Opinion & Commentary
Modest gains but at a price
After a very quiet 2008 for higher education policy, 2009 is the critical year in which the Rudd government will set its policy direction. The economic slowdown will make the price tag attached to the Bradley report recommendations look high: around $6 billion in extra funding for higher education institutions, about $1 billion for related programs, and perhaps $850 million in extra lending to finance HELP debt on student contribution amounts.
For higher education institutions, most of the extra federal money comes from four progams: a $1.8 billion increase in funding for teaching and learning, and about $1.1 billion each from new places, improved indexation, and more generous founding for research infrastructure. There are smaller sums for implementation, structural adjustment, regional higher education, international research students, and philanthropy matching.
New student contribution amount revenues are not provided in the Bradley report itself, but from other information I estimate they will total just over $1 billion. About $150 million is likely to be paid up-front, with another $850 million borrowed through HECS-HELP.
Part of this student contribution revenue would come from the proposed 25% increase for teaching and nursing courses. Assuming that all universities lift their charges, and that enrolments remain roughly at current levels, this would increase university income by about $225 million over four years.
Most additional student contribution amount revenue would come from higher education providers offering new places under the proposed voucher scheme. By reverse engineering the funding commitment, we can infer how many extra student places the Bradley committee thinks the voucher scheme would create. Assuming a similar mix of courses to now, I estimate that these new students would deliver approximately $800 million extra in student contribution income.
Not all the Bradley recommendations for new public spending would help universities financially. There are about $1 billion worth of initiatives that would go directly to others: improved student income support, debt remissions for nurses and teachers, and a new regulator.
In addition to these, several Bradley proposals would generate new costs that are likely to absorb all their new revenue. In the package’s most glaring omission, it would do little to fix the unattractive economics of Commonwealth-supported places. The combined $1.9 billion in Commonwealth and student contributions for all the new places should appear as both revenue and expense estimates, with no net gain.
The $120 million for international research student scholarships would on my calculations incur $180 million in expenses, due to the Bradley report’s recommendation that universities pay student living expenses. The funding for implementation and structural adjustment would cover once-off equivalent costs, but do nothing for existing programs and students.
There are also new expenses that are harder to cost. A controversial suggestion in the Bradley report is that institutions calling themselves universities be research active across all the broad fields of study in which they offer coursework degrees. The status anxieties evident in the spat late last year over community colleges suggests that current universities will do whatever it takes, and spend whatever it costs, to keep their title. Universities would also have to spend more on outreach efforts to attract disadvantaged students and to support them through their studies.
Without including any estimates for these further expenses, new revenue for existing activities would be about $4.6 billion over four years. Put in the context of income that universities could expect to receive in the same time period without the Bradley reforms, this can be seen as a modest financial boost. Using conservative forward estimates of university revenue, it represents around a 3% gain in 2009-10, rising to an 8.5% gain in 2012-13.
Institution-level predictions are more complicated. Far more funding than in the past would be contingent on “performance” of various kinds. The Bradley committee recommends $1.8 billion over four years in clawbacks on teaching and learning funding to support social inclusion and quality targets. Universities unable to attract significant numbers of low socioeconomic status students are likely to lose out under these clawbacks, but apart from that too little information is available for predictions.
The other contingent factor is of course the voucher scheme. The days of funding agreements keeping competitors in check would end, and once new regulatory structures are in place private providers and TAFEs would be able to compete with public universities on equal funding terms.
Though a well-designed voucher scheme could shake the sector up, I doubt this voucher scheme would generate the student movements hoped for by some and feared by others. Once the clawbacks on base funding are deducted, and without a general increase in student contribution amounts, most disciplines would end up with only a 1-2% real increase in total base funding per Commonwealth-supported place. On those rates, competition would be for international rather than domestic students.
In the end, the Bradley package looks rather like the Nelson reforms. It offers a series of financial patch-ups that would, if accepted by the government, help the sector stagger on for another few years. But the increases in revenue are too small to transform Australian higher education.
Andrew Norton is a Research Fellow at the The Centre for Independent Studies.
