Our Whimsical Uni Funding Model

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Over the weekend, the Government announced that funds for the Gonski reforms would be found from $2.3 billion in savings from the university sector. The savings were made up of three components:

  1. An efficiency dividend for university funding of 2 per cent in 2014 and 1.25 per cent in 2015;
  2. The removal of the 10 per cent discount on paying university fees upfront for Commonwealth-supported places, and the removal of the 5 per cent bonus received for voluntary repayment of HELP debts; and
  3. Providing Student Start-up Scholarships as equivalent income contingent loans (similar to a HECS-HELP debt).

The public outcry regarding the announcement suggests that the oft-repeated mantra ought to have been: “I Give a Gonski … provided it doesn’t cost me anything.”

The Gonski part of the question is neither here nor there. The Federal Government is facing a losing battle to fund all the things on its increasingly long wish list. If it weren’t raiding the university piggy bank for schoolkids, it would be raiding it for DisabilityCare, the NBN, DentiCare, or Creative Australia.

They’d even be tempted to find savings in the sector just to get the budget a few decimal places nearer to surplus. This is because, provided the increase in funding to universities is greater than zero, government funding to universities is arbitrary and whimsical.

To see this, it is handy to look at how universities are funded. Last Tuesday, the Australian National Audit Office (“ANAO”) released a report assessing the Department of Industry, Innovation, Climate Change, Science, Research and Tertiary Education’s administration of the block grants provided by the Government to universities. As a group, the mechanisms for funding universities is called the Research Block Grants Program (“RBG”) and, as the audit summary shows, it is a complicated mix of various funding streams.

If you'd rather not read the audit summary page (it's nonetheless an inefficient cure for insomnia) the key point is that funding streams are based on competitions between universities using retrospective metrics. If you want to know how much a university will get in RBG to undertake work this year, you first need to look at what it accomplished last year and compare that to the achievements of all the other higher education providers. Each year, the government provides a slightly bigger funding pie than the previous and  each funding provider gets a slice based on their relative performance.

RBG is neither forward-looking nor needs-based. Universities do not gather as a group and say: “If you give the University of Dixon $20 million, we can train the best Jedi. If you give the same $20 million to the University of Isaacs, we can build a Death Star. The same $20 million at the University of Knox will establish a research centre for lightsabers.” At no point in the RBG process do universities have to demonstrate what they would do with the funds, nor does the Government have to express a clear position on what outcomes it wants from our taxes. Universities are just entitled to that money. Taxpayers are just obliged to cough up.

The peak body representing Australia’s universities, Universities Australia, responded to the Gonski cuts announcement with the usual points: universities need more money; the economy needs more money to go to universities; other countries are spending more on universities — and won’t somebody please think of the undergraduates?

What you won’t find in the press release is an estimate of how much money universities actually need. You won’t find any argument there about why universities are a cost-effective way to invest in productivity. You won’t find an explanation for why universities continue to pump out vocational degrees for industries where there are very few jobs (journalism, for example). You won’t find a rebuttal to Futurama’s argument that universities are “basically expensive day care centres.”

In fairness to universities, no political party has been forthcoming with a grand vision for the university sector. While some parties believe that we need more students and other parties believe that industry – somehow, in some way – should have a firm hold of university priorities, nobody has been able to draw up a vision of why universities exist in Australia.

By default, this means that the only meaningful difference between the various parties is how much they’re willing to abandon to universities. One party promises $2 bajillion where another promises $5 godzillion; neither cares how it is spent and universities don’t really know how they’d spend it.

And thus we get back to Craig Emerson’s poorly expressed funding announcement. What the Minister is trying to say is that the Government created the expectation of an increase in the amount going to universities but, due to funding pressures, they are reducing the amount of that increase.

$900 million over three years is coming from the efficiency dividend. This is Government code for: “We don’t have a strategic plan for where you need to find the savings; we just believe that universities have some bloat and that you can do your current work more cheaply.” New Matilda  has run articles making that claim in the past.

About half of the money ($1.2 billion) is coming from providing Student Start-up scholarships as loans. This “buy now, pay later” system is not a bad mechanism although there has been a growing concern about the amount of debt undertaken by undergraduates. The removal of the discounts accounts for voluntary payments makes up $228.5 million in savings. Most people are unaffected by this; only 16 per cent of people take advantage of them. As far as saving measures go, this is fairly modest. But instead of explaining or defending the announcement, Tertiary Education Minister Craig Emerson’s strategy was to pick a fight with Peter van Onselen.

It’s obvious that there is no grand vision, so the decision looks arbitrary. And while Twitter is always five minutes overdue for an outrage, screaming “FLAME ON!” at journalists is just kicking the hornets’ nest. Universities need to know why they exist. The public needs to understand how universities are funded. And governments need to provide a vision for the sector. None of these three is currently true.

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