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CAUT Bulletin Archives

May 2000

It's Open Season on the Public Purse for Private Universities

Bill Bruneau & Chris Charlton
In November 1999, the premier of Ontario announced he would "welcome advice on whether we ought to allow those who seek to create private universities, fully funded by private money, with no taxpayer dollars, in the province of Ontario." Only five months later, without consulting formally with anyone, the Ontario government announced it had approved the establishment of private, degree-granting institutions in Ontario.

So what happened? Did the premier find a way of adding capacity to the university system without drawing on public funds? Or is he simply hoping no one will notice taxpayer dollars are now subsidizing shareholder profits at private universities?

Judging by the experience of other Canadian jurisdictions, the answer is the latter. Most Canadians would be surprised to know just how extensively we publicly subsidize private universities in this country.

The network of subsidies for private post-secondary education in Canada is remarkable, partly because it is so extensive, and partly because it is a "network." Various subsidies work together, rather than singly, to make it possible for private institutions to benefit from public financial support.

Even a cursory look at the list of subsidies currently being offered by all three levels of government in Canada shows how far taxpayers are on the hook for private universities.

Charitable Status

Just about all private non-profit institutions of post-secondary education in Canada will claim charitable institution status under the guidelines of the Canada Customs and Revenue Agency. Although private universities can only acquire "charitable" designation if they are registered under the provincial Societies Act or equivalent, or if they are granted a charter by provincial legislation, it is relatively easy to be registered or chartered. British Columbia's Trinity Western University, for example, has the benefit of being both a registered society and an institution chartered by the British Columbia Legislature.

And, once either one of these designations is achieved, private donations to those institutions become eligible as income tax deductions. (In the case of profit-making private universities, the situation is more complicated – but that, for now, is uncharted territory.)

For private institutions, the tax-deductibility of donations is a sizeable and highly significant indirect public subsidy, a subsidy so important it becomes an integral part of the institution's planning and budgeting arrangements.

Tax Incentives for Students

Just as donors to private institutions can write off their contributions against income, so students can claim both their tuition fees and education credits. Since student fees account for the largest part of a private university's operating funds, any tax benefit for students becomes an indirect subsidy to the private institution.

Student Loans

The Canada Student Loan Program, soon to return entirely to government hands, recognizes any post-secondary institution that is "appropriately registered" with a provincial government. Thus, any benefits that students acquire under this plan mirror the effect of student tax incentives, and become indirect subsidies to the institutions themselves.

Research Grants

Staff at private universities will inevitably apply for research grants from Canada's granting councils. Again, this is a public subsidy that supports the work of a private institution.

Zoning Variances

Municipal and provincial zoning authorities (all public bodies, of course) will have to licence/countenance the rezoning of lands for high-density uses. After all, a university or other post-secondary institution implies a novel use, or a "new density" on the property it seeks to occupy. Enormous value may be realized in various future real estate deals, developments or speculations. An initial public decision thus becomes a subsidy for all future operations of the private institution.

Dispensation for Municipal Services

Along with municipal changes to zoning by-laws, private institutions also benefit from special dispensations in the provision of services such as water and sewer. Once such hook-ups are in place they, too, become indirect subsidies that increase the overall value of the private institutions over the long term.

Property Tax Exemptions

Municipal authorities routinely grant property tax holidays or exemptions to industries they wish to attract. Additionally, in the case of private post-secondary institutions, they may rely on the precedent of churches and "general educational" institutions, all of which enjoy full property tax exemptions. Such exemptions are, of course, an indirect subsidy for all the operations of the private institution.

Subsidies for Training

Training programs (for everything from airplane piloting to computing technology to cooking) are routinely supported by direct government subsidies, and/or indirect subsidies to students. Private universities and colleges are certain to apply for such subsidies. To take the British Columbia example, of the more than 1,400 private institutions offering some form of post-secondary training or education, a number are in receipt of training subsidies from provincial and federal sources – as the pertinent government department annual reports merrily show.

"Loans" of Library & Facilities

Library, Internet, and other analogous public facilities have developed over long periods of time at enormous public expense. Private institutions expect to use these facilities, and such "free-riding" on public resources minimizes the institution's cost of delivering its service, thus becoming yet another subsidy.

Matching Grants

Industrial research and development programs – some of them operating by direct government subsidy, others under tax-reduction regimes – already benefit a wide range of public post-secondary institutions and private industrial bodies. There is no reason to expect private universities would not also benefit from the same form of subsidy.


NAFTA and WTO rules assure that subsidies of certain kinds, operating for the benefit of public institutions, must operate similarly for out-of-country institutions that wish to compete in Canada. This would mean institutions such as Gonzaga University, City University, the University of Phoenix, and their like, may have a legal right to extensive programs of direct and indirect public subsidy.

Capital Funding Allocations & Subsidies

The Ontario SuperBuild program (and similar policies and programs across the country) must surely be open, on principle, to applications from private post-secondary institutions. Although the Ontario government is on record as saying private universities will not be eligible for such funding, we wonder whether this provincial decision would survive a legal challenge.

Two Very Different Systems

Although this list of subsidies is likely not comprehensive, it does suggest public dollars are being spent on the provision of private benefits to a significant number of Canadian corporations. What is not apparent, however, is whether any public benefit accrues from these expenditures.

Theoretically, it could be argued that at a time of increasing demand for a post-secondary education, private universities add much needed capacity to a system that is struggling under the corrosive effects of years of government under funding.

Yet, there is no guarantee private universities will offer the same, high quality education that has been the hallmark of Canada's university system. In fact, in most jurisdictions, the approved programs for private universities do not have to meet provincial standards. In Ontario, for example, documents provided by private universities have to be accompanied by the following statement: "The ministry does not certify that this program meets Ontario university standards. Potential registrants should verify for themselves whether the degree program offered would be recognized by potential employers and/or other post-secondary institutions."

Since private universities are based on a free-market model, the assumption is simply that the quality must be high in order for the institution to be able to attract students at relatively high tuition costs.

Conversely, however, the new attitude to private post-secondary education means students who can afford to attend a private institution, can circumvent the more stringent requirements of Canada's public universities, thus (in an indirect sense) "buying" their degrees.

Public dollars subsidize two very different systems of post-secondary education: a public system premised on
the notion that every willing and qualified student should be able to attend; and a private system that ensures every willing and wealthy student can get some sort of post-secondary education.

And herein lies yet another rub – governments are not inclined to ensure private universities will deliver an education comparable to that being offered by the country's public universities. The Ontario government announcement of a new quality control agency for post-secondary education has a minimalist ring. The government view seems to be that standards must be adjusted to accommodate private providers, not that private providers must meet the high standards already achieved in the public system. Tax dollars are thus being spent without any real accountability for excellence. By any sensible standard, that is scandalous.

Instead of allowing private universities to syphon taxpayer money away from public institutions, governments across the country must now ensure Canadians get a return on their investment. Only a high-quality, public system of post-secondary education can meet that test and that goal. Governments should not foster private benefits ahead of the public good. It's elementary.

Bill Bruneau is professor of educational studies at the University of British Columbia; Chris Charlton is Policy Analyst with the Ontario Confederation of University Faculty Associations.

The views expressed are those of the authors and not necessarily those of CAUT.