Post-Secondary Institutions Bankruptcy Protection Bill

Second Reading--Debate Continued

May 10, 2022

Hon. Yonah Martin (Deputy Leader of the Opposition) [ + ]

Honourable senators, I rise today to speak to Bill S-215, An Act respecting measures in relation to the financial stability of post-secondary institutions. I would first like to thank Senator Moncion, who introduced this bill. A vibrant, world-class post-secondary education system in Canada is vital to our country’s future, to our productivity, to our international competitiveness, to the health of our society and to the success and well-being of our young people.

While the intention of the bill — to ensure financial stability for the post-secondary sector — is certainly laudable, how we accomplish that is, potentially, another matter. The bill asks the minister, in consultation with the institutions themselves — municipal and provincial governments, and groups and associations representing faculty, staff and students — to develop a proposal for federal initiatives to reduce the risk that an institution becomes bankrupt or insolvent; protect students, faculty and staff in the event that an institution becomes bankrupt or insolvent; and support communities that would be impacted by an institution becoming bankrupt or insolvent.

You will not be surprised to learn, mainly because the bill’s sponsor mentioned it in detail in her speech, that the immediate impetus for this bill is the situation of Laurentian University in Sudbury, Ontario.

In February of last year, Laurentian filed for protection from creditors under the Companies’ Creditors Arrangement Act. It was the first ever publicly funded entity in Canada to do so. In the process, it fired 100 academics, cut 69 programs and, as one observer put it, “. . . shattered what it proudly billed as its tri‑cultural mandate by disproportionately cutting back francophone and indigenous offerings.”

As the Office of the Auditor General of Ontario pointed out in its report on Laurentian University:

Until Laurentian’s filing . . . the CCAA process had been used exclusively in the private sector. However, there are no restrictions in the act that limit its use by a government-funded and broader public sector institution.

Laurentian University, as the Auditor General of Ontario also flagged, is one of the primary post-secondary institutions serving northern Ontario, a tri-cultural — English, French and Indigenous — and bilingual post-secondary institution. Moreover, it is one of Sudbury’s largest employers, so, as Senator Moncion pointed out in her speech, its insolvency issues are devastating for the community. They are also devastating for its student body, 19% of which is composed of French students.

This is a tragedy for the community, and for all staff and students who are a part of the Laurentian community — that we can all agree on.

I believe Senator Moncion’s bill has flagged an important issue, but I also believe there is some room for debate around the source of the problem her bill seeks to address, and perhaps even the solution that her bill seems to propose.

In short, things are more complicated than simply a lack of or a decline in government support.

Let me begin with the problem first. In her speech, Senator Moncion placed the source of the problem squarely at the feet of the government. In Laurentian’s case, the Ontario government:

Despite the emergence of institutions by and for francophones such as the University of Sudbury, which has clear unified community support, governments have been slow to act.

For example, the Government of Ontario, she continued:

. . . took over one year to intervene in the case of Laurentian University and only intervened because it was compelled to. Laurentian University was losing its operational funding, which would have accelerated the actual bankruptcy. This waiting game lasted a year with the Government of Ontario.

Elsewhere in her speech she pointed out that, over the past 20 years, the portion of funding coming from provincial governments for the post-secondary sector has decreased, and federal funding has been stagnant since about 2008. In real dollars, funding of the official languages and education programs has been in steady decline.

I don’t doubt that, but also in decline are the number of francophones living outside Quebec. Statistics Canada projects that if present trends continue, the number of francophones living outside Quebec will decrease from 4% in 2011 to 3% in 2036. This decline will have an impact on funding as well, at least in some provinces. The reason for that is the provincial funding formula for post-secondary education differs from province to province. In Ontario, Saskatchewan and Quebec, core funding is related to enrolment levels.

As The State of Postsecondary Education in Canada 2021 report notes:

. . . the amount of funding an institution receives is mostly based on the number of students it has in different types of programs. . . .

In the other seven provinces, funding is largely historically-driven: that is to say that what a school receives in any given year for core funding is largely a function of what it received the previous year . . . .

This does not negate the point Senator Moncion is making with her bill: the need for stable funding. But it does illustrate how complicated the situation is, especially when you understand that education is the exclusive purview of each province, as we all know.

So we are getting into jurisdictional issues as well. While there are similarities in the education systems across each province and territory, there are also many differences in legislation, policies and programs, not to mention geography, history, language, culture and the unique needs of the population in each province.

Again, this does not take anything away from Senator Moncion’s bill. It may, in fact, reinforce it. But it also hints at the fact that the way forward may not be straightforward.

I would suspect that, at the outset, a federal government initiative in this area might be viewed suspiciously by the provinces and territories who — once the feds start down this road — may well, at the very least, want to add their own particular issues to the agenda based upon those issues I just cited.

Finally, I want to say a word about the specific situation of Laurentian University. As I mentioned before, Senator Moncion was quick to point out the Ontario government’s tardy and half-hearted reaction to the university’s dire financial situation. This may be true. But the situation was also not so cut and dried, at least according to what I have read.

University World News, for instance, reported that Laurentian was plagued by mismanagement for years prior to seeking creditor protection. Also, as a former professor at the university commented, “The university had been so non-transparent with their finances for so long, that it was like crying wolf.” As a result of that mismanagement, the university had accumulated a debt of $322 million.

Furthermore, it did not do itself any favours in this debacle. For instance, in May of last year, according to the University World News article, Laurentian requested a loan of $100 million from the government which, in turn, requested an independent third-party review of Laurentian’s finances. The university refused. That obstinacy continues today.

The provincial Public Accounts Committee called upon the Office of the Auditor General of Ontario to look at the university’s finances, and its report is less than flattering. After noting that given the level of government funding the university received, there was an expectation of transparency and accountability. The report said:

Unfortunately, our office has been denied access by Laurentian to information we consider absolutely necessary for the conduct of our audit work . . . In many instances, it has also declined to provide non-privileged information on the basis that to review documents to determine if information is privileged would be too resource intensive . . . Such a pervasive restriction of our audit work is unprecedented.

The report further noted that the university had created a culture of fear among university staff around interactions with their office.

I do not think the situation of Laurentian University is the best test case of the need for a bill like this. However, as stated earlier, I do worry that some will get their backs up about the jurisdictional issues that a bill like this may raise.

Honourable senators, I don’t doubt the difficult financial situation in which our universities find themselves, especially in the last two years, because of the pandemic and the drop in international student enrolment. I support the idea of sending this bill to committee where it can be studied in depth. Thank you.

The Hon. the Speaker pro tempore [ + ]

Senator Moncion, do you have a question?

I have a couple of questions for you.

I want to thank you for the excellent speech. The information that was brought forward is information brought forward after I started speaking on Bill S-215.

There is one situation with the Companies’ Creditors Arrangement Act, and the problem is that when you use this act, the larger creditors are the ones who usually get the money and the smaller creditors will not get the money because there is not going to be anything left at the end following the sale of assets, if it goes there.

What has happened — it’s the same situation that has happened at Nipissing University, which is the university where I live, and I was on the board of directors at Nipissing. I was there before 2010.

My question is that the deficits that were brought forward at Laurentian were exactly the same as the one at Nipissing, but Nipissing went to the government and Laurentian went to the government — but very late in the game — so the government did not have enough time to react and within a month Laurentian became involved with the Companies’ Creditors Arrangement Act.

I wanted to know if you were aware of that situation because it is in the report that you read. Do you agree with me that when they are a provincial entity and there is the use of a federal law, there could be a constitutional issue, like you said? But someone is paying down the line, and I think that small creditors are footing the bill here. There are a lot of things that I am providing here, but I would like to hear you on these few issues.

Senator Martin [ + ]

Yes, thank you for the added information. Truthfully, I am not an expert in any of these areas. But I am aware of the importance of the institutions and the timing of what happens.

You are right that it seems unfair. The fact that — had there been stronger funding from all levels — they would not have been in this situation. Thank you for adding that bit of information for the chamber.

Do you agree that using a federal law to correct a provincial problem could be a problem? This is something that we are studying within my office, these jurisdictional issues. But would you agree?

Senator Martin [ + ]

Yes, I agree that there are these challenging factors, and that is why I support it going to committee. I hope that throughout this process what we can also shed light on is the importance of these institutions, as you so clearly demonstrated to us. I do agree with you on that.

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