Sub 2002 Finance
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The document provides a critique of the Canadian government's policies around post-secondary education and innovation. It argues that while the economy has grown, funding for post-secondary education has declined significantly. It offers a detailed analysis of the government's policy papers on innovation and post-secondary education, arguing they have largely proposed only superficial solutions. It concludes by recommending changes to student loan programs and expressing criticism of using tax measures as a means of funding post-secondary institutions.
![Canadian Federation of Students
12
carry forward education and tuition credits the education tax credit measures introduced in
ultimately gain less value from their credits the U.S. appear to have provided state
than students who have enough income to claim governments with an incentive to raise tuition
them in the year they are assessed. Lower fees at public institutions9.
income students are thus penalised for not
having enough income to claim the credits Recommendation 14:
when they are first made available. With the The federal government should cancel the
total carry forward of education and tuition fee education and tuition amount for those
credits projected to reach $380 million by 2003, earning over $70,000 and apply the savings
the cumulative amount lost by lower income directly to new national system of needs-
students through this depreciation could run based grants.
into the millions of dollars7.
The Student Loan Interest Credit
The Student Loan Interest Credit is probably
the least useful of current federal tax
expenditures for education. Though the total
"cost" of this credit was over $71 million in
2000, the average amount claimed on it works
out to only $9.50 per month worth of debt and
tax "relief" per claimant. Low income earners
(less than $20,000) only received an average of
$6.83 a month. As this credit is only available
on interest paid, it provides absolutely no relief
to the most desperate student loan holders who
are unable to keep up with their loan payments.
With average student debt loads approaching
$25,000, this credit is totally ineffective in
addressing the ongoing crisis of student debt.
Tax credits do not increase access
to higher education
On the whole, tax credits are "back-ended"
measures and do little to improve access for the
most economically disadvantaged groups. Tax
credits require students to pay money "up front"
in order to (maybe) have it refunded at some
point in the future. As a policy, education tax
credits do nothing to address the initial
financial obstacles that prevent low and lower
middle income students from accessing higher
education. Thus, education tax credits are most
likely to benefit those who require little
assistance with high tuition fees. A recent study
by Harvard University professor Dr. Bridget
Long found that this was precisely the outcome
of education tax credits introduced in the
United States: "[a]lthough one goal of the tax
credits was to increase access to higher
education, this study found no evidence of
increased postsecondary enrollment among
eligible students"8. Long's study also found that](https://image.slidesharecdn.com/sub-2002-finance-090923225334-phpapp01/85/Sub-2002-Finance-13-320.jpg)
![2002 Submission to the Standing Committee on Finance 13
Footnotes to Innovation Section: Appendix A
1. “Money + Science = Ethics Problems on From the Canadian Labour Congress's 2002
Campus.” The Nation. March 22, 1999. Composite Resolution on Unemployment
Insurance:
2. Cited in “The Kept University.” 2001
Science and Technology Policy Yearbook Therefore be it Resolved
(American Association for the Advancement of Training entitlement and benefits [be]:
Science), Teich, A. et al. eds. 1. expanded beyond apprenticeship so that
regular EI benefits are available for all
3. The Natural Sciences and Engineering forms of workplace training;
Research Council supports approximately 75% 2. accompanied by a requirement for: the
of faculty in the so-called “hard” sciences. development of a workplace human re-
source and training plan; Canada-wide
training and occupational standards;
Footnotes to Tax analysis: recognition of prior learning and worker
experience; a primary role for public
1 Department of Finance Canada Tax Expen- education to ensure access, high standards
ditures and Evaluations 2001 and accountability; and union participation
in approving the training plan and establish-
2 The education amount has risen from $80 ing standards with employers, education and
per month to $400 a month since 1996, but government;
the actual credit is calculated by multiplying 3. coupled with an EI premium reduction for
the total of the education and the tuition fees employers who provide paid education
amount by the lowest federal tax rate (16% leave or workplace training equivalent to
for 2001 and 2002, and 17% on earlier what is provided by EI training insurance
returns). (similar to the premium reduction for
employers and their employees with private
3 The most recent year for which interim insurance plans that top-up maternity,
statistics are presently available parental, and sickness coverage);
4. accompanied by the same protection of
4 Canada Customs and Revenue Agency worker employment rights in federal and
preliminary figures provincial labour standards that are pro-
vided for EI maternity and parental benefits;
5 Department of Finance Canada Tax Expen- 5. framed so that training in the event of job
ditures and Evaluations 2001 loss is the equivalent to job search; and
6. framed so that hours of work prior to a
6 Department of Finance Canada Tax Expen- training count as qualifying time for benefit
ditures and Evaluations 2001 entitlement during and following leave.
7 Department of Finance Canada Tax Expen-
ditures and Evaluations 2001
8 Bridget Terry Long "The Impact of Federal
Tax Credits for Higher Education Ex-
penses", Prepared for the NBER Volume
and Conference: College Decisions: How
Students Actually Make Them and How
They Could, Harvard University August 2,
2002
9 Bridget Terry Long "The Impact of Federal
Tax Credits for Higher Education Expenses"](https://image.slidesharecdn.com/sub-2002-finance-090923225334-phpapp01/85/Sub-2002-Finance-14-320.jpg)
Sub 2002 Finance
- 2. 2002 Submission to the Standing Committee on Finance 1 Introduction it was a decade ago. The Canadian Association of University Teachers estimates that an The growth of the Canadian economy over the immediate investment of $2 billion would be past year has created unique challenges and required just to restore college and university opportunities. The Canadian economy operating funds to the level that they were at continues to outperform the US economy and the beginning of the 1990s. most European economies. Canada’s Gross Domestic Product (GDP) continues to climb In the following brief we will document the and job growth remains strong. Despite these policy effects of these cuts. In addition, we will promising developments, Canada is also offer a critical analysis of the largely patchwork growing in another less desirable area, what policy initiatives for post-secondary education Judith Maxwell referred to as a social deficit. that the federal government has taken in recent This contention is backed by an array of budgets. Though the past three budgets have troubling data. Take, for example, that in 2001, announced a variety of new policy initiatives, the Canadian Centre for Policy Alternatives we will argue in this brief that these measures (CCPA) reported that between 1989 and 1998 have, for the most part, been cosmetic. In the average after tax income of the poorest 20% addition, we will offer a critique of the federal Canadians dropped by 5.2%, while the government’s recent policy of using the tax wealthiest 20% saw their incomes rise by 6.6%. system as funding vehicle for post-secondary The same study found also that in 1998 the education. wealthiest 20% earned 45.2% of all market The brief will be divided in four sections. The income, against only 3.1% for the bottom 20%. first section will respond to the federal These numbers confirm an earlier study by the government’s recent policy paper on innovation Canadian Centre for Social Development’s entitled Achieving Excellence. The second (CCSD). According to the CCSD’s Canadian section will offer a detailed assessment of Fact Book on Poverty there are 1.3 million Knowledge Matters. The third section will offer more poor households in Canada than there several recommendations on the Canada were 20 years ago. Between 1981 and 1997, the Student Loan Program. The final section will be rate of poverty among young families more a critical assessment of the recent move toward than doubled from 21.7 per cent and 46.1 per tax measure as a policy solution to the cent. challenge of ensuring the accessibility and In examining the growing gulf between the affordability of Canadian colleges and prosperous and the desperate in Canada, it is universities. clear that one of the key dividing lines is access to education. Throughout Canadian history, no Section I – Innovation for Whom? other institution has been more successful in Canada’s Innovation Strategy expanding new opportunities to Canadians. As the Canadian workforce adjusts to the realities On March 14, 2000, a letter with the signatures of the new economy this point becomes even of 1,400 of Canada’s most prominent scientists more compelling. Human Resources and academics was presented to Prime Minister Development Canada (HRDC) reports that by Jean Chrétien. The letter rejected the 2003 close to 75% of all new jobs will require conclusions of the report of the Expert Panel on three years of post-secondary education. the Commercialisation of University Research. The signatories consisted of eminent Despite these difficult challenges Canadian researchers in every academic discipline. The colleges and universities have seen a dramatic sweeping nature of the report’s commercially drop in public funding. As a portion of GDP, oriented recommendations elicited this spending on post-secondary is education down unprecedented response. Among other by over 50% since the 1980s. Public spending suggestions, the Panel concluded that “the on higher education was cut drastically from commercialisation of research” be added as a 1991/92 to 1997/98, and despite some fourth mandate to the mission statement of restoration of funding since 1998, real per universities. capita funding remains at least 17% lower than Unfortunately, much of the tone and substance
- 3. Canadian Federation of Students 2 of the Expert Panel’s report is repeated in a. Research Agenda Achieving Excellence, thus making the Strategy is a thinly veiled reassertion of the “The biotech revolution itself would not have previously rejected political objectives. For happened had the whole thing been left up to example, Achieving Excellence calls on the industry,” federal government to: “Support academic –Paul Berg, Nobel Prize winning biochemist, a institutions in identifying intellectual property pioneer in the field of DNA splicing with commercial potential and forging Traditionally, university and college research partnerships with the private sector to has enjoyed the freedom to investigate that commercialise research results,” (page 52). which no market-driven laboratory would have Such a statement could have been lifted directly an interest. Basic/exploratory research, research from the Expert Panel’s executive summary. on health issues in developing nations, and However, Achieving Excellence couples research on poverty are all examples of projects alarming passages like this one with many that serve the public interest, but have very laudable targets, such as the doubling of little immediate commercial value. Yet with the Masters and PhD fellowships. Despite clear proliferation of public-private partnerships in allegiances with the vision of the Expert Panel’s research, the research agenda is increasingly report, Achieving Excellence is a more determined by the short-sighted market criteria balanced document and presents several favoured by industry. For the less commercially promising policy ideals. This brief will oriented fields, this means less funding and a highlight the inadequacies of the papers, as well slow decline. For the potentially lucrative as provide productive suggestions for the fields, corporate funding means corporate implementation of an Innovation Strategy interests steer the aims and goals of the where “innovation” is in the public interest. projects. What gets studied, what questions are At its core, the motivation for commercialising asked (or not asked), and who sees the results of university research is to blur the vital are not determined by disinterested inquiry for distinctions between “public” and “private.” the public interest, but rather what could yield Universities and colleges in Canada have maximum return for private investors. evolved to function, albeit imperfectly, as Federal government research policy has public institutions. That is, they are funded by promoted this model of university research in the public’s collective resources via a recent years. Worse, Industry Canada has progressive system of taxation. By definition, appropriated the term “innovation” to narrowly then, such institutions should serve the public describe research initiatives that accomplish interest. This public interest can be defined commercialisation. Nowhere has this deliberate through three broad functions: education, shift from the public interest to the private community service, and research. In particular, sector’s interest been more obvious than in the university research serves to pursue and asymmetrical investments in the federal publicly disseminate knowledge. Industry, granting councils. The Canada Foundation for government, and other researchers may take Innovation (CFI) has received $1.9 billion this knowledge and build upon it for their own dollars since 1998 to fund research projects that ends, but what characterises the university’s require a private sector partner. Compare this to social product (or simply good science) is the the $37 million of new funding for the Social objectivity of the process. Science and Humanities Research Council The public mandate stands in stark contrast to (SSHRC) in the same time period. The trend is private sector interests. By definition, clear: private industry research is at the corporations are ultimately accountable to forefront of public spending on research. At a shareholders. The short-term solvency of the time when per capita spending on post- business drives a preoccupation with short-term secondary education is at its lowest in Canadian gains. This motive extends to the expectations history, private industry research has seen a of partnerships in university research. When boom in public funding. private interests/business ethics are applied to science in the institutional setting, academic freedom is in peril in three specific ways:
- 4. 2002 Submission to the Standing Committee on Finance 3 b. Publication Interference researchers were successful in gaining some degree of support or attention. When university research funding policy merges with commercial interests (“innovation” • Nancy Olivieri, M.D., a researcher at the as defined by the federal government), the University of Toronto and the Hospital for scientific principles of dissemination and Sick Children, was contracted by Apotex, sharing of knowledge can, and have been, Canada’s largest drug manufacturer and one threatened. In fact, the entire notion of of the University of Toronto’s most important proprietary information, “trade secrets” donors, to test a new drug for the blood achieved through the commercialisation of disorder thalassemia. During the course of research, runs contrary to the advancement of her research Olivieri discovered several the common body of knowledge that disturbing side effects of the drug and underwrites science. This tension between recommended that the trails be discontinued, private gain and the public sharing of research or at least suspended, until the risk to her results has led to a series of disturbing cases in patients could be assessed. When Olivieri which public dissemination has been sacrificed sought to publish her results and alert her for proprietary concerns. These sacrifices range patients, she was threatened with legal action from delays in publishing to the active and a smear campaign was organized against suppression of taxpayer funded research results. her. The delay in the publication of results that is What is most disturbing and surprising about required by many industry partners poses Dr. Olivieri’s case is not the behaviour of the several problems. In some cases, graduate drug company but the behaviour of the students cannot reveal the research for their university. Instead of supporting Olivieri in Masters or PhD theses until their corporate this important case of public safety versus sponsor has successfully filed a patent. In cases corporate profit the university attempted to where researchers are trying to develop medical fire Olivieri and did everything it could to treatments for illness, a publication ban of mollify Apotex for fear of losing funding twelve months can prevent treatments from from this important donor. University of becoming widely available to the people who Toronto President Robert Pritchard went so need them. A 1994 survey of life science far as to write a letter to the federal university research found that 58% of industry government in support of Apotex’s call for sponsors required a publication delay of at least changes to patent legislation. Throughout the six months. entire controversy, the University of Toronto was involved in sensitive negotiations to As university-industry ties become more establish a $25 million partnership with intimate and the boundary between public Apotex under the auspices of the CFI. research and private research blurs, the future security of private sector sponsors become • David Kern, M.D., an associate professor of more dependant on the results of “their” medicine at Brown University (U.S.), had his university research. In cases where the results full-time research position eliminated at one are not as encouraging as expected, or even of the medical school’s affiliated hospitals in detrimental to the corporate sponsor’s Pawtucket, Rhode Island. The elimination economic interests, many researchers followed protests from a local textile experience subtle or even direct pressure to producer/university donor Microfibres Inc. suppress their findings. The company claimed that if Kern published findings describing the lung disease that In the last two years, there have been a number Microfibres’ employees were contracting, he of high-profile in which principled university would be revealing “trade secrets”. researchers have had to resist intimidation and legal threats to publish the results of their • At the University of California-San research. The cases of Drs. Olivieri, Kern, Francisco, Dr. Betty Dong was threatened Dong, and Healy serve as disturbing reminders with litigation if she published findings that of the perils of industry sponsored research. Of concluded that her corporate sponsor Knoll course, these examples are only the cases where Pharmaceuticals’ drug was no more effective
- 5. Canadian Federation of Students 4 than the generic alternative. generous interpretation possible. Their careers may depend on it. • Dr. David Healy is an internationally renowned psychiatric researcher. He was Many cases of manipulation are more direct. offered a position that he accepted with the Many industry partners attempt to exercise University of Toronto. Shortly after his editorial control over the manuscript before appointment, Healy presented at a conference publication. In 1996 Sandoz Corp. removed where he described a disturbing lack of passages from a draft article that it was research to investigate the potential sponsoring, prompting the four researchers relationship between Prozac and suicide involved to quit and write a letter to the Journal rates. He made his remarks in the context of a of the American Medical Association outlining paper that raised serious concerns about the the threat to academic freedom such meddling ability of large pharmaceutical companies to poses.1 Other researchers capitulate to the drive the national research agenda. The pressure and delete vital information. A study University of Toronto immediately withdrew found that 35% of researchers in engineering its offer of employment to Healy. Eli Lilly, research centres would let industry partners the company that manufactures Prozac, is a delete passages before publishing the results.2 large donor to the University of Toronto. Achieving Excellence outlines a need to c. Manipulation of Results “double the number of Master’s and Doctoral fellowships and scholarships awarded by the The most extreme form of undue influence federal granting councils,” (page 60). The related to corporate partnerships is the altering Canadian Federation of Students is in full of research data for commercial gain. It is support of increased support for graduate important to stress that manipulation of data student research, if this funding is administered does not need to necessarily stem from a through the three granting councils. Adequately conscious misrepresentation of research results. funded graduate students will be essential to Certain methodologies can be designed to elicit developing high quality teaching researchers to certain results. In a study conducted by Mildred fill vacancies created by faculty retirement over Cho at Standford’s Centre for Biomedical the next decade. Ethics, 79 percent of non-affiliated research projects reported favourably on the drugs they However, federal government policy on were researching, compared to 98 percent of graduate student funding has created massive researchers who were industry-sponsored. The gaps in available support. Years of under- push to commercialise can also create pressures funding the Social Science and Humanities internal to the university that manufactures a Research Council (SSHRC) led to the vested interest in the success of commercial cancellation of the funding for Masters spin-offs. In 1999, Sheldon Krimsky of Tufts students. Masters students make up more than University found that out of 800 scientific 62 percent of the graduate student population in papers he analysed, one third of the authors had Canada, yet they receive zero percent of a significant financial interest in the outcome of SSHRC’s resources directly. their research. A hidden cost associated with this absence of In most cases, the relationship between federal government support is the cost to researcher and industry sponsor is based on faculty. Already thin resources of arts and social unequal relations of power. Future funding science faculty are stretched even thinner by the from sponsors may be contingent upon short- additional stress of funding students. Since no term commercialisable outcomes. Thanos Masters students receive federal support for Mergoupis at the London School of Economics their research and slightly more than a third of lost his job and a £250,000 contract when the PhD students secure grants, many graduate World Travel and Tourism Council saw the students rely on small portions of a faculty interim report on the research they were member’s research grant as their only income. funding. Although this case does not represent a SSHRC’s grants to faculty only fund about 25% case of data manipulation, clearly there is of the eligible community, and are more often intense pressure on researchers to give the most shared between researchers.3 The additional
- 6. 2002 Submission to the Standing Committee on Finance 5 strain of a large pool of unfunded graduate Recommendation 1: students makes the federal government’s The Canadian Federation of Students humanities funding increasingly scarce. recommends doubling the number of graduate research grants awarded through the Federal funding cuts to transfer payments in the federal granting councils. The new grants 1990s have limited universities’ ability to must be distributed in a manner that reflects provide proper institutional support for the asymmetrical situation of graduate researchers. The recent infusion of students in the arts and human sciences. infrastructure funding through the so-called “indirect costs” of research only begins to Recommendation 2: address the problems associated with shrinking The Canadian Federation of Students operating budgets. New federal government recommends that the Canada Foundation for support in the form of research grants does very Innovation drop the requirement for little to maintain and improve libraries and researchers to seek out matching funds. laboratories. Research funding must be coupled with a commitment to additional core funding Recommendation 3: to ensure that world-class research is not The Canadian Federation of Students undone by fourth-rate facilities. recommends that the Social Sciences and Humanities Research Council budget be The Canadian Federation of Students increased by $365 million by 2007-2008, recommends doubling the number of graduate with an immediate infusion of $97 million for research grants awarded through the federal the 2003-2004 year granting councils. The new grants must be distributed in a manner that reflects the asymmetrical situation of graduate students in Section II - Access Matters: the arts and human sciences. Canada’s Skills Agenda Achieving Excellence’s stated goals for In 2002 the government released Knowledge university participation in Canada’s Innovation Matters the fulfillment of a commitment made Strategy do not simply overlook the public in the 2001 throne speech to develop a interest; they contain the potential to undermine comprehensive national skills strategy. To that it. This brief contains descriptions of many end, the paper lays out the framework for cases where good science in the public interest federal government initiatives in skills and has placed a distant second to the drive for training. In what follows we will offer an profit. When this trade-off occurs at a assessment of the strategy and offer concrete business’s own research facility, it is disturbing. recommendations to the committee to consider When it happens at a publicly funded university in the context of the skills agenda. or college, it is indefensible. Public research The gap between low and high income should never be placed in circumstances where Canadians is widening and those Canadians private gain override established scientific most in need of skills and training are being tenets. Yet this is precisely the risk that the denied access. Since 1990, tuition fees have unbridled pressure to commercialise university increased by over 126% and most provincial research runs. When public research is put at governments have cut or eliminated grants and risk, so too is the public interest, and re-training programs. Between 1993 and 1998, institutions are no longer accountable to the 18-21 year olds from the wealthiest 25% of Canadian public. Canadian families were more than twice as What about those scientists who have not come likely to attend university as 18-21 year olds forward? In dealings with Drs. Olivieri and from families in the lowest income quartile. Healy, Canada’s largest university sent a clear From 1990 to 1998 student debt increased from message to whistleblowers: your institution will an average of $8000 to $25,000. If the federal not support you. Or perhaps more thematically: government is committed to more than just the “the customer is always right.” rhetoric of a skills agenda, the soaring cost of post-secondary education must be addressed.
- 7. Canadian Federation of Students 6 In order to create a truly comprehensive, income and parental educational attainment. national system of highly accessible and quality The study found in those homes with a family post-secondary education the federal income of less than $30,000, 80% of parents government must set the national standards. said they hope to save funds for a child’s These standards should be modeled on the education. However, only 18.7% of those Canada Health Act and be designed to ensure parents were actually able to save. In homes that all Canadians have equal accessible quality with family income of over $80,000 researchers public education. To that end, the Canadian found that 95% hoped to save for a child’s Federation of Students calls on the federal education and that 62.6% were actually saving. government to enact a Post-Secondary Education Act. These numbers confirm the case put forward by the Canadian Federation of Students in earlier Recommendation 4: submissions to the Standing Committee on The Canadian Federation of Students Finance. The RESP program has been shown to recommends that the federal government be a national system of grants for the wealthy; a enshrine a post-secondary education act that social program funded by all Canadians mirrors the principles of the Canada Health designed to reward those with the means to Act. Such an act would be designed to ensure save. The recent findings by Statistics Canada that all Canadians have access to high quality, confirms this analysis and provides hard data to affordable post-secondary education. support the contention that the RESP and CESG programs are a regressive use of public Recommendation 5: funds. These programs are doing virtually The Canadian Federation of Students nothing to assist those Canadian most in need recommends that the federal government of the skills and training offered by post- restore the cuts made to the Canada Health secondary education. RESPs merely expand the and Social Transfer (CHST) during the already existing gap in Canada between those 1990’s. who want to help a child attend post-secondary education and those who are actually able to Scrap the Millennium Scholarship help. It is perverse public policy to spend public Foundation and the Canada funds on those who least need assistance while doing little or nothing to help those for whom Education Savings Grant for RESP post-secondary education remains only a Program dream. The evidence is now overwhelming that high The effect of the Millennium Scholarship tuition fees and high student debt is choking off Foundation has been even more fruitless. access for low income Canadians. Regrettably Announced in the 1998 “education” budget, the recent federal government policy initiatives Millennium Scholarship Foundation was a have done little to address this problem. In fact belated acknowledgement by the federal several programs are actually exacerbating the government of the student debt crisis in problem of student debt and declining Canada. In the face of average debt levels of participation rates of low and middle-income $25,000 the Millennium Scholarship students. Consider, for example, the Registered Foundation was to be the centrepiece of the Education Savings Program (RESP) and the federal government’s student debt reduction Millennium Scholarship Foundation. In the strategy. At the time of its introduction, Finance case of the RESP, new data conclusively Minister Paul Martin declared in the House of demonstrates that the program is not promoting Commons that the Foundation would help those opportunity among those Canadians most at in greatest need and reduce average student risk of being denied access to post-secondary debt by $12,000. However, three years after its education. In an April 2001 study, entitled implementation the Foundation has proved to Survey of Approaches to Educational Planning, be largely a public relations exercise that has researchers tracked attitudes toward saving for led to no appreciable decrease in student debt. a child’s post-secondary education as well as the actual saving families were able to The Foundation’s mandate and terms of accumulate. The study controlled for family reference are contained in the 1998 Budget
- 8. 2002 Submission to the Standing Committee on Finance 7 legislation. The Act spells out the governance college or university, the Foundation wilfully of the Foundation as well as the framework ignores the fact that direct financial barriers through which scholarships are disbursed. In were the most commonly reported reason for theory, the Foundation’s job is to disburse $250 non-attendance: over 23% of participants in million annually in student financial assistance. their survey list direct financial barriers as the However, the federal government chose to reason for not going on to college or university. disperse the funds through existing provincial Instead of recognising the significance of this student assistance programs. Without any result, the Foundation chose to draw attention advanced consensus from the provinces about to the remainder of the non-attendees’ implementation, the hastily conceived structure responses as proof of other accessibility of the Foundation made some provinces problems. resentful participants. This decision by the Foundation is even more The record of re-investment on the part of confounding when the data is more closely provincial governments has been spotty at best. examined. Many of the “non-financial barriers” The provinces signed agreements to re-invest cited by non-attendees are actually likely to be the savings in augmentations to their existing indirectly related to insufficient personal student financial assistance programs; however resources. In this light, the number of people the agreements were non-binding. who “chose” not to attend college or university because of financial barriers is much higher. As The Nova Scotia government simply ignored this study relied on data collected in 1991 and the agreement, consciously re-directing funds 1995, its results also fail to take into account intended for students into other government the effects of the enormous increases in tuition revenues. In Ontario, where approximately 40% fees across Canada since the mid nineties. of the Foundation funds are transferred, the provincial government has directed less than In a 2001 poll conducted on behalf of the 15% back into student financial assistance. Canadian Federation of Students, 46% of lower Despite the misuse of Foundation funds by income Canadians cite lack of money as the these governments, the Foundation has done reason for not attending college or university. virtually nothing to rectify the situation, and The Foundation rarely acknowledges the fact has neither criticised them publicly nor that the vast majority of those who don’t attain signalled a willingness to withhold further a post-secondary education are from lower payments. Instead, the Foundation has opted to income homes. Indeed, the dividing line in actively deny that the misuse of the endowment almost all studies on access to college and has diminished its impact on student debt. university is the financial status of the individual in question. Despite (or perhaps because of) the fact that it has been unable to address the issue of student A Credible Reading of Existing Data debt, the Millennium Scholarship Foundation has recently embarked on a campaign to Foundation officials have publicly claimed that downplay the crisis of student debt. In higher tuition fees have little or no effect on appearances before government committees, accessibility, and that money is not the primary federal bureaucrats, and university and college factor in determining who goes on to higher presidents, Foundation officials have argued education. However, most credible evidence that higher student debt and higher tuition fees points to the contrary. For example, Statistics will not affect accessibility. In other words, a Canada recently reported that wealthy supposedly arms-length, publicly-funded Canadians are twice as likely to attend foundation has taken on the role of apologist university as low income Canadians. for the federal government’s record on post- This conclusion is further supported by the secondary education. 2000 Statistics Canada Youth in Transition The Foundation’s efforts to downplay the Survey. The Survey found that financial student debt crisis rely on a misreading of the obstacles were a barrier for over 70% of the 18 data. For example, using research involving to 20 year old high school graduates who cited interviews with 60 people who did not go to barriers to their participation in higher
- 9. Canadian Federation of Students 8 education (see Figure 1). This Statistics Canada higher tuition fees. In the end it would seem, survey is yet another example of research that despite Paul Martin’s promise that the the Foundation has reported upon without Millennium Scholarship Foundation would drawing attention to the significant deterring reduce student debt, the Foundation has made it effects that high costs of post-secondary its business to campaign for increased student education have on students from disadvantaged debt. backgrounds. Recommendation 6: Figure 1: Barriers to Post-Secondary Education The Canadian Federation of Students recommends that the Millennium Scholarship Foundation and the Registered Education Financial situation 70.7% Savings Plan be replaced with a comprehensive, national program of needs based grants. With the cancellation of the Not accepted 12.8% Millennium Scholarship Foundation and the Registered Education Savings Plan, such a program would be revenue neutral. The MSF has been an abject failure and is now using Other 9.6% taxpayer funds to deny the crisis of student debt. Following on the concerns of auditor 0% 10% 20% 30% 40% 50% 60% 70% 80% general Sheila Fraser we call on the federal Source: Statistics Canada Youth in Transition Survey (2000) government to wind up the operation of the Foundation by the end of this fiscal year. We Conclusion further recommend that the RESP program be For whatever reason, the Millennium terminated. As this brief documents, the Scholarship Foundation has consistently sought RESP program is transferring public funds to to perpetuate the idea that existing federal those Canadians least in need. Taken government measures have sufficiently cumulatively the funds currently expended on addressed the crisis of student debt. This effort the RESP and the MSF would easily fund a has been bolstered by the Foundation’s research national system of needs based grants. project. Despite overwelming evidence to the contrary, Unemployment Insurance and the Foundation’s research project has training entitlements essentially made the following three points: The Employment Insurance (EI) program is 1. The federal government should not invest decades out-of-date with the realities of the any more money in student financial organisation of work and the growing demand assistance; for education, training and lifelong learning. At 2. Non-financial barriers are more important in present, workers (except for apprentices) are determining access to college and university not entitled to regular insurance benefits for than an individual’s financial resources; training. Despite the obvious need and value of 3. $25,000 (or higher) average debt is perfectly expanding EI sponsored support for training acceptable “because it doesn’t matter how and education, the surplus in the EI account is much debt a student has, what matters is instead used every year by the federal their ability to pay it back.”1 government for debt reduction, tax cuts or spending on unrelated government programs. If These are alarming positions for the Foundation the federal government is serious about meeting to adopt, given that its alleged mandate is to the goals outlined in Knowledge Matters, EI alleviate student debt and promote access to should be restructured to reflect the original post-secondary education. Not only has the objectives of the Unemployment Insurance (UI) Millennium Scholarship Foundation been a program: to ensure earnings loss in the event of failure in the implementation of its own unemployment, pregnancy, parental leave and program, it has now begun an aggressive temporary sickness. EI must also be expanded campaign to justify higher student debt and
- 10. 2002 Submission to the Standing Committee on Finance 9 to include income support for workers Section III - The Canada Student participating in the full range of educational Loan Program and training opportunities available. In Summer 2000, the federal government With these goals in mind, the Federation assumed control of the Canada Student Loan strongly endorses the Canadian Labour Program after the banks withdrew from the Congress's 2002 Composite Resolution on risk-sharing agreements established five years Unemployment Insurance, with special earlier in 1995. Under these agreements, the emphasis on the "Training entitlement and banks had a decisive say in the policy and benefits" section of the resolution (see administration of the Canada Student Loan Appendix A).As stated in the CLC resolution, Program. Under the banks’ tenure several trainining and entitlement benefits should: regressive policy measures were instituted • be expanded beyond apprenticeship so that under the guise of accountability. The most regular EI benefits are available for all forms regressive of these measures was the ten-year of workplace training; prohibition on the discharge of student loans • include a primary role for public education to through bankruptcy. This unconscionable ensure access, high standards and legislation strips students of the very last accountability financial protection offered under the law. The • be accompanied by a requirement for provisions of the Bankruptcy and Insolvency Canada-wide training and occupational Act are designed to offer a last hope to those standards unable to cope with debt. Under the Act, an individual must appear before a judge and • be framed so that training in the event of job present evidence under oath that their financial loss is the equivalent to job search disposition makes it impossible for them to In order to ensure the long-term security of meet their obligations. It is this provision that these training and education programs, a has compelled the Canadian Federation of renewed Unemployment Insurance fund, Students to launch a Charter challenge before operating at arms-length from the federal the Supreme Court of Canada to repeal this government and within a clear legislative unjust and unconstitutional law. framework, should be established. Furthermore, n Knowledge Matters there is a call to increase the restructured UI program should ensure that access to post-secondary for all Canadians. all worker and employer UI premiums collected However, in Knowledge Matters there is a be used exclusively for earnings insurance particular accent on part-time learners. This call payments and training/education measures for is largely in response to the steep decline in workers. The use of UI money for federal debt part-time study in Canada over the past decade. reduction, tax cuts or spending on government In addition, the authors of Knowledge Matters programs should be made explicitly illegal. The expressed concern about the degree to which Federation also recommends the repayment of the part-time provision under the Canada the cumulative surplus (estimated at fifty Student Loan Program is underused. To this billion dollars by 2003) already borrowed from end, the Canadian Federation of Students will the EI account by the federal government for offer several recommendations designed to purposes unrelated to Employment Insurance. increase the participation rates of part time Recommendation 7: students. The Canadian Federation of Students Finally, we are calling on the federal recommends that the Employment Insurance government to honour a commitment made to program be renewed to once again meet the students in the 1998 “education” budget. That objectives of the original UI program and budget committed to a Debt Reduction in expanded further to provide income support Repayment program (DRR) supposed to help to workers participating in a full range of over 12,000 students per year. Designed to education and training opportunities. reduce a student’s debt five years after graduation, less than 500 students per year are benefiting from the program to-date. The
- 11. Canadian Federation of Students 10 Department of Finance has designed entirely Section IV - Tax Credits as unrealistic income eligibility tables, and the Education Policy result has been a small financial savings for the government and a door slammed in the face of Since the mid 1990s, the Federal Government student debtors. Officials from both the has increasingly looked to so called "tax Department of Finance and Human Resources expenditures" as a substitute for directly Development Canada acknowledged this allocated student financial assistance. Federal problem several years ago, but to-date no action tax expenditures for education have grown has been taken. We urge the Standing from an estimated $566 million in 1996 to a Committee on Finance to honour the projected $1.425 billion in 20021. Some of the commitment made in the 1998 budget. more significant new measures and changes to existing education oriented tax credits have Recommendation 8: included: The Canadian Federation of Students • 1996 to 2001: A series of increases to the recommends that the federal government education amount (the amount on which the reverse discriminatory changes to the federal non-refundable education credit is Bankruptcy and Insolvency Act. calculated) which has raised the potentially Recommendation 9: allowable credit from $13.60 to $64 per The Canadian Federation of Students is month of full time studies2. recommending that the federal government • 1997: The non-refundable education and honour the commitment made in the 1998 tuition tax credits were altered so as to allow budget and institute the Debt Reduction in students to carry value forward if the credits Repayment Program (DRR). cannot be claimed in the original year • 1998: The introduction of a 17 percent Recommendation 10: federal tax credit on the interest portion of The Canadian Federation of Students federal and provincial student loan payments recommends that the federal government pay (changed to 16% in 2001). the in-study interest for those students studying on a part-time basis. Despite the size of these expenditures, they have failed to keep up with rapidly escalating Recommendation 11: increased tuition fee and living costs. Canadian The Canadian Federation of Students students are significantly financially worse off recommends that the income threshold for the now than they were in the late 1980s and early Canada Study Grants and student loans for 1990s. Moreover, evidence suggests that part-time students be raised in order to education oriented tax expenditures increase the number of students eligible and disproportionately benefit higher income that living costs, in addition to educational earners, and that education tax credits as a costs, be included in the loan assessment for general policy do little or nothing to improve part-time students. the accessibility of higher education. Recommendation 12: The Canadian Federation of Students The Education and Tuition Fees Non- recommends that those students currently in refundable Tax Credit: Failing to meet default on student loans retain access to debt the increased cost of education relief measures such as interest relief and that Of these various federal tax measures, the non- the federal government change the current refundable education and tuition fee tax credits definition of default from 90 days to 360 have been the most expensive and the most days. widely used. In the 2000 tax year3, 2,169,360 students and parents/grandparents of students Recommendation 13: claimed the education and tuition amounts, The Canadian Federation of Students costing the federal government $909,728,140 in recommends that the amount students are deferred tax revenues4. The changes introduced allowed to earn while in study be increased in the 2001 budget will likely bring this total from $600 per year to $1,700 per semester. even higher.
- 12. 2002 Submission to the Standing Committee on Finance 11 With a probable overall price tag of over $1 mum federal education and tuition fees credit billion for the 2001 tax year, these credits available to an average Ontario university undoubtedly appear impressive when viewed as student in 2001 amounted to only $1,215, a total amount. One would expect an leaving a gap of almost $9,000 between basic expenditure of this magnitude to deliver education costs and applicable federal non- significant improvements to the financial well refundable tax credits for education. being of individual Canadian students. The unfortunate reality, however, is that changes to Figure 3: Total Costs Per Year of University Studies (Ontario) and Federal Non-refundable Tax Credits for Education, federal non-refundable tuition and education 1988, 1995 and 2001 (2001 Dollars) tax credits have actually done very little to 12000 offset the soaring tuition fees and increased 10000 $10,211 living costs students have faced over the last $8,614 Total basic cost of one year of undergraduate university studies decade. 8000 $6,755 (tuition fees, additional mandatory fees, room and board) 6000 Maximum claimable Federal Non- Figure 2 compares average Ontario university refundable Tax Credits for education (Tuition fees and Education Credit, 4000 based on average Ontario undergraduate tuition fees to the maximum undergraduate tuition) federal non-refundable education tax credits 2000 $587 $1,215 $428 available to Ontario students in 1988, 1995 and 0 1988 1995 2001 2001 (in 2001 dollars). In 1988, an average Source: Calculations based on Statistics Canada data Ontario university undergraduate paid $1,854 in tuition fees and could claim or transfer up to Helping those most who need help the $425 in federal education tax credits, leaving a least? gap of $1,426 between these tax credits and Substantial disparities exist on the average tuition fees. By 1995 this gap had increased to amount being claimed by income bracket $2,151, as tuition fees climbed to $2737 and through the education and tuition fees credit . applicable education tax credits rose to $587. Individuals from the highest income brackets By 2001 average tuition fees had risen to over tend to claim more on these credits than do $4,000 and, despite increases to the education claimants from the lower and middle income amount in the 2001 budget, the gap between ranges. In the 2000 tax year, for example, tuition fees and federal tax credits was nearing claimants with incomes less than $60,000 a $2,900. year claimed an average of $409 worth of education and tuition fee credits. Claimants Figure 2: Ontario Tuition Fees and Federal Non-refundable Tax Credits 1988, 1995 and 2001 (2001 dollars) earning over $250,000 (most of whom 4500 presumably claimed this credit as a transferred $4,062 4000 amount from a child) averaged $628 on these 3500 same credits. A substantial (and rising) 3000 $2,737 Average Tuition Fees (Ontario University Undergraduate) percentage of non-refundable education credits 2500 are being claimed as amounts transferred, 2000 $1,854 Maximum claimable Federal Non- refundable Tax Credits for education (Tuition fees and Education Credit, which provides no guarantee that the full value 1500 $1,215 based on average Ontario undergraduate tuition) of this credit is necessarily being applied to 1000 education-related expenses5.The Department of $587 500 $428 Finance estimates that total education credits 0 1988 1995 2001 transferred have outstripped total credits claimed by students since 2001 (excluding amounts carried forward)6. The gap between federal tax credits and the costs facing students living away from home is The "carry forward" measures introduced in even more dramatic. As shown in Figure 3, 1997 have allowed lower income students to combined tuition fees, mandatory student fees claim non-refundable credits that would have and room and board for an average Ontario been lost to them in the past. Although this is a university undergraduate climbed from $6,755 small improvement over the previous system, it per year in 1988 to $10,211 in 2001. While tax contains a flaw that again skews the value of credits also rose during this period, they did the credit towards those with higher incomes. little to mitigate increasing costs. The maxi- Because of inflation, students who are forced to
- 13. Canadian Federation of Students 12 carry forward education and tuition credits the education tax credit measures introduced in ultimately gain less value from their credits the U.S. appear to have provided state than students who have enough income to claim governments with an incentive to raise tuition them in the year they are assessed. Lower fees at public institutions9. income students are thus penalised for not having enough income to claim the credits Recommendation 14: when they are first made available. With the The federal government should cancel the total carry forward of education and tuition fee education and tuition amount for those credits projected to reach $380 million by 2003, earning over $70,000 and apply the savings the cumulative amount lost by lower income directly to new national system of needs- students through this depreciation could run based grants. into the millions of dollars7. The Student Loan Interest Credit The Student Loan Interest Credit is probably the least useful of current federal tax expenditures for education. Though the total "cost" of this credit was over $71 million in 2000, the average amount claimed on it works out to only $9.50 per month worth of debt and tax "relief" per claimant. Low income earners (less than $20,000) only received an average of $6.83 a month. As this credit is only available on interest paid, it provides absolutely no relief to the most desperate student loan holders who are unable to keep up with their loan payments. With average student debt loads approaching $25,000, this credit is totally ineffective in addressing the ongoing crisis of student debt. Tax credits do not increase access to higher education On the whole, tax credits are "back-ended" measures and do little to improve access for the most economically disadvantaged groups. Tax credits require students to pay money "up front" in order to (maybe) have it refunded at some point in the future. As a policy, education tax credits do nothing to address the initial financial obstacles that prevent low and lower middle income students from accessing higher education. Thus, education tax credits are most likely to benefit those who require little assistance with high tuition fees. A recent study by Harvard University professor Dr. Bridget Long found that this was precisely the outcome of education tax credits introduced in the United States: "[a]lthough one goal of the tax credits was to increase access to higher education, this study found no evidence of increased postsecondary enrollment among eligible students"8. Long's study also found that
- 14. 2002 Submission to the Standing Committee on Finance 13 Footnotes to Innovation Section: Appendix A 1. “Money + Science = Ethics Problems on From the Canadian Labour Congress's 2002 Campus.” The Nation. March 22, 1999. Composite Resolution on Unemployment Insurance: 2. Cited in “The Kept University.” 2001 Science and Technology Policy Yearbook Therefore be it Resolved (American Association for the Advancement of Training entitlement and benefits [be]: Science), Teich, A. et al. eds. 1. expanded beyond apprenticeship so that regular EI benefits are available for all 3. The Natural Sciences and Engineering forms of workplace training; Research Council supports approximately 75% 2. accompanied by a requirement for: the of faculty in the so-called “hard” sciences. development of a workplace human re- source and training plan; Canada-wide training and occupational standards; Footnotes to Tax analysis: recognition of prior learning and worker experience; a primary role for public 1 Department of Finance Canada Tax Expen- education to ensure access, high standards ditures and Evaluations 2001 and accountability; and union participation in approving the training plan and establish- 2 The education amount has risen from $80 ing standards with employers, education and per month to $400 a month since 1996, but government; the actual credit is calculated by multiplying 3. coupled with an EI premium reduction for the total of the education and the tuition fees employers who provide paid education amount by the lowest federal tax rate (16% leave or workplace training equivalent to for 2001 and 2002, and 17% on earlier what is provided by EI training insurance returns). (similar to the premium reduction for employers and their employees with private 3 The most recent year for which interim insurance plans that top-up maternity, statistics are presently available parental, and sickness coverage); 4. accompanied by the same protection of 4 Canada Customs and Revenue Agency worker employment rights in federal and preliminary figures provincial labour standards that are pro- vided for EI maternity and parental benefits; 5 Department of Finance Canada Tax Expen- 5. framed so that training in the event of job ditures and Evaluations 2001 loss is the equivalent to job search; and 6. framed so that hours of work prior to a 6 Department of Finance Canada Tax Expen- training count as qualifying time for benefit ditures and Evaluations 2001 entitlement during and following leave. 7 Department of Finance Canada Tax Expen- ditures and Evaluations 2001 8 Bridget Terry Long "The Impact of Federal Tax Credits for Higher Education Ex- penses", Prepared for the NBER Volume and Conference: College Decisions: How Students Actually Make Them and How They Could, Harvard University August 2, 2002 9 Bridget Terry Long "The Impact of Federal Tax Credits for Higher Education Expenses"