February 4th, 2021 - Alex Usher
Hi everyone. Apologies for jumping into your email twice in one day but I goofed a bit in the post I sent you earlier today. It was an excel error which I didn't catch before going to bed last night (it happens to Nobel Prize-winning economists, but you never think it will happen to you). The blunder - which affected a number of calculations around enrolments - was not enough to invalidate the argument, but still misleading enough I thought I should correct the record. Mea culpa, and what follows should be correct.  

I want to go into more detail on Laurentian, digging into finances, and correcting one or two things I got wrong yesterday. An unfortunate amount of time is going to be spent dragging Laurentian for bad data practices, but that can’t be helped.
Let’s go back to this graph I showed yesterday. With a little bit more digging, I see that Laurentian claims that there were about $8 million in outstanding deficits prior to 2012-13, and that they are claiming an anticipated deficit of $5.6 million for 2020-21, with the losses mainly due to COVID. I have no reason to doubt any of those figures. What that tells you is they have about $25 million in losses from operations over the last 15 years or so. This still leaves about $11 million to account for, given there are apparently $36 million in allegedly reserved funds that have disappeared, but we’ll leave that for someone else to figure out.

Figure 1.   Laurentian Net Revenue, 2012-13 to 2019-20 (in thousands)
The question we need to ask ourselves here is: why was Laurentian continually running such high deficits? There are basically three reasons posited in Laurentian’s affidavits: not enough students, staff are too expensive, and classes and programs are too small to be economical. Let’s look at each of these.

On student numbers, I flat out do not buy what Laurentian is selling. Between 2012-13 and 2018-19, according to data Laurentian filed with the provincial government (see here), enrolments rose slightly (a little less than 1%). That was below the provincial average, but significantly better than its fellow northern institutions fellow northern institutions Algoma (-13.9%), and Nipissing (-5.4%). Laurentian tries to diminish this success in the affidavits by pointing to the drop in local students (20%), and claiming that the increase in numbers, which are mainly in online and graduate programs, are “unsustainable”. This a pure assertion on Laurentian’s part – literally no evidence is provided to back up the claim of unsustainability.

(What about international students, you say? Patience, grasshoppers. I will return to them in a bit).

Another line of argument – not one that Laurentian makes directly, but it’s implicit, is that Laurentian professors are pretty expensive. And, look, obviously, “expensive” is in the eye of the beholder, but as Figure 2 shows, little Laurentian, not by any means a research powerhouse (SNOLAB and that CFREF in Mineral Exploration notwithstanding) does pay some pretty wild salaries. In fact, as Figure 2 shows, median salaries at Laurentian are slightly above the mid-point of the U-15 (and, amazingly, $20,000 per year higher than at McGill).

Figure 2: Median Salaries, Laurentian plus the U-15, 2018-2019
Now, I’m sure lots of people will want to claim all sorts of innocuous reasons for this: maybe the profs are older, it’s about the age pyramid, etc. To which the answer is: yes, but from the perspective of being able to make payroll, it’s all totally irrelevant. Governments don’t give institutions higher funding because their professors are older, and you can’t charge higher tuition on that basis either. No matter how you explain the high number, it’s a problem.

On its own, this isn’t necessarily a huge problem. Even if you lopped average salaries down to McGill’s level, you’d only be saving about $7 million a year – not nothing, and certainly not enough to get the university back on track. But where it would get much worse is if the institution had too many profs. And this is the point the university has been making for quite some time: that it has way too many small-enrolment course and programs (partly a function of offering programs both in English and French, which raises per-student costs significantly). Here’s a couple of interesting passages from the court filings:

“Laurentian offers 132 undergraduate programs and 43 graduate programs.  Approximately 25% of students are enrolled in the top five programs, approximately 62% are enrolled in the top 25 programs and 83% are enrolled in the top 50 programs.”  


“Of the 1,902 courses offered by LU in the Winter 2021 semester: (a) 162 courses (8%) have five students or fewer enrolled;  (b) 180 courses (9%) have between six to ten students enrolled;  (c) 1,018 courses (53%) have between eleven to fourteen students enrolled; and (d) 568 courses (30%) have fifteen or more students enrolled.”
OK, now the general story these pieces tell isn’t wholly wrong – Laurentian does have somewhat higher staff:student ratios than Lakehead, Winnipeg and VIU, which are probably its closest comparators. But I think you’ll find that most institutions have similar dispersions across programs. And as for those class size numbers, I call bullshit. The university’s own “class size” data produced for the Common University Data Ontario (CUDO) Set suggests the institution has fewer than 950 undergraduate classes. So, for that figure about class sizes to be right, the university is either offering as many graduate courses as undergraduate ones (which would be utterly bananas given undergrads outnumber grads by a factor of over ten to one at Laurentian) or they are using a different definition of “courses” here than they do in their CUDO data.

(Do you see how hard it is to evaluate institutional claims when everyone insists on playing with inconsistent data all the time? They’ll never learn. So annoying)

What you have here is – I think – evidence of light overstaffing, mainly to deal with its mission to teach in both official languages. Now, Laurentian does get an extra stipend for that from the government – perhaps not enough to cover these costs, but still they aren’t entirely free from offset. The bigger deal is the cost per staff member. Fix that – and to be fair it’s the kind of thing that seems solvable reasonably quickly with some buy-outs – and you’ve mostly fixed the cost-side problem.

But the bigger issue, I think, is on the revenue side. If you just look at raw revenue growth between 2012-2013, Laurentian looks pretty much like the rest of Ontario - growth of a little over 15%, after inflation. But the big difference was that at Laurentian roughly half of that increase came from research funding, which can’t (or shouldn’t) be used to help pay the day-to-day bills. The important thing is that Laurentian was being left behind when it came to tuition funding – a reflection of the fact that it was not playing the international student game the way everyone else was. As Figure 3 shows, tuition fee income – that is the stuff that really matters in terms of keeping the lights on – only rose by 14% after inflation at Laurentian between 2012-2013 and 2018-2019, whereas it rose by 47% across Ontario universities as a whole.

Figure 3: Tuition as an Indexed Percentage of Total Revenue, Ontario v. Laurentian, 2012-13 to 2018-19
You know where this is going: it’s all down to international students. 

Figure 4: International Students as a Percentage of Total Student Population, Ontario v. Laurentian, 2012-13 to 2018-19
Put it this way: if Laurentian university had increased its international enrolments at the same rate as other Ontario universities, it would have an extra 277 students, and another $7.8 million in gross revenue in 2018-19, as well as another $20 million or so in the bank from previous years  (anyone who says this can’t be done in Sudbury need to take a trip to Sydney, Nova Scotia). If its average salary costs had been like McGill’s over the past seven years, present annual costs would be reduced by $7.5 million, and the institution would be around $35 million better off in total costs.

This isn’t rocket science. As Mr. Micawber said, “Annual income twenty pounds, annual expenditure nineteen pounds six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.” Laurentian, caught up in its considerable research success, just seems to have stopped paying attention to the nuts and bolts of keep the operating budget in balance. The results are dispiriting. But on the other hand, the road back to health is pretty clear, too.