THE STANDING SENATE COMMITTEE ON BANKING, COMMERCE AND THE ECONOMY
EVIDENCE
OTTAWA, Tuesday, October 4, 2022
The Standing Senate Committee on Banking, Commerce and the Economy met with videoconference this day at 6:30 p.m. [ET] for the examination of Bill S-215, An Act respecting measures in relation to the financial stability of post-secondary institutions.
Senator Colin Deacon (Deputy Chair) in the chair.
[English]
The Deputy Chair: Welcome to the Senate Committee on Banking, Commerce and the Economy. My name is Colin Deacon. I am a senator from Nova Scotia, and I am deputy chair of this committee.
I would like to introduce the members of the committee: Senator Bellemare, Senator Gerba, Senator Loffreda, Senator Woo, Senator Moncion, Senator Ringuette, Senator Smith and Senator Marshall.
Today we begin our examination of Bill S-215, An Act respecting measures in relation to the financial stability of post-secondary institutions. For our first panel, we have the pleasure of welcoming our colleague Senator Moncion, who is the sponsor of the bill. She is accompanied by Darius Bossé, a lawyer at Juristes Power Law, and we are joined by videoconference by Juliette Vani, a lawyer at Juristes Power Law. I welcome you and thank you for joining us this evening.
Senator Moncion, the floor is yours for about five minutes of testimony.
[Translation]
Hon. Lucie Moncion, sponsor of the bill: Good evening, honourable senators.
I’d like to start by thanking the Chair and members of the Standing Senate Committee on Banking, Commerce and the Economy for the opportunity to appear before you today to discuss the bill I am sponsoring, Bill S-215.
Bill S-215, An Act respecting measures in relation to the financial stability of post-secondary institutions, was proposed in response to Laurentian University’s decision to restructure under the Companies’ Creditors Arrangement Act, or CCAA for short. In a nutshell, what the bill would do is prevent publicly funded post-secondary educational institutions from using the CCAA or the Bankruptcy and Insolvency Act to restructure, on the recommendation of the designated minister.
Prior to such a recommendation, the designated minister would have to develop a proposal based on the consultation of stakeholders identified in the bill. The proposal would set out federal initiatives, including legislative amendments, to reduce the risk of publicly funded educational institutions becoming bankrupt or insolvent, as well as measures to protect and support students, faculty, staff and communities that would be impacted in the event that an institution became bankrupt or insolvent. The proposal would have to be tabled in both houses of Parliament no later than one year after the bill’s coming into force, and any legislative amendments proposed would have to be accompanied by a timeline for their introduction.
In short, the bill would require the Government of Canada to put forward solutions to improve the financial health of Canadian post-secondary educational institutions, while ensuring that restructuring processes triggered under the CCAA, as in Laurentian University’s case, are the exception, not the rule.
[English]
I would now like to provide some context for the bill. Laurentian University is the first public post-secondary institution to initiate restructuring proceedings under the CCAA. This unprecedented process has had devastating economic, cultural and academic consequences for Northern Ontario communities, particularly the city of Sudbury. As you know, hundreds of faculty and staff at Laurentian and in three former federated universities have been put out of work. A dozen programs have been eliminated, including several French and Indigenous programs, exacerbating the existing problems of young people leaving the North and the anglicization of francophone students due to a lack of French-language program options.
Why should the CCAA not be an option to address the financial situation of our public colleges and universities? To answer this question, allow me to quote the Auditor General of Ontario, Bonnie Lysyk. In her report Preliminary Perspective on Laurentian University, she writes:
There is a strong argument that the CCAA, an important tool used in the private sector, is an inappropriate remedy for public entities. There are certain principles held high in the public sector — including transparency, accountability and the primacy of the public interest — that make the CCAA — court-ordered protection — a detrimental choice for public entities.
The CCAA is a legal tool that allows insolvent businesses to return to profitability for the benefit of their creditors. This is a legitimate goal in most cases. However, in the absence of clear public policy direction, this commercial pragmatism is inappropriate for the treatment of a publicly funded educational institution. Governments and by extension the public have a vested interest in the financial viability of post-secondary institutions. The CCAA does not provide any mechanism for stakeholders consultation or a requirement to take into account the mandate of the institutions involved.
For all these reasons, it is inappropriate for these entities to use these legal tools. In the event of insolvency or heightened risk of insolvency, the federal government must study and consider a different restructuring process tailored to these public entities with an educational mandate. Bill S-215 provides the blueprint to achieve this objective.
I’m just going to speak on the constitutionality of this bill. For questions relating to the constitutionality of this bill, I’d like to refer members of the committee to the legal opinion that I tabled before this committee. I believe the document will be provided tomorrow, as we encountered delays due to the translation of the legal opinion from French to English.
In summary, with regard to the division of powers under the Constitution Act, 1867, the bill respects the limit of federal jurisdiction in bankruptcy and insolvency matters. The true character of Bill S-215 is to establish a process for eventual legislative change by Parliament on the issue of institutional bankruptcy and insolvency. This bill does not affect the state of the law in the absence of a proposal by the minister and his approval. In this sense, it does not create a legal void and proposes a vigilant path to follow.
The opinion to which I refer does, however, raise an issue with the title and short title of the bill. Titles of legislations are used by the courts to determine the true character of a statute in jurisdictional constitutionality analysis. It would be preferable under the rules of constitutional law that the title and short title of the bill be amended to use language that more closely resembles the language used in bankruptcy and insolvency matters, which are clearly a federal jurisdiction. For those reasons, at the appropriate time, I will be proposing an amendment to change the current title to “An act respecting financial arrangements for post-secondary institutions.”
I am available to answer any questions you may have. Thank you again for the invitation and for listening to my presentation. At some point, I will be asking Darius Bossé and Juliette Vani to add to some of the questions and comments I will be providing for you.
The Deputy Chair: Thank you. I would ask Mr. Bossé and Ms. Vani to give us background on their area of expertise and what you bring to the committee meeting.
[Translation]
Juliette Vani, Lawyer, Juristes Power Law: My name is Juliette Vani, and I am joined by my colleague at Juristes Power Law, Darius Bossé. Our firm specializes in constitutional law. That is why the senator reached out to us regarding the constitutionality of the bill. We are here this evening to answer questions on that subject, and we hope you will have access to our legal opinion very soon, as the senator mentioned.
Darius Bossé, Lawyer, Juristes Power Law: My name is Darius Bossé, and as my colleague mentioned, I also work at Juristes Power Law.
[English]
This is not totally unusual, but when you are asked to provide a legal opinion, it is confidential. However, we are now talking about it very publicly. My understanding is that the senator wanted to make sure that the bill respected the confines of federal jurisdiction. We confirmed that it does, and we would be very happy to answer questions in that regard.
Our firm also acts for minority rights, language rights, Indigenous and Métis groups as well, so we love this field of constitutional law. We are very privileged to be asked to accompany the senator today.
The Deputy Chair: That’s wonderful. Thank you very much to both of you for giving us that bit of background. We will now move to questions.
Senator Loffreda: Kudos and thank you to our panel. Thank you for being here, Senator Moncion, and kudos to you for bringing forward this much needed bill. I say that because, going back to your second reading debate on Bill S-215, the post-secondary sector is an industry that generates $55 billion a year. Quoting from your second reading speech, it “represents roughly 2.4% of the national economy.” So this is important. Senator Moncion continues and says that:
We must act now to save communities from the same fate as northern Ontario, with the restructuring of Laurentian University under the Companies’ Creditors Arrangement Act. The case of Laurentian University is a first, to put some context into the question.
Bill S-215 includes the following precision:
(2) The proposal under subsection (1) must be developed in consultation with representatives from
(a) institutions;
(b) provincial and municipal governments;
(c) groups and associations of — or advocating on behalf of — students, faculty and staff of institutions.
Do you have any particular groups or associations in mind?
Senator Moncion: Thank you for that, Senator Loffreda, and for the information that I provided in my second-reading speech.
Yes, different groups are impacted very much by the bankruptcy of a university. The students are the first to suffer from a bankruptcy or when a university cuts programs. They are impacted first. If we look at Laurentian, to give you a bit of context, the midwife’s program was completely cut. Some of the students who were halfway through their program were left with nowhere to go. I understand that another university in Ontario has picked up the program, but that’s the first group to be directly impacted.
The second group that’s affected when they cut programs are the professor positions that were cut in the university. In the context of Laurentian — and Darius will correct me if I am wrong — over 100 faculty members were let go without severance pay. They are impacted. They should have been at least consulted on this.
The community puts a lot of money into universities by way of the funds that they provide for bursaries and, in other universities, where they provide large amounts for the students’ funds and for university projects. They should also be consulted. There is the community at large. Laurentian serves communities right across northern Ontario. It covers 800,000 square kilometres of surface. There are about a quarter million francophones in that area. These are people who will have to go further to get their education, whether they get it in French, in their own language, have to go to an anglophone university or have to go to universities in other provinces.
The provincial government also needs to be consulted because they fund universities. They need to be part of the conversation when situations like this happen.
Have I forgotten anyone?
Mr. Bossé: In addition, in the CCAA process, for example, this is the first time that a university mobilizes that framework and endangers programs that are protected under a quasi-constitutional act in Ontario, the French Language Services Act. The advocacy groups that are defending these rights had to find their way in the process, which is not really fit for those types of questions. The interests that are considered in a CCAA process are mostly financial and tend not to deal with or be apt to deal with constitutional rights or other rights.
Senator Moncion: I forgot to add that there is also the research part because the federal government will provide, through NSIRC and other funding bodies, available funds for research in universities. They should also be consulted in situations like this. It is a very broad consultation process. A lot of people are involved, and a lot of people suffer when a situation like this happens.
The Deputy Chair: Thank you very much for that. That provides a lot of context for the importance of this bill as well.
Senator Marshall: Thank you very much for being here tonight. Senator Moncion, it is very strange to see you at that end of the table as opposed to this end.
I was very interested in the first part of the bill, and that’s what Senator Loffreda started with. When you are saying that the minister must develop a proposal, what did you have in mind conceptually? What would be in the proposal?
Senator Moncion: It would be an involvement. If we look at Laurentian University’s process — and it is the only example we have, but the same process could be used by any other university. A few years ago, either in 2014 or in 2015, Nippissing University, which is in the city where I live, went to the Government of Ontario to restructure their finances because they were having problems. It is important that the first step with any university is the question of the ministry of education, which is the primary funding source for a university. They need to look into the situation at every university.
I was on the board of Nippissing University for seven years. I was vice-chair of the board when I left. At that time — and I think it has always been the same in Ontario and anywhere else in Canada — universities were not allowed to accumulate deficits. What happened in the last few years is difficult to understand as to where the situation has changed. The ministry of education in Ontario and in any other province where they fund education needs to be involved.
The federal government also has a role to play when official languages and Indigenous education bodies are involved because, through the heritage ministry, they provide money to the provinces for programs that are given to universities. These moneys transit through the provincial government to provide more money for specific programs that are for francophones and for Indigenous communities.
Senator Marshall: Could the proposal include, conceptually, financial support?
Senator Moncion: It could look at financial support. It could look at financial restructuring. If you go to the bankruptcy right away, you are already looking at liquidating assets to pay bills that are not being paid by the universities. When we restructure, especially in education, we say that we can find other ways to fix this without going through the bankruptcy act. There are costs associated with going through that. In the case of Laurentian, it cost $25 million just to get the protection and to pay for the lawyers and the accountants that have been taking care of this. [Technical difficulties]
Senator Moncion: According to the needs. Sorry.
Senator Marshall: I have a specific question on subsection 5. It says the minister is to develop the proposal, and the time frame has to be no later than one year after the date. Then, in the next section, it says the minister will table it “as soon as practicable.” Why is there no time frame there? “As soon as practicable” could be two or three years. Was that deliberate? I was expecting to see that they would have another six months before they table it in Parliament. Was it a conscious decision to leave it “as soon as practicable” as opposed to putting in a time frame?
Senator Moncion: I will let Darius answer, and I might add something at the end.
Mr. Bossé: I think that part of this is to recognize that the issue is complex, and that’s sort of the wisdom of this bill as well. It does not prescribe a specific answer. Instead, it recognizes that the issue requires creative solutions.
In law, “as soon as practicable” is still pretty speedy. It is still pretty quick. It imposes a duty on the minister to propose something and, as soon as that solution is practicable, to put it forward. The minister would not be able to avoid putting forward the proposal.
Senator Moncion: In the case of Laurentian, as soon as Laurentian went under the protection of the bankruptcy act, the government was out of the picture until the proposal came to the creditors. That’s when the provincial government stepped up and started looking into it. As soon as you get under the bankruptcy act, everything is on hold. Every creditor is on hold until the proposal comes out and is looked at by the creditors. Right now, in the process, because it will be two years in January since they have looked into the bankruptcy act, they have a proposal. It was brought forward to the creditors. They accepted it. It was supposed to go to court for approval this week, on October 5, and it has been postponed, I think, to November 21, but it will have taken almost two years. The provincial government has intervened in the meantime because there were specific needs for the operation of the university while this is going on.
[Translation]
Senator Gerba: Thank you, Senator Moncion, and congratulations on this bill.
You mentioned groups that are impacted, and I’d like to hear your comments on one group in particular, international students. According to figures for 2017-18, international students account for roughly 40% of tuition fees, so just over $20 billion. That specific group merits consideration.
You mentioned accountability. Who will be responsible for measuring the financial sustainability of these post-secondary educational institutions?
Senator Moncion: I’ll start with your second question and, then, circle back to the international students question.
I hope every provincial government will step up to better regulate and oversee universities’ operations. My background is in the financial institution sector, and if you ask people in the sector, they will tell you that the compliance costs a financial institution has to assume to remain solvent are huge. The auditing of universities’ operations represents somewhat of a missed opportunity.
Between 2000 and 2010, the push was on among many universities to acquire real property. They bought land, built buildings and so forth. As we know, that period was affected by financial crises. Universities put up fine buildings and invested heavily in bricks and mortar. However, tougher financial conditions tend to cause liquidity issues and difficulty repaying real estate debt. The money to repay that debt has to come from somewhere, though.
I’m speaking of Ontario, here, but it was more or less the same in every province. In the early 2000s, the province provided 40% of universities’ funding, and tuition and other fees — things like residence, meals and parking — accounted for another portion. Universities were doing fine, but over time, the province gradually reduced its funding. At one point, a tuition freeze was introduced, and universities welcomed more international students because an international student pays double what a Canadian student pays.
Many universities in the country went this route to supplement their funding and were able to stay solvent and profitable. Some are doing quite well and even enjoy surpluses. The funding that international students provide is much more available to large institutions, which have access to a lot more funding thanks to grants and scholarships that are created. They receive significantly more research dollars from the government. They have other sources of revenue, so they do quite well.
Canada has 349 colleges and universities of varying sizes. Provinces such as Quebec, Nova Scotia and Newfoundland and Labrador provide much more education funding. Institutions in other provinces, including Alberta and British Columbia, are having more trouble. There is a big difference in how much provinces provide in terms of funding, so institutions have to find ways of bringing in additional money to fund their operations.
The message to the government is this: It’s important to pay attention to how universities are doing, and to make sure they stay viable and don’t end up with liquidity issues, as was the case with Laurentian University.
To deal with its liquidity issues, the university used scholarship funds meant for students, research funding and funding intended for Indigenous and French-language programming. It did all of that in an attempt to stay solvent. It didn’t work, however, and the university had to seek protection under the CCAA. That’s how we got here.
I believe that kind of situation can be avoided with Bill S-215. I also think the government needs to be on top of things when it comes to education because having top-notch institutions for students, Canadian or international, is vital to the future of our regions, provinces and country.
Canada is a popular choice, with more than 300,000 international students applying each year. That’s a lot.
Senator Gerba: Thank you for that. I want to follow up on something you said. Are any of the 349 institutions you mentioned in trouble right now?
Senator Moncion: I’ve been in contact with some francophone universities, and the University of Alberta’s Campus Saint-Jean is struggling. Université de Moncton isn’t in any financial trouble, per se, but it isn’t exactly a wealthy institution. I would say that the smaller universities tend to have more difficulty staying solvent and covering expenditures.
We didn’t do a comprehensive review, but I could send you what we have.
Senator Bellemare: First, congratulations on your bill. As Mr. Bossé said, it is a very complex bill. However, I am perplexed and have a lot of difficulty understanding it.
I understand the cause, and I agree that we need to protect our francophone universities, not only in Quebec, but throughout Canada. Universities in the regions and those with collective and community missions are just as important.
However, what I don’t understand is the nature of the bill in relation to some of your assertions, particularly when you say that you have spoken with the president and vice-chancellor of the Université de Moncton.
It was not your university that was experiencing a structural and operational deficit, but it reminded me that your university is experiencing a structural and operational deficit.
How, in the context of structural and operational deficits — which are often a problem that an institution under provincial jurisdiction may experience — can we at the same time ask to hold the federal government accountable for finding solutions and making decisions? This is where I have questions. Perhaps it is because, in my own framework, the pressure is on the provincial level. In Quebec, that’s the way it works.
Universities are trying to innovate in all sorts of areas. I’m not suggesting that this isn’t also happening on your side, but how will this bill address a structural problem of numbers?
Senator Moncion: Thank you. This is an excellent question for which Mr. Bossé will be able to explain the legal dimension. I’ll start by saying that the federal government has funds set aside for the whole issue of francophone programs. This is one aspect of the funding.
You have the bill that is under federal jurisdiction and you have a provincial university that is using a federal statute to shelter itself from its creditors. So there’s a degree of liability associated with using the Companies’ Creditors Arrangement Act.
Now, as for transfers to the provinces for university funding, the federal government has a responsibility for everything related to education, whether it’s in French or English.
The federal government also has funds associated with French-language education across Canada, including the Official Languages in Education Program, OLEP. The federal government also has funds dedicated to Indigenous people, as there is still a federal responsibility for transfers in programs that affect official languages.
On the legal issue, I will turn the floor over to Mr. Bossé or Ms. Vani.
Ms. Vani: With respect to federal jurisdiction over bankruptcy and insolvency, the bill, as currently drafted, respects that jurisdiction. Of course, any initiatives that are proposed by the minister must remain within that jurisdiction.
When you look at the bill, you can see the objectives that are stated, that the minister must [Technical difficulties] initiatives. In section 4(2), there are objectives relating to bankruptcy and insolvency.
These objectives are, first, to reduce the risk that an institution will fail or become insolvent; second, to protect students if the institution fails or becomes insolvent — thus, in cases of bankruptcy and insolvency; and third, the same is true for communities that would be affected if an institution failed or became insolvent. These three objectives [Technical difficulties] and the initiatives that the minister will propose will have to be within this jurisdiction.
Of course, I understand that your question is more about whether, by staying within his jurisdiction, the minister will be able to propose something that will actually address the problem that we face.
That remains to be seen, and Bill S-215 will not answer the question. On the other hand, sometimes the jurisdiction in bankruptcy and insolvency matters is perhaps a little broader than one might think, because a state of insolvency or a risk of insolvency is required. The innovations may be such that one does not necessarily have to go to an asset distribution procedure to deal with a bankruptcy. We can really find remedies upstream.
In addition, the definition of insolvency status is also provided for in the insolvency legislation. Thus, the federal government could arrive with a definition of insolvency that is broad enough to allow it to intervene before problems become impossible to resolve without ensuring a redistribution of assets.
As Senator Moncion just mentioned, I also think it is possible that the initiative could come from the federal spending power, which is not tied to any particular jurisdiction. It could make the funding conditional on certain provincial initiatives, in which case some provinces could refuse the funding. On the other hand, there would be no jurisdictional problem in this regard.
What is also interesting about the bill is that it proposes consultation with stakeholders. This will perhaps make it possible to find initiatives that we would not have thought of until now with the bill, but which could emerge during the consultations with the minister. So, this is also an element to consider.
I don’t know if Mr. Bossé would like to add a comment or if I have answered your question.
Mr. Bossé: To give an example of a structural problem, it is that if the bill invites the minister to consult and determine what the problems are... If, in one case, the problem is a funding problem, the federal government, as my colleague has said, can use its federal spending power to help find solutions to that problem, for example, by asking the provinces to make a similar contribution. If the problem is one of accountability, as Senator Gerba mentioned, the federal government can ask for conditions in provincial regulations that better frame accountability to be attached to its transfer of funds.
[English]
Senator Woo: Thank you, Senator Moncion, and witnesses for appearing today and for your passion on this subject. I’m going to build on Senator Bellemare’s question.
It struck me as I was listening to the responses that there is an explicit objective in your bill and then there is an implicit one. The explicit one I support in principle; it is to think about alternative frameworks for dealing with serious liquidity or insolvency problems at public institutions, such as universities, and for us to imagine if an alternative way of sorting out these problems could be conceived. That’s okay. I don’t know what that way is, but we can think about it.
That explicit objective is conditional on the implicit assumption that has just come out here in the last few minutes, which is that there would be a bailout from either the feds, the province or the fed’s arm twisting the province or the province giving in to pressure, or something like that. If you take out that implicit assumption or belief, then you’re restructuring the explicit goal of a different restructuring model. It simply finds a different way to inflict pain on the stakeholders, if I can put it in the crudest terms. The CCAA is a very crude way of inflicting pain to solve severe financial difficulties. It has rankings of creditors and it freezes payments, all of that. Everyone takes a haircut, right? The courts work out how much of a haircut you take. If you take out the implicit assumption that there will be a bailout, there is still going to have to be a haircut. Somebody’s hair is going to be lost.
We can discuss this for a long time. Is there really a better restructuring approach without any bailout money that is going to make people any happier, or is this simply going to create more pain for the institution? It is going to be difficult to negotiate with the school of midwifery and the architecture people and the neighbourhood where your university is and all of the other stakeholders. That might lead to the more rapid demise of the institution.
Senator Moncion: The question is about the bailout and its structure. The problem, or the challenge, I should say, for universities and for people when they go under the insolvency act is understanding the depth of the problem within the institution and how to solve the problem and how long it can take to solve it. It doesn’t always have to require bailout money. It could be a long-term debt that finances the structural problem that you find within a university. It might be something that is not solved within the next two or three years; it might take 20 or 25 years. It’s not new money that you’re going to put into the institution; it is financing that is going to be provided with strict conditions.
Yes, at some point, difficult decisions are going to be made, but they are going to be made with the full understanding of the situation. What happens when a university goes under the CCAA? It becomes a process that is done within a very limited number of people. The idea is to cut and fix the problem quickly, as opposed to when you look at the whole situation and find all the dark holes where there are problems. You look at the problem in its entirety. If you look at some of the structural problems that you could possibly have, you might have a problem with the pension fund, which is requiring more money than is feasible in the long term. You will cut at some point, but you will cut with the people knowing what is going on and by finding solutions other than just getting rid of most of your creditors.
In the case of Laurentian, people are getting 14 to 24 cents out of every dollar. At the end of the day, there are many people who have lost money here as opposed to a longer-term financial restructuring where you could possibly have people getting 50 cents on the dollar instead of what they’re getting right now.
[Translation]
Senator Ringuette: Thank you very much, Senator Moncion, for your very laudable intentions. I have no doubt about that. However, I wonder about the federal government’s involvement. We are talking about transfer payments for post-secondary institutions and, in particular, for universities in a minority context, whether they are anglophone institutions in Quebec or francophone institutions in the rest of the country. However, once these payments are made to the provinces, the audit is done by the province’s auditor. There is never any accountability at the federal level. That’s my first observation.
My second observation is about the Bankruptcy and Insolvency Act and the CCAA, which was the door that Laurentian University went through. Your bill, which falls under the sole jurisdiction of the federal government in a similar matter, excludes post-secondary institutions from both of these federal entities. In fact, the only link that could exist in such a situation has just been excluded, or excluded by means of this bill. It says that from now on, regarding these two projects under federal jurisdiction, post-secondary educational institutions are excluded from the definition; I find that problematic.
I understand where you want to go. You want to have a more cooperative system for educational institutions. Are you convinced that the approach you are advocating is the solution? You’ll have to convince me.
Mr. Bossé: On the issue of federal jurisdiction, I would like to point out that the minister’s proposal could be to create a section in the CCAA that would deal specifically with these institutions, with a regime that would be more appropriate to the considerations that arise when a public post-secondary institution is publicly funded, but that would also implement the rights of certain groups. So, once you put all of those considerations together, perhaps the minister will say that this merits a regime that is bankruptcy or insolvency-specific for these institutions.
What we know is that when there is a CCAA process, the weakest do not win. It’s not the programs with the fewest students that are protected; they are the first ones that are cut. Often these are the very programs that help vulnerable communities and people with constitutional rights —
[English]
The Deputy Chair: We are going to have to move on to the next questioner at some point here. Can you quickly wrap up?
Senator Ringuette: I need to be convinced that this is the way to go.
[Translation]
Mr. Bossé: This law would be a matter of federal jurisdiction, or rather this proposal would fall under federal jurisdiction.
Ms. Vani: The minister does not have to remove post-secondary institutions from the CCAA and the BIA; he should only do so if it is consistent with his proposal. Thus, he could decide to leave post-secondary institutions in these two statutes and give them a section that would mention that there are other interests that must be considered in the order in which claims are to be dealt with. The minister may decide that the best way to proceed would be to keep these two acts but make some adjustments to them. It could be a completely different act, which could be called the Post-Secondary Education Bankruptcy and Insolvency Act, for example, which would be similar to the BIA; these initiatives would not necessarily result in an exclusion.
[English]
The Deputy Chair: Thank you, Ms. Vani.
We’ll go to second round. We will do our questions one after the other and see what our witnesses might be able to offer. Quick questions, if we could, and then we’ll hand it over to our witnesses to try and wrap it up.
Senator Loffreda: We’ve discussed bankruptcy and what happens “if,” but one area I would like to touch on — and for that I’ll go back to your second reading speech — is prevention. How will Bill S-215 prevent bankruptcies? I say that because an important aspect and facet of long-term sustainability is always financing, but also community support. I say community support because I was on the board of governors of Concordia University, and I did many fundraisers for McGill University, and regardless of how successful we were, the first thing we would do is say, “Who can we put together to raise money for the community?” The budget was always the first thing we would look at. I go back to your second reading speech where you say:
Despite the emergence of institutions by and for francophones such as the University of Sudbury, which has clear unified community support —
I would put that in capital letters.
— governments have been slow to act.
Have you explored that? How will it help the community support? How will it help obtain financing? Maybe prevention would be the key more than insolvency.
Last but not least — maybe you can answer in writing — you speak on Bill S-215 and say that the minister should be responsible for developing a proposal for federal initiatives designed to reduce the risk that an institution becomes bankrupt or insolvent, et cetera, but which minister? Where would you see this responsibility taking place?
The Deputy Chair: We will get all three questions on the table and then answers in writing if we can’t get them in the time we have left.
Senator Marshall: Is this going to infringe upon provincial jurisdiction? I’m just thinking about my own province. Not all provincial governments might appreciate it. If there’s money attached, they probably would. To me, that’s an issue.
The other issue is that when we talk about the proposal, if the proposal is implemented and then the minister does table it in Parliament as soon as is practical, how do we bring the circle right around with the accountability? I think Senator Ringuette touched on that. When we implement the proposal or the proposal is implemented, what is the accountability mechanism that goes back to the minister and gets tabled in both houses?
[Translation]
Senator Bellemare: My question echoes the themes that were just discussed. I wonder if, in order to simplify the bill, it would be a good idea to remove the responsibility for federal initiatives from the bill and include that in an act.
Why not try to do that, politically speaking? In any case, if people don’t want to meet, they won’t, whether there is a law or not. We are talking about consultations and all that. So, we should have a strategy based on provincial and federal involvement and have the necessary provisions in the Bankruptcy and Insolvency Act that allow for action. We would have something simpler to help the university and build a model based on exchanges that occurred during consultations.
Senator Moncion: This is one of the things that we think should be revisited, because the Companies’ Creditors Arrangement Act is so easy to use and so accessible that very often companies do not make the effort to come up with solutions that could solve their problems without a loss of business. I will take three minutes for that example, and then we will answer the questions that the senators have asked in writing.
Take Mountain Equipment Co-op (MEC). When MEC used the Companies’ Creditors Arrangement Act — it was a cooperative — their first instinct was to get protection from their creditors, and they sold the cooperative to American interests.
However, in the cooperative model, they had everything they needed to solve their problem. All they had to do was ask their members for an extra $5 share, because they had over five or six million members. All they had to do was get $5 more from each of their members and they would have solved their cash flow and insolvency problem. Using the Companies’ Creditors Arrangement Act was quick, they solved their problem, but Mountain Equipment Co-op is gone.
[English]
The Deputy Chair: I think we’ve had some great answers. Not every single question has been answered fully, so I’m going to ask our witnesses if they could follow up based on the final questions. If there is anything more you would like to add, we would like to receive it through the clerk.
The impassioned responses have certainly captured my attention on the importance of this as an alternative, and I’m glad we’re studying it robustly. I’ll bring us to a conclusion and thank our witnesses very much for being here. We will switch over to the next panel.
We now welcome our second panel. In the room, we have David Robinson, Executive Director, Canadian Association of University Teachers; and Ms. Sarah Godwin, Director, Legal Services and Labour Relations, General Counsel, Canadian Association of University Teachers. With us via videoconference are Susan Wurtele, President, Ontario Confederation of University Faculty Associations; and Mina Rajabi Paak, Policy Analyst, Ontario Confederation of University Faculty Associations.
We will begin with an opening statement from Mr. Robinson, followed by Ms. Wurtle. If you could keep those opening statements to less than five minutes, that would be great.
David Robinson, Executive Director, Canadian Association of University Teachers: I would like to begin by acknowledging that we are meeting this evening on the unceded and traditional territory of the Algonquin people.
I am grateful for the invitation to be here tonight on behalf of the Canadian Association of University Teachers. For those of you who are not familiar with us, we represent 72,000 faculty, librarians and professional staff at more than 120 post-secondary institutions in all provinces across the country.
The post-secondary institutions bankruptcy protection act would exclude public post-secondary institutions from the Companies’ Creditors Arrangement Act and the Bankruptcy and Insolvency Act. Our association fully supports this important change. These processes are inappropriate and unnecessary for publicly funded institutions, universities and colleges and are counter to the fundamental values and principles of those institutions including, quite centrally, collegial decision-making and academic freedom. We’ve learned this the hard way. In February 2021, Laurentian University was the first publicly funded university to apply for and receive CCAA protection. It was an unnecessary, inappropriate, costly and destructive decision by the university’s administration.
It was unnecessary because mechanisms to deal with the institutions’ financial challenges already existed. First, as was noted by the Auditor General of Ontario, the university did not follow the normal broader public sector precedent to seek financial assistance from the provincial government. Second, it deliberately ignored language in the contract with the Laurentian University Faculty Association that provides for a specific process to follow in instances where bona fide financial pressures exist. Virtually every faculty association in Canada has negotiated financial exigency provisions in their collective agreements that deal with such instances of financial crises. The administration of Laurentian University chose to ignore the collective agreement, purposely withheld financial information from the faculty association and turned to an expensive and combative legal process.
In pursuing protection under the CCAA and casting aside the financial exigency process, the administration also betrayed the fundamental values of the university. Historically, it’s important to remember that financial exigency clauses arose in collective agreements precisely to protect the principles of collegial academic decision-making and academic freedom. Financial exigency processes ensure that decisions about academic restructuring and program closures are made not by administrative or creditor diktat, but with the active participation of the academic community — those who have the expertise on educational matters.
Financial exigency language also protects the foundational value of all universities — academic freedom. As the Supreme Court of Canada has noted, academic freedom is necessary to allow a “free and fearless search for knowledge and the propagation of ideas” that is “essential to our continuance as a lively democracy.” Academic freedom grants academic staff the right to teach, research and express views without institutional censorship or reprisal. Tenure, awarded only after a lengthy probationary period, is the procedural safeguard for academic freedom. It ensures that academic staff can be dismissed only for just cause or bona fide financial reasons. Financial exigency language ensures that administrations do not use a financial crisis as a cover to violate the principles of tenure and academic freedom by targeting academics they find controversial, difficult or unpopular. In short, the values and goals of post-secondary institutions are inconsistent with the commercial framework that ordinarily guides CCAA proceedings.
Finally, the CCAA process is also extremely and needlessly costly compared to the normal financial exigency options available. The Laurentian University administration needlessly spent tens of millions of dollars on lawyers and consultants while nearly 200 faculty and staff positions were lost and 69 programs were cancelled, many of which were unique French language and Indigenous programs, including the only Indigenous bilingual midwifery program serving northern Ontario.
Earlier this year, CAUT released a commissioned report by Simon Archer of Goldblatt Partners and Dr. Virginia Torrie, Professor of Law at the University of Manitoba. Their conclusion was:
The policy objectives of public institutions, such as universities, are inconsistent with the core rationale of insolvency law to promote commercial risk-taking. Universities rely on and are backstopped by government funding. Applying the CCAA to such institutions changes the ground rules on which they operate. This requires them to compete in a “marketplace”, commodifies public purposes and goods, and undermines university governance ...
The report concludes by emphasizing the pressing need to amend the CCAA and the Bankruptcy and Insolvency Act to preclude its use by public universities and colleges. I therefore urge the committee to support this legislation, particularly in light of the harsh lessons learned from Laurentian University.
Thank you.
The Deputy Chair: Thank you, Mr. Robinson.
Susan Wurtele, President, Ontario Confederation of University Faculty Associations: I am speaking to you from the treaty and traditional territory of the Mississauga Anishinaabeg people.
I am the president of the Ontario Confederation of University Faculty Associations, OCUFA for short. With me tonight is Mina Rajabi Paak, a policy analyst at OCUFA. We represent 17,000 full-time and contract faculty and academic librarians at 30 universities across Ontario, including the Laurentian University Faculty Association. We are here today to address the committee regarding Bill S-215, the post-secondary institutions bankruptcy protection act.
We strongly support the measures proposed in the bill, particularly the amendments to the Companies’ Creditors Arrangement Act and the Bankruptcy and Insolvency Act, which will provide for post-secondary educational institutions to be excluded from these processes. The CCAA is designed to protect private companies from their creditors and has no place in the public sector. Public and publicly assisted institutions differ from private corporations in significant ways, including their requirements for compliance with provincial policy and operating procedures related to accountability, finance and administration. These institutions should not be subject to the same rules and regulations governing financial insolvency and bankruptcy for corporations in the private sector.
In February 2021, faculty, staff, students and community members across Canada were shocked to learn that Laurentian University, a public institution in Ontario, filed for insolvency protection under the CCAA. It was an unprecedented move that triggered the largest cuts ever experienced at a Canadian university and resulted in the cancellation of 69 academic programs and the loss of nearly 200 faculty and staff positions. The cuts rocked the foundations of the Sudbury community and threatened many of the academic programs that were integral to Laurentian’s mission as a bilingual and tricultural institution with a mandate to serve northern Ontario.
The cuts to francophone programs and course offerings undermine Canada’s commitment to bilingualism and will have an immeasurable impact on the educational and employment opportunities for one of Canada’s largest francophone communities outside of New Brunswick and Quebec. In response, Ontario’s French Language Services Commissioner has called out the Laurentian administration and the Government of Ontario for failing in their responsibilities to safeguard the interests of Ontario’s French speakers. The cuts have also resulted in the closure of Laurentian’s Indigenous Studies Program — a leading department in North America — at a time when teaching from an Indigenous-centred perspective has been deemed to be an essential component of Canada’s commitment to the Calls to Action of the Truth and Reconciliation Commission. The loss of these programs serves to underscore why it is inappropriate for public institutions of any kind, and most especially universities, to be subjected to a corporate mechanism designed to safeguard the investment of shareholders and consumers.
A preliminary report from the Office of the Auditor General of Ontario found that Laurentian’s CCAA filing was inappropriate and could have been avoided. The report also detailed poor management decisions and financial choices by administration officials, limited transparency and a lack of action from the provincial government.
In short, it is the responsibility of federal and provincial governments to ensure the health and sustainability of public institutions through legislation, regulations and funding. The purpose of public institutions, like universities, is to strengthen the social and cultural fabric of our communities and serve the common good, whereas the goal of a private corporation is largely to ensure profits for shareholders. Legislation intended for private sector corporations has no place in the public sector.
That Laurentian University was able to file for credit protection has far-reaching implications for all publicly funded institutions in Canada. If the CCAA and BIA are not reformed, this process could be used to restructure other institutions and undermine Canada’s public post-secondary education system.
We urge this committee to take heed from the Laurentian crisis and recommend the adoption of Bill S-215 to prevent any of Canada’s vital public post-secondary educational institutions from being subjected to BIA or CCAA proceedings. We join with the committee in a shared commitment to ensuring an independent, stable, accessible, high-quality and thriving public university sector, and it is in that spirit that we offer our remarks in support of the bill today. Thank you.
The Deputy Chair: Thank you, Ms. Wurtele. We will now move to questions from the senators.
[Translation]
Senator Bellemare: I understand that you support the bill, specifically the provisions that deal with the Bankruptcy and Insolvency Act. I have not heard you speak to the proposals regarding the ministers’ structural plan.
Is my interpretation of your position correct? Do you agree with the bill, and in particular the specifics that relate to the Bankruptcy and Insolvency Act?
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Mr. Robinson: I think our remarks are more geared towards the Companies’ Creditors Arrangement Act under which Laurentian reached insolvency. Similarly, we wouldn’t want an institution to have access to the Bankruptcy and Insolvency Act as well.
Senator Bellemare: We are talking here about universities, human capital and a problem of solvency. We have accountability rules that are very specific for capital in general. Do you think — I don’t know if this is your area of expertise or if you ever thought about this — if we had other accounting rules that would treat human capital and investment into this area in another way that it could be helpful in financing the production of such knowledge or of such capital?
Mr. Robinson: That’s certainly a big question. It’s well beyond my area of expertise. What I can certainly say, from our experience, is that questions of accountability and transparency are at the root of how universities and colleges should function. Universities and colleges should be financially accountable to their communities. One of the failings that we discovered at Laurentian was a failure in governance, oversight and accountability.
I would say that one of the key lessons that we learned from Laurentian, in addition to looking at the CCAA process, insolvency and bankruptcy, is that we also need to look at what the structures of our institutions are in terms of their accountability to the community. Clearly, in this particular case, no one outside of a small group was fully aware how deep they had fallen into a financial crisis until it was too late.
Senator Loffreda: I thank our panellists for being here.
I would like to go back to the question I asked Senator Moncion. We were all very excited about her being on the witness stand and we had so many questions that she didn’t have a chance to answer, but she will answer in writing, I hear. I would like to have your opinion. The purpose of the legislation is also prevention. We want to prevent insolvency and bankruptcy. You mentioned the word “community,” not to go back to her second reading where she mentioned Laurentian University had significant community support. I’m not quoting, but that was the intent of her comment. I could go back and quote it, but that was what she intended to say, and she did say that. You mentioned communities.
How will Bill S-215 help prevent bankruptcy and insolvency? You seem to know a little more about the bankruptcy of Laurentian University than many of us. I was on the board of governors of Concordia University and did fundraisers for McGill University, and the community involvement was huge in those universities. You always want government to be involved as least as possible when it comes to situations such as community support that could replace government support. It is always better to do that.
Why wasn’t there community support? How will Bill S-215 help labour relations? Will it help labour relations?
Mr. Robinson: Thank you very much for the question.
I think the best way that we can prevent an institution from falling into insolvency is ensuring that we follow the financial exigency provisions that is the custom and practice in contract language in almost every agreement across the country. Financial exigency exists to prevent a financial catastrophe, but it is one that involves the entire community. Laurentian could have decided to trigger the financial exigency clause well before it went past the point of no return. It decided not to. But we could have then seen, and the Auditor General of Ontario makes this clear, a much more cooperative, inclusive process in which all considerations, not just financial but also educational considerations, were also taken into account.
I don’t think that the bill has a direct prevention measure, but it prevents institutions from bypassing a better, less costly and more inclusive process of dealing with financial problems.
Ms. Wurtele: I completely agree with the comments that Mr. Robinson has made in terms of this bill. It would provide an opportunity for a pause long enough to engage some of these additional processes. I think the situation that unfolded at Laurentian happened so fast that there wasn’t a moment when the community could actually step in, intervene and coordinate to try to save the university. I think one of the important elements of this bill is that moment to pause to try and engage in more appropriate structures to operate within a university system, as opposed to just referring to or reverting to the CCAA and BIA.
Senator Marshall: One of the areas that I am stuck on is that the federal minister is going to develop a proposal to help an institution that’s having financial problems, but it is going to require the cooperation of the provincial government, probably the municipal government, and other stakeholders. I can’t see that working in all instances, so I would like to hear your feedback on that aspect of it. It sounds like this is going to work, but knowing what I know about provincial governments, I would say some provincial governments are going to look at this as infringing on their jurisdiction.
When I think about what happened to Laurentian University, it seemed that based on the Auditor General’s report that the province was willing to let the university fall. I mean, it is possible that in another instance you may find yourself in a situation where the province wants the institution to fail but the federal government doesn’t. There is that conflicting possibility. I would appreciate your comments on that, Mr. Robinson. I would also appreciate it, Ms. Wurtle, if you could speak to that.
Mr. Robinson: Thank you for the question.
I think the challenge we have in post-secondary education is that there is some degree of shared responsibility. Obviously, the provinces are responsible for core operation funding for the teaching purpose of the institution, and the federal government plays a lead role in research. One of the things we discovered at Laurentian was that money provided by the federal government for research purposes was not going to research purposes but was going into generally revenue. There was a significant problem and there was an interest that the federal government and provincial government had. I would certainly hope that there would be some willingness to cooperate when these situations arise because there is both provincial and federal money floating around in the system.
Ms. Wurtele: Within the structures of the CCAA process, things shut down almost immediately and there is no opportunity. There is no information flowing and there is really no opportunity to find those solutions.
To speak to your question about the minister and who would be responsible, we are a unique sector in that we bridge so many different jurisdictions. We certainly rely on support from a variety of different jurisdictions, but that also means we have different stakeholders. We have a range of stakeholders who have, we would argue, a responsibility to ensure that the universities don’t fall through the cracks in these proceedings. I think that, in many ways, Laurentian University fell through the cracks in terms of falling into a legislation that was inappropriate for it in this particular circumstance.
Senator Marshall: But the legislation specifically says that the proposal must be developed in consultation with the institution, the provincial government, the municipal government, the federal government, the groups and associations. There are a lot of stakeholders involved. Based on my experience, I think it would be a challenge to get everybody to agree on a proposal. I think that could be a challenge.
Sarah Godwin, Director, Legal Services and Labour Relations, General Counsel Canadian Association of University Teachers: If we remove the crutch of the CCAA as a possibililty or an option, then there has to be consultation and all of that disclosure and discussion will happen. It has no choice but to happen. At Laurentian, the Auditor General found that they were planning for a year or two out on engaging the CCAA. If they hadn’t had that process, they would have been forced into the consultation and mechanisms provided for in the collective agreement.
Senator Marshall: The only problem is that there could be consultation, but at the end of the day, are you going to be able to come up with a proposal that all the stakeholders are willing to support? I would see that as a challenge.
Senator Moncion: I want to keep on talking about the consultation process because I think it is important. How do you see the role of the federal government as opposed to the one for the provincial government? The responsibilities are very different, but they are also complementary. I would like to hear you on this aspect.
Mr. Robinson: The issue is that you have a shared jurisdictional overlap in the sense that the federal government has money that goes to the institutions, and in the case of Laurentian University, it was also providing direct funding for French-language programs under the Official Languages Act. It is a key stakeholder, particularly around the research envelope. With the provincial government, as Ms. Godwin pointed out, the problem we had was in going into the CCAA process. Once the process began, we knew there was consultation with the provincial government happening with the university, but we had no idea on our side what was being discussed or what was being promised. At least lifting that veil of secrecy and having that kind of transparency allows everyone to act in an informed way. I would hope that would allow us to have an adult conversation about how we solve the problem. The problem with the CCAA process is that it’s so secretive that we don’t know. We act with imperfect information.
Ms. Wurtele: I would add that I am struck by the number of senators on this committee who have experience in university settings, so you can all appreciate what I’m going to say, which is that universities are used to coming up with creative solutions. They are used to crossing boundaries to find situations. As Ms. Godwin said, when you have the option of going to the CCAA as your first step, then you can bypass all of that. It is true that perhaps the discussions will not result in a successful outcome, but that doesn’t mean you ought not to try to accomplish that. Given my years of experience in the university setting, I would say that one thing we are particularly good at is finding those kinds of solutions.
Senator Moncion: What if during the consultation you were to add other universities to the conversation?
Ms. Wurtele: I think we have history in that regard as well. We have situations where universities have come together to co-author programs, for example, or to find synergies, whether it is programs or taking on faculty. There was no opportunity to find any of those kinds of solutions that would have saved those jobs, programs and the publicly funded services that exist within those communities.
Senator Woo: I think you have all made a good case for the mismatch between the CCAA and the post-secondary educational institutions, and I think it is worthwhile to think about better ways of solving very difficult problems. What is your theory about why the Laurentian administration did not pursue options that manifestly would have been better for the university as a whole, and presumably for their reputations, for the community and for all of the good things that you’ve talked about? Can you offer an explanation?
The key here is that if they screwed up, to use the colloquialism, maybe that’s where we should identify the problem. It strikes me that some of these solutions you talk about already exist. You pointed out that financial exigencies are in place already. So is it a question of better board education for members of university boards? Is it a question of peer review among universities so that more experienced university administrators can help other university administrators? Do we have to go as far as actually designing a holding system for insolvency and bankruptcy?
Ms. Wurtele: From where I sat, it is hard for me to understand and appreciate why the administration took that route. I think David Robinson may have some additional insights because he was closer to the actual process of the CCAA. We certainly know — there is no doubt — that, in part, it appears on the surface to have been an effort to avoid the collective agreement provisions that would have required those kinds of conversations to take place. There is also speculation about a grand design to change the university, and that would have taken a much longer and more elaborate process and possibly would not have met with successful buy-ins. There is a lot of speculation, and I don’t want to fuel unjust speculation.
You’re absolutely right that board education is an important element of it. I have no doubt that we will see improvements because the Laurentian situation has been so horrible for Laurentian that I think it really does stand to reason that other universities are standing up and paying attention. That means all of the stakeholders of those universities.
As I said, I think David Robinson was closer to the CCAA process at Laurentian itself, so he may have something to offer.
Mr. Robinson: Before answering the question of what motivated the administration, I have to check with my counsel: Do I have qualified privilege in this room?
It’s always difficult to speculate, but during collective bargaining, when the administration was making claims of financial poverty, we had pushed them to open up the books and show us. They never provided any other financial information. As was mentioned earlier, this was the plan all along. I think they were being advised that this was a way in which they could deal with the financial crisis and also deal with the union and gut the contract, which is essentially what they attempted to do in the first part of the negotiation around the plan of arrangement.
Most important, as part of your second question, Laurentian is a great case study in the failure of governance. The Auditor General made very clear that the board of governors was not adequately informed, and they did not engage in good practice. There were people voting on matters in which they had a conflict of interest. It was a fundamental problem from the very beginning with a lack of transparency and accountability. The faculty association didn’t have a representative on the board, unlike in most other universities where they would so that there would be some accountability or openness to the community.
There is a whole series of failures here, and the CCAA process was a perfect avenue for the university to continue to hide behind the veil of secrecy and go after the programs, individuals and the contract in a way that was incredibly brutal. When the matter came to the Senate, the Senate was told that they either accept the plan or they shut down the university. You’re negotiating with a gun to your head. It’s terrible.
[Translation]
Senator Gerba: Thank you to our witnesses.
Bill S-215 provides protection for students in the event of institutional failure and support for communities affected by institutional failure or insolvency.
Earlier, with the first panel, we talked about international students, who are one of the most important sources of funding for universities. How do you think this bill could better protect foreign students in particular? They arrive, they have a residence permit linked to their enrolment in a university, their funding is assured in advance, because they have to prove that they have already paid their enrolment, and they find themselves in a context where their educational institution is bankrupt. What can we do to better protect them and solve the problem in this case that would put them in a very, very difficult financial situation?
[English]
Mr. Robinson: That’s the important question. It’s not too theoretical, because we’ve had lots of difficulties in the private for-profit sector of international students coming to Canada and finding out the institution is not offering the program they want, it does not exist anymore or it is going bankrupt. There have been lots of difficulties.
We haven’t faced that so far among our public institutions, but what I would hope is that, in an instance where programs have to be closed or declared redundant, that we would have cooperation among other institutions to pick up those international students so that they’re not left in the lurch with having their student visas expiring because they no longer have a program to be enrolled in.
Again, the CCAA process is not one in which the interests of international students or any students will be considered. The interests of creditors trump everything else. That is why it is fundamentally contrary to the principles of what education institutions exist for, which is to serve students, advance knowledge and serve communities. That’s very different from commercial enterprises.
The Deputy Chair: Ms. Wurtele, do you have anything to add?
Ms. Wurtele: I don’t have anything to add to that, thank you.
Senator Ringuette: Thank you for being here. I truly appreciate how you have transmitted to us the bad experience that you had with Laurentian.
It seems to me that the biggest issue, from your perspective, was the easy access to CCAA. One part of the bill in front of us removes post-secondary public education institutions from the CCAA. Imagine the following scenario: Laurentian does not have access to CCAA, and then the only option is the Bankruptcy Act. From what you’ve lived through, what would have been the middle option for Laurentian and the provincial government? If the only legal option was the bankruptcy — that meant closure — what would have happened, from your perspective? I know it is hypothetical, but it seems that the heart of the issue is the CCAA.
Ms. Godwin: It’s not just the CCAA but the Bankruptcy Act as well that shouldn’t have been an option, nor is it an appropriate option. In this case, there were legal mechanisms within a contract, the collective agreement, that could have been triggered — the financial exigency clause.
Part of the problem is that the board operated or was operating in perhaps a stereotypical commercial context, or that’s how it was behaving, as if it should keep everything tight and secret and not transparent. The help that could have been available through consultation with the province, for instance, in consulting with its academic staff association and its other unions wasn’t available because it wasn’t providing that transparency. When you remove those barriers and force the transparency to happen, there are all kinds of dialogue and options available. It wasn’t just bankruptcy. It wasn’t CCAA or bankruptcy. There was consultation to find other options.
Senator Ringuette: What you are saying is that, from your perspective, the only option that should be available should be the federal one, kind of forcing mediation?
Mr. Robinson: I think what we’re saying is there are existing practices and norms within the sector around financial exigency that have been employed before. This isn’t theoretical. Nipissing University faced a financial crisis at one point. It didn’t go to the CCAA. It went through financial exigency provisions and negotiated a way out. It has been done before. It works well. It’s not great or perfect, but it is much better than the CCAA process because you get all stakeholders involved and ensure that academic and educational values remain at the heart of the discussion and are not something that’s put aside.
Ms. Wurtele: I would add that the other piece that gets lost, and it has been mentioned before, is that what you didn’t have an opportunity for is the appropriate accountability and transparency that we expect of public institutions. We think about the accountability and transparency with which the federal and provincial governments are expected to operate. We do not expect that publicly funded institutions will be able to sidestep that. That is exactly what happened. The minute the CCAA was invoked, the system shut down and nobody could have an eye on it. The Auditor General speaks to this very forcefully in her interim report and, I expect, will make this point again when her full report is released.
Senator Ringuette: You mentioned a certain financial institution. Could you elaborate?
Mr. Robinson: Sorry, I was referring to Nipissing University.
Ms. Wurtele: Financial exigency, maybe.
Senator Ringuette: You said “financial exigency.”
Mr. Robinson: I don’t think I used a financial institution’s name.
Ms. Wurtele: Is the question about the financial exigency?
Senator Ringuette: Yes.
Ms. Wurtele: The financial exigency is a particular provision in faculty collective agreements that, on some level, is designed to protect a system of tenure. It is designed ultimately to ensure that faculty can’t be fired, for example, for breaching political issues, speaking ill against the university and other elements of academic freedom.
Financial exigency articles in collective agreements lay out a process. If a university gets to the point where its finances are in such dire shape that they feel the need to lay off or terminate tenured faculty, they must go through an explicit process in which they open up the books, share the information and demonstrate publicly that this is required. When they’ve done that, then, under the collective agreement, they can take steps to secure the kinds of financial resources that would come from laying off or terminating, for example, professors that hold tenure. It’s a particular feature that exists within a university system. As David Robinson said, it has been used before. The faculty association in this case was begging the university to invoke that so they could go through this appropriate process, a process appropriate to the university system.
The Deputy Chair: Thank you very much to our witnesses for those answers.
As we move to the second round, I wouldn’t mind having you address the issue of how a university’s or college’s revenue might be affected by students becoming aware of financial challenges and choosing to pre-empt any bad situation. That revenue decline may be exacerbating things. Have you spent time thinking about that?
Ms. Wurtele: We didn’t have an example before Laurentian of how the two options would play out. Certainly for a university to invoke financial exigency is a public process. It’s not as public, I would argue, at the outset as going through and filing for CCAA protection. There is no doubt that it could exacerbate it. However, I think universities are particularly good at demonstrating — when they’re working together, and when they are working productively — and finding ways to assure students that they will be protected. That’s a piece that was not possible under the CCAA. Where you could have managed the information flowing to the students and the expectations and such under a normal process, you couldn’t do that at all. We saw the consequences. The negative publicity will take Laurentian decades to overcome.
Mr. Robinson: The CCAA in terms of student perception is the nuclear option. It came out of nowhere without any warning. Suddenly you put students into a position where they’re wondering, is the institution going to be around in September? The university was deliberately threatening to shut everything down unless they got everything they wanted through the plan of arrangement.
Looking at the two options, when you’re in a financial crisis or facing financial difficulties, you can’t hide it forever. You have to come clean at some point. The question is, how do you come clean? Do you come clean through this secretive process, which is all or nothing, or do you try to have a conversation with the community and the stakeholders involved about how you get through this crisis with the least damage possible?
Senator Marshall: I want to go back and talk about accountability, transparency and governance. Mr. Robinson, when you were speaking earlier, unless I misinterpreted, you said that with Laurentian University, you really didn’t know what was going on and what was happening. It wasn’t transparent.
When you look at the proposed legislation, I do have a concern about one part. The minister has to develop the proposal. The minister, he or she, has to consult with the provincial and municipal governments and the groups, associations, students and the faculty. I think you would support that. Then the minister has to develop the proposal no later than one year. Then, in order to be tabled and become public, there is no time frame there. There is no parameter. It is just as soon as practical.
It is quite possible that the minister might develop a proposal and have consultation with you. We’ve had a lot of groups in here. Ministers have consulted with the groups, but when they see what comes out of the consultation, they don’t like it. They’re surprised. Do you have that concern, that you’re going to participate in this process but, at the end of the day, you might not be given advance notice as to what’s in the proposal? I would be interested in your views on that.
I would also like to hear the views of Ms. Wurtele.
Mr. Robinson: I think our preferred approach would be not so much a consultation but the negotiation that takes place through the financial exigency processes within collective agreements. That is not a consultation. It has to be negotiated. Both sides have to agree on it. It is through mutual consent that, in the end, we reach a deal. That’s the best way to go about it. It’s not consultation within any particular body. It is a mutual negotiation.
Senator Marshall: Almost like a negotiation, yes.
Ms. Wurtele, do you have any comment or concerns? Making this proposal public like this, it is impractical and not contained, right? You could be waiting three years before you see it.
Ms. Wurtele: I certainly see the point you’re making. The alternative right now is the only thing I can see, which is the possibility of invoking the CCAA process, which shuts down everything. I don’t think in terms of specifics that I have anything to add to what David Robinson said.
Senator Loffreda: We mentioned Laurentian University was a first, and it did set a dangerous precedent. You both have extensive knowledge of the university environment, being the Ontario Confederation of University Faculty Associations and the Canadian Association of University Teachers. My question is a general question, in a sense. I support the bill, because Laurentian was a precedent and it must not happen again. That is why I discussed prevention at first.
I will go straight to the question and then elaborate. Do you know of any other universities that are experiencing similar financial difficulties? Is this bill really necessary? Could we do a lot more with respect to prevention? I think Senator Woo mentioned some of that. I have a hard time believing that Canadian universities would repeat this frequently in the future. I say that because, in my background as a senior executive in a Canadian financial institution, the last thing we would want to do — the last thing — would be to put a university into bankruptcy. We would do everything else, but never would we go to an insolvency with respect to a university. There are Canadian banks. There is brand recognition and brand value. They would never go to that extent.
To community support, I mentioned the fundraising that was done in two of the universities — and I can go on — and all the Canadian universities have specific programs on that. It comes down to the board of governors. Is it well run? If it’s not well run, what can we do?
Kudos to Senator Moncion, and I said from the top when she was on the witness stand that it is well needed and we don’t want this to repeat again, but it’s not easy to put legislation in place. We talk about stakeholders. Herself, she had an extensive list of stakeholders. If we wanted to call all the witnesses to the stand, we would be here for months. Is it really necessary?
Could I have both your comments on that? This is an important question.
Ms. Wurtele: It is an important question, and I thank you for it.
The observation I would make is that before February 2021, nobody imagined that a university would take these steps. It was unimaginable for the reasons you described from a different perspective. Yet it happened, without understanding fully how it happened. We do know now that it has been done, and it is out there as a possibility. I think that’s the really dangerous piece of the precedent.
Mr. Robinson: I agree in that I think Laurentian exposed a weakness in the CCAA. It also exposed a lacuna or our own omission in that we didn’t see this. No one imagined this would happen.
Are other institutions facing financial difficulties? We do have institutions who are struggling financially. We have cases during recent rounds of collective bargaining where the institution says, “Do you want another Laurentian here?” It is being used as a threat in other places as well. I think we need to close that door and say that if there are financial difficulties, let’s follow the appropriate collegial processes that are conducive to and sympathetic with our educational values as an institution.
I do think it is necessary. It is unfortunate, but I do think it is necessary.
Senator Loffreda: Would putting together a piece of legislation facilitate this happening in the future, saying, “Hey, it’s there, because it could happen again?” I’m just being the devil’s advocate here.
Mr. Robinson: I appreciate that, but as long as the legislation closes the door, I think it says the other thing. It says, “Go back to the processes you already have, that you already negotiated and that has already been used and has a proven track record.”
Senator Loffreda: Thank you.
Senator Smith: I appreciate, Senator Moncion, what you’ve done, and kudos to you. I think it is strong leadership, but — there are no buts, but I’m sitting here and my head is spinning because one word keeps circulating: leadership, leadership, leadership, leadership, leadership, execution, leadership, execution.
It is easy to be critical of people, and it is easy to be critical of situations, but I would be thinking right now, okay, let’s get the legislation through, if this is what we want to do, and what’s next? Because for the leadership of a restart, do you know how hard it is to restart something? I can tell you, just from my own little experience, that if you have a 55,000-seat stadium with 1,800 tickets and you have losses over ten years, that’s tough to start in a small business. In a big business and with community involvement, what are the next steps? Leadership. What have you done with the leaders right now? The board is all gone? This is a clean chart or a clean picture —
The Deputy Chair: Or a vacuum.
Senator Smith: — or we’re starting to create the picture? What is the next step of getting the picture moving forward?
Obviously, the legislation has to go through, so the first objective is that, but what are the next two or three steps that need to be taken or, at least, thought about now? Time is of the essence. The longer you go without getting things done, the more difficult it’s going to be. It’s simple business, but it’s just hitting me on the head, and I’m getting a headache.
The Deputy Chair: The leadership vacuum, Ms. Wurtele, and trying to dig out of the hole now?
Ms. Wurtele: I think one of the main lessons from this situation is that the board at Laurentian has to operate in a different way. I think we’ve seen some evidence that that will be the case. I think there’s some cautious optimism. Again, as long as the CCAA process is there as an option for Laurentian or for other institutions to do again, it’s not going to funnel people towards having those challenging conversations and developing that robust leadership.
Senator Smith: Ms. Wurtele, is the government going to be effectively in charge of the full operation until they get going again? Is this how the implementation of the CCAA is going to be?
Ms. Wurtele: That’s not my understanding, but David Robinson might know more about that.
Mr. Robinson: Quickly, because I know we’re running out of time, I absolutely agree there was a failure of leadership, and that’s why one of the conditions that we attached to faculty signing off on the plan of arrangement was that the senior administration be renewed. They’re gone. Most of the board is gone. There is a whole new leadership team, which is necessary to emerge from this.
In terms of what has happened is the government has reached a deal where, essentially, it has bought the property of Laurentian and is leasing it back to them. It essentially gives them a cash infusion to start over again and maintain operations as the restructuring plan is put into place.
Senator Smith: Is there a committee now that is being put in place to initiate this process and get this process moving?
Mr. Robinson: There are a number of committees. There is a governance review that’s going to take place. Again, we had to fight to get to faculty representation on that as well. There is a financial review happening. All those things are coming into place, but the government is not directly controlling that. That would be, obviously, a violation of institutional autonomy. What the government has done is a financing mechanism to keep the university operating.
The Deputy Chair: I want to thank all of our witnesses for your great contributions this evening.
(The committee adjourned.)