Some Random Thoughts of a Mathematician

Student tuition fees account for about one-third of UBC’s operating revenues. Students and faculty expect UBC’s teaching and learning mission to be the top priority for the use of these fees.

The 2021/22 budget (see p. 7 of the pdf) assumes revenues from tuition fees to be $984 million, which is roughly split 60% international student (ISI) tuition fees and 40% domestic student (DOM) tuition fees. The total assumes increases in the tuition fee rates for the coming year.

At its meeting on April 7th, the Finance Committee of UBC’s Board of Governors voted to recommend to the Board the Administration’s plan to increase tuition fees for 2021/22.

The tuition rate increases applied to fees paid by current students returning to UBC would add $18 million to tuition revenues if the Board agrees to them at its April 19th meeting.

Further increases in tuition revenue come from new students paying the higher rates and from an increase in enrolment for 2021/22. (I am waiting for confirmation of the amount of these increases. A new reporting rule changes the way tuition revenues appear in the budget.)

Students oppose these tuition rate increases, and the student Governors have pressed the Administration to create an affordability plan and metrics to track how well UBC is addressing students’ needs.

The lone vote against the budget on the Finance Committee was Governor Max Holmes, one of the representatives for students on the Vancouver campus. He is the only student on this committee. [1]

The Administration has stated it would not be applying the Tuition Allocation Model (TAM) to this $18 million increment in 2021/22, which means the Faculties’ would not be receiving any of this money directly through the TAM. This applies to 2021/22 only at this point.

Instead, this money will be allocated to “COVID-19 impacted student priorities”.   The AMS has submitted their priorities. (I cannot find a public document with the UBCSUO priorities.)

At the moment, most budget-related documents remain in closed Board dockets, and the current public version of the 2021/22 budget does not give full details for the intended allocation of the $18 million increment.

Faculties are responsible for absorbing inflationary costs in their budgets. This inflation is mostly due to salary increases for both faculty and staff beyond the base general wage increase (2%) funded directly by the BC Provincial Government grant.

Large faculties would absorb such cuts by using their reserves as well as revenues from any increased enrolments. Note this reduces the amount available to meet any increased teaching needs related to increased enrolments. This would also affect the faculties’ ability to support their future academic initiatives.

For some of the smaller faculties, particularly those with few programs attracting international students, sequestering the $18 million increment has the effect of imposing a cut that would further undermine their financial positions. In some cases, these faculties would likely require support to meet their basic expenses. (This support would come from the Revenue Sharing Fund discussed in Part 3 of this series.)

How might these tuition increases affect teaching and learning at UBC?

This question is less straightforward than one might think.  (One of my greatest frustrations as a Governor has been figuring out how to engage the Administration in a conversation about the financial and operational health of academic departments [2].  Their contention is the TAM is working and “all is well”. I know too many cases where the TAM is failing and all is definitely not well. I am hopeful this conversation will finally happen over the coming months.)

To begin, we consider the resources an academic department has to put towards teaching and supporting students in its programs.

Consider the operating budget of an academic department I will call Department Q. Department Q’s operating budget does not include research grant revenues and the related research expenditures.  Department Q’s teaching does not involve wet labs, clinical labs, studio work, etc.

Suppose Department Q’s (lean) budget of $10 million [3] is allocated as follows:

1. 85% to faculty (tenure-track and contract) salaries and benefits,
2. 7% to staff salaries and benefits,
3. 6% to student teaching assistants (UTAs and GTAs), and
4. 2% to non-salary expenses.

Like most UBC academic departments, Department Q is teaching at full capacity, which means increases in enrolment would result in increased teaching loads for existing faculty or hiring more contract faculty on a per course basis. (There is no known threshold for increased teaching that would trigger hiring new tenure-track faculty for Department Q.)

The inflationary costs for Department Q are primarily wage increases:  2% GWI + 2.5% PTR for faculty; 2% GWI + 1% merit for staff; and 2% GWI for student teaching assistants.   Thus, Department Q needs an extra $400 thousand, or 4%, added to its budget.

About half of this is provided by Central passing on the government guaranteed 2% GWI to faculties (from the BC Government grant). The remaining $200 thousand needs to come from tuition revenue. Department Q is in a faculty where the Dean allocates this needed $200 thousand to the department. (Not all faculties work this way, so some departments would have to make cuts, meaning fewer TAs, fewer staff, or fewer faculty.)

In theory, tuition increases would result in more resources for Department Q (and other departments)  to put towards its teaching mission. In practice, not so much.

Because the plan for 2021/22 is to sequester the faculties’ share of the $18 million increment (far less than $18 million, by the way), the dean of Department Q’s faculty would need to rely on new tuition revenue or faculty reserves to fund increases to salaries and benefits.

My back-of-the-envelope calculations tell me the effects for faculties of sequestering the $18 million tuition increment would be mitigated for many faculties in 2021/22 by increased tuition revenues from new students, to which the TAM applies.

(Even without the proposed tuition increases, increased enrolment of new students seems likely to be sufficient to cover the basic inflationary costs for many faculties for  2021/22. )

Are we forcing faculties to rely too much on increasing enrolments in their budget models?

Faculty budgets already rely on increasing enrolment as an important mechanism to manage inflationary costs and to build capacity to fund faculty-level initiatives and capital projects.

While the Administration speaks of flattening enrolments in the near term, there is still a background rate of increase of about 2% that is partly driven by the way UBC admits students. Some deans also speak of much higher rates of increase for enrolment as a key source of new funding.

Given UBC has almost $1 billion in tuition revenue, we should be able to provide our students with the kind of top-tier educational experience they are expecting from us.

I am concerned the current TAM is diverting too much of this revenue to the Academic Excellence Funds (not all of which are for academic purposes), leaving some deans looking for new sources of revenue for their faculties.  Enrolment increases are the easiest way to increase revenue. (The TAM uses a 2016 baseline, which unfortunately means many more new students are needed to get significant new revenue in a faculty this way.)

This drive to increase enrolments also adds further stress to departments (like Department Q) already struggling to maintain their high quality programs with limited faculty resources.

Thus, diverting so much revenue from faculties and their academic departments creates and sustains financial and operational stresses in UBC’s teaching and learning mission. (These stresses are on top of unresolved problems from UBC’s previous decade of unmanaged enrolment growth.)  Even with some of this money returned to faculties through central initiatives, the restrictions on such funding usually mean it cannot be used to address many long-standing problems.

(Centrally supported, research-based faculty hiring programs are important as well, but our current ones are not sufficient to address the broad faculty hiring in academic departments needed to also alleviate stresses in our teaching and learning mission.)

Should UBC increase tuition rates for 2021/22?

UBC is presenting a balanced budget for 2021/22. It is drawing a relatively small amount from its reserves to do this, but, unlike many public universities in the world, UBC is in a strong financial position.

The 2021/22 budget also includes significant expenditures for a number of new and on-going initiatives and capital projects. (The public version of the budget does not give many details for these.)

This is not an austerity budget.

I am moved by students’ arguments against increases this year: There have been many pandemic-related effects on UBC students and on what we have been able to offer them, and these effects deserve to be weighed in our decision. Should we not acknowledge this financially, at least for current students who are returning for 2021/22?

I also believe our current model for allocating tuition does not support academic departments and their teaching and learning missions as well as it should. This needs to change.

All in all, it seems hard to justify asking students to pay higher tuition fees until we can guarantee they will get the educational experience they expect from UBC.

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[1] There are no faculty Governors on the Finance Committee at this time, though its current chair engages with the faculty Governors regularly. This situation is under discussion.

[2] I use “academic department” to refer to the basic organizational unit for faculty in UBC; not all such units hold the status of “department”, formally speaking.

[3] I’ve chosen to scale Department Q’s budget to $10 million.

Preamble: I intended to publish this post last week, but my inner mathematician was still wrestling with some of the details of UBC’s Tuition Allocation Model and its relationship to the budget. As it happened, PAIR posted the 2020W enrolment data this week, which allowed me to replace my (very close) enrolment estimates with real data and recompute the TAM outcomes. In spite of these new calculations, there are still some puzzles remaining arising from unexpected discrepancies between my calculations and numbers reported in the 2020/21 budget and elsewhere. One of these puzzles is the size of the ISI tuition allocation to the Academic Excellence Fund (AEF). I expect to solve these puzzles, most likely with expert help from the Administration. 

UBC collected well over $900 million in tuition fees from students this year, 60% of this from international students. UBC has an obligation to use students’ tuition fees foremost to ensure the faculties and academic departments are able to deliver on the university’s  commitment to provide students with access to academic programs and educational experiences one expects to find at a leading research university. (This necessitates UBC using its considerable resources to support its core academic research mission, as well.)

In terms of UBC’s budget, the way tuition revenue is distributed in the university should reflect this obligation to put the academic mission ahead of all other considerations in deciding how to spend tuition fees.

UBC encodes its priorities for spending tuition revenue in its Tuition Allocation Model (TAM), which is then used as the mechanism for determining for each faculty its share of the tuition fees paid by students registered in courses in that faculty. UBC’s TAM also allocates tuition revenues to the central administration and to “excellence funds” controlled by the central administration. (More on these funds later.)

On the face of it, the TAM is formulaic and the allocations it produces thus seem predictable, which is a good feature for those managing budgets and analyzing the financial effects of decisions that affect enrolment.

The basic description of the model is fairly simple, though there are (unnecessary?) complexities in the detailed version.

(I would provide the reader with a link to a document describing the TAM, but I have not found a public version of one. Bits of commentary on the TAM are scattered in public budget documents, but not coherently. I knew the basics of the TAM before joining the Board of Governors through conversations with administrators, and so I am assuming what I say about it to be in the public domain.)

As with all such mathematical models, one must study the TAM’s outcomes to learn how it works, which is necessary to decide whether the TAM produces results that align with the University’s principles, values, and goals — all things that should have influenced the implementation of the model. After all, the budget should tell the same stories UBC tells about who we are and how we are achieving our goals so we and others can assess the outcomes through the stories the budget produces throughout our faculties and academic departments.

Thus, the TAM is far more than an algorithm.

Behind the mathematics of the TAM are the policies and managerial approaches the Administration uses to implement its vision of how UBC should operate.

Thus, a consideration of the TAM includes asking the question ‘Do the policies and managerial approaches used to code the TAM produce outcomes that support the academic mission as the central purpose of the University?’

Before we can dive into such questions, I need to tell you how the model works. I will start with a description of how to compute the tuition allocations and then give an example for a faculty I will call Faculty X. I will focus on the revenue from undergraduate tuition fees.

I am aware most of my readers aren’t mathematicians, and will try to keep that in mind in what follows.

A Description of the TAM

UBC’s Tuition Allocation Model has the same basic set-up for both the Vancouver and Okanagan, though there are some differences in the way revenue is split between the faculties and the central administration (often shortened to “Central” in budget and finance documents).  This reflects the different operating and financial contexts for each campus.

In the detailed model, there are also variations for tuition fees from COOP students on work terms, exchange students, and non-degree students, etc. I will ignore these and focus on fees for undergraduate students in degree programs.

It is important to note UBC budgets many of the “system-wide” activities through the Vancouver budget, so “Central” in what follows sometimes refers to this Vancouver+System part of the budget and sometimes to the part specific to Vancouver; context should make this clear. I will use “Okanagan Central” for the Okanagan-specific central administration, and note there are chargebacks from Okanagan Central to Central, which I won’t discuss in this post.

The TAM also treats domestic student (DOM) tuition fees and international student (ISI) tuition fees differently.

In my calculations, I use enrolment data from PAIR (you need to be on campus or have a UBC VPN to access these data online), and I make various approximations based on public data when I do not have access to real data or when data are not public. Keep in mind this contributes to small uncertainties in any numbers I present here. (These uncertainties are  of a different nature than the unexpected discrepancies I mention in the Preamble.)

Now, the TAM.

1. A portion of all tuition revenue is committed to student financial aid (SFA).  Currently this is 7.5%.

2. A portion of all tuition revenue goes to overhead such as bad debt.  Currently this is just over 1%. (I only know the actual figure from a Board document, but the 1% figure is commonly used by those speaking publicly about the TAM.)

After these amounts are taken off the top, the remaining tuition revenue is then allocated to the faculties and Central/Okanagan Central, including their “excellence funds”.

3a. DOM tuition in Vancouver is split 75% to the faculties and 25% to Central.  For a student in Faculty A taking a course in Faculty B, the faculty tuition revenue is split 50:50 between the two faculties.

3b. DOM tuition in the Okanagan is split 60% to the faculties and 40% to Okanagan Central.  (Many services managed by individual faculties in Vancouver are managed centrally in the Okanagan.) For a student in Faculty A taking a course in Faculty B, all the faculty tuition revenue would go to Faculty B.

Things start to get interesting when we look at ISI tuition revenue, so I hope I haven’t lost you so far.

4. For ISI tuition revenue, the TAM uses 2016/17 as a baseline for calculating the allocations. This means each faculty is guaranteed to receive a base of ISI tuition revenue equal to that based on 2016/17 fees.

In 2016/17, ISI tuition revenue (after the amounts in 1 and 2 above are taken out) was allocated as follows:  in Vancouver, 65% to the faculties and 35% to Central, and in the Okanagan, 50% to the faculties and 50% to Okanagan Central. This provides the base component of the current-year allocations.

5. The TAM then proceeds to allocate the incremental ISI tuition revenue from the current budget year over 2016/17, which is calculated by taking the current year’s ISI tuition revenue and subtracting an amount equal to the the revenue based on 2016/17 ISI tuition fees. This incremental ISI tuition revenue amount is large as tuition fees have grown significantly since 2016, as has enrolment.

How is the incremental ISI tuition above the 2016/17 baseline distributed?

Two-thirds of this incremental ISI tuition revenue is put into the Academic Excellence Funds (AEF) in Vancouver and the Excellent Funds (EF) in the Okanagan.

(We will talk more about the AEF a bit later as it is an important part of the story.)

The remaining one-third of this incremental ISI tuition amount is then allocated in the “usual way”: (Vancouver) 65% to the faculties and 35% to Central, and (Okanagan) 50% to the faculties and 50% to Okanagan Central.

Before I present how this works for Faculty X, I will note that because the TAM uses 2016/17 as a baseline for distributing ISI tuition revenue, the amount of money flowing to the AEF and EF grows as the ISI tuition revenue increases, both through tuition rate increases and ISI enrolment increases.

We are (potentially) nearing a point of relatively constant enrolment (or at least that is inferred from the enrolment plans the Administration has presented to the Senates , p. 94ff), so the rate of growth of this increment should slow down.  However, the annual ISI increment will continue to be a large percentage of the total ISI tuition revenue, and the increment will also grow at some rate of inflation (determine mostly by tuition rate increases).

Using 2016/17 as a baseline for our incremental budgeting means faculties and academic departments are receiving baseline funding relative to a year prior to UBC’s most recent growth spurt in international student enrolment.  It also assumes the faculties and academic departments in 2016/17 were in a state of good general operational and financial health. There is evidence this assumption should be questioned.

Since 2016/17, overall enrolment at UBC has grown about 16%, mostly through increased numbers of international undergraduate students.  As I discussed in my last post, the faculty complement has grown at a much, much slower rate. This is on top of similar growth in enrolment over the previous 5 years and little growth in the faculty complement. UBC undergraduate enrolment has grown 32% since 2011. This has an impact on the ability of academic programs to meet students expectations about their academic experiences at UBC, and affects students’ access to highly demanded programs and courses.

An Example:  The TAM Outcomes for Faculty X

Faculty X on the Vancouver campus has a large undergraduate enrolment in its programs and courses.  Let’s assume Faculty X has a little over 10 thousand undergraduate students enrolled in its courses.  About 60% of the students it teaches are in Faculty X; the rest are in other faculties. About 26% of the students it teaches are international students.

The total tuition fees associated with undergraduate students in Faculty X is $146.1 million. From this the TAM deducts 7.5% ($11 million) for students financial aid. A further 1% ($1.46 million) is deducted for overhead.

The leaves $133.7 million to be allocated to the faculties and Central (including the AEF).

The TAM then allocates $22.7 million to Faculty X and $5.3 million to other faculties from $37.3 million in DOM tuition fees.  This leaves $9.3 million for Central. Up to rounding, this gives the 75:25 split between faculties and Central.

This leaves $96.5 million in ISI tuition fees to allocate.

The next step in the TAM is to allocate two-thirds of the incremental ISI tuition revenue relative to the 2016/17 ISI tuition revenue.

For tuition revenues connected to courses taught in Faculty X, this increment is $96.5 million minus $52.9 million, which gives $43.6 million.

Thus, the AEF is allocated 2/3 of $43.6 million, which is $29.1 million. This is 30.2% of the total ISI tuition revenue available.

The other 1/3 of this $43.6 million, which is $14.5 million, is added to the 2016/17 base of $52.9 million. This means $67.4 million of the original $96.5 million ISI tuition revenue is allocated 65:35 to the faculties ($43.8 million) and Central ($23.6 million).

Faculty X must now share this $43.8 million with other faculties.  In the end, Faculty X gets $34.5 million and the other faculties get $9.3 million.

Thus, Faculty X  receives $34.5 million out of $96.5 million from the ISI tuition revenue for courses it teaches.  That is 35.8%.  Other faculties receive a further 9.6% of the original $96.5 million. Altogether, the faculties receive 45.4% of the total ISI tuition revenue.

And Central receives $52.6 million, with $29.1 million in the AEF and $23.6 million in its general revenues. This is 54.6% of the original $96.5 million of ISI tuition revenue.

So, how much tuition revenue do Faculty X and Central each receive in total through the TAM?

Faculty X gets $22.7 million from DOM tuition fees and $34.5 million from ISI tuition fees for a total of $57.4 million. This is 42.9% of the total tuition revenue available, $133.7 million.

Central gets $9.3 million from DOM tuition fees and $52.6 million from ISI tuition fees for a total of $61.9 million.  This is 46.3% of the total tuition revenue available, $133.7 million.

For comparison, prior to the implementation of the AEF, Central would have received $43.1 million, leaving the faculties $90.6 million, of which Faculty X would have received $71.3 million.

Added note: I have applied the TAM to the tuition revenue associated with courses taught in Faculty X. Faculty X also receives a portion of the tuition fees for students from Faculty X taking courses in other faculties (remember the faculties split tuition 50:50 for these students).  I calculate this to be $6.9 million, which brings the total tuition revenue Faculty X receives to $64.3 million. (There is no adjustment to the above AEF amounts for Faculty X because the AEF is allocated money before the ISI tuition revenues are split between the faculties and Central.)

What does the TAM mean for faculties and their academic departments?

How do we decide if the outcomes from the TAM for faculties align with the University’s (ambitious) goals for its academic mission, especially its teaching mission given this money comes directly from our students?

Academic departments do the teaching, so any analysis could begin by examining the state of the financial and operational health of the individual programs in Faculty X and the reasons a program is in the state it is. Such analysis should consider how well a program is able to meet the demands on it, including its ability to offer a diverse set of courses with sufficient enrolment capacity to meet demand from students.

It is possible to apply the TAM to each academic department in a faculty so we would see how their teaching contributes to the overall faculty tuition revenue (and I have done so for Faculty X). While this would provide us with some information to help assess the financial and operational health of each department, on its own, this information may not be sufficient to answer many of the basic questions we might ask.

Why is this so?

The TAM allocates tuition to faculties, but after that, it is up to the faculty’s dean to decide how to allocate tuition revenue to the academic departments. While some faculties implement a faculty-level tuition allocation model similar to the university-wide TAM flowing tuition revenue to each department depending on their enrolments of domestic and international students, others do not do this.

In fact, the failure to implement a faculty-level TAM can (and does) have the effect of creating at-risk academic departments where enrolment growth does not attract sufficient new resources to meet the new demands on an academic department’s teaching mission. (Students’ needs are not met as a result.)

Faculty X does not have a faculty-level tuition allocation model, and so has several departments at high risk with respect to their teaching missions because problems created by past decisions about funding these departments continue in spite of greatly increased tuition revenues to Faculty X. (There are at-risk academic departments in other faculties similarly in jeopardy when it comes to their teaching missions.)

The failure of the TAM to include a component of the model to allocate tuition revenues to academic departments is a serious flaw in the tuition allocation exercise at UBC. It is equivalent to allowing the Central Administration to allocate tuition revenue to the faculties without any regard for the teaching done by these faculties (some might say “on a whim”). Would any dean whose faculty is adversely affected by this accept such a state of affairs?

What about the AEF and its impact on academic departments?

The Vancouver-based Academic Excellence Funds (AEF) were originally created as the Strategic Investment Funds in 2016 to support UBC’s “excellence” goals and the desire for UBC to become Canada’s best university by 2026.

In 2018, the AEF terms of reference were changed in 2018 to create five funds:

1. Strategic Fund,
2. Revenue Sharing Fund,
3. Academic Capital Fund,
4. Student Financial Aid (SFA) Fund, and
5. Integrated Renewal Project (IRP) Fund.

The April version of the 2020/21 budget document and the 2019/20 budget document each have some information about the intended allocations from the AEF for those years. Unless you know the project details, it may not be clear when money from the AEF has gone to faculties and academic departments directly, particularly with respect to their teaching mission.

There are AEF  allocations for central projects related to the research mission — e.g. for the Clusters of  Research Excellence program and for the Advanced Research Computing (ARC) project. These do not include unrestricted, on-going funds for academic departments, however.

There is also support for research students; e.g. the PAEI is supporting UBC’s increase in the minimum funding for PhD students.

What about support for hiring faculty?

The Strategic Fund is supporting the President’s Academic Excellence Initiative (PAEI), which includes a competitive research hiring program focusing on themes identified by each faculty. (I have not found a public document describing the PAEI in detail.)  One hundred faculty members will be hired through the PAEI Accelerate Phase, 84 in Vancouver and 16 in the Okanagan, over the next 5 years, say (there are some pandemic delays).  There will be a second phase (details not yet public). The PAEI is one of the few long-term commitments from the AEF, and for Vancouver, about $13.5 million recurring will support these positions (faculties contribute to the recurring salary costs as well; currently the rate is 20%).

It is exciting to have opportunities to hire new faculty, but the PAEI is not intended to address the kinds of teaching capacity issues that characterize at-risk academic departments. The allocation of positions, only a few to each faculty, are made on a research basis and are intended to be add-ons to the larger hiring plans of the faculties. This implies the faculties themselves are intended to manage, on their own, the risks associated with academic departments whose academic missions at risk because of their current financial situations.

(I am focusing on the Vancouver AEF, but I would be remiss if I didn’t mention the Okanagan EF, which has a strong overall focus on the academic mission, in my opinion. For example, the EF funds a program to provide bridging funding to support the diversification of the faculty by hiring BIPOC faculty.)

The Revenue Sharing Fund is similar to funds at other universities and is designed to support faculties unable to meet their commitments to their programs given their precarious financial state. These faculties often have limited opportunities to enrol international students. Smaller faculties can also be unstable because even relatively small changes in their enrolments can put them into a deficit situation. Allocations from the Revenue Sharing fund often provide salary support over a few years so the faculty can work to stabilize its position. This fund is a residual fund (last in the queue for its share of the AEF) not designed to fund long-term faculty positions.

The Academic Capital Fund makes contributions to capital funding for academic buildings. The amounts are small at this point (~$5m). In theory, other small capital projects related to research or teaching could be supported by this fund.

The SFA Fund simply pools its money with the rest of the SFA allocation, though it could be used for targeted scholarships, bursaries, and other forms of student financial support.  For example, some student members of the Black Caucus presented to the Board of Governors in February and requested scholarships and research funding for Black students.

I am perplexed by the inclusion of the IRP Fund as an “academic excellence” fund.

Is the AEF the right tool for UBC to achieve our “academic excellence” goals?

Whatever “academic excellence” means for a university, I am certain its meaning is deeply connected to the work of the university’s faculty.  Achieving “academic excellence” goals thus starts with hiring and retaining faculty members whose creativity, intellectual capacity, and commitment to their academic work are likely to lead them to great achievements in research and teaching, and then making sure they are well-supported by UBC.

Given this premise, and given the main contribution of the AEF to faculty hiring is through the PAEI, if the PAEI is to act in a supporting role in faculty hiring plans instead of a main contributor to them, as it seems to be designed to do, then the faculties must be given more resources to fund hiring plans that really can enable academic departments to build the teaching and research capacity needed for UBC to keep its promises to students and to fulfill its ambitions as a research university.

(There is, of course, value to having some central funds to enable responsiveness to novel or changing contexts for the academic mission. And there is great value in a system in which whether or not a faculty or academic department has the ability to generate tuition revenue from international student fees  creates large inequities to have a mechanism to redistribute money to address these inequities.)

Faculties also have academic capital needs to support its faculty and students. Many faculties need updated or new academic space. The current model for funding a new academic buildings at UBC requires the faculty to contribute to the cost. The AEF’s Academic Capital Fund will only be able to support a small number of projects, which limits its effect.

I believe UBC would better achieve its “academic excellence goals” if it put more unrestricted money into its faculties and their academic departments — right at the heart of UBC’s research and teaching activities. Faculties would then make decisions about how to allocate such money to best achieve their “academic excellence goals”. Faculties would also have more predictability about the resources they will have to reach their goals, which would allow for longer term planning with more certainty.

The Administration (and the Board of Governors) would need to trust the faculty and their collective expertise in this vision of UBC.

It is time for a review of the TAM (and hence, the excellence funds, too) to decide if it supports UBC’s core academic mission in keeping with the University’s principles, values, and goals.

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Caveat: The exercise of running the TAM using real data for a faculty left me with as many questions as answers about what I see in budget documents. Budgets are not balance sheets and UBC’s financial reports are not “the books.”  This can make it difficult to reconcile information in the budget. UBC’s incremental budgeting adds to the difficulty of tracking the evolution of key budget entities, like the AEF.

I have, for example, calculated an estimate for the total amount of tuition revenue added to the AEF for 2020/21. It differs greatly from what is reported in the budget, creating a puzzle I’m likely to obsess over.  Commitments to funds often run over multiple years, which can affect the amount available to use in any given year. I cannot tell such accounting details from the budgets and other documents available to me.

As a child, I took an early interest in mathematical puzzles and was given at some point a copy of Henry Dudeney‘s Amusements in Mathematics. I spent many happy hours (and a few frustrating ones) working my way through Dudeney’s puzzles, which were as much about clear thinking and logic as anything else. For some reason, I have been thinking about my childhood obsession with such puzzles as I have been working to understand how UBC treats faculty salaries in the budget, both financially and philosophically.

Salary and benefits costs for tenure-track faculty, in particular, are sometimes presented as problematic in conversations about university budgets, as if dealing with them is a difficult and tricky puzzle as yet unsolved.  Certainly tenure-track faculty are generally well-paid and hiring one creates a 35+-year commitment.  As well, the “faculty salary mass” (total salaries + benefits) is one of the largest financial commitments for any university.

Of course, one might also view this faculty salary mass as one of the largest and most important investments made by a university given the academic mission is built around the work of the faculty. Even if one takes a cold financial viewpoint, the major sources of revenue for UBC — tuition fees and provincial government grants — are tied to the work done by the faculty. For 2020/21, tuition revenues are close to the $943 million predicted in the April 2020 version of the budget.  The BC government grant is $732 million, which was guaranteed by the BC Provincial Government as part of its support for UBC during the pandemic. In total, this is $1.675 billion, which is about 75% of UBC’s operating revenues this year.

Research grants, also connected to faculty work, account for a further $650 million per year, but this money is not part of UBC’s general operating revenue given the restricted uses of these funds.  However, the effect of these grants is captured in the consolidated budget as a result of grant-funded salaries, for example.

Thus, it is important to understand the faculty salary mass and how it evolves to understand the UBC budget story.

Note about 2020/21 budget data: I am using information from the two versions of the 2020/21 budget.  The July 2020 version of the budget passed by the Board of Governors is very conservative, as it needed to be, and predicted a massive drop in tuition revenue that did not materialize. The July 2020 version also lacks the level of detail of the April 2020 version, and the latter provides better insight into many matters that affect questions around faculty hiring and salaries.

The Faculty Salary Mass

Before the 2020/21 budget, faculty salaries and benefits were not reported as separate line items UBC’s budget or its financial statements.  Even the public consolidated financial reports have only recently started to report information about faculty salaries beyond the reports on aggregated salaries and benefits for all employees of the University.

The 2020/21 budget  reports academic salaries as a separate line item (p. 10 of the linked pdf, Salaries – Academic under Operating Expenses):  $537 million.  Note this July 2020 budget reports a potential reduction due to  COVID of $3 million relative to the pre-COVID April 2020 budget, which reports an expected $540 million for academic salaries. The cost of benefits adds 18% to this (benefits are only recorded in aggregate in the budget).

About 88% of the reported academic salaries and benefits costs are for faculty appointed in the various Faculties; librarian and archivist salaries are under the Vancouver VP Academic and Provost budget.

This means the Faculties’ budgets include $473 million x 1.18 = $558 million for faculty salaries and benefits.

This $558 million estimate uses the assumption most of the planned faculty hiring in the April version of the 2020/21 budget is happening, which is a reasonable assumption based on the minor change in the budget line for faculty salaries in the July 2020 budget relative to the pre-COVID April 2020 budget.

Some comparators to put in context the size of UBC’s faculty salary mass:

(1) SFU’s operating revenues for 2020/21 (p. 18 of the pdf) are ~$596 million and SFU has about 30 thousand students;

(2) UVic’s operating budget for 2020/21 is $424 million and UVic has about 22 thousand students; and

(3) UBC’s increase in the total revenues from tuition fees and the BC Government grant between 2016/17 and 2020/21 is ~$554 million.

Finally, UBC’s overall operating revenues for 2020/21 are $2.2 billion, lower than expected because of lower revenues from ancillary operations such as food services, parking, and student housing. UBC’s operating expenses for salaries and benefits overall are $1.41 billion.

Growth of the Faculty Salary Mass Through Salary Increases

Inflation is an important factor for the UBC Administration to consider in managing the university. The growth of the faculty salary mass through salary increases is incorporated into the long-term financial model for the university.

Faculty salaries increase at UBC through general increases and career progress increases (CPI, merit, and PSA). In the current faculty collective agreement general increases have been set at 2% each year, and the remaining increases total to 2.5% (1.25$ CPI, 0.75% merit, 0.50% PSA) of the total of continuing bargaining unit member salaries.

At first glance, UBC’s faculty compensation model may appear to result in an annual growth rate of 4.5% for the faculty salary mass, assuming a constant faculty complement. The real growth rate under this condition is less than 4%, however.

Analyzing the faculty salary mass over time is non-trivial since there are dynamics at play that change the actual composition of the faculty over time. Even assuming a constant number of faculty (often done in basic budget models), new faculty are hired and other faculty leave (e.g. change jobs, retire). To build a reasonable model of the faculty salary mass, it is sufficient to work with a model that averages over these dynamics.

A newly hired assistant professor normally has a lower salary than a retiring full professor.  This generates savings that lower the annual growth rate for the faculty salary mass from 4.5% per annum.  While this rate varies a bit from year to year, I estimate its current value to be between 3.5% and 4%, so let’s use 3.75% going forward.

Currently, the 2% per annum general salary increases for faculty are funded by the BC Government in keeping with the PSEC mandate.   This leaves 1.75% UBC must fund from its operating revenues. Although UBC has generally had operating surpluses in recent years, the Administration has typically put forward tuition increases to grow the University’s revenues; they are proposing a tuition increase proposal for 2021/22, as well. Either way, these increases are fully funded by UBC’s operating revenues and are included in the budget. (Oddly, the Administration often refers to “unfunded” salary increases when, in fact, such increases are fully funded by the core sources of operating revenue for the University.)

Growth of the Faculty Complement

To understand the financial and budget impacts of the faculty salary mass, one needs also to study the affects of the growth rate of the faculty complement.

The Board of Governors received a report in June 2019 that included an analysis of the growth rates of the faculty complement compared to those of student enrolment and and staff hiring.

For the Vancouver campus, the compound annual growth rate (CAGR) for faculty in the 10-year reporting period 2008 to 2018 was about 0.35%, while for students it was about 2.4%. If we look at only research faculty, the CAGR was -0.24% (a decline).

For the Okanagan campus, the reporting period covers the planned ramp-up in domestic student enrolment after the campus was created and the CAGR for student enrolment is about 5%. The reported CAGR for faculty is about 2.4%, but for research faculty, it is about 0.1%.

(There is a story about the impact the differences in these rates has on the academic mission, but I will leave that for a future blog.)

The analysis in the 2019 report uses data for 2008 to 2018.  If we include data (obtained from PAIR, say) for 2019 and 2020, and look at the 5-year period starting in 2016 (the lifetime of the current administration), then we see that student enrolment has a CAGR about 3.4% and the faculty complement a CAGR around 0.8%.

From these numbers, we see that the growth of the faculty complement has been far out-paced by the growth of student enrolment, resulting in increasing FTE student to FTE faculty ratios. (The annual averages of these ratios are reported in the 2019 report to the Board, but the failure to report the distribution of student to faculty ratios across academic departments hides serious problems.) Much of the growth in student enrolment is due to international students, whose tuition fees are the main reason UBC’s operating revenues have increased so much over the past five years (about $400 million of the $554 million increase).

Thus, the growth of UBC’s faculty salary mass due to increases in the faculty complement is a small fraction of the increases tuition revenues due to increases in student enrolment. Factor in increases in tuition fees, and this fraction is even smaller.

So, why is the growth rate of the faculty complement so low?

My first answer is “I can’t solve this puzzle.” Or maybe, “it defies logic.”

There has certainly been some faculty hiring, but the rate is very low and has been so for a long time in spite of large increases in enrolment and large increases in operating revenues.

There are pieces of descriptions of Deans’ hiring plans dispersed throughout the April 2020 version of the budget, but they are not collated into one overarching UBC faculty hiring plan. Indeed, it is not clear all the pieces needed to build a picture of faculty hiring at UBC are included in the budget. (Does UBC have a faculty hiring plan?)

Some Deans have committed to replace faculty who have retired or resigned. Some additional hiring looks to be based on transfers from the Academic Excellence Funds — both transfers from the President’s Academic Excellence Initiative (PAEI) and transfers from the Revenue Sharing Fund to faculties without potential for growing undergraduate international student enrolment (e.g. Education, Law, Medicine). The Research Excellence Clusters initiative seems to be a key focus for some of this hiring, though the funding for these faculty positions comes from the a combination of PAEI funds, Revenue Sharing Funds, and the operating funds for the Faculties.

Beyond this, the 2020/21 budget provides no targeted money to address the large and growing teaching deficits in many of UBC’s academic departments. These deficits are a consequence of the continuing growth in enrolment coupled with a limited faculty hiring to meet the needs of the increasing numbers of students. (The result is erosion in the academic experiences many programs are able to offer students.)

One decision restricting the University to this low rate of faculty hiring is the re-organization of the Academic Excellence Fund the Board of Governors approved in 2019/20. This has resulted in significant amounts of tuition revenue being directed away from the core academic mission of the University to other ventures and activities (e.g. Workday).  I argue this leaves the Faculties (and their Deans) with insufficient resources to solve serious entrenched problems undermining the teaching and research missions of UBC’s academic departments.

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(I have restricted myself to using publicly available data in my analyses.

For those who might do their own data analysis, caution is needed when working with UBC data. For example, there are discrepancies between the data reported to the Board in the 2019 report I reference and the data reported publicly by PAIR.  I have also noted discrepancies with other data sets I have. Getting clean data on UBC’s faculty complement is particularly difficult.  Perhaps Workday will help with this.)