Federal Budget Update
May 28, 2014 12 Comments
The big news for the last week has of course been the Federal Government’s budget proposals for Higher Education. I will come to these a bit further down but wanted to deal with some good news stories first.
The first thing I wanted to note was the changeover in Presiding Officer for Academic Senate. Professor Ben Bradley has now been replaced by Professor Jo-Anne Reid. Senate is a very important feature of a university because it is the mechanism through which the voice of the academy – separate to the corporate considerations of running the University as an organisation – can be distilled and articulated. This in fact is legislated as part of the Charles Sturt University Act. Senate achieved a lot in the period in which Ben was the Presiding Officer and Jo-Anne served as the Deputy and I want to thank them both for their contribution to the University through that. Naturally, I would also like to thank Jo and indeed all the members of Senate for continuing to perform this important work for the University.
Second, congratulations to Residence Life for winning the 2014 College/University Housing Operation of the Year. This is a terrific achievement and a testament to the hard work done by the staff in Residence Life. We count the students who are employed as Resident Advisers as part of that staff and having attended their training sessions for the last three years I have been really impressed with their enthusiasm and commitment. All the staff should be (and are) very proud of this and at a time when more than ever we need to focus on providing excellent services to students this is a great affirmation of what we do.
Third, congratulations to Charles Sturt Campus Services at Orange who achieved 1000 days without a lost time injury. This again is a terrific achievement – I have been very keen to encourage everyone to be vigilant about workplace health and safety and it is really good to see areas celebrating their achievements.
Fourth, I wanted to give a plug to the CSU Academic Women’s Association which is providing mentoring and support for academic women across the University. In common with most universities, women are under-represented at senior academic levels and one of the targets in our strategy is to improve this. I hope this will complement other initiatives to assist women to build their careers.
I would also like to note that this week is National Reconciliation Week. I think this has been rather overshadowed by the discussion of the Federal Budget. Having just written an acquittal of the University’s performance, one area where we have clearly been successful is in increasing Indigenous enrolments and Indigenous staff numbers. That I hope is making a continuing contribution to reconciliation.
So now to turn to the Federal Budget.
Here are my thoughts on the government’s proposals on fee deregulation, which are quite lengthy, but this is a critical set of reforms for the sector and for us.
Let me start by saying I do not argue that we need to balance the Federal budget over the longer term. I would also agree that we have probably been too generous in terms of personal tax cuts and tax relief. However, personally I would have preferred us to have had a decent conversation about the balance of taxation and welfare before the last election which would have allowed the electorate to make a more informed decision. This is not a particular criticism of the Government as neither Labor nor the Coalition really facilitated this conversation. In any case despite that we now have proposals which are acknowledged by the Minister to be the biggest reform in 30 years and I do not think he is exaggerating. What do they mean, what are the advantages and what are the potential problems?
The major aspects for me are:
1) A deregulated fee market – universities are free to charge any amount for domestic tuition as long as it does not exceed international fees. My presumption is that this means that domestic fees at a university cannot exceed the international fees at that university.
2) An average across-the-board reduction by 20% of government support for student tuition. This will shift the balance of average student contribution from 41% to about 52%. Note that because students were paying less, this means that the proportional increase for students is more like 27% – assuming the overall cost of education doesn’t change.
3) HECS debt to carry a real rate of interest equivalent to the 10-year government bond rate capped at a maximum of 6%. This is an increase of something like 1.5% and means that, unlike now, if students are not paying off their debt it will be growing in real terms (assuming that inflation stays below 6%).
4) If universities raise their fees beyond the amount required to replace lost government support, they will be required to put 20% of the money raised into a scholarship fund which will be available for use at that university.
5) Sub-degree places will now be uncapped and covered by commonwealth support.
6) Private providers and TAFE will also have access to commonwealth support. The government sees this as contributing to competition (the Minister talked about an ‘adrenaline jolt of competition’) in the sector.
7) PhD students will also be required to pay a part of their tuition costs, which will also be supported via a HECS loan.
8) Any student who enrolled after the date of the budget (13 May) will move onto the new fee arrangements from 2016. Anyone who enrolled before that date will stick with the existing fee arrangements until the end of their course, until they change course, or until 2020 whichever is the earlier of the three.
9) The government has committed to an additional year of NCRIS (National Collaborative Research Infrastructure Scheme) funding and to fund Future Fellows for the foreseeable future.
A point of detail to note, there was early concern that there was a threat to our Dental school because of the budget changes. We did lose $15m that had been pledged by the previous government to build additional dentistry clinics in Taree, Kempsey and Port Macquarie. This would have allowed us to expand clinical placements and hence student numbers as well as working to reduce the public dental waiting lists in that area. The loss of this funding does not affect our existing operations but as noted will prevent any expansion of Dentistry or Oral Health on the Mid-North Coast.
The government’s view is that the suite of proposals provides a fair balance of costs between the private benefits that students receive and the benefit that the nation receives from higher education. Whilst many people have drawn comparisons to decades past where higher education was free, or substantially cheaper, that was a very different world. A very small proportion of the population attended university, there was very much less gender equity and very much less social equity. I do not think it is realistic to expect that we could make higher education free with the participation rates that we have now. That is unless we are prepared to pay a lot more income tax, which it seems we aren’t. So I don’t think we should be debating whether students and graduates should bear some of the cost, what we need to debate is whether policy settings will drive the kinds of social and economic outcomes we are looking for.
Good things in these proposals are that the demand driven system is retained, that sub-degree places are included and that the Government has committed support for NCRIS and the Future Fellows scheme. I think it is reasonable also that private providers be brought into the system, provided we retain some means of funding the social good part of public universities’ missions. I will talk more about the possible problems with fee deregulation below, but it has to be said that an unregulated market in the international space released a lot of creativity and entrepreneurialism from universities and grew international education substantially. Of course, that was bringing new money into the country, not redistributing existing money within the country.
So what’s likely to happen? The Minister has suggested some fees might go down. According to our calculations Mathematics and Humanities will be receiving more government support than they currently do and, if substituting commonwealth money with student fees is all we do, that would allow a reduction. Fees in all other areas would have to rise, simply to replace the money removed by the government. For CSU we calculate this to be an average of 23.5% across the board. Some areas would need to rise substantially. Science fees would need to be increased by 62%, Agriculture by 48% and Environmental Studies by 114%. Is it going to be as simple as this? I don’t think so because we will need to consider the totality of the fees we set so that we can do the best job for our communities and we will have to see how the market behaves, and what happens to student demand, when it starts operating in 2016. I will have a bit more to say about how fees might play out below.
So what are the potential concerns? My first concern is with the pretexts on which this is being pursued. The first pretext is that we don’t have enough diversity in the sector and that diversity is a good thing. I agree with the second proposition but not the first. Early last year I attended a workshop on the U-Multirank tool run by the LH Martin Institute. The conclusion of this workshop was that in fact the sector is already very diverse. Charles Sturt University is nothing like University of Sydney, nor does it wish to be anything like it. We have very different missions, cater for very different student demographics, have different levels of research intensivity and we employ different kinds of staff. We teach more than half of our students by distance education and USyd teaches almost all of theirs by face to face. I think what people from Group of Eight universities mean when they say ‘we don’t have enough diversity’ is ‘we don’t have teaching-only universities, and therefore we have to share our research money with universities that shouldn’t have it.’ This to me is not a good reason for seeking more diversity. I did my first degree at what was then Trent Polytechnic. The staff were mostly professional engineers with a couple of researchers thrown in. They took their teaching very seriously and they did a very good job. However, there was a bit of intellectual spice missing from the education and at the end I did feel a little bit like I’d had the creativity beaten out of me. That was probably OK in 1989 but given the way the world is changing I think we need more flexibility of thinking, not less and I think the inclusion of some research in the culture is important to that end. In both Australia and the UK the binary divide was abolished for a reason and we are better for it.
The second pretext is that fee deregulation will allow Australian universities to climb up the global university rankings. Noting that these are almost exclusively research rankings, I remain to be convinced that requiring students to provide increased funds is going to do the job. On the Times Higher Education rankings, our highest performer in 2014 is the University of Melbourne at 43. To make it into the Top 20 it would need to more than double its score to 14.9, and this at a time when particularly Chinese universities (from a country of one billion people, let’s note) are having mind-boggling quantities of funds injected by their government. On the ARWU rankings, Melbourne again is our highest performer at 54 with a score of 30.2. To lift itself into the top 20 on the ARWU, it needs to improve this score by about 50% and go past University College London and Imperial College as well as the Universities of Illinois, Toronto and New York. If the Go8 are serious about shrinking their student numbers to get more focussed, their undergraduates are going to be paying a very high price indeed for this kind of ambition. I have previously suggested we might be able to pull this off by merging Melbourne and Monash or Sydney and UNSW, selling one of each of their campuses and investing the proceeds in research. I hate to be a grouch, but personally I’m not even sure what, apart from national bragging rights, would be the advantage of having two universities in the Top 20 as opposed to six in the Top 100? What would be the benefit to the economy or community?
The second concern I have is with the impacts on workforce supply. In the existing system we have been able to boost the supply of skilled professionals in regional areas. I worry that this may be undermined by these changes as regional students are put off studying. It would appear that the current higher education market has saturated – that is that the demand for higher education at its current price has plateaued. Assuming that the higher education market operates like any other, we are now looking at a substantial increase in price and we would therefore have to assume that some students will decide not to come. Universities have many fixed and semi-fixed costs which, even if staff were shed to match the fall in students, would not scale down at the same rate. On top of this, note that the Minister’s intention is for universities to be better resourced as a result of these changes “education institutions themselves will be able to grow, to employ more people and invest more back into their local communities.” http://budget.gov.au/2014-15/content/glossy/education/html/index.htm Both of these would suggest that fees will need to rise more than the simple replacement value. On top of this, it should be noted that in previous fee deregulations around the world, fees have risen. The most recent example of this is in the UK where fees tripled – almost all of them up to the cap. I find it very difficult to believe therefore that fees will not rise beyond the simple replacement value which is likely to deter even more people. The minister may be counting on private providers and TAFEs to provide enough competition to restrain price rises and to expand supply. However, if this does happen note that even if it’s good for students it will go against the idea that universities will be able to grow and invest more into their communities as suggested in the budget material above.
The third concern I have is with the scholarship fund. As currently planned, this requires 20% of the additional dollars raised above the replacement level to be put into a fund in each university for scholarships. Quite clearly, the most elite universities will be able to charge the highest prices and will therefore have the largest scholarship funds. Currently, these universities have the lowest level of low SES students. This therefore runs the risk that they will be incentivised to recruit students from regional Australia and if, as the Minister intends, competition restrains fees elsewhere in the market, the universities who currently support the most low SES students will be least able to do so. This is a fundamentally regressive proposal which in my view needs to be changed.
Other concerns follow for me, including knock-on macroeconomic effects like graduate wage inflation and the possibility that if the sector raises fees too enthusiastically there might be some rapid re-regulation. I mentioned regional work force above, there is also the possibility that the prices we set (because of the costs of programs like agriculture, veterinary science or engineering) are out of whack with student demand and we end up with even worse labour market shortages in regional areas than we already have.
What does it mean for Charles Sturt University and other regionally-based universities? It’s really hard to say. It seems almost certain to me that we will lose some students who have the least financial resources. We already know that some students struggle to attend university and this may be enough to deter them. It is possible that some students currently moving to capital cities to study may decide to stay in their regions instead. Perhaps it will increase the trend of some students studying for a year or two before moving to the city to finish their degree off and vary their experience. It is possible that more students may decide to move from metropolitan areas to regional areas to study. It is really difficult to do more than guess what the combined impacts may be. We have a great reputation for being entrepreneurial but I think we would be foolish to think that Charles Sturt University will be unscathed or significantly better off. I suspect we would at the very least be significantly different. It will take quite some time to fully work this through. I am hoping that compromise can be reached on the proposals as the budget makes its way through the Senate. Certainly at the moment Labor, The Greens and the Palmer United Party have said they are against it. We will begin to do contingency planning and work out how we will walk the path through the next few years as things unfold. I think this will amplify the existing trends of competition and privilege, much of which is based on history, in the sector.
As a final point, the Organisation for Economic Cooperation and Development (OECD) produces a regular report called ‘Education at a Glance’. One of the sets of tables in this gives a calculation of the private and public benefits of tertiary education. For Australia, the private rate of return is approximately 9% whereas the public rate of return is approximately 13%. I don’t know what difference these proposals might make to this (perhaps any economists reading can) but I think it does indicate that simply making the tuition costs 50-50 between students and the state does not necessarily give the full picture on the full benefits. My concern is that we do not unintentionally shrink the system and therefore undermine the benefits both to individuals and to our communities.
Finally, the changes in higher education policy are a very important step for our nation. I think our local Members of Parliament need to hear your opinions on this as they decide what to do about steering the budget through the Senate. The government has indicated it is willing to make compromises and it is important that they are informed about community opinion. You may be in favour of these changes, ambivalent, or dead against them and I would be very relieved to discover that none of our students is worried by these proposals. However, I think democracy would be served by sending an e-mail to your local Federal Member of Parliament to let them know your thoughts. They do take community feedback very seriously and it will help them to understand your perspectives and therefore hopefully make wise decisions.
For my part, I look forward to hearing your thoughts through the comments, or to firstname.lastname@example.org if you don’t want to express them publicly.