Canada Millennium Scholarship Foundation Not Renewed--New Student Grant Program Announced.
Ten years ago yesterday, Paul Martin rose in the House of Commons to announce the Canadian Opportunities Strategy and its centrepiece – the Canada Millennium Scholarship Foundation. From the start the Foundation, which was given an “initial” endowment of $2.5 Billion, has been living with a death sentence as its endowment legally had to be spent by the end of 2009 (in practice, nearly all the money will be gone by next January). Today, Finance Minister Jim Flaherty ended the speculation by confirming that there would be no second act for the Foundation – it will run its course over the next eighteen months and be replaced by a new Canada Student Grant Program.
The basics of the new Canada Student Grant Program are extremely positive. As outlined in the budget, the $350 million currently being spent each year in grants by the Foundation will be replaced not by another endowment but by statutory annual spending in a program to be run by the Canada Student Loans Program. In addition, the new Canada Student Grant will also receive the $138 million in funding which currently goes to the various Canada Study Grants, giving it a total budget of $488 million in 2009-10, rising to roughly $550 million by 2011-12.
Unlike most existing grant funding, which is need-based, the new funding will be income-based. The difference sounds small but as EPI revealed in its research piece Are the Poor Needy, Are the Needy Poor, need-based aid is far more likely to go to higher-income students, whereas income–based aid goes directly to those students from low-income backgrounds who have the greatest access problems. This program will not be the first to focus on income instead of need; in 2005, both the Foundation and the Canada Student Loans Program initiated new income-based programs (based in part on EPI’s research on the subject). But the new program will be much, much larger and be available for all four years of study. Students who are “low-income” (exactly how this will be defined has not yet been determined) will receive a flat $250/month; middle-income student (again, yet to be defined) will receive $100/month.
In the broad picture, this is all pretty good news: students are guaranteed that with the end of the Millennium Scholarship Foundation they will not, on aggregate, lose any funding. And – perhaps surprisingly from a conservative government seemingly wedded to targeting “median” voters the emphasis in this program is squarely on helping the poorest in society – which is excellent from an access point of view. This is not to say, however, that there will be no winners and losers. In a number of different ways, the student aid picture will shift.
These issues might cause some friction with provinces and with student groups who may not like the implications, but from a public policy perspective they are probably not overly serious. There are, however, three very major unresolved issues around the new grants which do give grounds for concern and which will require urgent attention.
These three problems will clearly cause people a lot of headaches over the months to come, but they are fixable and should not detract from what is overall a pretty good-news story: students will not lose out when the Millennium Scholarship Foundation’s term ends. Two things that will be missed, however, are the Foundation’s widely-admired merit and research programs. These, apparently, will not be picked up by the Government of Canada.
Changes to Canada Student Loans Program
The federal budget calls for the allocation of $123 million over four years to help “streamline and modernize” the Canada Student Loans Program. The $123 million will fund three new initiatives aimed at improving the service and supports available to students and families.
The new investments are:
The budget has allocated a fairly large sum of money to this, but details on how it will be spent are scarce. The money could presumably be used in one of three ways: to reduce loan interest during the 6-month grace period following graduation, to improve the current Interest Relief (IR) program, or to improve the Debt Reduction in Repayment (DRR).
A minor change to RESPs was also announced, to allow an account to be open for 35 years instead of 25 and to extend the contribution period accordingly. A technical change to the rules regarding timing of Educational Assistance payments under the RESP system was also made.
New Investments in R&D
During the past decade, a large proportion of the overall growth in Canada’s investments in R&D have been made directly by Ottawa through the three federal research granting councils (Social Sciences and Humanities Research Council, Natural Sciences and Engineering Research Council, and Canadian Institutes of Health Research) and through a series of recently created and specifically targeted initiatives funded through Industry Canada such as the Canada Research Chair program, Indirect Costs of Research, Canada Graduate Scholarships, Canadian Foundation for Innovation, etc. As a result of Budget 2008, that dominant and direct federal government role in generating R&D activity is likely to continue:
Continuing the current government’s focus on the hard sciences, there were also some targeted one-time investments made in specific areas of the research sector:
The business sector remains the largest source of R&D investments in Canada, but since 2003 growth there has slowed and in terms of growth rates lags significantly behind the public sector. In an attempt to jump-start growth in the private sector, Budget 2008 introduces $70M worth of changes to the Scientific Research and Experimental Development Tax Incentive Program. Central changes include the introduction of adjustments geared toward enhancing support for small and medium-sized businesses in addition to the introduction of coverage of some SR&ED costs incurred outside of Canada. In addition the federal government announced in Budget 2008 $250M over five years to support R&D in the automotive sector. The process by which this funding will be allocated is unclear.
On the surface, this all seems like good news for Canadian universities. Ten years ago, just over 27% of all R&D activity (an estimated $4.4B) took place within the higher education sector. In 2007, the dollar value had increased to more than $10.4B, and the proportion of the national total had grown to 36%. But there are costs as well:
Updates from Previous Years
In the last budget brought in under the Liberal Government, a one-time $1B investment in post-secondary infrastructure was announced and funds transferred to provincial governments in the 2007/08 year. Despite language at the time suggesting that there would be some reporting on how this money would be spent, Budget 2008 provides no clues as to how this money was disposed of.
Similarly, last year the Government of Canada created a separate funding envelope within the Canada Social Transfer designated specifically for post-secondary education. This envelope was due to increase by $800 million in the coming (08-09) fiscal year and increase by 3% thereafter. At the time, the Government of Canada promised that this funding would come with requirements for appropriate reporting and accountability to Canadians. Budget 2008 makes absolutely no reference to any such reporting, suggesting that despite the fanfare that surrounded the creation of a PSE “transfer”, the federal government actually considers this money to be an unrestricted transfer to the provinces.
Overall, this was a good but not great budget for higher education in Canada. There is money for research spending, though the picture here is not unmixed. The largest sums of S and T money seem to go to businesses, not universities. This is understandable, perhaps, given business’ recent track record, but a let-down for institutions nonetheless. There is more money for granting councils, but the government seems increasingly inclined to cherry-pick “winners” in terms of research funding areas. A number of smaller boutique-like programs were also announced, each of which is worthy on its own but collectively does not seem indicative of a coherent overall strategy.
On student aid, a major question mark over the future of grant aid in Canada was erased, but in terms of total dollars going to students, it’s really just the status quo. The targeting of aid was – from EPI’s perspective at least – improved, though there will be winners and losers in the shake-up and some major questions remain with respect to program design. Married students get a boost, program delivery should – in theory at least – be improved and money for unspecified improvements in loan repayment was introduced.
The end of the Foundation will be applauded by some and mourned by others. For nine years, it has provided a different way of doing business in student aid. Indeed, without the findings of its research program, it is doubtful that the Government of Canada would ever have undergone the profound re-think of its programs that culminated in today’s CSG announcement. And most provincial student aid offices would likely dispute the Budget`s claim that the CSL represents a less intrusive version of federalism than the Foundation; for all the difficulties of its birth, in the end it forged very productive working relationships with provinces. In the end, the Foundation died as a result of the same vagaries of politics through which it was created.
The only real sad note today was the way Minister Flaherty chose to deliver the news of the Foundation’s end, dismissing it with a couple of half-baked criticisms of the Foundation’s performance which in truth could equally be levelled at the Canada Student Loans Program. Within the very weird strictures imposed by its original legislation, the Foundation did a good job of delivering the best possible need and merit programs to students, and immeasurably improved the public policy debate on student aid. The auditor-general said as much in her last report on the Foundation; a classier Minister would have echoed it. The Foundation may have too weird a structure to deserve renewal, but it nonetheless deserves a very great vote of thanks from all Canadians for its work over the last eight years.
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