Ontario Announces Stop-Gap Measures to Support Struggling Universities

On February 26, 2024, the Province of Ontario (Ontario or the Province; rated AA (low) with a Positive trend) announced its decision to extend the freeze on domestic tuition for an additional three years, at the same time allowing a 5% fee increase for out-of-province students. Additionally, the Province has committed to investing $1.3 billion toward the stabilization of post-secondary institutions. While the funding may temporarily alleviate some of the pressures that post-secondary institutions are facing, we view the announced funding as modest considering the amount of revenues the sector has lost over the past years, ongoing revenue constraints, and the recently announced federal cap on international enrolment.

Key highlights include the following:
-- Tuition fees will remain frozen for another three years, at least until 2026–27.
-- The Province has committed to investing $1.3 billion toward the stabilization of post-secondary institutions.
-- Funding is likely to provide temporary reprieve for financially challenged universities; however, without the ability to increase revenues, risks to financial sustainability will persist.

“While these measures may act as a stop-gap in the short term, they fail to address the fundamental lack of revenue flexibility for Ontario universities,” said Apurva Khandeparker, Assistant Vice President, Public Finance. “As such, we expect universities will continue to be faced with challenging budget decisions, which could ultimately have negative effects on the quality of higher education and on credit ratings in the sector.”