Will Performance Based Funding lead to accountable and high-quality education in Ontario?

For a long time, university budgets have had two primary components: provincial operating grants and tuition. Traditionally, operating grants, given directly to the university based on how many students were attending the university, weighted by year and program, made up most of university budgets. Tuition, which makes up the next largest proportion of university budgets, is collected directly from students attending university and is set by the institution itself within restrictions set by the province. There are other income sources as well, including ancillary fees and federal grants; but historically, tuition and provincial operating grants have made up the vast majority of university budgets.


That’s about to change.


The provincial government recently announced that over a period of five years (2020 to 2025), universities will receive significantly less funding from provincial operating grants. These will be replaced by a performance-based funding (PBF) system. PBF links funding to how well universities perform on specific metrics set by the government. PBF policies are meant to incentivize (or disincentivize) certain outcomes or behaviours, differing from traditional operating grants, which were independent of performance outcomes and intended to incentivize institutions to grow their student population. 


I’d like to talk about what these changes mean for post-secondary education and what I think should change to make PBF more responsive to students. It’s a technical topic, but essentially it’s about incentivizing certain behaviours and outcomes. I hope I can make it understandable, and hopefully spark some passion in you about a nerdy topic close to my heart.


This policy isn’t being rolled out until 2020, which means we don’t yet know how it will work in practice or how universities will react to it. However, there are some things that we can intuit or theorize about how PBF will work. The policy itself, Strategic Mandate Agreement 3, includes signed agreements between institutions and the provincial government. Prior to this iteration of the policy, the previous Liberal government had planned to implement PBF on a more limited basis though Strategic Mandate Agreement 1, and Strategic Mandate Agreement 2 with small amounts of PBF becoming available in Strategic Mandate Agreement 2.. 

It’s important to understand that this policy does not mean that funding to the overall university system will be expanded. Operating grants have been stagnant for a long time, and these changes will eventually shift 60% of operational funding on a 1-to-1 ratio to performance-based funding. Depending on the specifics of the policy, not all funding will be spent under a PBF framework where funding is contingent on university performance. While it is subject to change, PBF could result in a decrease to university funding, even before taking the effects of inflation into account. However, if the province is hoping to generate better performance from institutions, it is important that incentives come in the form of additional resources, rather than demanding universities do better without being given the financial resources necessary to implement changes and make improvements.


It is also important to understand that PBF policies like Strategic Mandate Agreements (SMAs) are a difficult tool to wield. Governments need to ensure that they are: basing funding on metrics that are measurable; balancing institutional self-improvement with comparative metrics across institutions; developing metrics closely associated with provincial goals; incentivizing actions under institutional control that both advance provincial goals; and avoiding perverse incentivization accidentally paying universities for acting differently and getting results you don’t want. 


However, while a public document has yet to be released, some of the rumoured indicators fail to meet these requirements. For example, measuring graduate earnings can disincentivize universities from offering programs that have lower earnings potential but nonetheless provide value to society. The government is also rumoured to be measuring industry-sourced funding, incentivizing applied research. While it can have advantages, a focus on applied research can limit the advancement of theoretical knowledge and hurt disciplines with fewer direct industry research applications, such as language studies or philosophy. This is counterbalanced by proposed recognition of public research dollars; but while public research dollars have metrics to balance both STEM and non-STEM research work, the industry funding metric does not. Instead, the industry funding metric provides aggregate funding that favours contracts that have high dollar amounts,  which creates an imbalance between more financially intensive STEM and non-STEM research contracts.  


Another metric is rumoured to measure community impact and while this may come from good intentions, there is no sophisticated way planned to measure this outcome. Measuring university performance is not an easy task, and it therefore may be important for the government to invest extra resources in high-quality, sophisticated monitoring and assessment, particularly for more complex indicators such as community impact or areas of focus, to be effectively and critically evaluated.


Respectfully, I think the government should take a few pointers from students. OUSA typically endorses the use of PBF in our policies from two perspectives: endorsement of institutional differentiation, which means incentivizing universities to specialize and experiment in innovative program and service offerings; and using PBF to reward universities who deliver high-quality programming that supports students.


However, of the rumoured upcoming metrics, only a few support academic differentiation. While the previous Strategic Mandate Agreement 2, process allowed universities to define areas of strategic interest and growth in a way that wasn’t directly linked to funding, Strategic Mandate Agreement 3 indicators will assess institutional strength by measuring the percentage of students in a designated area of study. While this makes the metric easy to measure and establishes a direct link to funding, it has the potential to disincentivize strategic thinking in favour of simply focusing on the fastest growing or largest areas, rather than rewarding institutions for thoughtfully choosing areas and taking action to increase growth rate and provide institutional support. 


Strategic Mandate Agreement 3 also gives universities the ability to propose an indicator of their own. This is a positive aspect of the new framework and gives some flexibility for institutional differentiation. However, with as many as nine government-set indicators, this balance may be a little skewed. Ideally, more space should be given to universities to pitch their own success indicators, which would contribute to the strong tradition of university self-governance and independence something that must be thoroughly defended, especially if base operating grants will be decreased to the degree expected.


Based on what we know about the proposed metrics, the government is also overlooking the ability to incentivize student experience the second recommendation from students in OUSA’s PBF policies. None of the rumoured indicators are particularly student-centered, which means the government is failing to directly incentivize activities that promote student experience and learning quality.


Unfortunately, the government is currently measuring learning experience by proxy, relying on graduation rates and graduate incomes imperfect measures of quality of teaching and learning. This does not mean, though, that I am advocating for standardized testing; curricula across the province can be quite diverse, which is advantageous to society. Instead of focusing on content, the government should consider incentivizing the use of pedagogical practices that have been proven to work. One such area is High-Impact Practices, which are a set of proven experiences that benefit student learning. There is a wealth of literature on effective teaching practices, and the government can partner with agencies like the Higher Education Quality Council of Ontario (HEQCO) to determine which practices would benefit students and support desired learning outcomes if they were more prevalent in post-secondary classrooms across the province. Another potential incentivizing metric that the government should consider is the proportion of tenure-track or permanent instructors. Teaching similar courses repeatedly may lead to better learning outcomes - though more research may be required before moving forward with this idea.


Student experience beyond the classroom is also being overlooked, despite there being a wealth of practices under university control that the province may wish to incentivize and reward. Priorities could include equity and access toward the growth of Indigenous student populations, faculty, or program offerings, or the proportion of first time university students. These priorities could help to incentivize space that is non-instructional and non-administrative in nature. Student spaces, being those where classes cannot be offered, are typically not revenue-generating and therefore institutions have limited incentives to provide and fund these spaces, leaving students to cover 100% of the costs. Additionally, if the province does not provide more direct support for mental health funding or increase the amount of specialized grants available to universities for mental health resources, strategic mandate agreements could provide an opportunity to incentivize institutions to create more accessible campus mental health resources. They can do this by developing a rigorous survey instrument to measure stress and analyse minimum service levels across institutions. A final potential use of PBF may be to develop a measurement system to identify students at tenuous academic levels in order to provide the support they need to meet their academic goals and program requirements. 


PBF is a difficult policy tool to implement, but it can be rewarding if done right. There is a lot of work to do, but there is also a fair amount of time left until Strategic Mandate Agreement 3 is finalized and implemented. It is important that this time be used to incorporate the student perspective in the final design. 


Hopefully you, dear reader, who have endured over 1600 words, have learned something today from my passion for a topic that will fundamentally and dramatically change the funding model of post-secondary education in Ontario. If you are passionate about this like I am, it will be interesting to see how it rolls out. During the next election, I encourage you to take the opportunity to ask candidates if they will support PBF or other funding frameworks that incentivize the programs and services you want to see at your university and others across the province.