Private donations and partnerships: solving or contributing to the funding crisis?

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While commenting the recent $15-million donation from businessman Paul G. Desmarais, leading to the naming of the University of Ottawa’s Desmarais Building, La Rotonde columnist François-Olivier Dorais claims that : «Dans un contexte où le financement public des universités reste limité et que les hausses de frais de scolarité sont impopulaires auprès des étudiants, le recours à des fonds privés reste souvent la solution la plus lucrative.» (When public funding for universities remains limited and when tuition fee increases are unpopular with students, turning to private funds often remains the most lucrative solution.) [La Rotonde, November 12th issue]

 

This argument, an almost exact repeat of speeches from Gilles Patry and other university administrators in Ontario, is ironically presented by Dorais as an «alternative vision» on public-private partnerships in universities. In fact, his English-language counterpart, Maureen Robinson of The Fulcrum, wrote two months beforehand: «At the University of Ottawa, recent partnerships with, or donations from, IBM, Bruker, Husky Energy, Ian Telfer (CEO of Goldcorp Inc.), Paul G. Desmarais (former CEO of Power Corporation), Jay Hennick (CEO of FirstService), and Cognos have allowed the U of O to offer degree-enhancing tools, namely equipment, buildings, and special programs, that would be out of its reach otherwise. »

The goal of this article is to place these donations in the greater context of funding of public universities and to present the relevant numbers, both aspects missing from the articles of Robinson and Dorais or from the speeches of U of O officials. The consequences of this debate are not merely academic. Both the columnist and the administrators use the «necessity» argument to push aside any ethical consideration – conflict of interest, labour rights or environmental standards – that others would like to bring to this debate.

 

Where does the University of Ottawa gets its revenues from?

[Note : All financial data are taken from the U of O budget, available on-line: http://www.uottawa.ca/services/planfin/en/bdgt/bdgt-e.htm%5D

The university’s budget is made of two main parts: an operating budget of nearly $500 million and a research budget slightly over $150 million. (Exception: Some revenue-generating services, like residences, food services and parking, appear in a separate budget.)

The operating and research budgets are independent from each other, which means that research contracts and subsidies (both public and private) cannot be used for operating expenses. Professor and support staff salaries, maintenance and energy costs for buildings, services such as the library, as well as scholarships are all examples of operating expenses. As we’ll see below, these operating expenses are paid in great part by governmental subsidies and tuition fees.

Let’s compare the relative importance of different sources of operating revenues between 2003-2004 and 2006-2007. This period coincides with the « unprecedented » fundraising campaign that brought in $225 million of private funds (individual and corporate donations) to the U of O.

Provincial government subsidies : 52,8% in 2003-2004; 56,6% in 2006-2007 (+3,8%)
Tuition fees and other fees : 40,7% in 2003-2004; 37,2% in 2006-2007 (-3,5%)
Investment revenues : 2,7% in 2003-2004; 2,5% in 2006-2007 (-0,2%)
Other revenues : 3,8% in 2003-2004; 3,7% in 2006-2007 (-0,1%)

By adding the years in between, one can see that over four years, the government share of the University of Ottawa funding gradually went up, the share paid by students went down and other revenue sources remained constant. Despite the large media attention for private partnerships, it is really an increase in provincial subsidies, added to a tuition fee freeze between 2004 and 2006, which caused the (relative) reduction of the students’ financial burden. As for the government share, it is still largely inferior to its pre-1990 value in Ontario and to its current value in Quebec (about 80% of total operating revenues, in both cases).

Some claim that with an increase in private donations, the university could invest this money and use the interests to reduce its dependancy on public funds. In 2007-2008, the university planned to receive slightly under $10 million in investment revenues.

Let’s consider an extreme case where eight private donors would mimic Ian Telfer’s donation to the School of Management, by each giving $25 million to one of the eight other faculties (for a total $200 million). When he was invited to speak about the fundraising campaign to the Graduate Students’ Association (GSAÉD) Council, former vice-president university relations David Mitchell said that 4,5% of U of O investment values was put in the operating budget each year. This means that, in our extreme scenario where the university successfully « sold » the name of all its faculties, this would translate in $9 million in additional revenues. Even if that would double current levels of investment revenues, this share would still account for less than 5% of the operating revenues. As a comparison figure, the tuition fee hikes for a single year (between 2005-2006 and 2006-2007) added up to $11 million in extra revenues..

Private donations and partnerships which receive so much media attention cannot offer a sustainable solution to reduced public funding of universities. One could even say that since these partnerships give an excuse to the governement to reduce its share, they even contribute to this funding crisis.

 

What about ethics?

This last section should be sufficient to dissolve most myths on the financial necessity of private donations and partnerships.

However, would that mean that ethical criteria should be left aside if the financial weight of those partnerships was more important? «Au-delà des réprimandes que l’on peut adresser au donateur […] il y a l’intérêt des étudiants» (Beyond anything blame we could give to the donator […] there is the students’ interest », says François-Olivier Dorais. Is it fair to fund the studies of a future Canadian CEO at the Telfer School of Management from the benefits of Goldcorp’s Central America mines, which run in countries were health and environmental standards are lower and where local population pay the price? To ignore that question simply because the cheque is large enough, seems irresponsible, to say the least.

We live in an increasingly interdependent world, where all issues are closely related, and it is not possible anymore for student journalists, or student representatives, to speak in isolation of the «students’ interest », without considering the impact of these choices on the rest of society.

 

Philippe Marchand
December 29, 2007

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