Melting Newfoundland’s Tuition Freeze

Recent comments by the Auditor General of Newfoundland and Labrador have sparked debate throughout the province surrounding public investment in post-secondary education. Specifically, the Auditor General suggested the need to review the existing tuition freeze and evaluate whether it has been effective. By considering the high costs of the tuition freeze and the lack of significant benefits, however, it is clear that ensuring fairness for provincial taxpayers requires some form of change. Thus, the provincial government should consider removing the tuition freeze in the upcoming provincial budget.

In 2001, the Government of Newfoundland and Labrador announced a program to freeze tuition in an effort to keep post-secondary education affordable in the province and encourage enrolment. This program focused primarily on increasing core funding to two post-secondary institutions in the province, namely College of the North Atlantic (CNA) and Memorial University of Newfoundland (MUN), including spending over $282 million since 2005. Further, tuition was lowered every year from 2002 to 2005 for a total decrease of 22.7 per cent at the cost of over $50 million. Now, provincial tuition rates are second only to Quebec for affordability, yet the question remains: has this investment been worth it?

To consider whether it has been, it is important to evaluate how effective the tuition freeze has been in meeting the goals that the policy was to address. The provincial government implemented a tuition freeze for two reasons: 1) encouraging university enrolment in a province that has an ageing population and substantial outmigration in the last half-century and 2) helping ensure that post-secondary education for residents of the province is affordable. An appeal to the evidence, however, shows that this policy has not effectively met these goals.

While there are serious demographic issues set to face the province over the coming decade, including severe labour shortages due to a lack of young skilled workers in an ageing workforce, the tuition freeze has not been successful in attracting skilled young people to enrol in provincial institutions or to stay in the province after graduation. Instead, we have seen increased enrolment from out-of-province Canadian students who pay the same discounted rate. Out of province enrolment has increased by 64 per cent, however, less than half of them (43 per cent) are staying in the province after graduation to work and live. Further, enrolment for provincial residents has actually decreased by 13 per cent in the same period. This development should signal to the provincial government that the policy is not working. It also shows massive inequity for provincial taxpayers who subsidize students from other provinces to earn a post-secondary education.

Furthermore, while the tuition freeze was put in place to ensure that provincial residents can afford to earn a post-secondary education, the existing policy ignores recent reforms made to the provincial student aid program that already ensures this possibility. Over the last decade, the Government of Newfoundland and Labrador has invested over a $100 million in their existing student aid program and has modified the program criteria to ensure more students are able to access Student Aid services. Most notably, the Government has announced the conversion of provincial student loans to non-repayable grants to take effect this fall. These reforms have significantly reduced the barriers for provincial residents to earn a post-secondary education and would continue to assist students in earning an education without the continued implementation of a tuition freeze.

As indicated in my last blog post, faltering oil prices means severe consequences for the government of Newfoundland and Labrador and illustrates a need to curb spending in risk of a near-billion dollar deficit. By cutting the tuition freeze, Newfoundlanders and Labradoreans would no longer be subsidizing the tuition rates of out-of-province students, nor be on the hook for an ineffective public policy.

Devin Drover is an AIMS on Campus Student Fellow who is pursuing an undergraduate degree in economics at Memorial University. The views expressed are the opinion of the author and not necessarily that of the Atlantic Institute for Market Studies

The Importance of Growth

Of the current issues facing the Canadian economy, the biggest of them depend on how Canada’s trade negotiations with other countries settle. The Comprehensive Economic and Trade Agreement (CETA) with Europe, for instance, creates enormous potential for Canada’s export-oriented industry to expand. In Atlantic Canada, however, there could be severely negative consequences if the provinces fail to take steps that bolster economic growth and attract new talent to the region. The new method of determining health transfer payments, which focuses on population and GDP, is just one illustration of how important economic and demographic development is in Eastern Canada.

Canada’s economic success is rooted in exports, and the export-industry, which is composed primarily of natural resource extraction, has an opportunity to not only supply other countries with raw materials and manufactured goods, but also value-added products. Reducing and eliminating barriers to trade with the European Union (EU) will likely benefit key economic sectors, such as energy, manufacturing, and seafood, and freer trade between Canada and Europe will encourage domestic economic activity, as it expands the market available to Canadian industry. The EU is currently Canada’s second-largest trading partner–behind the United States–and, in 2012, exports to Europe totalled $41 billion. However, it is critical that Canadian industry remains competitive in foreign markets and focuses on value-added products, as well as supplying factors of production. In fact, CETA eliminates protective barriers that currently prevent Canadian industry from exporting value-added products into Europe, and vice-versa, which levels the competition, in addition to providing an opportunity for Canadian-EU businesses to produce the most desirable products.

CETA also creates enormous potential for the Atlantic Provinces to expand the agriculture and seafood sectors into the EU, but they face significant demographic challenges that could restrict new prospects. In the last several years, Atlantic Canada’s population has declined and the average age has increased dramatically. In 2011, roughly 16 per cent of Atlantic Canada’s population was aged 65 or above, compared to 14.4 per cent of Canada’s entire population, and by 2036, Statistics Canada expects it to be around 29.1 per cent (compared to 23.7 nationally). Furthermore, Canada’s labour force increased by 1.1 per cent between 2012 and 2013, however, Atlantic Canada’s increased by half that amount, which is due in large part to an outflow of young individuals and families and an influx of retirees. As a result, the region is not equipped to attract large-scale industry, especially compared to British Columbia, Alberta, and Saskatchewan, and has contributed much less than other regions to Canada’s GDP in recent years. This is an important caveat, considering the federal government will begin calculating the Canada Health Transfer using population and GDP in 2018. If the Atlantic Provinces fail to generate economic growth and attract newcomers, they will receive less than other provinces to fund their healthcare systems, which will become more cumbersome in the future due to an ageing population and declining tax base.

In coming years, these two developments–freer trade and the new healthcare funding mechanism–will play a large role in determining Canada’s economic prosperity and the viability of its healthcare system. Canada’s export sector and healthcare system are rooted historically in the country’s history and it is unclear what changes will materialize because of modifications to them. In any case, the Atlantic Provinces need to take measures that bolster economic growth and attract new talent, both of which will allow them to take full advantage of CETA and other free trade agreements and create a sustainable source of funding for their healthcare systems.

Rachel Lowe is a 2013-2014 Atlantic Institute for Market Studies’ Student Fellow. The views expressed are the opinion of the author and not necessarily the Institute

Reforming Canadian Healthcare

The provinces are responsible for administering and delivering healthcare in Canada and while provincial jurisdiction may appear odd, it was not of major concern when the Fathers of Confederation ratified the British North America Act in 1867. Following several years of debate, however, the Judicial Committee of the Privy Council declared the provinces responsible for administering and provisioning healthcare. The federal government is responsible for public health, in addition to providing healthcare to certain groups, including First Nations, Inuit, military personnel, and federal inmates. It does provide funding to the provinces via the Canada Health Transfer, which is supposed to assist them with costs and ensure some degree of equivalency between provincial healthcare systems.

Former Saskatchewan Premier Tommy Douglas, widely recognized to be the “Father of Medicare,” fought ardently for the implementation of a publicly funded healthcare system. In 1962, one year after his departure from provincial politics, Saskatchewan began providing public healthcare and, shortly thereafter, so too did Alberta. Former Prime Minister John Diefenbaker, in 1958, announced the federal government would fund 50 per cent of provincial healthcare, and eight years later, then Prime Minister Lester B. Pearson ratified this motion.

As a result, Ottawa’s role in healthcare funding is controversial and has been a major policy issue in Canada. Indeed, without federal funding, there would be significant disparities among the provinces in terms of quality, yet, despite these concerns, healthcare innovation is provincial jurisdiction.

The debate over federal funding remerged following the expiration of the Canada Health Accord, established in 2004 under Paul Martin’s tenure as Prime Minister of Canada. It guaranteed six per cent annual increases in funding for healthcare and was supposed to help with deficiencies, such as high wait times. Stephen Harper’s government recently committed to a six per cent increase until 2017, after which the government will fund based on inflation-adjusted economic growth (although the level of funding will not fall below 3 per cent). This development has prompted critics to demand the government return to guaranteeing the six per cent increase, arguing that underfunding issues could worsen the system, and more worrying, allow new issues to emerge.

However, despite funding increases, very little has changed in terms of quality. Kelly McParland of the National Post, for instance, notes the lack of progress in reducing wait times. Moreover, citing the Health Council, he noted that homecare services for seniors are inadequate, primary care is insufficient, and prescription drugs are unaffordable. For example, as reported by the National Post, the federal government has given $41 billion in extra healthcare funding since 2004, yet in 2010 Canada ranked last of 11 countries in wait times.

McParland is not the sole critic. Indeed, there are several reports revealing the shortcomings of Canada’s healthcare system given the amount of money spent on it. Funding, therefore, is not necessarily the issue. There needs to be real reform of the Canadian healthcare system: Ottawa should retain its role, however, the provinces must consider new healthcare models as a means of strengthening their programs. Perhaps the first step ought to be reforming the Canada Health Act to be less restrictive in terms of delivery requirements. The Act requires that healthcare be publicly administered, greatly restricting any partnership with private entities. France, on the other hand, embraces a two-tier system, which typically performs highly in comparison to healthcare systems administered by other rich, democratic countries, in terms of both cost and outcome.

Randy Kaye is a 2013-2014 Atlantic Institute for Market Studies’ Student Fellow. The views expressed are the opinion of the author and not necessarily the Institute