2. 2002 Submission to the Standing Committee on Finance 1
Introduction it was a decade ago. The Canadian Association
of University Teachers estimates that an
The growth of the Canadian economy over the immediate investment of $2 billion would be
past year has created unique challenges and required just to restore college and university
opportunities. The Canadian economy operating funds to the level that they were at
continues to outperform the US economy and the beginning of the 1990s.
most European economies. Canada’s Gross
Domestic Product (GDP) continues to climb In the following brief we will document the
and job growth remains strong. Despite these policy effects of these cuts. In addition, we will
promising developments, Canada is also offer a critical analysis of the largely patchwork
growing in another less desirable area, what policy initiatives for post-secondary education
Judith Maxwell referred to as a social deficit. that the federal government has taken in recent
This contention is backed by an array of budgets. Though the past three budgets have
troubling data. Take, for example, that in 2001, announced a variety of new policy initiatives,
the Canadian Centre for Policy Alternatives we will argue in this brief that these measures
(CCPA) reported that between 1989 and 1998 have, for the most part, been cosmetic. In
the average after tax income of the poorest 20% addition, we will offer a critique of the federal
Canadians dropped by 5.2%, while the government’s recent policy of using the tax
wealthiest 20% saw their incomes rise by 6.6%. system as funding vehicle for post-secondary
The same study found also that in 1998 the education.
wealthiest 20% earned 45.2% of all market The brief will be divided in four sections. The
income, against only 3.1% for the bottom 20%. first section will respond to the federal
These numbers confirm an earlier study by the government’s recent policy paper on innovation
Canadian Centre for Social Development’s entitled Achieving Excellence. The second
(CCSD). According to the CCSD’s Canadian section will offer a detailed assessment of
Fact Book on Poverty there are 1.3 million Knowledge Matters. The third section will offer
more poor households in Canada than there several recommendations on the Canada
were 20 years ago. Between 1981 and 1997, the Student Loan Program. The final section will be
rate of poverty among young families more a critical assessment of the recent move toward
than doubled from 21.7 per cent and 46.1 per tax measure as a policy solution to the
cent. challenge of ensuring the accessibility and
In examining the growing gulf between the affordability of Canadian colleges and
prosperous and the desperate in Canada, it is universities.
clear that one of the key dividing lines is access
to education. Throughout Canadian history, no Section I – Innovation for Whom?
other institution has been more successful in Canada’s Innovation Strategy
expanding new opportunities to Canadians. As
the Canadian workforce adjusts to the realities On March 14, 2000, a letter with the signatures
of the new economy this point becomes even of 1,400 of Canada’s most prominent scientists
more compelling. Human Resources and academics was presented to Prime Minister
Development Canada (HRDC) reports that by Jean Chrétien. The letter rejected the
2003 close to 75% of all new jobs will require conclusions of the report of the Expert Panel on
three years of post-secondary education. the Commercialisation of University Research.
The signatories consisted of eminent
Despite these difficult challenges Canadian researchers in every academic discipline. The
colleges and universities have seen a dramatic sweeping nature of the report’s commercially
drop in public funding. As a portion of GDP, oriented recommendations elicited this
spending on post-secondary is education down unprecedented response. Among other
by over 50% since the 1980s. Public spending suggestions, the Panel concluded that “the
on higher education was cut drastically from commercialisation of research” be added as a
1991/92 to 1997/98, and despite some fourth mandate to the mission statement of
restoration of funding since 1998, real per universities.
capita funding remains at least 17% lower than
Unfortunately, much of the tone and substance
3. Canadian Federation of Students
2
of the Expert Panel’s report is repeated in a. Research Agenda
Achieving Excellence, thus making the
Strategy is a thinly veiled reassertion of the “The biotech revolution itself would not have
previously rejected political objectives. For happened had the whole thing been left up to
example, Achieving Excellence calls on the industry,”
federal government to: “Support academic –Paul Berg, Nobel Prize winning biochemist, a
institutions in identifying intellectual property pioneer in the field of DNA splicing
with commercial potential and forging
Traditionally, university and college research
partnerships with the private sector to
has enjoyed the freedom to investigate that
commercialise research results,” (page 52).
which no market-driven laboratory would have
Such a statement could have been lifted directly
an interest. Basic/exploratory research, research
from the Expert Panel’s executive summary.
on health issues in developing nations, and
However, Achieving Excellence couples
research on poverty are all examples of projects
alarming passages like this one with many
that serve the public interest, but have very
laudable targets, such as the doubling of
little immediate commercial value. Yet with the
Masters and PhD fellowships. Despite clear
proliferation of public-private partnerships in
allegiances with the vision of the Expert Panel’s
research, the research agenda is increasingly
report, Achieving Excellence is a more
determined by the short-sighted market criteria
balanced document and presents several
favoured by industry. For the less commercially
promising policy ideals. This brief will
oriented fields, this means less funding and a
highlight the inadequacies of the papers, as well
slow decline. For the potentially lucrative
as provide productive suggestions for the
fields, corporate funding means corporate
implementation of an Innovation Strategy
interests steer the aims and goals of the
where “innovation” is in the public interest.
projects. What gets studied, what questions are
At its core, the motivation for commercialising asked (or not asked), and who sees the results
of university research is to blur the vital are not determined by disinterested inquiry for
distinctions between “public” and “private.” the public interest, but rather what could yield
Universities and colleges in Canada have maximum return for private investors.
evolved to function, albeit imperfectly, as
Federal government research policy has
public institutions. That is, they are funded by
promoted this model of university research in
the public’s collective resources via a
recent years. Worse, Industry Canada has
progressive system of taxation. By definition,
appropriated the term “innovation” to narrowly
then, such institutions should serve the public
describe research initiatives that accomplish
interest. This public interest can be defined
commercialisation. Nowhere has this deliberate
through three broad functions: education,
shift from the public interest to the private
community service, and research. In particular,
sector’s interest been more obvious than in the
university research serves to pursue and
asymmetrical investments in the federal
publicly disseminate knowledge. Industry,
granting councils. The Canada Foundation for
government, and other researchers may take
Innovation (CFI) has received $1.9 billion
this knowledge and build upon it for their own
dollars since 1998 to fund research projects that
ends, but what characterises the university’s
require a private sector partner. Compare this to
social product (or simply good science) is the
the $37 million of new funding for the Social
objectivity of the process.
Science and Humanities Research Council
The public mandate stands in stark contrast to (SSHRC) in the same time period. The trend is
private sector interests. By definition, clear: private industry research is at the
corporations are ultimately accountable to forefront of public spending on research. At a
shareholders. The short-term solvency of the time when per capita spending on post-
business drives a preoccupation with short-term secondary education is at its lowest in Canadian
gains. This motive extends to the expectations history, private industry research has seen a
of partnerships in university research. When boom in public funding.
private interests/business ethics are applied to
science in the institutional setting, academic
freedom is in peril in three specific ways:
4. 2002 Submission to the Standing Committee on Finance 3
b. Publication Interference researchers were successful in gaining some
degree of support or attention.
When university research funding policy
merges with commercial interests (“innovation” • Nancy Olivieri, M.D., a researcher at the
as defined by the federal government), the University of Toronto and the Hospital for
scientific principles of dissemination and Sick Children, was contracted by Apotex,
sharing of knowledge can, and have been, Canada’s largest drug manufacturer and one
threatened. In fact, the entire notion of of the University of Toronto’s most important
proprietary information, “trade secrets” donors, to test a new drug for the blood
achieved through the commercialisation of disorder thalassemia. During the course of
research, runs contrary to the advancement of her research Olivieri discovered several
the common body of knowledge that disturbing side effects of the drug and
underwrites science. This tension between recommended that the trails be discontinued,
private gain and the public sharing of research or at least suspended, until the risk to her
results has led to a series of disturbing cases in patients could be assessed. When Olivieri
which public dissemination has been sacrificed sought to publish her results and alert her
for proprietary concerns. These sacrifices range patients, she was threatened with legal action
from delays in publishing to the active and a smear campaign was organized against
suppression of taxpayer funded research results. her.
The delay in the publication of results that is What is most disturbing and surprising about
required by many industry partners poses Dr. Olivieri’s case is not the behaviour of the
several problems. In some cases, graduate drug company but the behaviour of the
students cannot reveal the research for their university. Instead of supporting Olivieri in
Masters or PhD theses until their corporate this important case of public safety versus
sponsor has successfully filed a patent. In cases corporate profit the university attempted to
where researchers are trying to develop medical fire Olivieri and did everything it could to
treatments for illness, a publication ban of mollify Apotex for fear of losing funding
twelve months can prevent treatments from from this important donor. University of
becoming widely available to the people who Toronto President Robert Pritchard went so
need them. A 1994 survey of life science far as to write a letter to the federal
university research found that 58% of industry government in support of Apotex’s call for
sponsors required a publication delay of at least changes to patent legislation. Throughout the
six months. entire controversy, the University of Toronto
was involved in sensitive negotiations to
As university-industry ties become more establish a $25 million partnership with
intimate and the boundary between public Apotex under the auspices of the CFI.
research and private research blurs, the future
security of private sector sponsors become • David Kern, M.D., an associate professor of
more dependant on the results of “their” medicine at Brown University (U.S.), had his
university research. In cases where the results full-time research position eliminated at one
are not as encouraging as expected, or even of the medical school’s affiliated hospitals in
detrimental to the corporate sponsor’s Pawtucket, Rhode Island. The elimination
economic interests, many researchers followed protests from a local textile
experience subtle or even direct pressure to producer/university donor Microfibres Inc.
suppress their findings. The company claimed that if Kern published
findings describing the lung disease that
In the last two years, there have been a number Microfibres’ employees were contracting, he
of high-profile in which principled university would be revealing “trade secrets”.
researchers have had to resist intimidation and
legal threats to publish the results of their • At the University of California-San
research. The cases of Drs. Olivieri, Kern, Francisco, Dr. Betty Dong was threatened
Dong, and Healy serve as disturbing reminders with litigation if she published findings that
of the perils of industry sponsored research. Of concluded that her corporate sponsor Knoll
course, these examples are only the cases where Pharmaceuticals’ drug was no more effective
5. Canadian Federation of Students
4
than the generic alternative. generous interpretation possible. Their careers
may depend on it.
• Dr. David Healy is an internationally
renowned psychiatric researcher. He was Many cases of manipulation are more direct.
offered a position that he accepted with the Many industry partners attempt to exercise
University of Toronto. Shortly after his editorial control over the manuscript before
appointment, Healy presented at a conference publication. In 1996 Sandoz Corp. removed
where he described a disturbing lack of passages from a draft article that it was
research to investigate the potential sponsoring, prompting the four researchers
relationship between Prozac and suicide involved to quit and write a letter to the Journal
rates. He made his remarks in the context of a of the American Medical Association outlining
paper that raised serious concerns about the the threat to academic freedom such meddling
ability of large pharmaceutical companies to poses.1 Other researchers capitulate to the
drive the national research agenda. The pressure and delete vital information. A study
University of Toronto immediately withdrew found that 35% of researchers in engineering
its offer of employment to Healy. Eli Lilly, research centres would let industry partners
the company that manufactures Prozac, is a delete passages before publishing the results.2
large donor to the University of Toronto.
Achieving Excellence outlines a need to
c. Manipulation of Results “double the number of Master’s and Doctoral
fellowships and scholarships awarded by the
The most extreme form of undue influence federal granting councils,” (page 60). The
related to corporate partnerships is the altering Canadian Federation of Students is in full
of research data for commercial gain. It is support of increased support for graduate
important to stress that manipulation of data student research, if this funding is administered
does not need to necessarily stem from a through the three granting councils. Adequately
conscious misrepresentation of research results. funded graduate students will be essential to
Certain methodologies can be designed to elicit developing high quality teaching researchers to
certain results. In a study conducted by Mildred fill vacancies created by faculty retirement over
Cho at Standford’s Centre for Biomedical the next decade.
Ethics, 79 percent of non-affiliated research
projects reported favourably on the drugs they However, federal government policy on
were researching, compared to 98 percent of graduate student funding has created massive
researchers who were industry-sponsored. The gaps in available support. Years of under-
push to commercialise can also create pressures funding the Social Science and Humanities
internal to the university that manufactures a Research Council (SSHRC) led to the
vested interest in the success of commercial cancellation of the funding for Masters
spin-offs. In 1999, Sheldon Krimsky of Tufts students. Masters students make up more than
University found that out of 800 scientific 62 percent of the graduate student population in
papers he analysed, one third of the authors had Canada, yet they receive zero percent of
a significant financial interest in the outcome of SSHRC’s resources directly.
their research. A hidden cost associated with this absence of
In most cases, the relationship between federal government support is the cost to
researcher and industry sponsor is based on faculty. Already thin resources of arts and social
unequal relations of power. Future funding science faculty are stretched even thinner by the
from sponsors may be contingent upon short- additional stress of funding students. Since no
term commercialisable outcomes. Thanos Masters students receive federal support for
Mergoupis at the London School of Economics their research and slightly more than a third of
lost his job and a £250,000 contract when the PhD students secure grants, many graduate
World Travel and Tourism Council saw the students rely on small portions of a faculty
interim report on the research they were member’s research grant as their only income.
funding. Although this case does not represent a SSHRC’s grants to faculty only fund about 25%
case of data manipulation, clearly there is of the eligible community, and are more often
intense pressure on researchers to give the most shared between researchers.3 The additional
6. 2002 Submission to the Standing Committee on Finance 5
strain of a large pool of unfunded graduate Recommendation 1:
students makes the federal government’s The Canadian Federation of Students
humanities funding increasingly scarce. recommends doubling the number of
graduate research grants awarded through the
Federal funding cuts to transfer payments in the federal granting councils. The new grants
1990s have limited universities’ ability to must be distributed in a manner that reflects
provide proper institutional support for the asymmetrical situation of graduate
researchers. The recent infusion of students in the arts and human sciences.
infrastructure funding through the so-called
“indirect costs” of research only begins to Recommendation 2:
address the problems associated with shrinking The Canadian Federation of Students
operating budgets. New federal government recommends that the Canada Foundation for
support in the form of research grants does very Innovation drop the requirement for
little to maintain and improve libraries and researchers to seek out matching funds.
laboratories. Research funding must be coupled
with a commitment to additional core funding Recommendation 3:
to ensure that world-class research is not The Canadian Federation of Students
undone by fourth-rate facilities. recommends that the Social Sciences and
Humanities Research Council budget be
The Canadian Federation of Students increased by $365 million by 2007-2008,
recommends doubling the number of graduate with an immediate infusion of $97 million for
research grants awarded through the federal the 2003-2004 year
granting councils. The new grants must be
distributed in a manner that reflects the
asymmetrical situation of graduate students in Section II - Access Matters:
the arts and human sciences. Canada’s Skills Agenda
Achieving Excellence’s stated goals for In 2002 the government released Knowledge
university participation in Canada’s Innovation Matters the fulfillment of a commitment made
Strategy do not simply overlook the public in the 2001 throne speech to develop a
interest; they contain the potential to undermine comprehensive national skills strategy. To that
it. This brief contains descriptions of many end, the paper lays out the framework for
cases where good science in the public interest federal government initiatives in skills and
has placed a distant second to the drive for training. In what follows we will offer an
profit. When this trade-off occurs at a assessment of the strategy and offer concrete
business’s own research facility, it is disturbing. recommendations to the committee to consider
When it happens at a publicly funded university in the context of the skills agenda.
or college, it is indefensible. Public research
The gap between low and high income
should never be placed in circumstances where
Canadians is widening and those Canadians
private gain override established scientific
most in need of skills and training are being
tenets. Yet this is precisely the risk that the
denied access. Since 1990, tuition fees have
unbridled pressure to commercialise university
increased by over 126% and most provincial
research runs. When public research is put at
governments have cut or eliminated grants and
risk, so too is the public interest, and
re-training programs. Between 1993 and 1998,
institutions are no longer accountable to the
18-21 year olds from the wealthiest 25% of
Canadian public.
Canadian families were more than twice as
What about those scientists who have not come likely to attend university as 18-21 year olds
forward? In dealings with Drs. Olivieri and from families in the lowest income quartile.
Healy, Canada’s largest university sent a clear From 1990 to 1998 student debt increased from
message to whistleblowers: your institution will an average of $8000 to $25,000. If the federal
not support you. Or perhaps more thematically: government is committed to more than just the
“the customer is always right.” rhetoric of a skills agenda, the soaring cost of
post-secondary education must be addressed.
7. Canadian Federation of Students
6
In order to create a truly comprehensive, income and parental educational attainment.
national system of highly accessible and quality The study found in those homes with a family
post-secondary education the federal income of less than $30,000, 80% of parents
government must set the national standards. said they hope to save funds for a child’s
These standards should be modeled on the education. However, only 18.7% of those
Canada Health Act and be designed to ensure parents were actually able to save. In homes
that all Canadians have equal accessible quality with family income of over $80,000 researchers
public education. To that end, the Canadian found that 95% hoped to save for a child’s
Federation of Students calls on the federal education and that 62.6% were actually saving.
government to enact a Post-Secondary
Education Act. These numbers confirm the case put forward by
the Canadian Federation of Students in earlier
Recommendation 4: submissions to the Standing Committee on
The Canadian Federation of Students Finance. The RESP program has been shown to
recommends that the federal government be a national system of grants for the wealthy; a
enshrine a post-secondary education act that social program funded by all Canadians
mirrors the principles of the Canada Health designed to reward those with the means to
Act. Such an act would be designed to ensure save. The recent findings by Statistics Canada
that all Canadians have access to high quality, confirms this analysis and provides hard data to
affordable post-secondary education. support the contention that the RESP and
CESG programs are a regressive use of public
Recommendation 5: funds. These programs are doing virtually
The Canadian Federation of Students nothing to assist those Canadian most in need
recommends that the federal government of the skills and training offered by post-
restore the cuts made to the Canada Health secondary education. RESPs merely expand the
and Social Transfer (CHST) during the already existing gap in Canada between those
1990’s. who want to help a child attend post-secondary
education and those who are actually able to
Scrap the Millennium Scholarship help. It is perverse public policy to spend public
Foundation and the Canada funds on those who least need assistance while
doing little or nothing to help those for whom
Education Savings Grant for RESP
post-secondary education remains only a
Program dream.
The evidence is now overwhelming that high The effect of the Millennium Scholarship
tuition fees and high student debt is choking off Foundation has been even more fruitless.
access for low income Canadians. Regrettably Announced in the 1998 “education” budget, the
recent federal government policy initiatives Millennium Scholarship Foundation was a
have done little to address this problem. In fact belated acknowledgement by the federal
several programs are actually exacerbating the government of the student debt crisis in
problem of student debt and declining Canada. In the face of average debt levels of
participation rates of low and middle-income $25,000 the Millennium Scholarship
students. Consider, for example, the Registered Foundation was to be the centrepiece of the
Education Savings Program (RESP) and the federal government’s student debt reduction
Millennium Scholarship Foundation. In the strategy. At the time of its introduction, Finance
case of the RESP, new data conclusively Minister Paul Martin declared in the House of
demonstrates that the program is not promoting Commons that the Foundation would help those
opportunity among those Canadians most at in greatest need and reduce average student
risk of being denied access to post-secondary debt by $12,000. However, three years after its
education. In an April 2001 study, entitled implementation the Foundation has proved to
Survey of Approaches to Educational Planning, be largely a public relations exercise that has
researchers tracked attitudes toward saving for led to no appreciable decrease in student debt.
a child’s post-secondary education as well as
the actual saving families were able to The Foundation’s mandate and terms of
accumulate. The study controlled for family reference are contained in the 1998 Budget
8. 2002 Submission to the Standing Committee on Finance 7
legislation. The Act spells out the governance college or university, the Foundation wilfully
of the Foundation as well as the framework ignores the fact that direct financial barriers
through which scholarships are disbursed. In were the most commonly reported reason for
theory, the Foundation’s job is to disburse $250 non-attendance: over 23% of participants in
million annually in student financial assistance. their survey list direct financial barriers as the
However, the federal government chose to reason for not going on to college or university.
disperse the funds through existing provincial Instead of recognising the significance of this
student assistance programs. Without any result, the Foundation chose to draw attention
advanced consensus from the provinces about to the remainder of the non-attendees’
implementation, the hastily conceived structure responses as proof of other accessibility
of the Foundation made some provinces problems.
resentful participants.
This decision by the Foundation is even more
The record of re-investment on the part of confounding when the data is more closely
provincial governments has been spotty at best. examined. Many of the “non-financial barriers”
The provinces signed agreements to re-invest cited by non-attendees are actually likely to be
the savings in augmentations to their existing indirectly related to insufficient personal
student financial assistance programs; however resources. In this light, the number of people
the agreements were non-binding. who “chose” not to attend college or university
because of financial barriers is much higher. As
The Nova Scotia government simply ignored this study relied on data collected in 1991 and
the agreement, consciously re-directing funds 1995, its results also fail to take into account
intended for students into other government the effects of the enormous increases in tuition
revenues. In Ontario, where approximately 40% fees across Canada since the mid nineties.
of the Foundation funds are transferred, the
provincial government has directed less than In a 2001 poll conducted on behalf of the
15% back into student financial assistance. Canadian Federation of Students, 46% of lower
Despite the misuse of Foundation funds by income Canadians cite lack of money as the
these governments, the Foundation has done reason for not attending college or university.
virtually nothing to rectify the situation, and The Foundation rarely acknowledges the fact
has neither criticised them publicly nor that the vast majority of those who don’t attain
signalled a willingness to withhold further a post-secondary education are from lower
payments. Instead, the Foundation has opted to income homes. Indeed, the dividing line in
actively deny that the misuse of the endowment almost all studies on access to college and
has diminished its impact on student debt. university is the financial status of the
individual in question.
Despite (or perhaps because of) the fact that it
has been unable to address the issue of student A Credible Reading of Existing Data
debt, the Millennium Scholarship Foundation
has recently embarked on a campaign to Foundation officials have publicly claimed that
downplay the crisis of student debt. In higher tuition fees have little or no effect on
appearances before government committees, accessibility, and that money is not the primary
federal bureaucrats, and university and college factor in determining who goes on to higher
presidents, Foundation officials have argued education. However, most credible evidence
that higher student debt and higher tuition fees points to the contrary. For example, Statistics
will not affect accessibility. In other words, a Canada recently reported that wealthy
supposedly arms-length, publicly-funded Canadians are twice as likely to attend
foundation has taken on the role of apologist university as low income Canadians.
for the federal government’s record on post-
This conclusion is further supported by the
secondary education.
2000 Statistics Canada Youth in Transition
The Foundation’s efforts to downplay the Survey. The Survey found that financial
student debt crisis rely on a misreading of the obstacles were a barrier for over 70% of the 18
data. For example, using research involving to 20 year old high school graduates who cited
interviews with 60 people who did not go to barriers to their participation in higher
9. Canadian Federation of Students
8
education (see Figure 1). This Statistics Canada higher tuition fees. In the end it would seem,
survey is yet another example of research that despite Paul Martin’s promise that the
the Foundation has reported upon without Millennium Scholarship Foundation would
drawing attention to the significant deterring reduce student debt, the Foundation has made it
effects that high costs of post-secondary its business to campaign for increased student
education have on students from disadvantaged debt.
backgrounds.
Recommendation 6:
Figure 1: Barriers to Post-Secondary Education The Canadian Federation of Students
recommends that the Millennium Scholarship
Foundation and the Registered Education
Financial situation 70.7%
Savings Plan be replaced with a
comprehensive, national program of needs
based grants. With the cancellation of the
Not accepted 12.8% Millennium Scholarship Foundation and the
Registered Education Savings Plan, such a
program would be revenue neutral. The MSF
has been an abject failure and is now using
Other 9.6%
taxpayer funds to deny the crisis of student
debt. Following on the concerns of auditor
0% 10% 20% 30% 40% 50% 60% 70% 80% general Sheila Fraser we call on the federal
Source: Statistics Canada Youth in Transition Survey (2000)
government to wind up the operation of the
Foundation by the end of this fiscal year. We
Conclusion further recommend that the RESP program be
For whatever reason, the Millennium terminated. As this brief documents, the
Scholarship Foundation has consistently sought RESP program is transferring public funds to
to perpetuate the idea that existing federal those Canadians least in need. Taken
government measures have sufficiently cumulatively the funds currently expended on
addressed the crisis of student debt. This effort the RESP and the MSF would easily fund a
has been bolstered by the Foundation’s research national system of needs based grants.
project.
Despite overwelming evidence to the contrary, Unemployment Insurance and
the Foundation’s research project has training entitlements
essentially made the following three points:
The Employment Insurance (EI) program is
1. The federal government should not invest
decades out-of-date with the realities of the
any more money in student financial
organisation of work and the growing demand
assistance;
for education, training and lifelong learning. At
2. Non-financial barriers are more important in present, workers (except for apprentices) are
determining access to college and university not entitled to regular insurance benefits for
than an individual’s financial resources; training. Despite the obvious need and value of
3. $25,000 (or higher) average debt is perfectly expanding EI sponsored support for training
acceptable “because it doesn’t matter how and education, the surplus in the EI account is
much debt a student has, what matters is instead used every year by the federal
their ability to pay it back.”1 government for debt reduction, tax cuts or
spending on unrelated government programs. If
These are alarming positions for the Foundation
the federal government is serious about meeting
to adopt, given that its alleged mandate is to
the goals outlined in Knowledge Matters, EI
alleviate student debt and promote access to
should be restructured to reflect the original
post-secondary education. Not only has the
objectives of the Unemployment Insurance (UI)
Millennium Scholarship Foundation been a
program: to ensure earnings loss in the event of
failure in the implementation of its own
unemployment, pregnancy, parental leave and
program, it has now begun an aggressive
temporary sickness. EI must also be expanded
campaign to justify higher student debt and
10. 2002 Submission to the Standing Committee on Finance 9
to include income support for workers Section III - The Canada Student
participating in the full range of educational Loan Program
and training opportunities available.
In Summer 2000, the federal government
With these goals in mind, the Federation assumed control of the Canada Student Loan
strongly endorses the Canadian Labour Program after the banks withdrew from the
Congress's 2002 Composite Resolution on risk-sharing agreements established five years
Unemployment Insurance, with special earlier in 1995. Under these agreements, the
emphasis on the "Training entitlement and banks had a decisive say in the policy and
benefits" section of the resolution (see administration of the Canada Student Loan
Appendix A).As stated in the CLC resolution, Program. Under the banks’ tenure several
trainining and entitlement benefits should: regressive policy measures were instituted
• be expanded beyond apprenticeship so that under the guise of accountability. The most
regular EI benefits are available for all forms regressive of these measures was the ten-year
of workplace training; prohibition on the discharge of student loans
• include a primary role for public education to through bankruptcy. This unconscionable
ensure access, high standards and legislation strips students of the very last
accountability financial protection offered under the law. The
• be accompanied by a requirement for provisions of the Bankruptcy and Insolvency
Canada-wide training and occupational Act are designed to offer a last hope to those
standards unable to cope with debt. Under the Act, an
individual must appear before a judge and
• be framed so that training in the event of job
present evidence under oath that their financial
loss is the equivalent to job search
disposition makes it impossible for them to
In order to ensure the long-term security of meet their obligations. It is this provision that
these training and education programs, a has compelled the Canadian Federation of
renewed Unemployment Insurance fund, Students to launch a Charter challenge before
operating at arms-length from the federal the Supreme Court of Canada to repeal this
government and within a clear legislative unjust and unconstitutional law.
framework, should be established. Furthermore,
n Knowledge Matters there is a call to increase
the restructured UI program should ensure that
access to post-secondary for all Canadians.
all worker and employer UI premiums collected
However, in Knowledge Matters there is a
be used exclusively for earnings insurance
particular accent on part-time learners. This call
payments and training/education measures for
is largely in response to the steep decline in
workers. The use of UI money for federal debt
part-time study in Canada over the past decade.
reduction, tax cuts or spending on government
In addition, the authors of Knowledge Matters
programs should be made explicitly illegal. The
expressed concern about the degree to which
Federation also recommends the repayment of
the part-time provision under the Canada
the cumulative surplus (estimated at fifty
Student Loan Program is underused. To this
billion dollars by 2003) already borrowed from
end, the Canadian Federation of Students will
the EI account by the federal government for
offer several recommendations designed to
purposes unrelated to Employment Insurance.
increase the participation rates of part time
Recommendation 7: students.
The Canadian Federation of Students Finally, we are calling on the federal
recommends that the Employment Insurance government to honour a commitment made to
program be renewed to once again meet the students in the 1998 “education” budget. That
objectives of the original UI program and budget committed to a Debt Reduction in
expanded further to provide income support Repayment program (DRR) supposed to help
to workers participating in a full range of over 12,000 students per year. Designed to
education and training opportunities. reduce a student’s debt five years after
graduation, less than 500 students per year are
benefiting from the program to-date. The
11. Canadian Federation of Students
10
Department of Finance has designed entirely Section IV - Tax Credits as
unrealistic income eligibility tables, and the Education Policy
result has been a small financial savings for the
government and a door slammed in the face of Since the mid 1990s, the Federal Government
student debtors. Officials from both the has increasingly looked to so called "tax
Department of Finance and Human Resources expenditures" as a substitute for directly
Development Canada acknowledged this allocated student financial assistance. Federal
problem several years ago, but to-date no action tax expenditures for education have grown
has been taken. We urge the Standing from an estimated $566 million in 1996 to a
Committee on Finance to honour the projected $1.425 billion in 20021. Some of the
commitment made in the 1998 budget. more significant new measures and changes to
existing education oriented tax credits have
Recommendation 8: included:
The Canadian Federation of Students
• 1996 to 2001: A series of increases to the
recommends that the federal government
education amount (the amount on which the
reverse discriminatory changes to the
federal non-refundable education credit is
Bankruptcy and Insolvency Act.
calculated) which has raised the potentially
Recommendation 9: allowable credit from $13.60 to $64 per
The Canadian Federation of Students is month of full time studies2.
recommending that the federal government • 1997: The non-refundable education and
honour the commitment made in the 1998 tuition tax credits were altered so as to allow
budget and institute the Debt Reduction in students to carry value forward if the credits
Repayment Program (DRR). cannot be claimed in the original year
• 1998: The introduction of a 17 percent
Recommendation 10:
federal tax credit on the interest portion of
The Canadian Federation of Students
federal and provincial student loan payments
recommends that the federal government pay
(changed to 16% in 2001).
the in-study interest for those students
studying on a part-time basis. Despite the size of these expenditures, they
have failed to keep up with rapidly escalating
Recommendation 11: increased tuition fee and living costs. Canadian
The Canadian Federation of Students students are significantly financially worse off
recommends that the income threshold for the now than they were in the late 1980s and early
Canada Study Grants and student loans for 1990s. Moreover, evidence suggests that
part-time students be raised in order to education oriented tax expenditures
increase the number of students eligible and disproportionately benefit higher income
that living costs, in addition to educational earners, and that education tax credits as a
costs, be included in the loan assessment for general policy do little or nothing to improve
part-time students. the accessibility of higher education.
Recommendation 12:
The Canadian Federation of Students The Education and Tuition Fees Non-
recommends that those students currently in refundable Tax Credit: Failing to meet
default on student loans retain access to debt the increased cost of education
relief measures such as interest relief and that Of these various federal tax measures, the non-
the federal government change the current refundable education and tuition fee tax credits
definition of default from 90 days to 360 have been the most expensive and the most
days. widely used. In the 2000 tax year3, 2,169,360
students and parents/grandparents of students
Recommendation 13:
claimed the education and tuition amounts,
The Canadian Federation of Students
costing the federal government $909,728,140 in
recommends that the amount students are
deferred tax revenues4. The changes introduced
allowed to earn while in study be increased
in the 2001 budget will likely bring this total
from $600 per year to $1,700 per semester.
even higher.
12. 2002 Submission to the Standing Committee on Finance 11
With a probable overall price tag of over $1 mum federal education and tuition fees credit
billion for the 2001 tax year, these credits available to an average Ontario university
undoubtedly appear impressive when viewed as student in 2001 amounted to only $1,215,
a total amount. One would expect an leaving a gap of almost $9,000 between basic
expenditure of this magnitude to deliver education costs and applicable federal non-
significant improvements to the financial well refundable tax credits for education.
being of individual Canadian students. The
unfortunate reality, however, is that changes to Figure 3: Total Costs Per Year of University Studies (Ontario)
and Federal Non-refundable Tax Credits for Education,
federal non-refundable tuition and education 1988, 1995 and 2001 (2001 Dollars)
tax credits have actually done very little to 12000
offset the soaring tuition fees and increased 10000
$10,211
living costs students have faced over the last $8,614
Total basic cost of one year of
undergraduate university studies
decade.
8000
$6,755 (tuition fees, additional mandatory
fees, room and board)
6000
Maximum claimable Federal Non-
Figure 2 compares average Ontario university refundable Tax Credits for education
(Tuition fees and Education Credit,
4000 based on average Ontario
undergraduate tuition fees to the maximum undergraduate tuition)
federal non-refundable education tax credits 2000
$587
$1,215
$428
available to Ontario students in 1988, 1995 and 0
1988 1995 2001
2001 (in 2001 dollars). In 1988, an average Source: Calculations based on Statistics Canada data
Ontario university undergraduate paid $1,854 in
tuition fees and could claim or transfer up to Helping those most who need help the
$425 in federal education tax credits, leaving a least?
gap of $1,426 between these tax credits and Substantial disparities exist on the average
tuition fees. By 1995 this gap had increased to amount being claimed by income bracket
$2,151, as tuition fees climbed to $2737 and through the education and tuition fees credit .
applicable education tax credits rose to $587. Individuals from the highest income brackets
By 2001 average tuition fees had risen to over tend to claim more on these credits than do
$4,000 and, despite increases to the education claimants from the lower and middle income
amount in the 2001 budget, the gap between ranges. In the 2000 tax year, for example,
tuition fees and federal tax credits was nearing claimants with incomes less than $60,000 a
$2,900. year claimed an average of $409 worth of
education and tuition fee credits. Claimants
Figure 2: Ontario Tuition Fees and Federal Non-refundable Tax Credits
1988, 1995 and 2001 (2001 dollars)
earning over $250,000 (most of whom
4500 presumably claimed this credit as a transferred
$4,062
4000 amount from a child) averaged $628 on these
3500 same credits. A substantial (and rising)
3000
$2,737
Average Tuition Fees (Ontario
University Undergraduate)
percentage of non-refundable education credits
2500 are being claimed as amounts transferred,
2000 $1,854
Maximum claimable Federal Non-
refundable Tax Credits for education
(Tuition fees and Education Credit,
which provides no guarantee that the full value
1500
$1,215
based on average Ontario
undergraduate tuition) of this credit is necessarily being applied to
1000 education-related expenses5.The Department of
$587
500
$428 Finance estimates that total education credits
0
1988 1995 2001
transferred have outstripped total credits
claimed by students since 2001 (excluding
amounts carried forward)6.
The gap between federal tax credits and the
costs facing students living away from home is The "carry forward" measures introduced in
even more dramatic. As shown in Figure 3, 1997 have allowed lower income students to
combined tuition fees, mandatory student fees claim non-refundable credits that would have
and room and board for an average Ontario been lost to them in the past. Although this is a
university undergraduate climbed from $6,755 small improvement over the previous system, it
per year in 1988 to $10,211 in 2001. While tax contains a flaw that again skews the value of
credits also rose during this period, they did the credit towards those with higher incomes.
little to mitigate increasing costs. The maxi- Because of inflation, students who are forced to
13. Canadian Federation of Students
12
carry forward education and tuition credits the education tax credit measures introduced in
ultimately gain less value from their credits the U.S. appear to have provided state
than students who have enough income to claim governments with an incentive to raise tuition
them in the year they are assessed. Lower fees at public institutions9.
income students are thus penalised for not
having enough income to claim the credits Recommendation 14:
when they are first made available. With the The federal government should cancel the
total carry forward of education and tuition fee education and tuition amount for those
credits projected to reach $380 million by 2003, earning over $70,000 and apply the savings
the cumulative amount lost by lower income directly to new national system of needs-
students through this depreciation could run based grants.
into the millions of dollars7.
The Student Loan Interest Credit
The Student Loan Interest Credit is probably
the least useful of current federal tax
expenditures for education. Though the total
"cost" of this credit was over $71 million in
2000, the average amount claimed on it works
out to only $9.50 per month worth of debt and
tax "relief" per claimant. Low income earners
(less than $20,000) only received an average of
$6.83 a month. As this credit is only available
on interest paid, it provides absolutely no relief
to the most desperate student loan holders who
are unable to keep up with their loan payments.
With average student debt loads approaching
$25,000, this credit is totally ineffective in
addressing the ongoing crisis of student debt.
Tax credits do not increase access
to higher education
On the whole, tax credits are "back-ended"
measures and do little to improve access for the
most economically disadvantaged groups. Tax
credits require students to pay money "up front"
in order to (maybe) have it refunded at some
point in the future. As a policy, education tax
credits do nothing to address the initial
financial obstacles that prevent low and lower
middle income students from accessing higher
education. Thus, education tax credits are most
likely to benefit those who require little
assistance with high tuition fees. A recent study
by Harvard University professor Dr. Bridget
Long found that this was precisely the outcome
of education tax credits introduced in the
United States: "[a]lthough one goal of the tax
credits was to increase access to higher
education, this study found no evidence of
increased postsecondary enrollment among
eligible students"8. Long's study also found that
14. 2002 Submission to the Standing Committee on Finance 13
Footnotes to Innovation Section: Appendix A
1. “Money + Science = Ethics Problems on From the Canadian Labour Congress's 2002
Campus.” The Nation. March 22, 1999. Composite Resolution on Unemployment
Insurance:
2. Cited in “The Kept University.” 2001
Science and Technology Policy Yearbook Therefore be it Resolved
(American Association for the Advancement of Training entitlement and benefits [be]:
Science), Teich, A. et al. eds. 1. expanded beyond apprenticeship so that
regular EI benefits are available for all
3. The Natural Sciences and Engineering forms of workplace training;
Research Council supports approximately 75% 2. accompanied by a requirement for: the
of faculty in the so-called “hard” sciences. development of a workplace human re-
source and training plan; Canada-wide
training and occupational standards;
Footnotes to Tax analysis: recognition of prior learning and worker
experience; a primary role for public
1 Department of Finance Canada Tax Expen- education to ensure access, high standards
ditures and Evaluations 2001 and accountability; and union participation
in approving the training plan and establish-
2 The education amount has risen from $80 ing standards with employers, education and
per month to $400 a month since 1996, but government;
the actual credit is calculated by multiplying 3. coupled with an EI premium reduction for
the total of the education and the tuition fees employers who provide paid education
amount by the lowest federal tax rate (16% leave or workplace training equivalent to
for 2001 and 2002, and 17% on earlier what is provided by EI training insurance
returns). (similar to the premium reduction for
employers and their employees with private
3 The most recent year for which interim insurance plans that top-up maternity,
statistics are presently available parental, and sickness coverage);
4. accompanied by the same protection of
4 Canada Customs and Revenue Agency worker employment rights in federal and
preliminary figures provincial labour standards that are pro-
vided for EI maternity and parental benefits;
5 Department of Finance Canada Tax Expen- 5. framed so that training in the event of job
ditures and Evaluations 2001 loss is the equivalent to job search; and
6. framed so that hours of work prior to a
6 Department of Finance Canada Tax Expen- training count as qualifying time for benefit
ditures and Evaluations 2001 entitlement during and following leave.
7 Department of Finance Canada Tax Expen-
ditures and Evaluations 2001
8 Bridget Terry Long "The Impact of Federal
Tax Credits for Higher Education Ex-
penses", Prepared for the NBER Volume
and Conference: College Decisions: How
Students Actually Make Them and How
They Could, Harvard University August 2,
2002
9 Bridget Terry Long "The Impact of Federal
Tax Credits for Higher Education Expenses"
