Prolonged underinvestment in universities has put the system under serious financial strain, says a report from Universities Canada and the Canadian Association of University Business Officers. The University of Toronto's downtown campus on Oct. 20, 2025.Sammy Kogan/The Globe and Mail
Government funding to Canadian universities has dropped by more than 10 per cent on a per student basis since 2010, putting schools on an unsustainable financial path that will hamper research and skills training and undermine economic development just as enrolment is set to rise in the next decade, a new report says.
The report from Universities Canada and the Canadian Association of University Business Officers, released Tuesday, calls on the federal government to develop a talent plan that would help address the financial pressure and allow universities to boost recruitment of international students, whose numbers have dropped after government changes to immigration policy.
Gabriel Miller, president of Universities Canada, said the report is a reality check for the federal and provincial governments. If Canada is to meet the economic challenge of a changing geopolitical order, it will have to boost funding for its universities, he added.
“We just heard from the Prime Minister this week about how important it is for the country to take its future in its own hands, and we’re going to need to make equipping people for the future a core part of our strategy. That means sustaining universities in a way that we haven’t been doing for the past 10 or 20 years,” Mr. Miller said.
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The report argues that prolonged underinvestment in universities has put the system under serious financial strain. In 2010, more than 55 per cent of Canadian university funding came from governments, but by 2023 that proportion was just 41.2 per cent.
Some provincial governments also placed a cap on domestic tuition in that period, which restricted universities from using that revenue to make up the difference.
Beginning in the middle of the past decade, international student tuition became an important revenue source for universities and enrolment from abroad rose steadily. But in 2024, Ottawa announced it would cut the number of international study permits it issues in an effort to address a housing shortage.
Since then, a series of policy changes aimed at international students have contributed to a dramatic drop in demand, as foreign students came to see Canada as a less desirable destination.
“The result is that universities are balancing budgets through cuts, freezes and deferrals that undermine quality and reduce capacity,” the report states. “The choice is stark. Without co-ordinated action, system capacity will continue to contract, limiting access and affecting Canada’s economic performance.”
Universities are facing this financial strain as enrolment is projected to grow by between 218,000 and 488,000 nationally by 2040 because of a demographic bulge. A lack of funding could affect the number of available spaces, with Ontario universities alone warning that they could be short as many as 80,000 spots.
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Mr. Miller said he hopes the report will spark a conversation about future funding of the system and how some of the pressure can be alleviated.
“There’s no area of federal policy currently more important to the future health of our universities than its international policies,” Mr. Miller said. “That’s the lever that the federal government pulls that has the biggest financial implications for universities in the future.”
He said universities want to see an active roundtable with all the stakeholders in international education to create a strategy for a sustained recovery.
One concrete measure the report proposes is a tax rebate on the federal portion of GST/HST paid by universities, which would amount to about $240-million for the sector.
The report also calls for clarity around options for universities facing a financial emergency, as occurred at Laurentian University in 2021 when it filed for insolvency under the Companies’ Creditors Arrangement Act.
The government’s Bill C-59, approaching final implementation in June, bans postsecondary institutions from using the CCAA to restructure. But the report argues removing that option would force schools to shut down entirely or force a provincial government bailout.
It calls for a mechanism to be devised that would allow schools in an emergency to pursue an orderly and transparent restructuring.