11-08-2025
Ontario universities must be released from their financial chokehold
Fred Gorbet is a former federal deputy minister of finance for Canada and served 12 years as a governor of York University. He is currently a fellow at the Balsillie School of International Affairs.
Over the past decade, Ontario's university funding has declined significantly, particularly on a per-student basis, leading to a funding crisis. Regulated tuition fees have been cut and frozen; grants have decreased; universities have been urged to rely on international students for funding; and the supply of international students is now being reduced and more tightly controlled. One university said it was facing insolvency and filed for creditor protection in 2021. Almost all others are looking at program cuts, increasing deficits and growing deferred maintenance.
Ontario universities need relief from the financial chokehold they have been placed in. Healthy and vibrant postsecondary institutions are critical to the province's economic prosperity and social well-being. They promote individual development and prepare students for success; they are essential sources of the R&D and innovation that enhance competitiveness and productivity; and they develop highly trained professionals that meet social needs. Universities are currently facing many challenges, including the public perception that the value of postsecondary education is declining. But the greatest challenge they face is underfunding.
A 2023 study by Ryan Romard and Randy Robinson for the Canadian Centre for Policy Alternatives estimated that it would require more than $5-billion a year to raise government support for university students in Ontario to the Canadian average. In the current political climate, a financially strained Ontario government is unlikely to find the resources to come anywhere near that target.
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It is recognized within the sector and by informed observers that universities have to change, and perhaps radically. As respected commentator Alex Usher recently wrote, 'Institutions can no longer solve their short-term problems by just recruiting another hundred international students. They actually have to change the way they do business. They have to change processes. They have to think about production functions and work processes in a way they haven't before. And they have to do it while trying to pivot to new missions that give them more traction with government and the public.'
But can universities successfully do this in a world where they are overly constrained by government regulation, an archaic financing formula and a lack of public financial support? I believe that the answer is no, and that a different approach to university financing is necessary to provide the institutions with the capacity to adjust.
First, fees should be deregulated and universities should be allowed to compete with one another. If universities were allowed to set their own fees, they would be empowered to make important management and governance decisions about where they want to compete and excel, and what kind of institution they wish to become. In a deregulated world, one would expect to find increased specialization, a greater variety of institutional offerings, more centres of excellence, and possibly increased co-operation and collaboration among institutions.
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There should be three conditions on complete fee deregulation. First, universities would have to announce their fees early enough to provide prospective students with adequate information to make enrolment decisions. Second, they should provide assurance to incoming students that fees would not significantly increase during their terms of study. Third, they would have to make a strong commitment to promote accessibility.
In order to make this adjustment work, the government should provide transition support. It should maintain the current per-student allocations to each university, but deliver the funds as a block grant to the institution, indexed to inflation, for at least a 10-year period, to facilitate the transformation to a more competitive environment.
Additional policies should also ensure that accessibility is maintained. Those who do not need assistance should not receive it through artificially constrained tuition fees, but those who do need it should be able to get it.
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Universities should be required to distribute a fixed amount (say, 50 per cent) of the additional revenues that they receive from fee deregulation in the form of income-based student assistance. Programs should be transparent and audited by the government. There should be penalties for non-compliance.
The government should also work with universities and financial institutions to broaden the Ontario student-loan program. Two changes to consider would be to a) extend the interest tax credit to loans granted by private financial institutions and lengthen the carry-forward period; and b) to develop an income-tested repayment program for student loans.
Successful implementation of these reforms would ensure that limited government resources are directed to those most in need. And they would introduce a financial framework where universities have accountability and the degrees of freedom necessary to adjust to new realities, to thrive as vibrant institutions, and to continue contributing to the well-being of Ontario and Ontarians.
