There is ample evidence that higher education in North America and across the West is not adhering to the social contract implied by its public funding. Pick your favourite example: limited learning; the excesses of DEI; discriminatory hiring; cancelling unpopular viewpoints; antisemitism; extreme Left-skew in faculty political viewpoints (in spite of claiming to embrace diversity, equity and inclusion); the activist turn in university scholarship; questionable research. Something is seriously wrong with universities.
In Canada, provinces currently fund universities by handing over large sums of money to cover operating costs, while giving institutions considerable autonomy on how to spend it. This approach gives universities little incentive to align with public priorities.
Imagine if, instead of buying a car, you handed over a pile of money to a manufacturer with few strings attached and hoped they would build something worthwhile. What would manufacturers do? It’s because consumers actively choose between competing vehicles that manufacturers have the incentive to build cars that people want to buy.
I argue that provincial governments should apply a similar logic by using a funding formula that allocates money primarily at a more granular level than the institutional level, and that the departmental level is the right level.
Each university is organized into departments, such as physics or political science, that typically correspond to a specific field of study. Each department is responsible for the curriculum of its programs, for hiring, and for tenure decisions. Fields vary widely in what they prioritize. Some prioritize publications in top journals. Others see advancing versions of social justice as core to their mission. These priorities decide who the department hires, what it teaches, and the research it publishes.
Over the years, these faculty served on hiring committees, as department chairs, and in the top administrative roles that allocate funding. They also serve on committees that set and oversee university policies, hire academic administrators, and approve strategic plans. Academic hires thus shape the direction of the university as a whole. As a result, university governance tends to reflect the values and priorities of its faculty rather than those of the public.
As the main funders of public universities, provinces hold a lever: the university funding formula. In B.C., funding comes with a budget letter tied to specific student targets. Recently, B.C. has included specific targets and funding for priority programs in technology or health. My own sense is that administrators pay attention and are slightly more likely to grant hires for these programs, even with relatively weak incentives. I propose that this be extended to an explicit funding formula that commits to pay universities an amount that varies by department based on the number of faculty and students in the department.
For example, the funding formula might specify, for the Department of Wizardry at the University of Hogwarts, $50,000 per faculty member, up to a cap of 20 faculty members, and $4,000 per full-time equivalent students, up to a cap of 500 students. It could also specify metrics for changing that the next year. The dollar figures and caps would be determined by public priorities, based on consultations commissioned by elected representatives, such as Alberta’s Expert Panel. Such a model is akin to making a promise to a car manufacturer that specifies the cars we want and what we’ll pay for them.
There has been much discussion about what is right and wrong about our universities. Crucial for my proposal is that much of the relevant variation is between departments. Activist-oriented scholarship is mostly confined to a small number of departments. Teaching approaches, content, and job outcomes vary substantially by department. Much of this variation occurs across academic fields, but university documents, such as external reviews, course calendars, and job ads, provide institution-specific details. Thus, this mechanism could be used to prioritize job market needs (as in the B.C. example), fund a School of Civics, or reduce funding for activist departments or those with weak research standards, using the same broad policy lever, depending on public priorities.
More money for more students in priority departments gives the university the incentive to provide and promote high-quality courses and programs in these fields. More money for more faculty in priority departments gives the university the incentive to hire faculty in these departments to teach these courses, pursue valuable research, and lead their department and the university. Leaving ancillary expenses like administration out of the funding formula gives universities an incentive to free up money for faculty hiring and student learning rather than spending on administrators or activists.
That is, a funding formula tied to faculty and student numbers by department allows the province to match university incentives to public interest in the university’s teaching and research mission without interfering in university governance.
Institutional inertia guarantees that any change will be slow and gradual. This will require government oversight to set public priorities and review universities and departments, and Alberta’s current review is in a position to do so. But a transparent funding formula that gives universities the incentive to hire faculty and teach students in fields that are public priorities gets the incentives right. It’s the government’s most obvious and underused lever available.
