Proceedings of the Standing Senate Committee on
Social Affairs, Science and Technology
Issue 10 - Evidence - June 16, 2010
OTTAWA, Wednesday, June 16, 2010
The Standing Senate Committee on Social Affairs, Science and Technology met this day at 4:38 p.m. for its study on the accessibility of post-secondary education in Canada.
Senator Art Eggleton (Chair) in the chair.
[Translation]
The Chair: Welcome to the Standing Senate Committee on Social Affairs, Science and Technology.
[English]
My apologies for our late start; we had a longer session of the Senate and the traffic in getting back over here was horrendous, not to mention all the rainfall.
Senator Eaton: We are late because Senator Eggleton was talking.
The Chair: Yes, but I had no choice.
This is our last hearing on the study on the accessibility of post-secondary education in Canada. Today, we are particularly looking at the federal government's role and relationship with the provinces in that regard.
We have witnesses here from the Department of Finance and from the Department of Industry Canada. From the Department of Finance is Chris Forbes, General Director, Federal-Provincial Relations and Social Policy Branch; and Baxter Williams Director, Personal Income Tax Division, Tax Policy Branch. From Industry Canada, we have Robert Dunlop, Assistant Deputy Minister, Science and Innovation Sector.
Chris Forbes, General Director, Federal-Provincial Relations and Social Policy Branch, Department of Finance Canada: Thank you, Mr. Chair, and I thank the committee for the invitation to speak here today. We would like to talk about the Department of Finance's responsibilities in delivering federal support for post-secondary education. This includes $3.4 billion in federal transfers provided to provinces and territories, and about $1.6 billion to help students and their families save for future education, as well as deal with current tuition and other education expenses through the tax system.
I would like to start with my responsibilities, which cover the major transfers administered by the Department of Finance. Mr. Williams will then turn to the tax system.
The Government of Canada has made significant investments in post-secondary education over the past few years through the Canada Social Transfer, or CST, a federal block transfer to the provinces and territories. It also provides financial support to provinces and territories for social assistance and social services, and programs for children.
In Budget 2007, the federal government renewed and strengthened the CST by putting this funding on a long-term predictable track and by making the transfer more transparent and fair.
The funding framework was extended through to 2013-14; an annual 3 per cent escalator was legislated, effective in 2009-10; and annual funding for the post-secondary education component of the CST was increased by $800 million beginning in 2008-09. This $800 million continues to grow by 3 per cent per year as a result of the escalation.
[Translation]
At the same time as the Canada Social Transfer was strengthened, the transfer was moved to an equal per capita cash basis to reflect to the government's commitment to ensure that general-purpose transfers provide equal support for all Canadians.
In addition to the legislated base increase of $300 million in 2007-08, new investments totalling close to $700 million were made in 2007-08 to facilitate the move to equal per capita cash support.
With Budget 2007 investments, total CST cash support for post-secondary education and social programs amounted to $11.2 billion for 2010-11. As a result of the automatic escalator, this funding will reach $12.2 billion in 2013-14.
To address concerns regarding the transparency of the federal contribution to post-secondary education and social assistance, Budget 2007 notionally earmarked the CST along the three priority areas that it supports.
As a result, for 2010-11, over $3.4 billion of CST support to provinces and territories has been notionally allocated to post-secondary education. Provinces and territories are, however, free to spend the funds they receive through the CST in order to achieve their own goals and objectives.
Additional federal support for national priorities, including post-secondary education, is provided through two other major transfer programs administered by the Department of Finance.
The equalization program enables less prosperous provincial governments to provide their residents with public services that are reasonably comparable to those in other provinces, at reasonably comparable levels of taxation.
Territorial formula financing is an annual transfer to the three territories to support the provision of programs and services that are comparable to those offered by provincial governments.
[English]
Support through these two transfer programs totalled over $17 billion in this current fiscal year. Both equalization and the territorial formula financing are formula-based, unconditional transfers, which means that the provincial and territorial governments are able to direct funds according to their own needs and priorities.
Baxter Williams, Director, Personal Income Tax Division, Tax Policy Branch, Department of Finance Canada: The committee posed three questions concerning tax measures for students: who benefits from these measures; what is their rationale; and what is their impact on the accessibility of post-secondary education?
I would like to review the current tax assistance provided in support of post-secondary education and, in doing so, respond to your questions.
Mr. Chair, there are a number of tax measures through which the federal government supports post-secondary students and their families, which cumulatively provide about $1.6 billion annually in tax support for post-secondary education and training. These tax measures serve two main purposes. They recognize the cost of an education on a student's ability to pay tax, and they help families save for their child's post-secondary education.
The cost of post-secondary education is principally recognized through three non-refundable tax credits: the tuition tax credit, which provides recognition for tuition fees; the education tax credit; and the textbook tax credit. The education and textbook credit are intended to recognize incidental expenses associated with the pursuit of a post- secondary education.
The tuition tax credit provides 15 per cent tax credits to students who pursue studies at a post-secondary institution or an occupational training institution recognized by the Minister of Human Resources and Skills Development. The education tax credit provides a 15 per cent tax credit on $400 monthly for full-time students and $125 monthly for part- time students in attendance at a qualifying post-secondary education institution. Finally, the textbook tax credit provides a further 15 per cent credit on $65 monthly for such students attending full-time and $20 monthly for part- time students.
Allow me to provide an illustrative example of how a student can take advantage of these credits. A full-time student enrolled in an eligible program and attending university for a period of eight months in a year, or two semesters, who pays $5,000 in tuition, would be able to claim $8,720 in total credits. In taking into account other non- refundable credits for which he or she would be eligible, he or she would be able to earn $21,410 without paying tax.
Although many students work to help pay for their tuition and other expenses, not all students will have sufficient earnings to fully benefit from these tax credits in the year in which they are earned. If their income is insufficient, they may choose to carry forward these amounts or transfer them to an eligible relative.
Credit amounts may be transferred to a maximum of $5,000 annually to a parent, grandparent or spouse in recognition that these individuals often provide support for a student's education. Unused credits that are not transferred in this manner can also be carried forward indefinitely for use in a future year.
Due to the transfer and carry forward provisions, all students, regardless of family income, ultimately benefit from the value of these credits. In 2007, the most recent year for which CRA has tax data, we know that approximately 2.2 million students claimed the tuition tax credit and, among them, 2 million claimed the education and textbook tax credits.
The total tax relief provided through these three credits was $1.4 billion, which could be allocated roughly 37 per cent or $500 million to directly reduce the taxes paid by students. Another $470 million, or approximately one third, was transferred to a supporting relative. The remaining $400 million, or about 30 per cent, represented the value of credits that had been carried forward unused from previous years.
Tax relief is also provided to students and their families through the following measures. An exemption of post- secondary scholarship and bursary income introduced in Budget 2006 supports students in the pursuit of academic excellence. An apprentice vehicle mechanics' tool deduction provides an apprentice vehicle mechanic with an extraordinary portion of the cost of new tools. In addition, a student loan interest tax credit of 15 per cent is provided on interest payments of qualifying student loans, mainly the Canada Student Loans Program and similar provincial programs.
The second means to support education is through support for savings for post-secondary education, principally through the registered education savings plan, or the RESP. The savings accumulated in an RESP improve accessibility by increasing the financial resources available to fund post-secondary education. RESPs also encourage parents to begin planning early for a child's pursuit of post-secondary education.
How do RESPs work? Contributions made by families are not tax deductible. However, the income generated through RESPs will grow tax free over the years until it is withdrawn for a student's post-secondary education. This income is taxed in the hands of the student, but generally that results in it not being taxed at all as the student is not in a tax-paying position.
RESP contributions attract Canada education savings grants at a 20 per cent matching rate, up to $1,000 annually or $7,200 over the lifetime of a student. In 2007, almost $600 million in CESGs, Canada education savings grants, were provided, in addition to the $200 million in tax relief provided on earnings within RESPs.
Two measures have also been introduced over the last decade to encourage the participation of low and modest- income families in RESPs. For such families, enhanced CESGs of 30 per cent to 40 per cent are provided on the first $500 of RESP contributions. Additional support to low-income families is provided through the Canada learning bond, which provides up to $2,000 in grants to an RESP for children of low-income families to help kick-start their education savings.
The impact of these measures, as demonstrated through participation in them, has been significant in recent years. At the end of 2008, education savings in RESPs exceeded $22 billion and will provide for the post-secondary education of 1.8 million potential students.
From 1998 to 2008, $4.4 billion has been provided to supplement these savings through the Canada education savings grant. Since the introduction of the CESG in 1997, participation in RESPs has risen steadily. It is estimated that 39 per cent of Canadian children aged 17 and under have RESPs to help fund their future post-secondary education. In 2000, the participation rate was one-half of this, at about 19 per cent.
As a complement to the RESP, the lifelong learning plan, LLP, allows Canadians to access the savings they have accumulated in their registered retirement savings plans to help pay for the cost of pursuing post-secondary education. Individuals are able to withdraw up to $20,000 over four years. Amounts withdrawn must be paid back to the individual's RRSP in equal installments over 10 years. In 2007, an estimated 11,400 individuals accessed the lifelong learning plan, withdrawing $71 million.
That almost concludes my opening remarks to the committee. As a final note, I would refer to the earlier presentations made to the committee by our colleagues from Human Resources and Skills Development Canada.
I would point out that in addition to the various tax credits and savings vehicles provided through the income tax system, there are a number of federal measures outside the income tax system that directly address the issues associated with access to post-secondary education.
It is important to view the tax and non-tax aspects of government support as working together in a complementary manner to address different objectives associated with supporting post-secondary education. Tax measures are generally best suited to provide broad-based relief according to general eligibility conditions. In contrast, expenditure programs can be better targeted to address specific issues.
[Translation]
Robert Dunlop, Assistant Deputy Minister, Science and Innovation Sector, Industry Canada: Thank you for your invitation. Your study on the accessibility of post-secondary education in Canada involves examining barriers to access, sources of funding for institutions and students, and the role of research.
I have been asked to remark on the role of research, on federal support for higher education research and development, including through the knowledge infrastructure program.
Federal support for research helps to keep professors at the leading edge in their fields. As important as this is for advancing Canada's innovation potential, it is equally important for our students.
The federal science and technology strategy was released in 2007. It aims to foster three distinct science and technology advantages that impact our prosperity and quality of life: a people advantage, a knowledge advantage, and an entrepreneurial advantage.
Universities and colleges are important partners in the government's science and technology strategy, and they have a central role to play in achieving the government's innovation goals.
Universities are at the forefront of research, pushing the frontiers of knowledge in diverse fields. Colleges and polytechnics are well linked with local businesses, helping them adopt new scientific developments and technologies.
In four successive budgets, the government has systematically implemented the recommendations of its science and technology strategy.
I will provide you with a quick overview of progress to date, starting with initiatives to foster a people advantage.
[English]
The Science and Technology Strategy recognizes that talented, skilled and creative people are critical to building and sustaining a successful national economy and society.
The new initiatives are on a strong base of support that has existed for some time. For example, the Canada Research Chairs program supports 2,000 research chairs at Canadian universities and has an annual budget of $300 million. This program helps attract and retain some of the best researchers in the world.
The Canada Graduate Scholarships Program supports masters and doctoral students. In 2009-10, it offered more than 3,000 scholarships at the master's level and another 1,500 at the doctoral level.
A newer program introduced in 2008, for example, is the Vanier Canada Graduate Scholarships program, which has now awarded 336 scholarships to attract and retain the absolute best doctoral students. At $50,000 per year for up to three years, these scholarships are internationally competitive.
Through Budget 2010, the government announced the new Postdoctoral Fellowships Program to support research leaders of tomorrow. Valued at $70,000 per year, the focus is on making Canada a magnet for the some of the very best who are just starting out their careers.
Together, these programs cover the full spectrum of positions to help attract, retain and develop researchers, whether they are students, post-docs or beginning faculty researchers. I know the granting council representatives were here recently and covered some of these programs with you.
On the knowledge advantage, as you know, according to the OECD, Canada's commitment to the creation of new technology for universities is virtually unmatched in terms of expenditure on higher education, research and development. The Science and Technology Strategy sets out a number of commitments to ensure that Canada continues to be positioned at the leading edge of important developments; for example, investment in the granting councils, which is the principle mechanism for supporting higher education research and development. Most recently, in Budget 2010, their budgets were increased permanently by $32 million per year, bringing it to a record level of more than $2.7 billion in 2010-11.
The government has also made significant investments in partner organizations that support higher education in research and development, such as in the last budget, where additional funding was provided for Genome Canada and also reconfirmed the funding for the Canada Foundation for Innovation.
To achieve an entrepreneurial advantage, Canada must turn what it knows into an economic advantage. As you know, Canada punches above its weight in terms of our research excellence, but we lag behind other countries when it comes to innovation. The private sector in Canada does not adopt innovation as a competitiveness strategy as much as its competitors do. The government is encouraging firms to be more innovative through improvements to marketplace framework policies and also by fostering linkages between universities, colleges and business.
The applied research and training capacity at our colleges and polytechnics is a tremendous resource for building a more knowledge-based economy. In Budget 2010, the government doubled funding for the College and Community Innovation Program.
[Translation]
I will close with a brief report on the status of the $2 billion knowledge infrastructure program, introduced in Canada's Economic Action Plan.
This program has two objectives. First, to accelerate repairs, maintenance and construction at universities and colleges to provide a short-term, targeted stimulus in communities across Canada. And second, to help realize the objectives of Canada's science and technology strategy by enhancing the research capacity of post-secondary institutions, enabling them to attract students and provide a better educational experience for the highly skilled workers of tomorrow.
In total, the government is funding 536 projects, 124 of which will increase the capacity to train students in advanced knowledge areas.
With partners, the program has leveraged a total investment of nearly $5 billion, including the $2 billion in federal funding, in research and education facilities across the country.
Thirteen funding agreements are in place with provinces and territories and 14 bilateral agreements are in place with individual institutions. All of the program funding is allocated.
Half of the money is going to new construction. Renovation and repair projects represent 25 per cent of the funding, leaving the final 25 per cent for projects that represent a mix of both.
As of the most recent quarterly reports, dating back to February, 44 projects have been completed, 266 projects were in the construction phase, and 135 projects were in design or planning stages.
The June 2010 quarterly reports are coming in, and we expect to see additional progress. Many projects are expected to be completed over the summer while students are away and construction conditions are ideal.
[English]
The Chair: I have a question for each one of our witnesses.
Mr. Forbes, in 2007 the government made a commitment to increase its contribution through the CST by 3 per cent a year, and there is a notional allocation of 25 per cent of the CST going for post-secondary education. We do not know how the province will end up dividing the CST. Perhaps we should go back to the way we used to do it and have a direct contribution for education. You might want to comment on that.
How do you keep track of how much is going into education? Is that 3 per cent intended for education or for the whole CST?
Mr. Forbes: The 3 per cent applies to the entire Canada Social Transfer, so the entire pot of money, which is currently a little over $11 billion. It grows at 3 per cent per year.
On the question of the allocation, that notional allocation of the CST, if you will, among the three groupings, was done based on provincial and territorial spending patterns at that time. A little over 30 per cent that is notionally attributed to post-secondary education.
The nature of the overall transfer and the allocation recognizes that while there is a shared priority put on this funding, in the end provinces and territories have the responsibility. The provinces are best placed to do specific program designs and priority settings. That leaves them with flexibility within the entire social envelope and then within post-secondary education to determine what is the best way to use that funding.
The Chair: Would we not be better off with separating the two funds, the education transfer from the social programs, and know directly how much money is going into education? Is that not a better accountability of federal dollars?
Mr. Forbes: There is accountability for federal dollars. It is going to the provinces and we have indicated how much we think should be attributed to post-secondary education. The provinces and territories then, with this transfer, and with others, are then responsible to their own citizens for how they spend these dollars.
As I said, giving them a transfer of this nature gives them the flexibility to set the priorities in design as they see best for their jurisdiction.
The Chair: Mr. Williams, we heard from some people at previous hearings that the tax measures and the education tax credits are not the most effective way to improve access to post-secondary education. Improving access to post- secondary education is our main goal.
I do not know how any student could ever understand how all of these programs hang together and how they can work for them. Second, you gave some statistics that indicate there is some general take-up of these programs, but that does not tell us whether the more vulnerable groups, the people who are under-represented, not getting as much access to PSE are in there, whether they are Aboriginals or disabled or people of low income.
For many students out there it is a struggle in terms of the finances of getting this education. These tax credits that could be transferred or held over to another year, when you are living on small means that does not resonate very well. As you say, they "ultimately" will benefit.
Is there a better way to allocate this money? There is a tax expenditure involved. Is there a better way to spend it? As some people have suggested, to target those people, we need to get better representation in terms of access to post- secondary education.
Mr. Williams: The one thing that is clear when you look at the data is that there is a significant portion of those credits that are used in the year in which they are earned — 37 per cent — and that definitely contributes to improving accessibility to the system. In a larger context, you have to look at these credits as serving a larger tax purpose, first, in recognizing the cost of an education and ensuring that our basic principle in terms of tax policy is an ability to pay principle. When people are incurring these expenses, whether they are parents or students, it is important from a tax fairness point of view that they are appropriately recognized.
There are other rationales for introducing these credits in addition to that. You could draw an analogy to a business that incurs an expense to earn income. In many ways, an education is a form of investment in human capital. Therefore, in a tax policy context, it is appropriate to provide some recognition for that investment in assessing the taxes owing.
As I noted in my concluding remarks, there are limits in what you can achieve in terms of accessibility through the tax system.
The Chair: Yes, I noticed, but we are out to try to improve access and that means you have to look at the under- represented groups. These programs probably benefit many people; I am sure they do, as your statistics indicate, but they are not from the group of under-represented individuals. These people are not taking as much from the programs as are people with higher incomes or with parents with higher incomes.
I realize you have amassed these statistics, but have you sat down and had focus groups with students to determine what they think of these tax credits — there are so many of them — and how they might be better allocated?
Mr. Williams: To some extent, the credits have arisen in response to solicitation; something like the lifelong learning plan, for example. Over time, when you look at a credit like the RESP, just because of its broad usage, it inevitably will help improve accessibility. In that context, we have introduced provisions within something like the RESP specifically targeted to deal with low- and modest-income individuals who would in your context, address the accessibility issue. I would say the credits have been responsive.
[Translation]
Senator Champagne: Mr. Forbes, I think that my question will be going to you as the General Director of the Federal-Provincial Relations Branch.
I cannot help discussing with you the battle royal that we are fighting in Quebec, more specifically in Montreal at the moment, where McGill University, which is well aware of the success of its Master of Business Administration program, has decided to increase the students' tuition fees dramatically while, on the other side, the Quebec Minister of Education and the Premier are saying that, if it does, they will deduct all the money that the university collects from the amount the government normally gives for operations.
How can we bring those two sides together in some way?
Mr. Forbes: That is a matter for the government of Quebec and McGill University.
Senator Champagne: Yes, but since funding for post-secondary education in Quebec also comes from the federal government, it seems to me that there must be a way for you to zero in on that.
Mr. Forbes: We make transfers to the provinces and we recognize their responsibility to decide on their own priorities in terms of the management of programs and the use of the funds at post-secondary level. That use can also vary from one province to the next. It is true that we make the transfer from the post-secondary education envelope, but it is definitely up to them to decide how to use the funds and the way in which they will respond to what their residents are asking for.
Senator Champagne: In the last few months, our study has dealt with accessibility to post-secondary studies, including for less well-off families. That is why we want to find out about the various tax credits, scholarships, loans and so on.
As an example, let us take an internationally prestigious university like McGill, which attracts students from all over the world. They normally pay more than Canada or Quebec students and they would come to the university even if the fees to do so go up. So, in our report, what can we recommend to the government of Quebec? We certainly cannot take away what they themselves went out and got, because that would be in no one's interests. Nor can we take away the opportunity from the students, because who does not want to see someone get an MBA from McGill? Even if you can get them elsewhere.
What do we say to Quebecers and Canadians?
Mr. Forbes: There are several ways. As Mr. Williams said as well, tax credits, transfers and scholarships are available. There is a whole list of federal and provincial programs, meaning that we have a number of ways to provide students with assistance so that they can have access to post-secondary education.
But, for transfers, the money goes to the provinces. It is targeted for post-secondary education, but the provinces are free to decide their own priorities. If the government of Quebec makes a decision and the government of another province makes a different decision, that is up to them.
Senator Champagne: So, as I understand it, if we are brave enough to talk about it, we do so with a big smile and with white gloves up to here. Thank you. I will be back in the second round.
[English]
Senator Callbeck: Mr. Dunlop, how much of the Knowledge Infrastructure Program announced in Budget 2009, for $2 billion over two years, has been allocated so far.
Mr. Dunlop: All of the funds have been allocated.
Senator Callbeck: They all have?
Mr. Dunlop: Yes.
Senator Callbeck: Do you have a breakdown of that by province?
Mr. Dunlop: We could provide that information to you.
Senator Callbeck: I would like that, please.
The Chair: If you could provide it to the clerk, we will distribute it to all committee members.
Senator Callbeck: They had two years to complete the projects, so obviously if it is all committed, the two-year timeline was not a problem, was it?
Mr. Dunlop: This was part of the stimulus package. If you recall, universities and colleges had been saying for years that they had a large deferred maintenance issue. As I mentioned, a large percentage of the money is being spent on repair and maintenance type projects. For some of the construction projects, these are things that have been in the planning stages for quite a long time and, therefore, the universities and colleges were able to get moving quickly on them. The presidents of all the institutions had to indicate in writing that they were able to complete the construction within the period of two years.
Senator Callbeck: I believe in their pre-budget submission, they said they needed $5.1 billion, so $2 billion would not cover the problem. Have there been any talks with the universities about another fund?
Mr. Dunlop: No. The total spending under the program is about $5 billion. The federal contribution, which is a maximum of 50 per cent, is $2 billion. If you look at the contributions of the provinces and others, the total spending under the program will be about $5 billion.
It is a question of policy whether there would be another program. All I can say is what the government has said so far, that this was a one-time stimulus program that would be concluded on March 31, 2011, as announced in the budget.
Senator Callbeck: Did you say that the federal government funded 50 per cent?
Mr. Dunlop: Yes, that is correct.
Senator Callbeck: Was there any problem with the smaller universities coming up with their 50 per cent?
Mr. Dunlop: In most cases, the provincial governments picked up one-half of the funds. Depending on eligibility, because the federal government would fund up to half of what was eligible under our programs, sometimes the provinces were in for considerably more and sometimes the universities raised funds on their own. I have not come across an issue of smaller versus larger universities having difficulty raising the funds.
Senator Callbeck: That is good. I am not sure which witness, Mr. Williams or Mr. Forbes, talked about the student tax credits. That credit can be transferred, you say, to a maximum of $5,000 to a parent, grandparent or spouse. Is that a maximum of $5,000 for them all? It cannot be $5,000 to a parent and the same to a grandparent. Is that right?
Mr. Williams: No, it is a maximum on the total amount that can be transferred in a year.
Senator Callbeck: Could that go on forever and ever? Does that accumulate?
Mr. Williams: The credits can accumulate. That is right.
Senator Callbeck: Have you performed any analyses on the eligible tuition fees and all the various tax credits?
Mr. Williams: Yes, and we have published them in a tax expenditure report. I could make that report available to you.
Senator Cordy: Thank you for being here. It is nice to get all the tax policies and the things happening from the federal perspective at the same time. Thank you for that.
Senator Champagne talked about the CST transfers to the provinces. Whenever I meet with students groups, the thing they always comment that the education part should be separated so they can see whether it is actually being spent on post-secondary education. When I was looking at the numbers, about one-third of the transfers are actually for post-secondary education.
What can I tell these students? You mentioned in your answer to Senator Champagne that you allocate somewhat indirectly, that it is not a firm direction but a suggestion that one-third of the money be spent on post-secondary education. These students who are struggling financially are concerned that the money is not all going to post- secondary education and that it will be used in some other field, which may in itself be wonderful. However, they felt that the money was not all going to post-secondary education. It did not matter what part of the country they were from; this was unanimous.
Mr. Forbes: I have two comments. First is the issue as to whether that 31 per cent, if you will — a little over $3 billion — is going to post-secondary education. That notional allocation was based on spending patterns in the provinces a couple of years ago, which should not have really changed that much. In total, that should represent a fairly good estimate of a federal contribution to what provinces are spending overall in that area. It is not 100 per cent linked, but I would say it is a fairly good estimate of what is going there.
As far as the issue of breaking it out, the idea of allocating, notionally, the components of the social transfer into the component parts and making that public was to try to address that very point that people are raising: How much of this should be going to post-secondary education and how much should be going to other parts?
If there are concerns about how much provinces are spending in the area of post-secondary education, again, that really becomes a question for students to raise with their provincial governments, because we do provide funding towards that. As I mentioned, we do so both through the Canada Social Transfer and through general programs like equalization to provide funding in support of these programs. It is then up to the provinces. They are accountable to their legislatures and their citizens as to how they spend those dollars.
Senator Cordy: I have heard this from every province. Certainly, Nova Scotia is in a unique situation because we have more students coming into Nova Scotia than we have native Nova Scotians attending university. It is a little bit different in Nova Scotia.
Do you get feedback from students or from provinces in terms of how much they are actually spending on post- secondary?
Mr. Forbes: I cannot speak about students too much. We talk to the provinces regularly about the transfer system and hear their views on a range of transfer issues, as you might imagine. From their vantage point, one certainly hears that they are comfortable with the approach of having flexibility. Again, to go back to the answer I gave to the chair, they are comfortable with the approach of flexibility to design and deliver the programs based on how they want to set priorities and how they think they can best deliver in their jurisdictions. The only comments I get from my provincial counterparts would be —
Senator Cordy: "Leave it alone."
Mr. Forbes: — that this is the way to proceed.
Senator Cordy: Balancing federal and provincial jurisdictions is always a challenge.
I would like to move on to the tax policies you discussed today. Many of the committee members are familiar with these policies. When you look at the tax policies, they are designed for the most part for middle-class families. In many cases, the parents get the tax credits. The idea that you can hold it over indefinitely is a great idea. If people are not using the tax benefit that year, they can carry it over to another year.
I am concerned about something else, and the chair raised the issue earlier on. There are so many programs out there and so many things. Students are often 18 years of age, or very young anyway. That said, that demographic seems to be changing when we look at post-secondary education, because kids are taking gap years and what have you, or working or travelling for a bit. However, when you are 18 years of age, you are not necessarily in a position to be able to find all of the available programs et cetera.
How do you communicate to students what programs are available to them, and promote the idea of being able to save. Indeed, you would have to save your receipts from 2010 if you will not use them until 2015. You would have to be aware in 2010 that you can save them to use them in five years' time. How do you get this knowledge to students?
Mr. Williams: Students would gain eligibility for the credit in the year they file their tax return, so there would not be a need for them to hold on to the receipts. The universities are well aware of students' eligibility.
This is a question that CRA could better talk to you about in terms of the administration of a tax system. However, to give a general context, there is a high degree of awareness at universities regarding students' eligibility for these credits. They are provided the information they need in order to claim them.
Registered education savings plans and other plans are promoted through a number of sources. Then again, I may not be best placed to speak to that specifically.
Senator Cordy: Therefore, it is basically up to the student to get the information at the university level.
Mr. Williams: As part of tax filing, when you receive various information slips that allow you to file your income tax return, the student would receive information slips from the universities indicating their eligibility for various credits.
Senator Dyck: Thank you, Mr. Chair, and thank you for your presentations this evening.
I notice that you said that the Canada Social Transfer was "notionally allocated to post-secondary education." Let us say a high school graduate had worked part-time for a while because he or she was unable to find very good employment opportunities with their education. They then became unemployed. Is there anything available through the Canada Social Transfer that would allow that person to be retrained; let us say if they had to then go on Employment Insurance or welfare? Maybe we have dealt with this before and I have missed it somewhere along the line.
Mr. Forbes: Just to clarify, the Canada Social Transfer is a government-to-government transfer. There are various programs for students. You alluded to the Employment Insurance system which colleagues from Human Resources and Skills Development might be better suited to answer. However, there are a variety of direct programs for lower- income students. Also, if you are looking at retraining, there are programs either through the Employment Insurance system or otherwise that would help individuals in this kind of situation.
Senator Dyck: That budget is not part of the Canada Social Transfer, then?
Mr. Forbes: No, it is a specific program, or programs. There are youth employment strategies and other things that are run directly by the federal government, which can be found in the Human Resources Department. The social transfer is really from the federal government to the individual provinces. The provinces decide how they would like to spend that money.
Senator Dyck: My next question concerns some of the programs where you have matching funding. You mentioned that we are encouraging low- and modest-income families. What are the income ranges that are set for lower income? Do you have data available as to the number of low- and middle-income families that actually take advantage of these programs compared to people who would be above those sorts of income levels?
Mr. Forbes: I think you are referring to the RESP.
Senator Dyck: Yes.
Mr. Williams: If I remember correctly, the Canada learning bond is available to any child of a family that receives National Child Benefit payments. That would essentially be families with incomes below $42,000. They are also eligible for 40 per cent matching rate on the first $500 of the Canada education savings grant. The 30 per cent rate is unavailable for individuals whose families have incomes between $42,000 and $80,000, if I am correct.
Senator Dyck: That seems pretty rich.
Mr. Williams: It is a graduated program with the most enhanced relief available to those at the lowest income levels.
I will clarify the exact income thresholds when I get back and send those to you, but that is my recollection.
Senator Dyck: I am not at all familiar with the Canada learning bond. Let us say you had a family that had a $30,000 income. They would have to have an RESP, and then they would apply for a matching grant; is that correct?
Mr. Williams: By opening an RESP, for years in which you are eligible for the National Child Benefit supplement, you would receive initially a $500 payment and then $100 annually afterwards for every year for which you are eligible, providing a maximum of $2,000.
[Translation]
Senator Eaton: Mr. Forbes, does that $3.4 billion in federal transfers to the provinces and territories include a special envelope for Aboriginal communities?
Mr. Forbes: No. It is a general transfer from the federal government to provincial and territorial governments for social programs.
[English]
Senator Eaton: Once you give the money, at no point is there any accountability; right? Sheila Fraser cannot walk into a province and say, "We gave you X dollars last year; can you tell us how you spent that money?"
Mr. Forbes: Sheila Fraser does not, but each province has its own provincial auditor who could ask any such question. I cannot speak to what the provincial auditors do.
Senator Eaton: I do not mean to put you on the spot. I suppose one could go to a provincial auditor and get a breakdown of how the money is spent; is that correct?
Mr. Forbes: One could look at provincial financial statements or public accounts and determine what the provinces are spending in that area. My only comment is that was when we looked at the spending a few years ago and tried to notionally allocate the bigger social transfer, we found about 30 per cent of the social spending in this area was going to post-secondary education. That should be more or less the same.
Senator Eaton: Basically, you are saying that, from a taxation point of view, the federal government can have a more direct say with the money you give to provinces because what we say federally has little impact on how the provinces will spend or allocate their money for higher education?
Mr. Forbes: There is designing the federal tax measure as well as federal programs. We obviously control the eligibility criteria and to whom they apply. Mr. Williams described a number of tax credits, and federal laws put those credits in place. Similarly, we design federal programs. Again, I refer to Human Resources and Skills Development with their federal programs, and we would obviously be charged with designing them.
In the case of the provinces, we give them funding through a variety of forms, generally in a block format, and they are undertaking to spend in these areas. We leave it to them to determine how best to use that money and design in those specific instances.
Senator Merchant: Thank you for being here. Can you to identify some opportunities and suggest a different way of doing things so that we can improve the coordination between the federal and provincial governments?
I understand that education is primarily a provincial area of jurisdiction, but because the federal government is giving these transfers and tax breaks to provinces, what can our committee suggest as a means of improving the opportunities that are afforded to students and educational facilities?
Mr. Forbes: I do not think I can tell the committee what to recommend. We do have a recent example, and Mr. Dunlop talked about the Knowledge Infrastructure Program, where we worked on a two-year program with the provinces to find an area of shared responsibility or joint responsibility and deliver a program effectively and quickly. This is through Canada's Economic Action Plan. I think it is evidence of the way the system can work well. When we determine an area of joint interest, we can move forward.
I cannot speak for all of the programs across government, but certainly in ongoing dialogue with the provinces in determining some needs, we can identify some and they can identify some, and we can ensure that we try to address them. With the transfers, we leave them the flexibility to determine their individual priorities. Again, I cannot speak for the provinces, but that allows them the ability, with the varying circumstances across jurisdictions, to figure out, in the case of post-secondary education, the best way to target the funds to meet the needs of their populations.
Mr. Dunlop: We obviously work within a constitutional context where education is provincial competence. In my department and my programs, research is a shared jurisdiction. We deal with institutions that are creatures of the provincial governments, and most of our programs involve provincial funding as well as federal funding. It represents a different responsibility than the education side of the higher education. That is just a reality that we as officials deal with because that is the context in which we operate.
Senator Merchant: I still find it difficult that there is absolutely no accountability and the federal government does not have any ability to assess the programs. Again, as you say, there is the jurisdictional issue, so maybe there is no resolution to that right now.
The Chair: That is just on the social transfer, because on the other programs, the direct programs of taxation, they do.
Senator Seidman: Mr. Dunlop, if I might, there is no question that the Science and Technology Strategy put forward by the government in 2007 is of such critical import for our country and future generations. You said, "Canada punches above its weight in terms of our research excellence, but we lag behind other countries when it comes to innovation. The private sector in Canada does not adopt innovation as a competitiveness strategy as much as its competitors do."
You note that in Budget 2010, the government doubled funding for the College and Community Innovation Program. Might you tell me something about that program? Certainly, from what we have heard over the course of many weeks, this might be a rather significant program, and I am interested in hearing about it.
Mr. Dunlop: This program is run primarily by NSERC. It aims to increase the capacity of colleges and CEGEPs and polytechnic institutes to partner with local companies. NSERC has run a series of competitions, looking at projects that will have the maximum impact on the local economy. Some of the projects are actually larger than the local economy. The idea here is to develop this concept of applied research, which is a different kind of activity than universities would normally be comfortable in doing. Maybe it is more focused on the needs of small and medium-sized businesses, where the company is trying to solve a specific technical problem. In colleges, it is a very good experience for both professors and students to work on a solution, whereas the universities want to stay on the cutting edge and do the kind of research that will lead to publications and those kinds of activities as opposed to solving practical problems. Canada has not got that element as well developed, and in recent years government has been trying to work with the provinces and the colleges to develop that capacity in Canada, recognized by doubling the budget for this program in last year's budget.
Senator Seidman: Can you tell me about the response you have had from private industry?
Mr. Dunlop: The response from private industry has been very positive. Certainly, before the budget, we met with a number of companies that have used this kind of service, and the message we heard was they would like to see more of it.
Senator Seidman: I would like to try to understand a bit about how the program works, so that a student could be an intern in a way.
Mr. Dunlop: Once again, because it is competition based, the idea was not to be overly constraining in the required outcomes. Typically, a company would go to a college and indicate the kind of problem they have, and it could be a technical problem or a marketing problem. Especially in the past, the funding just was not available in the colleges either to free the professors or to support the students in working on those practical programs as opposed to their normal course of study.
I am trying to think of where a specific college would develop an expertise in, for example, plastics or moulding, and as part of the program, want to be able to involve students in solving a technical problem for companies. In other cases, it is marketing; it is not always technical.
Again, when it is competition-based, you are looking for the best ideas. There is not the assumption that we officials know what will work in Peterborough or in Rimouski, so make it competition. There is a board from NSERC that is led by the private sector. It is trying to make it a bit different from a standard peer review that involves just scholars. You end up with a variety of programs.
The Chair: We are familiar with the Science and Technology Strategy because we went through it a couple of years ago. Both in that strategy and in the 2007 Budget, the federal government states that it wants to work "with provinces and territories to develop shared objectives and targets, clarify roles and responsibilities and enhance public accountability."
How has that gone so far? Are the federal funds that are being transferred to support post-secondary education in this regard being used for that purpose in light of that statement?
Mr. Dunlop: I brought a copy, but I am not sure of the exact context of that quote. I believe that was dealing mostly with the programs in the area of research and development, whereas I said the Canada Foundation for Innovation, for example, where on a competition basis, federal funding for up to 40 per cent of a project is supported. Obviously, the universities need the support of their provinces for the other 60 per cent in making that happen.
We work quite closely with our provincial colleagues in achieving that and reflecting the nature of our federation, and we end up with different relationships with different provinces. For example, in Quebec, a university or college applies first to the province and ensures funding is available at the provincial level. Then they apply to the federal competition. In other provinces, they apply directly to the federal government and seek provincial funding after.
Over the years, we have developed various forms of cooperation with our provincial colleagues to reflect the shared jurisdiction we have in the research and development side.
The Chair: This statement talks about shared objectives and targets, clarifying roles and responsibilities. It sounds very heavy or heady. Do you know how that is being implemented? It is a government statement; it came in the document or in the budget; I do not know which.
Mr. Dunlop: We speak to provincial colleagues about their priorities. They influence those priorities by what they choose to fund. We stay in contact with them about what their priorities are in their local development.
Senator Champagne: Mr. Dunlop, in Budget 2007 there was an increase of $800 million, and in 2009, there was $5 billion in new funding for initiatives related to science and technology. In your speech, you said that Canada punches above its weight in terms of our research excellence, but that we lag other industrial countries when it comes to innovation. The private sector in Canada does not adopt innovation as a strategy as much as its competitors do, and yet in 2010 we doubled funding for community and college innovation programs. This follows what my colleague, Senator Seidman, was talking about.
With this extra money, is the market trying to get more involved? How hopeful are you that, with that money being available and being there, they will get more involved with innovation and that linkages will be easier to make? Will that money make a difference?
Mr. Dunlop: I should say that my statement leaned heavily on the analysis done by the CCA, the Council of Canadian Academics. I referred to a report done by Peter Nicholson, looking at innovation in Canada and comparing us to other countries. The report is entitled, Innovation and Business Strategy: Why Canada Falls Short, It is a comprehensive report that is very helpful.
We have seen this in a number of programs, and you mentioned the college program.
[Translation]
We are trying to leverage investment in post-secondary institutions by working with business and industry.
Senator Champagne: Is it easy to get industry involved in that kind of thing?
Mr. Dunlop: That is exactly the objective of the programs announced in recent years. We do not have a lot of experience up to now. As I mentioned earlier, SMEs are showing some interest in working with colleges; if that can get them interested in research and development, the program will have attained its goal.
As I mentioned, the program was announced in 2007. The budget envelope used to contain $15 million per year, which is not a lot for a large country like ours. Now the figure is $30 million.
Senator Champagne: So at least it has doubled.
Mr. Dunlop: Yes, at least it has doubled. The goal of the program is to encourage industry to get more involved in this area and to use our investment in post-secondary education as a strategic asset, as is the case in some other countries.
Senator Champagne: We are going to have to do some good marketing with our industries. May God hear your prayer and grant us all possible success!
[English]
Senator Callbeck: I want to ask you about the change that was made in 2007. Until that time, each province ended up with the same amount per capita, when you took in the tax points, the cash transfer and the associated equalization. The tax points are the same. Therefore, what change was made in that cash transfer? I know now that every province gets the same amount per capita. How is that figure calculated?
Mr. Forbes: The figure is calculated by determining the overall cash amount of the CST. At that time, we also enhanced the cash portion. As I mentioned before, we grow it every year. That is divided by the population of the country and the cash portion is allocated across jurisdictions so that the per capita amount of cash everywhere is the same across all jurisdictions.
Senator Callbeck: The previous method took into consideration regional economic disparities, right?
Mr. Forbes: The previous calculation was one of looking at the total of the tax points, as you mentioned, and the cash. The cash was effectively a residual. If you will, there was a total and then tax points were determined and the cash was what went to bring everyone up to a total of cash and tax that was equal.
Senator Callbeck: Why was that change made in the formula?
Mr. Forbes: It was part of a broader package of changes in 2007 to restore fiscal balance. You may recall that there were changes to the equalization program at the same time. There were enhancements to the Canada Social Transfer, and the idea of putting on equal per capita cash was to ensure that, across the country, the amount of cash transfer that went to each province in the form of cash transfers was the same no matter the province of residency.
Senator Callbeck: Right now, we still have that associated equalization, right? You get the tax points and the cash?
Mr. Forbes: The numbers I have discussed with you so far in my remarks were the cash portion. There was a tax point component, and that tax point could include the associated equalization, yes.
Senator Callbeck: It means a lot for the smaller provinces. Prince Edward Island, for example, used to get a lot more in cash per capita than, let us say, Alberta, and now it is the same.
Mr. Forbes: One of the important points is that there was a lot of additional cash to put into the system. Every province was better off through the increases to the CST, and we also at the same time had changes to the equalization system and so on. It was a full package of changes there and I think a significant investment from the federal government in Budget 2007. Every province benefited from those investments.
Senator Callbeck: My own province benefited very little compared to the richer provinces. I never really understood why the government did this because it favours the wealthier provinces in that we will have a bigger gap between the regions.
Mr. Forbes: Not to repeat myself, but at the same time, we significantly enhanced the equalization program, for example, which, as you mentioned, goes to the poorer provinces. There was a package of changes there, and I think Budget 2007 laid out in quite a bit of detail the implications by province. I do not have it here with me, but if you went back province by province, there were benefits across every province.
Senator Callbeck: I think that is right, but I guess my point is that the wealthier provinces gain more than the poorer ones.
Mr. Forbes: Again, if you looked at just the CST investment in isolation, that may be correct that if you were a province with a lower per capita cash payment before you would have gotten more benefit. At the same time, there were equalization changes and others that would have benefited, specifically the equalization-receiving provinces as a group.
The Chair: Just to clarify that, if I can, was that not part of the government's decision that CST should not be used as an equalization factor, that equalization should stand on its own and programs like CST should go evenly on a per capita basis?
Mr. Forbes: Fundamentally, at the same time as the CST was being moved to per capita cash, there were enhancements to equalization, and the idea was that is where the focus would be.
The Chair: That was intended to be the compensating factor. That completes my list, unless anyone else has something. I will then, therefore, thank our witnesses today. I appreciate you being here and contributing to our study on post-secondary education access. Thank you very much.
Colleagues, before we adjourn, I have a couple of things to discuss. First, tomorrow will be our last session on access to post-secondary education. It will be an in camera discussion on direction. You should have a report by now from the staff about some of the recommendations that have come over the period of time of these sessions. We will go through some discussion in terms of giving direction to the staff who will be drafting the report over the summer, and we will look at it in the fall when we are back.
Second, you will notice that today I put a motion for us to meet next Tuesday all day. I propose we meet from 9 a.m. to 11:30 a.m. We adjourn at that point because there are caucus meetings and we will come back at 3 p.m. and meet until 5 p.m., maybe 6 p.m. We will use the additional hour perhaps for going clause-by- clause consideration of Bill C- 11. Senator Seidman spoke today from the government side. Senator Jaffer from the opposition side will speak tomorrow. If it gets second reading, we are okay for Tuesday. If it gets held down and adjourned further, that changes the picture. The idea is to try to move up the hearing from June 28. The steering committee talked about June 28, which is a week from Monday. Instead we are saying have the meeting on June 22, which would work out well in our time frame.
June 23, our final meeting before recess, would be on the subject of Bill C-34, which was discussed today in the Senate as well. Are there any questions about that? That is the plan at the moment. Things can change, though; you never know.
With that, I will call adjournment and we will see you tomorrow morning at 10:30 a.m. Thank you.
(The committee adjourned.)