Alex, thank you for taking note of my paper on college-to-university transfer. Thanks especially for giving the paper a careful read and summarizing the nuances so well. There is much for Ontario to learn from the 14 jurisdictions I looked at, but, as you suggest, the details matter a lot.

You are right to say that my financial analysis uses revenue data as a proxy for expenditure data. Ideally one would want to have comprehensive unit cost data for every university and college program in Ontario, based on a standard methodology that everyone could agree on. If these data were available, one could test a number of interesting hypotheses.

First, one would want to test whether university programs in Years 1 and 2 generate a financial surplus. They may well do so, but the remarkably low operating grant that Ontario pays for students in Year 1 and General Arts suggests the surplus is lower than it would be in other jurisdictions.

If students in Years 1 and 2 do generate a surplus, one would want to test some different hypotheses about how that surplus is spent. One possibility is that university programs in Years 3 and 4 generate a loss that requires a subsidy. This is essentially the position taken in your commentary. We know from CUDO that programs in Years 3 and 4 have smaller class sizes than programs in Years 1 and 2. But we should also want to know how sessional lecturers are being used. Even small sections in upper-year courses can operate at a surplus if they are taught by sessionals. Sadly there is no system-wide data on how sessionals are being deployed to reduce unit costs.

Another hypothesis is that the surplus from students in Years 1 and 2 is being used to subsidize research. Neither the federal government not the Ontario government explicitly funds the research time of principal investigators, and government programs to support research overheads pay much less than actual costs. Given the magnitude of the research enterprise, any claims about cross-subsidization within the university will be sensitive to one’s assumptions about how research is being funded.

Yet another hypothesis is that the surplus is used to subsidize graduate programs, especially at universities that guarantee financial aid to students in research-oriented graduate programs.

Any analysis of cross-subsidization is complicated by differences among universities and programs. A further complication is that the level and direction of cross-subsidization need not be static; in fact, the situation probably changes each year as per-student costs outpace per-student revenues.

In the absence of better information, I think it is reasonable to conclude that any surplus from teaching students in Years 1 and 2 (however large or small) is being used to address many competing claims across the university, not just the costs of teaching Years 3 and 4. For this reason, I think revenue is the best available proxy for expenditure on teaching students in Years 3 and 4.