways of the university.

If it is more than a one-year funding program - a one-time funding mechanism, perhaps - how long would the negotiation process be between the federal and provincial governments to come up with such a specific, general federal program? That would take a long time to accomplish. We suggest that a one-time envelope to cover these deferred maintenance costs that are considered urgent would resolve things more quickly than if it were dependent upon negotiations between the federal and provincial governments.

[Translation]

Senator Ferretti Barth: In your presentation, you stated that in 1997, a Special Senate Committee on Post-Secondary Education recommended the federal government negotiate with the provinces to establish a joint program to prevent the deterioration of university library infrastructure. What has happened since these recommendations were first made?

The Chairman: Indeed, a special Senate committee chaired by our former colleague Senator Bonnell issued a series of recommendations.

Senator Ferretti Barth: We need to think of a more effective way of helping our universities. We need more and more educated people because the competition is incredible. Universities are extremely important institutions. Where do matters stand today, further to the 1997 recommendation?

The Chairman: This is neither the first time, nor will it be the last time, that the government has failed to follow through on a recommendation issued by a parliamentary committee.

Senator Ferretti Barth: If the government has turned a deaf ear to...

The Chairman: The committee is looking into this problem, because the situation has deteriorated markedly since 1997.

[English]

Many thanks, Mr. Arbuckle and Mr. South.

I now call to the table Mr. David W. Strangway, President and CEO of the Canada Foundation for Innovation.

Honourable senators, you will know that the Canada Foundation for Innovation was established in 1997 to invest in research infrastructure projects and is projected to exist until the year 2010. It has so far provided $3.15 billion in funding to projects.

Mr. Strangway, we appreciate your willingness to appear here on rather short notice, the more so as you have this afternoon appeared before the Finance Committee of the House of Commons. I do not know whether you are in double jeopardy or whether this amounts to cruel and unusual punishment.

Here you are before the Senate committee. I hope you will find your experience at least as pleasant as before the House of Commons committee. I hope you will be able to help us with the problem with which we are concerned.

Please proceed, Mr. Strangway.

Mr. David W. Strangway, President and CEO, Canada Foundation for Innovation: Mr. Chairman, the Canada Foundation for Innovation, or CFI, is mandated explicitly to support capital infrastructure in the research area. Basically, that means before proposals are submitted to us by universities and institutions, they talk first about what research they plan to do, what their needs are and then they apply to us.

We require them to submit a plan as to where they are planning to conduct their research over the next few years because we are making very substantial investments in these institutions. We need them to tell us where they want to go. They must then apply to us and demonstrate that they have the quality in the proposal that is required.

At this point, as you said, Mr. Chairman, we have received a total of $3.15 billion from the federal government over a period starting in 1997; the last amount was delivered to us toward the end of June so that it can be counted in the last fiscal year. On a slight aside, that was probably the most interesting experience that I shall ever have because I picked up a piece of paper from the government that said "125" and then a whole lot of zeroes after it. I had never seen anything like that and I probably will not see anything like it again.

The Chairman: This is the wrong committee to be telling that story, sir. We are the counterpart of the Public Accounts Committee. We deal with the Estimates.

Mr. Strangway: I understand that. This was a fascinating thing because that was the 10-year funding for the rest of the decade.

We support 40 per cent of the cost of a project that is approved by us. The institutions are under obligation to support the remaining 60 per cent. It is important to realize that the federal government does not have a partnership with the provinces in this activity; nor does the CFI have a partnership with the provinces. We support directly the universities in their applications and needs. They then must go and find the matching funds, the remaining 60 per cent.

So far, in most cases, they are finding a further 40 per cent from the provincial governments, but it is crucial to note that that is not a formal partnership. It is a strictly informal partnership and it depends on the success of the university presidents who are effective lobbyists. They will find the remaining 20 per cent largely from the private sector or from voluntary organizations. If it is health research area, they might work with the Heart and Stroke Foundation.

That is the pattern. At the present time, we have allocated or awarded more than $900 million out of the total of $3.15 billion, and that continues. You should also be aware that the $3.15 billion is in investments. Thus, by 2010, when the fund goes to zero, we will have committed a total of about $4 billion, given the interest that will accumulate. It is a massive program.

It is aimed entirely at the facilities that researchers need. When the proposals come to us, they are built upon either the excellence that is there or the reason they need this facility in order to achieve research excellence.

You are addressing the question of deferred maintenance. Deferred maintenance is not part of our mandate in any direct sense. There are occasions in which a proposal will come forward to us in which we say, "You tell us about the exciting research you plan to do and then tell us what the missing elements are. If it is a capital element, we might be able to deal with that." In that sense, we have done some things with respect to buildings.

However, there are always buildings or renovations of buildings always driven by the research they plan to do. If someone comes and says, as they did in one case, "We have a good group. We have a leaking roof and we need a new building to replace all of this," that dos not fit our mandate. We may be helping slightly with the deferred maintenance problem, but fundamentally we are not mandated to do so.

Mr. Chairman, some honourable senators may realize that I spent nearly 13 years as a university president. Thus, it is inevitable in taking off my CFI hat for a moment that I might make some comments about the question of deferred maintenance.

The Chairman: Please do.

Mr. Strangway: The deferred maintenance question is very profound and fundamental. As a result of my 12 years or so as President of the University of British Columbia, I would like to draw a couple of things to your attention.

The first is the terms of the transfer payments from the province to the university on a per-student basis. We lost 30 per cent of the funding in that 10-year period. That is in constant dollars, of course, but those were very serious belt-tightening exercises.

The Chairman: What is the 10-year period?

Mr. Strangway: I finished in 1997 and I started in 1985, so it is in recent memory. I do not think much has changed for them in the meantime.

When one is taking 30 per cent hits, it is not much different than what the federal agencies went through in terms of program review. I do not think there was anything unusual about the University of British Columbia. I think you will find this was a universal problem.

Faced with the issue of whether to replace the roof or to fire the faculty members, choices must be made. In the face of increasing student demand, you do not fire faculty members. They are the ones who deliver what the university is all about. We did not hire as many as faculty members as we would have if the deferred maintenance problem did not exist.

I like to characterize the deferred maintenance problem in a simple way. UBC, when I was president, had 20 acres of roof. Vancouver has a rainy climate. The average lifetime of a roof there is 20 years. Divide one by the other, one acre of roof should be replaced every year just to keep up. Instead we said that if the roof was not leaking, we would not replace it. When 15 or 20 years have gone by and all 20 acres start leaking at once, we are facing deep budget cuts.

That is the deferred maintenance problem in terms of a roof, but hundreds of other items are affected. Many temporary buildings on campuses were meant to last about 20 years - not a lifetime.

I have enormous sympathy and understanding regarding the deferred maintenance problem. You will find similarities in hospitals and colleges, but the sector I know is the university sector.

It is not an issue that CFI is mandated to deal with because we drive everything by the quality and the nature and the plans for the research.

The Chairman: We appreciate your testimony both as head of CFI and, in particular, your fairly recent experience as a university president.

Senator Stratton: So you have $4 billion over 10 years for research primarily?

Mr. Strangway: It is for the capital cost of research facilities and equipment. It is not for the performance of research.

Senator Stratton: I understand. Would you give dollars to build new buildings?

Mr. Strangway: We have given dollars to build new buildings where that was the missing element that was preventing outstanding research. We have done a fair number of renovation projects as well.

Senator Stratton: I can appreciate the need to change a building's function in order to allow research to take place.

I recall the construction boom in the 1970s at university campuses. I am from Manitoba and I recall the University of Manitoba undertaking huge construction. Of course, 25 years later, as you say, the costs catch up and the acres of roof start leaking. Huge infrastructure problems arise. Will we now, with this innovation fund, create the same problem for 20 years from now? Are we building in another long-term problem by the very fact of your work? I do not deny your work is needed.

Mr. Strangway: We may be building in long-term problems in more arenas than this one. Look at the world of high-performance computing. Many investments are being made there to allow people to use modern techniques to hook into the optical backbone across the country. In that field, the deterioration rate is five years, rather than 15 or 20 years. Somewhere down the road, people will need to look at that set of questions. Probably the proposals that we see five or six years from now will still be for first-rate research but it will include the replacement of outdated equipment. That is not a deferred maintenance problem, but it is a similar problem. Different parts of this deterioration have different time scales.

Senator Stratton: In this day and age, you can consider that an infrastructure problem?

Mr. Strangway: In the way we are dealing with it, it is an infrastructure problem, yes.

Senator Moore: You mentioned you provide funding for research, capital infrastructure and equipment. So you provide funds for new buildings, some renovations and for lab equipment. Is that correct?

Mr. Strangway: Yes, the researchers must tell us about the frontier research they plan to do. Then they must show what is missing in order to achieve that. They must demonstrate that they, in principle, can raise the matching funds, and, if the project is established, that they have the capacity to operate it and use it over time. The short answer is yes.

Senator Moore: When universities make their application to CFI, and your organization approves the funding, is any part of the funding set aside as a reserve for ongoing maintenance? Most buildings have a lifespan of 35 years. Is that taken into consideration? This is similar to what Senator Stratton was asking.

Mr. Strangway: Ongoing maintenance is not included in the proposals, but we do ask if they have thought about that question themselves.

Senator Moore: One of the reasons we ended up here is that previous business plans did not look ahead. It is one thing to put in a new window, but if it gets broken you must have the wherewithal to repair it. This would be the recipients' responsibility?

Mr. Strangway: CFI has one fund that was incrementally given to us as part of the increase; there is $400 million set aside for the use and operation of that infrastructure. This new fund is not retroactive. When a new proposal is funded, we help with up to 30 per cent of the cost of the capital to assist with the operation. A piece of equipment will likely require a technician or a support person. This is, in many ways, an indirect cost question.

Senator Moore: We have heard that referenced here as an indirect cost. That seems to cover many things.

Mr. Strangway: That umbrella covers a lot of things but there are many needs.

Senator Moore: With respect to sources of funds from private foundations, the culture there seems to be to provide funds for new projects as opposed to fix-up. In your tenure as UBC president, were you able to get foundations to realize the importance of the maintenance of buildings and to provide some incentive for them to consider and to provide funds for such projects?

Mr. Strangway: There were discussions of that kind, but that is not terribly attractive to donors. I think, increasingly, buildings are less attractive to donors than they used to be. What is much more attractive is scholarship support and support for endowed chairs. In my time at UBC, we raised $270 million. It was the largest campaign in Canadian history. Some that money went into buildings, including a new library, but most of it went into the endowment funds. We created 80 endowed chairs as a result of that campaign so we were able to hire 80 faculty members we could not have otherwise hired.

Much of the money went into endowments for scholarship funds for graduate students, or for students from across the country. We are seeing in the private-giving area a lot more interest in chairs and students than in the bricks and mortar. Bricks and mortar are a tougher sell. We did get quite a bit in bricks and mortar but it would not be as easy today.

Senator Moore: In terms of individual donations, do you think people would have more of an incentive to give if their donations and the charitable receipts given for them were treated in the same manner as political donations in that the amount would come off the taxes one would be liable to pay as opposed to a business donation?

Mr. Strangway: Most of the universities have charitable receipting capacity. They can give lots of tax breaks and so on. The tax break is a necessary condition but it is not the driving force. People want to do something good and they want to do something for the institution.

Many times we have had to argue with people and say, "Here is something we want to put your name on." They say, "I do not want my name on it." We say, "Please, we want your name on it because we want to honour you for what you have done."

The Chairman: Chances are you could broaden the base of your donors - although I am not suggesting that it needs to be done, as Senator Moore appears to be doing - if you could offer the kind of tax credit that is provided for political donations.

Mr. Strangway: This was not an issue for us particularly because we had a foundation that has Agent of the Crown status. We could manage through an Agent of the Crown. I do not know if that is universal across the country, but certainly we had that capacity at the University of British Columbia. I think a number of other jurisdictions have entertained an Agent of the Crown status.

The Chairman: I believe you are the first former university president we have had with us. Were you in office when the university business officers did their research?

Mr. Strangway: I was not. That report came out about a year or six months ago. I was not in office, but certainly was very much aware of it. We had done that analysis in my time at UBC.

The Chairman: The national number they say is $3.6 billion. How serious a problem is deferred maintenance at UBC as we speak?

Mr. Strangway: There are many different ways of trying to get at that question. One of the ways we did it was to ask what would be the replacement value is of the physical structure of the campus. We came close to a number in the billion-dollar range. If everything were levelled by an earthquake and we had to start from scratch, we would be looking at somewhere in the range of $1 billion.

People who work in the field of upgrading, maintaining and keeping buildings whole and hearty and sound will say we should be spending 10 per cent, 15 per cent or even 20 per cent a year. The deferred maintenance problem is an accumulated amount, but if one really had the capacity to properly manage an institution like UBC, one would be looking at expending between $100 million and $150 million per year in doing that.

If we put deferred maintenance on that, with five years' worth of catch-up, and multiply that through, $500 to $700 million would have gone a long way toward getting us back into the catch-up problem. As people have said, there is also the ongoing problem. That is just one institution. It is one of the very big institutions.

The Chairman: You spoke of the metaphorical roof, the choice you had between fixing the roof or firing, you thought, 20 professors, during those lean years. What did your staff load look like during those 10 years? Did you actually reduce faculty?

Mr. Strangway: We did not reduce faculty much but we changed the student-faculty ratio substantially.

The Chairman: You increased class sizes.

Mr. Strangway: Public institutions in Canada, let us say 10 or 15 years ago, might have had a student-faculty ratio in the global sense of perhaps 15 to one. I am pretty sure that by the time I left, we had managed to drive that up to about 21 or 22 to one. The great universities south of the border will always have a student-faculty ratio of eight to one or ten to one.

The Chairman: In terms of trying to absorb the cut-backs, the reduction in revenues from government, it was maintenance that took the hit?

Mr. Strangway: There is no question it was maintenance that took the hit.

The Chairman: It was not the faculty.

Mr. Strangway: It was not today's crisis, but the faculty also took the hit in the sense that the workloads of the faculty went up substantially. We did not reduce staff, but student numbers grew immensely. The workload went up.

The Chairman: What did your wage bill look like over the period? Did it increase by much?

Mr. Strangway: There were increases during the time. In the first years I was president we had just come out of the very deep cuts that had been instituted suddenly. Talking about 1 per cent sounded like an enormous, great success. Later on the salary budget grew somewhat, but not very much. It certainly grew less than inflation for much of that time.

The Chairman: That is the information I was looking for.

Mr. Strangway: I must relate one anecdote about the transfer payments. Some of you will remember a former finance minister in B.C. by the name of Mel Couvelier. One day, as we were chatting and walking down the hall, he said, "Mr. President, you must be really upset that the feds are beginning to reduce the rate of increase of the transfer payments." My answer to him was very simple: "Mr. Minister, you never gave it to me on the way up; why are you going to take it away on the way down?"

There was never any connection in those days. Later, of course, when it did start to go down seriously, it was, "Why are the feds cutting back education and health? That is their fault."

I always felt I was caught in that debate, but my cheque fundamentally came from Mr. Couvelier and his successors.

The Chairman: Thank you for coming, Mr. Strangway. It has been very helpful and extremely informative to have you here as head of the CFI and as a former president of UBC. I hope we will have an opportunity another time for a discussion in more depth and detail on the work you are doing.

The committee adjourned.

National Finance

Proceedings of the Standing Senate Committee on National Finance

Issue 20 - Evidence

Proceedings of the Standing Senate Committee on
National Finance