Performance-based funding comes to the Canadian postsecondary sector

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Performance-based funding, or PBF, has come to Ontario. Last fall, the provincial government formally announced the timeline and metrics for its new funding model, which will impact 45 publicly supported colleges and universities. Doug Ford’s Conservative government first announced its plans to implement the new funding formula in 2019, but temporarily put the scheme on hold because of the pandemic.

Ontario’s PBF model relies on 10 metrics – six related to skills and jobs, and four corresponding to economic and community impact – to calculate how much money it gives to individual learning institutions. It will first take effect in 2022-2023, with 60 percent of provincial funding to be impacted by the new measures by 2024-2025.

Observers suspect Ontario will merely be the first to roll out PBF. “It could definitely spread,” says Marc Spooner, a professor of educational psychology at the University of Regina who has commented periodically on “the folly” of PBF funding, including a piece for The Conversation Canada. While Saskatchewan, Manitoba and New Brunswick have reportedly been pondering this approach, Alberta is the most likely to follow Ontario.

Alberta struck a panel to consult on its finances and that group’s 2019 report recommended, among other things, to recalibrate its higher education funding model to achieve “better outcomes for students.” The province said it would comply and introduce PBF, but put the plan on pause last June for at least one year. Its model would eventually impact 40 percent of provincial funding.

“I’m quite sure the [Alberta] government is committed to it and I’d expect to see it at some point in the not-too-distant future,” says Kevin McQuillan, a professor in the department of sociology at the University of Calgary. He says Ontario’s experience could allow Alberta and other regions to assess its impact and also gauge public opinion. “If it turns out to be a political problem for the Ford government, then it might make other jurisdictions a little shyer about moving forward,” says Dr. McQuillan.

The value of higher education

Already, Ontario’s move has garnered disapproval regarding the message it sends about the underlying philosophy of postsecondary education. “The province is saying, ‘We don’t value higher education for the betterment of society. It’s entirely for the growth of the economy and labour markets,’” says Sébastien Lalonde, chairperson of the Canadian Federation of Students (CFS) Ontario. Dr. Spooner agrees, saying the measures are “an attempt to redefine what a university is and what a university does.”

Mr. Lalonde says such a funding approach rewards institutions that focus on programs that lead to immediate jobs and good pay, such as STEM subjects, and puts fine arts and humanities programs at risk. Further, it favours big schools, he says. “We fear what it will do for the smaller colleges and universities.”

Others suggest PBF simply does not work. “This is an idea that’s failed almost everywhere it’s been implemented,” says Dr. Spooner. In the U.S., where versions of PBF are used in 30 states, it has not increased graduation rates as intended. A December 2020 systematic analysis that reviewed 20 years of previous reports concluded that PBF led to either no impact or a modest increase in retention and graduate rates in the U.S., but led to access and equity issues for disadvantaged students, worsened the situation of under-resourced schools and triggered schools to game the system.

Dan Lang, professor emeritus with the Ontario Institute for Studies in Education of the University of Toronto, thinks Ontario’s system won’t impact education in meaningful ways. Since schools can declare specializations, they can set themselves up to succeed – plus there are other ways to tweak and game the system. “The performance funding scheme penalizes or rewards collective performance, so it allows institutions to offset minuses.” He suspects schools will calculate the cost of, say, increasing their graduation rates in one program by investing in student supports and discover this would be pricier than the government funds it could lose.

What’s actually at stake

Importantly, Dr. Lang notes, there’s actually not that much money at stake. In Ontario, provincial funding accounts for just 25 percent of total revenues for universities and colleges, and PBF will eventually impact 60 percent of those grants – but no school would ever lose anywhere close to that amount. Institutions in Northern Ontario will be affected even less, thanks to the special grants they get for teaching an underserved population. Calculations from higher education consultant Alex Usher on his Higher Education Strategy Associates blog suggest only about 1.3 percent of provincial money would be at risk for universities, “and in practice it’s probably a lot less than this,” he writes.

“There isn’t going to be enough financial incentive for any given university to change. Whatever it was doing, it’ll keep doing,” says Dr. Lang. He says in Quebec, where the province ponies up nearly 50 percent of revenues for higher education institutions, PBF could potentially have more impact.

Dr. Lang notes that jurisdictions that have succeeded at PBF, such as Tennessee, have offered additional funds to reward schools for their performance. He doubts Ontario, which has spent billions of dollars on the pandemic, plans to offer a financial incentive. Alberta’s entire motivation for moving to PBF is to save money, Dr. Lang says, and the province plans to claw back education funding.

PBF has its proponents, who say it could address the growing skills mismatch between grads and the job market. Dr. McQuillan thinks this is more of a hope of PBF, not a reality. “The choice of what people are going to study is a complicated one,” he says.

But such an approach to funding does help a government appear more responsible with its hefty education budget. “Postsecondary institutions are expensive to operate. Performance-based funding pushes governments in the direction of assessing if they are getting their money’s worth and looking at indicators of what schools are actually doing,” says Dr. McQuillan.

And while academics and education groups across the country continue to voice their displeasure with this type of funding model in Canada, Ontario’s universities say they’re fine with the program. That includes Cheryl Regehr, vice-president and provost at U of T, who told University Affairs in a written statement: “We applaud the government’s implementation of a differentiation framework as a means for setting out the province’s objectives for postsecondary education.”