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Submission to the Legislative Assembly of British Columbia Select Standing Committee on Finance and Government Services

September 18, 2014 _________________________________________________________________________________

CONTEXT

The importance of post-secondary education in providing benefits both to individuals and to society is well understood. The purpose of this submission to the Select Standing Committee

• n Finance and Government Services is to focus on the importance of university education from

an economic perspective; and specifically, how British Columbia’s research universities are world-leading engines of growth and are critical to the provincial economy. In British Columbia’s small, open economy, the ability to develop and apply new knowledge and develop a skilled workforce is crucial. Graduates from British Columbia’s research universities contribute to communities throughout the province. Today, alumni hold key positions in every sector of British Columbia’s increasingly complex, globally connected and constantly changing

• economy. University graduates on average have higher annual earnings and employment rates,

are more resilient during an economic downturn and, in fact, are instrumental in economic

• recovery. Drivers of change, new ideas and efficiencies, this pool of talent must be sustained to

fully realize the province’s potential. Research universities fully appreciate British Columbia’s fiscal circumstances and the need to maintain fiscal discipline, and have undertaken significant initiatives to achieve efficiencies, diversify revenue sources, and reduce program spending. However, universities are facing pressures that are placing them in a position where there is a real risk of a negative impact on the quality and accessibility of programs and services for students. This problem is particularly acute at a time when the needs of the labour market are so great. BC’s Skills for Jobs Blueprint provides a framework for how university degrees directly intersect with the provincial economy. The Province’s forecast for liquefied natural gas (LNG), for example, shows direct, indirect and induced jobs as a result of fully developing this resource. In comparing this forecast to Statistics Canada analysis on industry sector labour needs, it is clear there are impending labour market shortages across all jurisdictions. It is also clear that the province requires a comprehensive range of talent. Alongside the skilled trades needed to construct and operate LNG plants, the province will need a deep and wide pool of university

2 graduates in fields such as business, engineering, project planning, law, and accounting, as well as from sciences and humanities, to operationalize this and other initiatives for diversified economic growth. In June 2013, the Honourable Amrik Virk, Minister of Advanced Education, received a mandate letter from Premier Christy Clark setting out the Government's expectations for post-secondary education in British Columbia. The following illustrates how British Columbia’s research universities are meeting and exceeding these expectations.

Minister’s Mandate Letter:

COMMITMENT TO A STRONG ECONOMY

ECONOMIC IMACT Te tta anna en i i !at " te resear ni#ersities n te !r#inia en $ is %&'() *iin(

Direct spending includes spending by the university, students and visitors, and the resulting re-spending (multiplier) in the economy. The impact of alumni reflects that earnings of university graduates are substantially higher than other citizens. The impact of research on productivity and efficiency reflects the benefit the private sector derives from university graduates and how those graduates take their skills and knowledge to the marketplace.

Direct Spending (salaries, benefits etc.), $4.3 billion, 20% Student Spending (rent, food etc.), $1.4 billion, 7% Visitor Spending (parents, conferences, etc.), $680 million, 3% Effect of Alumni Higher Earnings on the Marketplace, $6.7 billion, 32% Impact of research

• n productivity and

efficiency, $7.9 billion, 38%

3 Appendix I contains examples of how British Columbia’s research universities are connecting with communities to advance economic growth and job creation across British Columbia. (Advanced Cood Processing, Innovation Boulevard, Vancouver Island Technology Park, Prince George Bioenergy Plant, Damloops Innovation, and ResourceE)

ATTRACTING +,N-S TO .C Tta S!nsred Resear / %0)1 iin in .ritis C *ia in &)'&2'3

In 2012F13, a total of $809 million in research funding came from the federal government (G4%), non-profit government sources (34%), and the Province (11%). Hf this $800 million, $700 million came from outside the province. Competition for funding is intense; it could have gone elsewhere in Canada, but it came to British Columbia. British Columbia outpaced other provinces by increasing federal granting agency funding by 1G2% between 2000F01 and 2011F12 - a rate greater than Hntario, Iuebec and Alberta and the Canadian average.

.RITIS4 COL,M.IA 5NO6LE-GE -E7ELOMENT +,N- 8.C5-+9 Attrated in#est ent " #er %:1) iin int .ritis C *ia sine &))'

The Province's investment of $426 million in the BCDDF has leveraged

• ver $790 million in direct

matching from the Federal government ($461 million) and from private and other sources ($329 million).

$437 $264 $109 54% 33% 13% $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 Federal (NSERC, SSHRC, CIHR, CFI, etc.) Not-for-profits, business, foreign,

• ther

Provincial (BCDDF, Ministries etc.)

$461 $426 $329 100 200 300 400 500 Canada Foundation for Innovation (CFI) BC Dnowledge Devlopment Fund (BCDDF) Hther Sources

Awards from 2001 Forward (Total $1.22 billion)

4

IMACT ON T4E ECONOMY 6at des .C5-+ !r#ide "r .ritis C *ia's en $?

Research in British Columbia’s universities has been instrumental in driving innovation in resource industries such as mining and forestry, and in new industries such as digital media and life sciences. It has contributed to advancing new technologies and treatments in health care and in protecting our environment. Examples of BCDDF funded research include: 4D LABS at Simon Fraser University is an applications and science-driven research institute that supports next generation technologies in clean energy, health care, information technology, environment and agriculture. Businesses such as Cooledge Lighting, Photon Control and Iuantum Solar Power have all used 4D LABS to advance product development. The Centre for Drug Research and Development (CDRD) located at The University of British Columbia addresses the commercialization gap between fundamental research and economic and health gains with results: 44 technologies advanced to commercialization; 6 technologies were out-licensed to the private sector or optioned; 33 new patent families supported; and over $40 million in international pharmaceutical investment attracted. The nanoplasmonics research laboratory at the University of Victoria is working with Biomark Technologies on early detection of cancers. Students and researchers from this laboratory have moved to private sector firms, including Lumerical, Carmanah, Redlen Technologies, Accelerware, TIR Systems, Starfish Medical, Schneider Electric and 3M. At the University of Northern British Columbia, research on the interactions between the groups of species involved in mountain pine beetle infestations has improved predictive models of spread, and contributed to the development of new models. At Royal Roads University, marine geologists are studying the coastal marine sediment records of hazardous events such as earthquakes, tsunamis and slope failures for advances in fisheries and risk assessment of natural hazards. The Community and Ecosystem Ecology Centre at Thompson Rivers University focuses

• n threatened wetland and grassland ecosystems and conservation and restoration

strategies, bringing together botanists, zoologists, geographers, geologists, mathematicians and economists.

G

Minister’s Mandate Letter:

MATC4ING S5ILLS NEE-E- TO S5ILLS GRA-,ATING

,NI7ERSITIES MEET ST,-ENT -EMAN- AN- LA.O,R MAR5ET NEE-

British Columbia’s research universities are highly responsive to student demand for programs and students are getting jobs in the Province’s labour market. From 2006 to 2013, the largest program percentage increases were in health professions (46.G%), business (34.3%), and engineering and computer sciences (34.0%). Decreases occurred in arts and humanities (-18.3%) and education (-0.6%).

Resear ,ni#ersit$ rgra r"ie Gradate and ,ndergradate -egrees Awarded &))6 &)'3 # Cange % Cange Health professions 1,397 2,046 649 46.G% Business and management 2,727 3,662 93G 34.3% Engineering and computer science 1,840 2,46G 62G 34.0% Social sciences 4,768 G,6G9 891 18.7% Life and physical sciences 2,93G 3,438 G03 17.1% Arts and humanities 3,372 2,7GG

• 617
• 18.3%

Education 2,404 2,390

• 14
• 0.6%

Tta '1,443 &&,4'5 &,1:& '5(3%

University graduates, on average, are less likely to be unemployed, have higher annual earnings, have lower rates of absenteeism, have higher pension earnings, and are more resilient during an economic downturn. They also pay much more than the total cost of their education through income taxes over their lifetime earnings.

6

Minister’s Mandate Letter:

ENS,RE ST,-ENT SEATS ARE .EING +ILLE-

.C'S RESEARC4 ,NI7ERSITIES RO7I-E 5,4)) A--ITIONAL SACES IN &)'&2'3

British Columbia’s research universities have historically over-produced student spaces beyond funded levels. This is particularly true at the higher cost graduate student level where, in 2012F13, actual spaces exceeded funded spaces by 4G.2%. Resear ,ni#ersities* &)'&2'3 +nded &)'&2'3 Ata Actual > Funded Utilization Undergraduate 71,371 71,879 508 100.7% Graduate 10,914 15,844 4,930 145.2% Total 82,285 87,723 5,438 106.6%

* UBC, SFU, UVIC and UNBC

Even with the creation of these additional spaces, the demand from students continues to rise and exceed the spaces available. As a result, the competition for spaces is pushing grade point averages (GPAs) for admission to universities to all-time highs, particularly in the areas of engineering, commerce and science.

Minister’s Mandate Letter:

DELIVERY ON INTERNATIONAL EDUCATION TARGETS

British Columbia’s research universities have achieved a high rate of international student growth, making a significant contribution to the targets in the BC Jobs Plan and the economy of British Columbia. International students are integral to the learning environment and awareness of all cultures in an increasingly globalized economy. Research University Actual International Student Total Headcount 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 Number of Students 11,857 12,515 14,200 15,796 17,728 18,877 Annual Increase 658 1,685 1,596 1,932 1,149 Annual Percentage Increase 5.5% 13.5% 11.2% 12.2% 6.5%

7

Minister’s Mandate Letter:

ENSURE EFFICIENCY AND BUDGET TARGETS ARE MET

SURCES F RE7ENUE

$otal revenue to the 3rovince)s si, research universities in 2!12F13 was >3.8 billion. $he 3rovince contributed >1.1 billion in oerating funds, or 3! ercent of total revenue, for the teaching, non%sonsored research and community service roles of the universities. $his was down from 38? of total revenue in 2!!!F!1. Significant measures have been ta+en by the universities to diversify revenue to rovide funds to achieve their mandates.

CHALLENGE

$he research universities are very aware of the rovince's constrained fiscal circumstances and the need to maintain fiscal disciline. $o that end, the research universities are wor+ing closely together to achieve efficiencies and hold the line on rogram sending desite rising costs and a reduction in the oerating grant. Since 2!1!F11, unfunded cost ressures have included wage increases, non%wage inflation costs, and carbon ta, levies. In addition, the oerating grant has been reduced and a reduction was made in the annual caital allowance. $his has resulted in aro,imately >13! million of unfunded cost ressures over the eriod 2!1!F11 to 2!13F14 (net of tuition increases).

8 $he research universities have underta+en initiatives to minimize the imact on students of reduced oerating funding and cumulative cost ressures. $hese include: business rocess imrovements( leveraging technology and other efficiency increases( ancillary services net revenue increases( cometitive rocurement( cash management imrovements( and increases in the number of international students. Hver this fiscal year and subse2uent two fiscal years, universities face continued inflationary cost ressures of >63 million, as well as the ro%rata reduction of >27 million to the

• erating grant. $hese ressures do not

include negotiated wage and benefit increases

• r the need to address deferred maintenance

for aging facilities. urther, tuition increases of 2? will only artially offset these increases. inding additional efficiency savings will be difficult as these have been largely ma,imized to manage cost ressures in the net zero and cooerative gains eriods of wage mandates. $he imlications of these cumulative ressures are the ris+ of deterioration in 2uality, reduced service levels, increased class size, and unmet student demand at a time when the rovincial labour mar+et needs have never been higher.

9

GING FRWARD

SHRT TERM REIN7ESTMENT

In the immediate term, the research universities are as+ing the 3rovincial Government to reinvest the >25 million reduction in funding to ost%secondary institutions lanned for 2!15F16. With this reinvestment, the research universities will commit to use their ortion of this funding to address the need for student saces in rograms of high riority labour mar+et demand. $he research universities are also see+ing aroval from the 3rovincial Government to be able to self%finance selected caital rojects, such as student residences, through their own revenue

• streams. $hese rojects are critical to suort imrovements for domestic students and further

growth in international students, and will stimulate regional job creation and economic growth through infrastructure develoment. As these rojects would be self%financed, there would be no additional e,enditure re2uested from government and no additional cost to the ta,ayer.

LNG TERM STRATEGIC IN7ESTMENT

In anticiation of an imroving fiscal environment, the research universities are roosing a collaboration with the 3rovincial Government, other artners in the ost%secondary system, and business and industry to develo a multi%year investment lan for ost%secondary education with clear lin+ages to economic growth in all arts of the rovince. In a global economy driven by intense cometition, British Columbia)s greatest assets are the s+ills and talents of its eole and a strategic investment lan is vital to the rovince)s successful economic growth.

1!

APPENDIX I

EXAMPLES F HW BC’S RESEARCH UNI7ERSITIES ARE SUPPRTING ECNMIC GRWTH AND JB CREATIN IN CMMUNITIES ACRSS BC UBC Wood roducts manufacturers and industrial designers can access cometitively% riced roduct develoment services from UBC)s Centre for Advanced Wood

• 3rocessing. British Columbia%based manufacturers can receive suort for these

rojects through the Wood irst rogram. Students from the B.Sc. Wood 3roducts 3rocessing 3rogram can be hired on co%o wor+ terms to hel with roduct develoment rojects. SFU Innovation Boulevard is a networ+ of health institutions, universities and comanies located in Surrey)s City Centre between SU Surrey and the Surrey Memorial

• Hosital. In its first year, Innovation Boulevard achieved significant milestones

including the oening of a Neuro$ech Laboratory, two innovation saces and international artnershis with institutions in Israel. SU Surrey itself is home to over 7,!!! students and generates leading%edge research in a variety of fields. U7ic $he Vancouver Island $echnology 3ar+ (VI$3), a UVic Enterrise, facilitates the growth

• f technology on Vancouver Island by roviding hysical infrastructure that lin+s

rovincial, national and international resources with emerging or growing tech

• comanies. VI$3 enhances the creativity and roductivity of its tenants by clustering

various technology comanies. UNBC In May 2!11, UNBC launched its Bioenergy 3lant on the 3rince George camus. $he lant was designed by Vancouver%based Ne,terra Systems Cor. It uses gasification to convert sawmill residue into useable heat in the form of hot water and has offset roughly 85? of the fossil fuels reviously used to heat camus buildings. $he ne,t hase for UNBC)s bioenergy system is the Sustainable Communities Demonstration 3roject which will greatly e,and UNBC)s ability to demonstrate sustainable energy in the North. TRU $RU has suorted the develoment of the Kamloos Innovation, a non%rofit society that serves the Central Interior region of British Columbia, and a BCIC Acceleration Networ+ artner. Kamloos Innovation offers affordable rograms that guide, coach and mentor early stage ventures. Its rimary rogram is the BC Venture Acceleration 3rogram that hels early%stage entrereneurs in BC grow their comanies. RRU $o hel local lanners to drive beneficial future investment in their communities, Ann Dale, the Canada Research Chair in Sustainable Community at RRU, has launched the Resource+ roject. Resource+ will be the first comuter%based model at the community level that combines land, water, and energy use data with statistics such as emloyment rates and economic outut.