Vancouver–Point Grey MLA David Eby has seen a lot since being appointed as the NDP critic for advanced education after the May 14 election. But one image stands out from his visits to 23 postsecondary institutions across the province, he said in a recent interview at the Georgia Straight office.
He was touring “decommissioned suites” in the family-residence building at Simon Fraser University. He explained that some had been condemned because they were too costly to fix. Then he came across a mother with a very young baby in the building.
“I have some allergies, and I was very aware that there was some mould in the air,” Eby recalled.
What bothered Eby was that SFU could not borrow money to build replacement housing. He said that’s because the Budget Transparency and Accountability Act prohibits colleges and universities from obtaining their own financing. This is even true for self-supporting debt that would be paid off with revenue coming into the institutions.
“The sole reason that that baby is breathing mouldy air—and many other children in this family residence—is because the government…would prefer this child to be in an unhealthy environment to the appearance of $10 million in debt, which isn’t even government debt,” he declared. “It wouldn’t cost the government a penny.”
Legislation governing postsecondary finances isn’t the sexiest political issue, but it has attracted Eby’s attention. The B.C. Liberal government amended the Budget Transparency and Accountability Act in 2001 to adopt generally accepted accounting principles as “the mandatory basis for government accounting policies”. Canada’s Public Sector Accounting Board established these principles, and the B.C. government has mandated that debts recorded by colleges and universities must be added to the overall provincial debt.
“Since then, there has been this dilemma for college and university administrators,” Eby said.
Eby pointed out that they need provincial approval to borrow to build student housing, even if this loan will be repaid through rents. And he claimed that the government is keen to keep the provincial debt down for appearances’ sake, despite the obvious need for on-campus residences.
In addition, Eby said that postsecondary institutions must put money aside to forestall future bankruptcies. As a result, he said, reserves for all public postsecondary institutions are approaching $500 million. He added that the institutions have no expectation of going bankrupt.
“Each of the schools is allocating this portion of their operating funding into these accounting lines to satisfy an auditor somewhere instead of spending it on school and student experiences,” he stated. “This is big money for them.”
Pierre Ouillet, UBC vice president of finance and resource operations, highlighted the lending restrictions during a September 20 presentation to the legislature’s finance and government services committee.
“We’ve got to be able to invest in non-taxpayer-supporter [sic] debt,” he said, according to Hansard. “We could today invest $200 million to $300 million in student residences that pay for themselves if and if only we had access to funding. We have the best credit rating in the country. We could do that tomorrow at very interesting rates. We just need to be able to be allowed to borrow.”
Former advanced-education minister and committee member John Yap followed up by asking if UBC could independently obtain credit. Ouillet responded that were the university not considered a government-reporting entity, it could borrow up to $500 million for projects that either generate revenue or reduce expenses, such as student housing, infrastructure, or clean tech.
However, the rules prohibit this. “Right now, the position with the government and the comptroller general is that everything that’s UBC debt is taxpayer-supported,” Ouillet said. “I would make a strong case that UBC debt could be split between taxpayer- and non-taxpayer-supported. That would potentially solve the issue.”
In the meantime, Eby said that the SFU Student Society was unable to obtain a guarantee from the university so it could obtain financing for a new building. As a result, he noted that the society will have to pay a significantly higher interest rate, costing students more money, even though revenue would pay down debt.
The minister of advanced education, Amrik Virk, was unavailable for comment by deadline. The ministry has claimed that the province closely monitors its debt-to-GDP ratio so it can obtain favourable borrowing rates and maintain its credit rating.
In addition, postsecondary institutions are not allowed to run deficits under provincial legislation, which also bothers Eby. That’s because colleges and universities can’t make three- to five-year financial plans with rolling surpluses and deficits, depending on their situations.
“They have to balance every year, which has implications for research funding,” he noted. “If you get the research funding, you have to spend it by year end, for example. You can’t plan grants over a certain period of time, so it’s an extra hurdle for granting agencies.”