Funding package to cost universities a billion dollars

Federal spending on higher education looks set to fall by AU$1 billion (US$797 million), according to Universities Australia. Chair of the nation’s main university organisation, Professor Margaret Gardner, said government’s spending on higher education would cut funding for universities and increase fees for students so they would pay more for less.

Gardner said that by 2021, funding of universities per student place would be 4.9% lower in real terms because of government cuts over the next two years. “This higher education package [in the government’s May budget] won’t increase university funding. In fact, it’s designed to do the opposite – the centrepiece of the package is a AU$1 billion cut,” she said on 24 July.

Although Education Minister Simon Birmingham had stated that federal funding of higher education would increase by 23% over the budget’s forward estimates, Gardner said almost all of this increase – 87% – was due to the growth in government loans to students whose enrolments were rising, loans that would ultimately be paid back by students.

“Most loans – nearly 80% – are expected to be paid back,” she said. “The figures used by the government reflect a decision to make students pay more. The increase in loans includes both a 7.5% increase in student contributions and the decision to move permanent residents and New Zealanders from government-subsidised places and make them pay full fees. The proposed changes will increase student contributions at the cost of their higher education.”

According to the Universities Australia calculations, by 2021 more than one in three government-supported students will be paying more than half the cost of their courses and nearly a fifth will be paying more than 90%. Universities Australia says that at the same time, the government’s own figures show no increase in public funding for universities which is already low compared to other countries.

After the government’s May budget had been presented to and debated in parliament, Birmingham told the Senate that the costs of higher education had to be brought under control. Universities were capable of making a bigger financial contribution and the student loans programme had to be made more sustainable, he said.

Presenting a bill to the Senate to achieve this goal, the 'Higher Education Support Legislation Amendment (A More Sustainable, Responsive and Transparent Higher Education System) Bill', Birmingham noted that the total amount of money owing from taxpayer-funded student loans now exceeded AU$52 billion.

“Without changes to tackle the increasing amount, around a quarter is expected never to be repaid,” Birmingham said. “Since 2009, taxpayer funding for Commonwealth supported student places in higher education has increased by 71%, effectively growing at twice the rate of the economy.

“Average funding per domestic student for universities increased by 15% between 2010 and 2015, while over the same period the cost for universities to deliver courses increased by only 9.5%. Excluding [student] loans, total government grant funding will grow by 5% (in nominal terms) over the forward estimates.”

Universities to be held to account

Under the government’s plans, university entry requirements will be made more transparent and the institutions will be held to account for improving retention, completion and employment outcomes, with 7.5% of each university’s funding contingent on performance against 'key benchmarks’.

“In 2018, this funding will be dependent on participation in admissions transparency reform and cost of education and research transparency initiatives,” Birmingham said.

“From 2019, it will be dependent on performance metrics such as student outcomes and satisfaction, transparency and financial management, with a formula to be developed in consultation with universities. Legislation will require that any funds withheld be reinvested into well-performing universities, new equity measures or additional research funding.”

Phasing in the increased maximum student contributions by 1.8% each year between 2018 and 2021 would result in a cumulative total rise of 7.5% [and] would lead to a better balance between the contributions of students and taxpayers, Birmingham said. This would mean an increase for students from 42% to 46% of the average cost of a course and a decrease from 58% to 54% in the cost to taxpayers.

He said the government would spend AU$27.9 billion on students, AU$11.8 billion on research, AU$592 million for the higher education participation and partnerships programme and AU$33.5 billion on student loans over the forward estimates. The reforms meant a more sustainable rate of growth in taxpayer support accompanied by measures to ensure universities put the interests of students first.

“This package ensures the government continues to be the majority funder of higher education average course costs and demonstrates that scare campaigns about prohibitive fees have no validity, with course costs for students increasing by no more than AU$3,600 over a four-year degree, none of which has to be paid up-front,” he said.

But representatives from Universities Australia who appeared before a Senate education and employment legislation committee over two days in late July, argued that a strong higher education and research system was essential to Australia’s future.

In a pre-meeting statement prepared for the committee, the group of 21 representatives said Australia’s universities educated more that 1.3 million students each year, employed more than 120,000 staff, and supported a further 40,000 jobs. The sector contributed more than AU$2 billion each year to Australia’s regional economies, and sustained in excess of 14,000 regional jobs.

The higher education sector delivered three quarters of the value – currently AU$22.4 billion – of Australia’s highly successful international education sector, and was responsible for the high esteem in which Australia is held as a destination of choice for international students.

“Australia cannot be an innovation nation without strong universities. Without adequate, sustainable and predictable funding, universities cannot open their doors to properly support, or provide the quality of education expected by all those with the requisite ability to complete a university education,” the statement said.

“They cannot undertake the world-leading research that saves lives and transforms industries or assures Australia’s successful transition to a very different technology-based future where lifelong learning, up-skilling and re-skilling are the new norms.”

'Budget savings, not policy reforms’

In the presentation and spelt out further during the two-day Senate hearing, the group said neither the government’s budget on higher education this year, nor its 2015 predecessor were policy reforms.

“They are budget savings measures and should be discussed and debated as such – honestly and transparently. The primary purpose of this bill is not to strengthen the university system, to provide a better experience for students, to drive a national innovation agenda, to put universities on a more sustainable footing or to improve Australia’s international competitiveness as a provider of international education. It is to deliver a AU$2.8 billion saving to the federal budget.”

The group argued that just one component of the legislation, a so-called 'efficiency dividend’, would reduce the total base funding to universities by AU$330 million a year by 2021, which was the equivalent of removing one entire university from the system.

Despite a substantial rise in enrolments, both as a share of government outlays and as a proportion of gross domestic product or GDP, public investment in higher education was falling. As a fraction of GDP, public funding for tertiary education had dropped from 1.2% in 1995 to 0.7%, the representatives said.

A package based on funding cuts and increases in fees would reduce the range, diversity and quality of universities’ offerings, driving the system to greater homogeneity as lowest cost modes of delivery were pursued.

“The case for how this benefits students has yet to be made. There is no doubt that universities in regional or outer metropolitan areas, as well as those institutions that do the heavy lifting on access and equity will be affected most,” the statement said.

'Ignoring costs’

During the two-day hearing, one of the senators asked Professor Colin Stirling, chair of the Innovative Research Universities group: “Do you see this current piece of legislation as a threat to the capacity of the sector?”

Stirling responded: “Absolutely! Part of the discussion has been that universities have this river of gold somehow, and it is ignoring the costs associated with growth of student numbers. Yes, we have more money, but it is because we have more students. It costs us much more to teach those students. It has been suggested that we generate surpluses and that those surpluses prove that we have more money than we need.

“[But] universities use surpluses to be financially prudent, to build them up in order to invest in infrastructure. Universities around the country are investing in new ways of teaching, new teaching facilities and digital infrastructure that is critical to maintaining our relevance in the international educational and university sector.”

The government’s bill to introduce the changes outlined by Birmingham faces amendments in the Senate where the government holds only 29 of the 76 seats while the Labor opposition has 26. So the government will need the support of at least 10 other senators and is likely to be forced to accept a number of changes.

To download a transcript of the Senate hearing click here.