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Are international students singlehandedly saving Canadian universities from bankruptcy?

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This month, Queen’s University’s leadership informed its faculty and staff that the university must make drastic cuts to ensure that it can remain open. The brunt of the cuts will likely affect the Faculty of Arts and Science and include slashing courses, not replacing faculty, delaying renovations, and reducing the number of teaching assistants. Reports of these imminent cuts follow an announcement last summer that the university was running a $62 million budget deficit, now sitting around $48 million.

While the situation at Queen’s may be the most high-profile budget crisis, other universities across Canada are staring down massive financial pains. These developments reflect deep structural issues facing the sector, including caps on tuition rates, tuition freezes, COVID-19 recovery, flat-lined public expenditures on universities, and declining enrolment in certain academic programs.

Many Canadian universities have sought to mitigate these challenges by increasing their enrollment of international students. According to post-secondary experts, it’s not an exaggeration to say that international students are increasingly keeping many of Canada’s universities afloat, especially in Ontario.

Alex Usher, president of Higher Education Strategy Associates, who specializes in post-secondary education, notes that in today’s policy environment, without international students making up at least 20 percent of the student body, no Ontario university can operate properly.

“I can almost guarantee you that every single one of [the universities with a budget deficit] has fewer than 20 percent international students. And all the ones that are in surplus, it’s because they’ve got more than 20 percent,” the former director of the Educational Policy Institute Canada insists.

Yet as previous Hub reporting has documented, growing public concerns about the massive rise of international students and its effects on housing costs have resulted in significant political pressure on the federal and provincial governments to limit the number of student visas.

At the end of 2023, the Trudeau government confirmed to the Globe & Mail that the number of study permit holders in Canada has surpassed one million, with just over half of them in Ontario; beating the government’s own forecasts. The top two source countries are India and China.

Federal Immigration Minister Marc Miler has signalled that a new cap on study permits for international students could be forthcoming, even going as far as to say the international student system has “gotten out of control”.

For universities, this valuable source of revenue could be in jeopardy.

Given that these international students are responsible for nearly half of all tuition fees paid to universities in Ontario, the financial implications for Canada’s universities could be monumental.

It risks exposing the extent to which the sector is increasingly relying on rising numbers of international students to obscure their underlying systemic financial challenges.

The humanities: ground zero of financial unsustainability

These challenges are most acute in the humanities. Since the 2008 Great Recession, most humanities departments across Canada have seen enrolment decline and faculties shrink.

In 2014, former Harvard president Drew G. Faust argued that economic anxieties were driving students away from the humanities and towards other more profitable areas of study, such as business.

The appeal of specialized programs as a path to well-paid employment after graduation has played a role in the budget crunches affecting humanities at many universities. This is especially true given that a significant number of international students—who pay much higher tuition fees (as much as five times more than domestic students) that fill the schools’ coffers—are themselves moving away from the humanities as an area of study.

Last year, Usher and his team found that the humanities were the least popular choice for international students, followed by the social sciences. Health, engineering, and science were the three most popular fields of study.

This is consistent with Statistics Canada data from 2016, which shows that just 8 percent of international students chose to study the humanities. The two most popular fields for international students were business, management, and public administration, chosen by 27 percent, and architecture, engineering, and “related technologies,” selected by 19 percent.

Limited options for budget shortfalls

As a result of all these structural challenges, Queen’s and other universities across the country are running budget deficits.

In the past, when faced with such budget shortfalls, universities would often take a wait-and-see approach, eyeing the government for financial support.

“Universities really worked on a sort of brinksmanship approach to funding where if things get bad, they assumed that the government would eventually come around,” says Ken Coates, the chair of Yukon University’s Bachelor of Arts in Indigenous Governance program. Coates studies post-secondary schools and is the author of the book Dream Factories: Why Universities Won’t Solve the Youth Jobs Crisis.

But this time around, that’s not happening, especially in Ontario, which is home to the greatest share of Canadian universities. Across successive governments, the Ontario government has consistently been among the lowest in the country when it comes to institutional funding for universities. Current provincial grants have been frozen in nominal terms. In 2019, the Ford government lowered tuition fees by 10 percent and then froze them. They have remained unchanged since. Provincial policy, in other words, is contributing to the problem.

Queen’s University campus in Kingston, Ontario, on Wednesday March 18, 2020. Lars Hagberg/The Canadian Press.

Amid this Ontario-wide funding crunch, the Ford government has told the universities to find “efficiencies” where they can, forcing schools, Coates says, into making some difficult decisions.

“The only thing you can really cut back on in any substantial way is university faculty. And you can cut back on support services,” he admits.

Coates notes across Canada there has been a quiet reduction of staff in humanities departments over the last 15 years, particularly in history.

“The history enrolments have dropped, and so you get a history professor who retires, and you just don’t fill the job,” he explains. “It doesn’t show up as a cutback, although in a practical sense, in the power of the history department, it is a real cutback.”

An increasing reliance on international students

Flat or even declining public funding and constraints on domestic tuition revenues have pushed universities in the direction of international students as a growing revenue source.

A 2022 Ontario Auditor General’s report found that from 2017 to 2021, international students went from making up 13 percent of enrolment to 17 percent of enrolment at the province’s universities.

During this same period, international students went from paying 29 percent of all tuition paid to universities to a staggering 45 percent.

At struggling Queen’s, international students make up about 11 percent of the undergraduate student body. Similarly, Sir Wilfrid Laurier University, with only 6 percent international students, is projected to have a deficit of $1.9 million for the 2023/24 fiscal year.

In contrast, the University of Toronto, with more than 25 percent international students, is projected to continue to have a balanced budget in 2023/24. The University of British Columbia, which reported that 27 percent of their undergraduate students were international, will also have a balanced budget.

Last year, former Hub editor-in-chief Stuart Thomson reported that across Canada international students had grown by 31 percent from 2021 to 2022. He also noted a 40 percent rise in international students at Cape Breton University.

Government-appointed panel recommends higher tuition

If the growth in the number of international students has been treated as a short-term solution to the challenges facing Canadian universities, a federal cap on students may expose how structural these issues have become for the sector.

A recent report by a blue-ribbon panel appointed by the Ontario government signaled the need for more serious reform.

The panel identified several key problems facing universities and colleges including financial instability, an insufficient share of government funding for universities, and over-dependence on international students for revenue.

Their set of recommendations includes a 10 percent boost in provincial operating grants and greater accountability and financial literacy for university board members.

But perhaps the most controversial is a five percent hike in tuition, followed by subsequent years of increases.

The report stated that due to higher rates of inflation over the last three years, Ontario’s domestic tuition freeze was posing a serious financial risk to the province’s post-secondary schools.

“As time goes on, this situation is ever more likely to pose a significant threat to the financial sustainability of a major part of the province’s postsecondary sector,” read the report.

A China slump and another President Trump?: Foreign affairs experts break down 2024’s geopolitical hotspots

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As federal MPs leave their ridings and return to their green padded seats in the House of Commons at the end of this month, we at The Hub thought it would be a good time to ask Canada’s leading foreign affairs experts, some of whom have spent time advising the federal government, which major global affairs issues and regions they believe our elected representatives must keep top of mind during the 44th Parliament.

We can’t predict what MPs will focus on when they get back to policymaking, but here’s what the experts think they need to look out for immediately:

China’s decline and an impending Canadian G7 summit

Garry Keller, vice president at StrategyCorp and former chief of staff to John Baird, former foreign affairs minister

As 2024 begins, it’s hard not to be consumed with a feeling of foreboding given the state of the world. 

Conflicts like Russia/Ukraine and Israel/Hamas continue to fill our news feeds, and, of course, the U.S. presidential election cycle kicked off in earnest this week with the Iowa caucus, followed closely next week by the New Hampshire primary. Given the impact of the last Trump administration on Canada’s trade, domestic, and foreign policy, we should obviously be watching the 2024 cycle closely.

2024 is a unique year. Nearly half the world’s population is eligible to vote in elections. While no one should be paying much attention to [Russian President] Vladimir Putin’s sham campaign, countries like India, Indonesia, and the United Kingdom will also be in election mode.

Outside of those news-leading events, I’m watching for the following:

1. China’s economic dip. The Chinese economy experienced a downturn over the course of 2023. The reality of falling exports, weak demand, increased “friendshoring” and the decline in the property market (see real estate developer Evergrande) will be something to watchAs well, the re-election of the Democratic Progressive Party to Taiwan’s presidency last weekend means the cross-straits relationship will continue to impact regional security decisions.

2. The Canada-India relationship. Given how the bilateral relationship has deteriorated over the years, coupled with Prime Minister Trudeau’s accusation in the House of Commons over Indian involvement in the Hardeep Singh Nijjar murder, plus Prime Minister Narendra Modi’s upcoming re-election campaign, Canada-India relations will continue to be important to watch, especially for Canadian industry and business.

3. BRICS expansion: Impactful or much ado about nothing? This month we saw the BRICS alliance welcome five new members: Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates (UAE). They join Brazil, Russia, India, China, and South Africa. Given that founding member Brazil is scheduled to host the G20 this year, and Saudi Arabia and the UAE are playing an important role in the world economic and political order, how does BRICS membership impact the “democratic West,” especially how the United States deals with these three players (if at all…)?

4. Canada to host a G7. With the 2024 G7 leaders’ summit scheduled for this June in Italy, work has already begun across the government of Canada to sketch out what our priorities will be for our 2025 presidency. A G7 summit in Canada during a potential election year may make for interesting domestic considerations!

Trump and AI’s shadow loom large

Janice Stein, Belzberg Professor of Conflict Management at the Munk School of Global Affairs and Public Policy

1. The U.S. election and Trump 2.0. One global issue “trumps” all others for Canada in 2024. The presidential election in the U.S.—both in its direct impact on our bilateral relationship and indirectly through its impact on all the global issues that Canadians care about, from climate change to peace and security. We need to prepare now for two scenarios.

2. Artificial intelligence. A second issue that does not get the attention it deserves is the development and regulation of artificial intelligence. AI will affect all of us in increasingly important ways in the next few years. Canada was an early pioneer in AI but has not kept pace with the investments that the private sector and governments have made in other countries. Brazil, France, and Saudi Arabia are now investing in big ways to grow national champions. We risk being left behind.

We need policymakers at the table now. Canadian scientists and businesses need more “compute” power if we are to stay in the game. Then we need “smart” regulation for a technology that promises both great opportunity and serious risks. Ottawa should be engaging now in widespread public consultations about AI regulation. It can then partner with other like-minded governments who are more likely to move at speed than multilateral institutions. Acting as a coalition, they can regulate the design of systems so that they minimize the harms and get out of the way of responsible innovation.

In the last decade, Canadian governments, working together with the private sector and universities, have grown the talent pool. That strategy worked. We have some of the very best people in the world right here at home. We need policymakers to build on that success now if we are to reap the benefits of our early investment. Otherwise, we will watch Canada blow a lead, yet again.

A negotiated settlement in Ukraine and the Red (Sea) scare

Ann Fitz-Gerald, director of the Balsillie School of International Affairs and professor of political science at Wilfrid Laurier University

1. The war in Ukraine. 2024 will pave way for continued offensives and counter-offensives in the Ukraine-Russia conflict. While Ukraine will build on its use of drones, Russia will continue to use disinformation strategies to disguise the levels of war fatigue it is experiencing and appease the population of the Ukrainian territory it seeks to control. It will also deepen alliances in the Middle East and Africa.

A reluctance by both the U.K. and the U.S. to put “boots on the ground” during election years may, at best, result in airpower support (F-16s) to shore up Ukraine’s air defences, the lack of which has weakened its ability to protect troops. But a win for Donald Trump in the 2024 U.S. presidential election will likely mean a significant U.S. retreat from Ukraine. This will compel Europe to front the defence of its continent, and with less collective capability to use force, may necessarily push some form of negotiated settlement.

Members of the pro-Ukrainian Russian ethnic Siberian Battalion rest at a military training close to Kyiv, Ukraine, Wednesday, Dec. 13, 2023. Efrem Lukatsky/AP Photo.

2. Africa and the Middle East. The Horn of Africa will remain a flashpoint in 2024. Current tensions between Somalia and Ethiopia over a signed MOU between Ethiopia and Somaliland that intertwines sea access with Ethiopia’s formal recognition of Somaliland. This will raise concerns across an otherwise peaceful Somali Regional State of Ethiopia, igniting Somali nationalism and potential linkages with other armed nationalist movements, which roam freely in Ethiopia’s other regional states.

Eritrea will continue to feel betrayed over Ethiopia’s post-conflict realignment with the Tigray People’s Liberation Front, the war between the Sudanese Armed Forces and the paramilitary Rapid Support Forces in Sudan will rage on, and a proxy battle to control Red Sea commercial shipping corridors will continue. Ongoing fighting will persist in the form of localized terrorism and insurgency campaigns.

Tensions between the United Arab Emirates and Egypt are also likely to emerge based on the UAE’s continued support of the Ethiopian federal government, while Egypt aligns itself with both Somalia and Sudan. Based on threats posed to the economic supply lines, a new Trump presidency will bring heightened readiness for military intervention in the Red Sea region. The combination of shifting and expanding alliances in the Horn of Africa region and the U.S.-led defence of the Red Sea waters will gradually impact a wider set of actors, including Russia and China, both of which support Eritrea.

3. Arctic China? Although China has been focused on its quest for economic supremacy vs. military activity, its interests in expanding its maritime beltway will see foreign adventurism in the Arctic take on new levels.

4. Misinformation. The rise of transboundary threats enabled by unregulated generative AI will intensify misinformation in elections and democracy, exacerbate harm to children’s mental health based on deepfake manipulation, and entrench powerful monopolies that undermine fair markets and economic dynamism. It will produce a dislocated and inequitable economic structure in an already challenged set of civil society inequities. Lastly, it will undermine the global copyright system.

Invest at home to invest abroad

Roland Paris, Director, Graduate School of Public and International Affairs, University of Ottawa

1. Canada’s foreign policy investments. Governments will always be tempted to announce new initiatives, but what Canada really needs now is to focus on essentials. This is not about a specific overseas event. There is a need to strengthen the foundations of Canada’s international policy so that we can defend and advance our interests. This means rebuilding the instruments of that policy—our defence capabilities, proceeding with the modernization of our foreign service—and the policy capacity of the government to deal with that. We’ve allowed them to weaken. It also includes starting now to prepare for a possible return of the Donald Trump to the White House – arguably the biggest foreign-policy risk facing Canada.

This is a year to make sure that we’re getting the fundamentals right. If Canada wants to be at any number of important international tables, we need to be contributing to efforts alongside our partners. One of the effects of allowing our international instruments to weaken is that we are not being invited to some of these discussions which are important for our interests.

2. Canada’s military. Crises are multiplying and Canadian interests are more exposed today than in decades. Canada’s military should be seen as an insurance policy against an even more unstable world, yet the the defence policy update first promised in 2022 still hasn’t been announced. Meanwhile, the readiness and capacity of the Canadian Armed Forces have been weakening at precisely the wrong time.

3. Canada’s foreign service. We need to transform and modernize Global Affairs Canada. There was an internal discussion paper, and then the associate deputy minister of Foreign Affairs issued a statement, and then there was the report by the Senate Committee on Foreign Affairs and International Trade, led by Peter Harder and Peter Boehm. (The committee called for the first substantive examination of Canada’s foreign service in more than 40 years.) They identified a number of ways in which our foreign ministry has to be transformed. But that’s going to cost money, and the department’s budget has been cut. This transformation must include getting more Canadian diplomats, our eyes and ears abroad, out into the world so that we can understand problems when they’re emerging.

4. Our Indo-Pacific strategy. It’s one thing to have a strategy for this vital region, but another thing to fully implement it. We’ve seen a lot of trips by ministers and the prime minister this past year, and a new special envoy has just been sent to Jakarta, Indonesia. But if this is increasingly the centre of global economic growth and increasingly an important region in geopolitics, we can’t just pop in from time to time. We have to be present, building or rebuilding those relationships in the region.