Wednesday, March 9, 2011
Tax Credits Are No Way to Fund Post-Secondary Education
I attended a debate On March 2, 2011 hosted by the University of Winnipeg Politics Society, as the Leader of the Green Party of Manitoba. Representatives from all four other political parties were present. The possibility of a University of Winnipeg faculty strike was raised several times and was clearly on the minds of students and faculty. Other concerns raised included: student debt, rising tuition fees, predictability of funding and corporate involvement in universities.
At the debate I tried to point out that while it would take time to move towards a system of universal access to education it clearly could be done.
Education is after all one of the classic examples of a public good. Education is a huge economic driver! And this warrants subsidization because of the overall positive benefits. An educated population drives innovation and facilitates the creation of new ideas leading to better ways of doing things. A vibrant economy is created when individuals, businesses, and organizations have access to educated population. Society needs people of all gambits: tradespeople, businesspeople, medical professions, teaching professionals, agriculturalists, and these skill sets and so many more must be learned somewhere.
College or University education is increasingly required in today's job market. European countries, particularly Scandinavian nations, manage to deliver extremely low-cost or even free education. Quebec delivers education to its residents at a substantially subsidized rate. So what is stopping us from taking similar action in Manitoba?
Now the common response to this is that we cannot afford to lower tuition fees, but is this actually true?
Using 2009 Statistics Canada data, we can see that Revenues of Universities and Colleges in Manitoba is ~$1.116 billion:
-The Manitoba government contributions ~$559 million, or around half of the revenue;
-The Canadian government provides ~$93 million, which adds up to less than 10% of revenue;
-Students pay ~$214 million in tuition fees, contributing to around 20% of revenue;
Local governments in Manitoba contribute ~$12 million;
-And the remainder is generated by Universities and Colleges themselves.
Looking at these numbers, clearly the federal government has not pulled its fair share since cutbacks in the mid-nineties.
That said education is a provincial responsibility, so the province needs to be willing to go it alone if the Federal Government fails to cooperate. Now to be fair the NDP have increase funding for post-secondary education, but these increases have quickly been eaten up.
A 'Dipper' Post-Secondary Education pamphlet handed out at the debate claimed an “80% increase in annual provincial funding for Manitoba's colleges and universities since 1999 – while the consumer price index rose only 22%.”
What the pamphlet neglected to address is that according to Council on Post-Secondary Education 2010 data between 1999 and 2009 university and college enrolment increased by around 35% depending on whether it is calculated on the basis of absolute number of students, or number of full-time equivalent students.
This adds up to a roughly 65% increase in costs, once the 22% CPI inflation and 35% increase in enrolment are factored together.
The same 'Dipper' pamphlet also bragged that the “Manitoba tuition fee rebate” and “Federal tax credits” equated to “An excellent deal for Manitoba students and Manitoba's economy.”
With respect, I could not disagree more!
Federally post-secondary education tax credits are worth $1.8 billion across Canada. Re-directing this money away from tax credits and funnelling it directly towards post-secondary institutions, and student loan, grants and bursary programs could unleash desperately needed funding for Universities across Canada.
In Manitoba the situation is much the same provincial tax credits for post-secondary education cost Manitoba about $25 million per year, and the new tuition fee rebate is estimated to cost up to $90 million per year.
The NDP Government commissioned report on post-secondary education, written by Dr. Ben Levin, explains the problem with tax credits quite well:
“...evidence suggests that the tax credits are not effective in encouraging enrolment in higher education ... Students from higher income families are the main beneficiaries of tax credits... for students of modest means the credits are not helpful because the money does not arrive when it is needed. Cash at the start of the year is much more important than the promise of a refund or credit in the future... about two-thirds of the value of the credits claimed in Canada each year is not used by students in the year earned. Instead, these amounts are transferred to a parent or carried forward to a future year. This means that most of the benefit, already indirect, is not available even within a year of the expense being incurred. ... Accordingly, accessibility would be improved if funds were used for direct assistance to students rather than for tax credits .” (p. 32-33)
I love Manitoba! As a student presently studying law in Manitoba, with the intention of establishing a Manitoba practice I will likely qualify for the 60% tuition fee rebate. So I personally stand to benefit, but from a public policy perspective I have to wonder: is a $90 million dollar tax cut - worth more than 40% of the value of annual tuition paid by Manitoba students - the best use of government revenue?
As a student I will receive up to an additional $250 tax credit in 2010, that will increase to a maximum of $500 in subsequent years. But why not just reduce tuition by an equivalent amount? I need the cash in fall when I am starting school, not in spring after I file my taxes.
Once I graduate and begin working in Manitoba I will be eligible for a 60% rebate of my tuition fees over as little as six years or as long as twenty years. But few graduates think about tax liability when selecting a new job; they are much more concerned with opportunities for advancement and the terms of compensation. Is this tax credit really going to attract the best and the brightest, or is it just going to give up to a $25,000 tax cut to people like myself who are likely to stay regardless of the tax fee rebate?
Even if retention is the aim of this tuition fee rebate it would seem to be more logical to target rebates for needed professionals, such as doctors and nurses in Northern and rural Manitoba. The rebate could be tied to a contractual agreements that would require the individual benefited from the the rebate to service needed areas. Such a targeted approach would seem to be more effective and economical.
For me the money spent on post-secondary tax credits could be spent more wisely. Tuition fees could be lowered, universities and colleges could be given more funding to retain and reward great staff and ensure that best technology is available thereby improving the quality of my education, funding to student aid could be increased so that more students qualify, and there is so much more that could be done if we moved away from the idea of using tax credits to fund post-secondary education.