April 3, 1998

In this issue:

• Globalization and the university community
• Saving for a 'rainy day'

Albertans live in a world in which international boundaries are increasingly irrelevant. Long part of an ecological "free-trade" zone, they are now being brought into closer interaction with people and events beyond their frontiers by technological change, markets and government policy whose ultimate objective is the creation of a single global economy.

Successful participation in this increasingly interdependent world requires knowledge and skills that did not previously exist. President Fraser wants to make sure the University of Alberta is up to the task of providing that knowledge and those skills. "I have one big question," says the president. "Thirty years from now, will today's graduates say that the University of Alberta prepared them to be successful in life?"

Knowing what knowledge will be necessary for success in the twenty-first century is not easy, but if current trends which bring people together from around the world can be taken as a guide, today's graduates will need to know a great deal more about the external world than their predecessors. The university must develop and communicate knowledge about the world beyond our borders if the education it provides is to remain relevant.

Internationalization is not an entirely new process designed to promote and integrate an international dimension into the university's traditional mission of creating and disseminating knowledge. It affects most, if not all, of the university's operations. What we teach, how we teach, to whom we teach and with whom we choose to work are all affected. What is new is the need to respond quickly.

International activities are the means the university uses to internationalize itself. President Fraser has identified five: the recruitment of outstanding international students, the development of strategic alliances with first class foreign universities in support of research and faculty and student exchanges, building alumni organizations abroad, developing relations with potential foreign benefactors and creating a capacity to identify and manage joint ventures and international projects. The president's recent trip to Southeast Asia resulted in progress on all five fronts. Students were recruited; partnerships identified; alumni mobilized; pledges made; and new joint ventures planned. More specifically, the Hong Kong Bureau of Education added Edmonton to the very limited list of North American cities in which it intends to recruit 750 teachers of English as a second language. These jobs, which pay between US $35-68,000, must represent one of the better opportunities currently available to U of A education graduates. Prior to the Hong Kong convocation, the bureau was unaware of U of A's ability to produce first-class ESL teachers.

Meetings held during and around the Hong Kong convocation also yielded four to five million dollars in additional pledges as well as new work-study opportunities for our students. Meetings in Bangkok and Singapore reinforced efforts to build alumni support in those cities and will result in new opportunities for student and faculty exchanges with three of those countries' leading universities. Plans were also discussed to involve the U of A in the development of a new university in Thailand, a project which will provide not only stimulating jobs for our faculty and students, but also funds which can be recycled into other international activities such as support for Alberta students to participate in international exchanges.

The opportunities which were uncovered during the president's recent trip to Asia are only a small part of a growing inventory. What is required now is for the university community -- faculty, students and administrators -- to take up the challenge of realizing these activities and using them to transform its traditional mission of developing and disseminating knowledge.

The community needs to set itself a common goal of incorporating an international dimension into its teaching and research. It needs to agree on a process for identifying, undertaking, evaluating and prioritizing international activities in support of that goal. It needs to provide itself with the required expertise and determine what financial resources it is prepared to commit to the exercise. And finally, because resources are limited and not everything can be done at once, the community needs to focus on a limited number of geographic areas, sectors of activity and types of activity.

Certain steps have already been taken. Those parts of the central administration concerned with the university's international activities have been reorganized in a new University of Alberta International. Draft proposals to assist the community in setting a common goal and in mobilizing the necessary resources have been prepared and are currently being discussed in small groups of faculty, students and administrators.

The university has a choice to make. It can attempt to ignore the world and condemn itself to a slow decline into irrelevance. Or, it can promote and use international activity to transform its research and teaching in such a way that its students will be able to answer the president's question "Did we prepare you well?" in the affirmative. One thing is clear: the choice belongs to and must be made by the university community as a whole. No one, however far-seeing, can realize this task alone.

Alberta has a large stake in energy prices. Among the biggest stakeholders is the government itself which derives -- depending on the level of oil and gas prices -- from 20 to 30 per cent of its revenues from this source. But that oil and gas revenue is unstable. In the 1998-99 budget, for example, the provincial treasurer estimates oil and gas revenues will be $1.1 billion lower than in 1997-98. Revenues from oil and gas in 1997-98 were $1 billion above the 1997-98 budget estimates and a major contributor to the provincial surplus in the fiscal year now ending. The fact is larger swings in energy prices can directly bring about anywhere from a 5 to 10 per cent change in provincial revenues. Energy prices still depend very much on the exercise of power by major OPEC producers to control the available supply of crude oil. Hence, Alberta's budget position is to some degree beholden to OPEC's ability to manage energy prices.

A tax structure whose revenue flow significantly reflects movements in energy prices creates problems, as we well know from Alberta's budget record of the past generation. The difficulties become even greater when a fickle revenue structure is coupled with legislation requiring surpluses to go to debt reduction and making deficits illegal. Simply adapting government expenditures to shortfalls in a fickle tax structure is dysfunctional. Expenditures on education, advanced education, health care and social services are 70 per cent of budgetary expenditures. Education and health care spending are closely linked to population. Downsizing to reduce deficits has, as we all know, reduced per capita spending for these purposes. After the cutting and restructuring in provincial expenditures of recent years, participants in the Growth Summit of September 1997 stated quite clearly they want reinvestment in these areas. Social service expenditures address the problems of the least privileged, and surely in a developed and civil society we do not want to make them the target of any further reductions in spending. Much of the other 30 per cent of provincial expenditures goes to maintaining the socio-economic infrastructure essential to a well-functioning society.

So if there is a problem -- and if we agree it best that our society should not be beholden to the vagaries of energy prices and to OPEC -- what do we do? One alternative has passed us by. That would have been to inflation proof the Heritage Trust Fund from its inception and to have continued to apply a significant fraction of resource revenues to building up the Fund. The flows off a Fund that would now be $30 billion would address the problem. But perhaps that was the path of the angels. What else might we do? One option, the longer term option, is to alter the tax structure to make revenue flows more stable by doing what virtually every other state and provincial jurisdiction in North America does -- adopt a sales tax. But in Alberta this is not politically feasible for reasons that run the gamut from rational to 'macho'. Hence, we have to look for second best solutions. The Alberta Government has adopted one of the obvious medium-term solutions by incorporating into the expenditure side of the budget a 'Revenue Cushion' budgeted for 1998-99 at $420 million, an insurance against natural resource revenue shortfalls. The problem is the cushion is not sufficient to protect against large and sustained -- but not improbable -- declines in energy prices. A 'Revenue Cushion', really an 'Expenditure Insurance Fund', needs to provide more insurance, say for coverage at 10 per cent of provincial budgeted expenditures. That is a level to set Albertans free from constant concern about the impact of, and budgetary response to, conditions in the energy market. How to go about it? It seems quite prudent the first charge against the estimated surplus of $2.3 billion in 1997-98 should be the establishment of a permanent revolving 'Expenditure Insurance Fund'. The conditions and circumstances under which the Fund is triggered should be specified in legislation.

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