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Instruction and educational services expenditure in Canadian Schools

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This article is part of the Canada’s School Spending series where GPetrium draws out insights through data visualization and analytics. If you would like to visit other articles within this series, please visit the Canada School Spending Series.

              In this article, we will take a deeper look at Instruction and Educational Services expenditure (from 1973 to 2016) for the Canadian education budget. This article will cover the economic classifiers that impact this expenditure and some of the major spikes that have occurred throughout its history. To better understand data visualization and the dashboard above, please refer to ‘Canadian School Expenditure Insights Through Data Visualization’.

              This series aims to use a single dashboard and its dataset to analyse instruction and educational services expenditure in Canadian schools throughout the 1973-2016 period. At $43.9 billion, instruction and educational services accounted for 70.8% of the $61.9 billion spent in Canadian school in 2016. Out of that, $35.4 billion (80.7%) goes to salary and wages, $5.3 billion (12.1%) to fringe benefits, $2.1 billion (4.8%) to supply and services, $836 million (1.9%) to fees and contractual services and the remaining $208 million (0.5%) to other operating expenditures.

              On a provincial basis, Ontario accounted for roughly $18.5 billion (42.2%) of the pie. While Quebec accounted for $8.4 billion ($19.3%), Alberta $5.9 billion (13.6%) and British Columbia with $4.5 billion (10.4%).

Economic Classifiers

              Fees and contractual services – At $836 million, fees and contractual services account for roughly 1.9% of the instruction and educational services budget. The growth in fees and contractual services decade-over-decade at the major provinces have gone up quickly with triple digit growth between 1976-86 and 1986-96. Interestingly, Quebec has been the major spender in this area for over 25 years (excluding Ontario’s spike in 1997) hitting $338.6 million in 2016, followed by British Columbia at $223.6 million, Ontario at $145.2 million and Alberta at $61.7 million. These number are likely to have been impacted by the province’s policies in relation to salaried and contractual work alongside teacher unions pressures in the bargaining table in relation to salaries and contract ratios, teacher’s sick days, among others.

              Fringe benefits – Throughout the decades, salaries and wages has seen a continuous decrease as a percentage of the instruction and educational services expenditure, moving from 89.7% in 1973 to 80.7% by 2016. As a counter-weight to the decrease seen in salaries and wages,  fringe benefit has seen a continuous increase for the same period , going from 2.78% of the economic classification to 12.09% by 2016. It is worth noting that all the areas have experienced an actual budgetary increase throughout the same period.

              At $5.3 billion, fringe benefits accounted for 12.1% of the instruction and educational services expenses in 2016. These numbers have been led by Ontario at $2.2 billion, followed by Alberta at $994.9 million, Quebec at $791.9 million and British Columbia at $785.4 million. It is clear that instruction and educational services employees have managed to successfully push for continued increases in the fringe benefits received. As fringe benefits trend up and become more robust, provinces may find a tight squeeze in their budget which may lead to budgetary austerity likely aimed at salaries and wages, which are often interlinked with fringe benefits. Unless salaries and wages are exceptionally weak, provinces and territories should start to be concerned at the pace of growth in this area.

              Salary and wages – Ontario continues to be the major salary and wages spender in 2016, accounting for $15.4 billion, followed by Quebec at $6.9 billion, Alberta at $4.2 billion and British Columbia at $3.3 billion. Alberta has seen the largest expenditure growth in this area decade-over-decade while British Columbia (BC) has seen the slowest growth in the past two decades. Due to the nature of salaries and wages in education, a decrease in spending seldomly occurs. An interesting outlier happened in 2011-12 when British Columbia saw its spending go from $3.14 billion to $2.97 billion, a $167.5 million drop (-5.3%). This may have been a by-product of a governmental response to teacher’s bargaining, which saw fringe benefits double from $374.6 million to $758.1 million (102% increase) in those same years. By 2015, political pressure seems to have swayed the government towards its prior levels, moving salaries and wages to $3.24 billion.

              Supply and services – The major supply and services spenders in 2016 were Ontario at $700 million, Alberta at $601.9 million, Quebec at $293.9 million and British Columbia at $222.7 million. Out of all provinces, Alberta seems to be an extreme outlier in this area since its population proportion (BC at 4.6 million people and AB at 4 million in 2016 according to StatsCan) is closer to British Columbia, even though it spends 2.7x times more in supply and services. According to the The Conference Board of Canada, in 2014 British Columbia, Ontario and Alberta were the top performers in Education and Skills.

              Questions should be asked as to whether the return on investment has been appropriate and what exactly is costing so much? Are they buying Virtual Reality sets for everyone? Subscriptions to multiple products? Did they set-up data center warehouses for machine learning/ AI modelling for the students? Education success is often a by-product of years to decades of investment, so it can be difficult to measure today’s investment. Their outlier status may serve as an example of what to do or not do, but as economic realities start to hit, this segment is likely to be at the top of the list when it comes to downsizing.

              Supply and services peaked in 2009 at $156.9 million and has dropped to $131.2 million by 2016, which was led by cuts from Ontario and Quebec. Supply and services have hit the lowest percentage of the business administration pie since 1973 at 8.26%, which can raise the question of whether there has been an over expenditure for decades or there is an under expenditure at this time. A quick projection would likely see Ontario and Quebec’s number stabilizing with a small incremental growth in the upcoming decade, likely leading to an expenditure range of $130-175 million.

              It can be difficult to determine a smooth linear expenditure in this segment since maintenance and much needed upgrades may come at different times and rates due to a variety of factors. Most governments around the world will use relatively simple historical models and expenditure predictions (with guidance from the districts) to determine a cap for each subcategory within supply and services. Districts and schools would then determine the level of priority within their directive based on budget availability.

              Other operating expenditures – Unless there are clear subcategories related to this section in the annual budget, it is quite concerning to have $208 million in 2016 alone. It would be strongly advised for provinces to refrain from using other operating expenditures to ensure transparency in operational expenses.

Spikes in History

              Fees and contractual services – Ontario saw an abnormal spike between the year 1996-97 going from $59.3 million to $346.8 million, a whopping 485% increase. It subsequently dropped back to a more realistic number at $61.8 million in 1998. One has to wonder whether it has any relation to Ontario teacher’s disputes which culminated in a strike in 1997 and partial lockouts in 1998 or if it was something else. Further research may be needed.

              Other Operating expenditure – Between 1994 and 2012, Alberta experienced a roller-coaster ride in terms of other operating expenditure. Such expenses ranged from as low as $28 million in 1994, $130 million in 1998, $68.9 million in 2002, $204.9 million in 2010 to $39.1 million in 2012. Although there are legitimate reasons for such expenditure, closer scrutiny may be warranted. It makes one wonder whether some form of pension payments was incurred at the time to off-set holes on the budget. Further research is required.

Conclusion

              Instructional and educational services remain the major expenditure in Canadian Schools. Fringe benefits has seen a growth in prominence in relation to other segments within instructional and educational services. Ontario remains the major spender in this function category, followed by Quebec, Alberta and British Columbia. Different provinces have seen unusual spikes in different economic classification categories throughout the history of the instruction and educational services data. Further research to understand certain abnormalities is warranted to allow for better transparency.

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