Universities should have a Commonwealth funding floor

Update 27/8/20: A funding floor has now been inserted in the Job-ready Graduates bill, albeit with some remaining issues.


As expected, the legislation for Dan Tehan’s higher education policy would formally repeal the Higher Education Support Acts bachelor-degree demand driven funding provisions, with a small exception for regional Indigenous students.

Funding for Commonwealth supported bachelor degree students has been capped since the end of 2017, so this might seem like just a formality. But in reality the repeal involves a major structural change, one that could undermine important higher education policy objectives.

Even though section 30-27(1) of HESA 2003 created a power to cap, section 30-27(3) required that the capped amount be at least the previous year’s funding level. The only way that a university could get less money than the previous year was by enrolling too few students, reducing their payment under the demand driven funding formula (section 33-5(5)). In effect, the link to previous Commonwealth payments created a funding floor that the government could only lower with parliamentary approval.

This floor will still exist for regional Indigenous students. But for every other Commonwealth supported student, from sub-bachelor through to postgraduate, the funding floor can be changed by the government each time university funding agreements are rewritten (section 30-27(1), as revised by the draft legislation).* Funding agreements can last up to three years, and usually have been for three years, but have sometimes been for one year.

For a three-year agreement, universities have temporary financial security, provided that they can deliver sufficient student places to reach their maximum grant (a key element of the Tehan reforms is requiring universities to deliver more student places per $1 million of Commonwealth Grant Scheme funding). But as funding agreements are renewed, the maximum grant could be reduced by whatever amount the government decides.

This level of funding discretion is undesirable, for at least four reasons:

1. A deterrent to committing to expansion plans

As the government has argued, one of the primary reasons for policy change in higher education is to expand the number of student places to meet the needs of the ‘Costello baby boom’. But if universities believe that their funding may be arbitrarily cut any significant expansion becomes high-risk. The international student crisis will focus university councils and senates on the dangers of committing to spending based on high-risk funding sources. The lack of a funding floor undermines the conditions of universities meeting one of the government’s main policy objectives.

2. De facto per student funding cuts

The government has struggled to get cuts to Commonwealth contributions through the Senate; former education ministers Christopher Pyne and Simon Birmingham both tried and failed. With the funding freeze universities were free to reduce their student numbers to maintain real per student funding, but more typically they left enrolments at around previous levels, taking a small cut to their average per student funding.

I don’t think that modest real cuts to per student public funding should be ruled out as one part of a package to generate more student places. Taking the savings from the freeze was part of Labor’s plan to restore demand driven funding, so there is even some possibility of bipartisanship. But the decision should be made by the Parliament, not a minister.

3. Further stresses on academic employment

Greater reliance on contingent income sources is one reason why academic staff have increasingly been employed on a casual or fixed-term contract basis (see chapter 4 of Mapping Australian higher education for the trends).

While some flexible employment is necessary, at current levels it is a problem. Employment insecurity is a deterrent to an academic career, causing talented people to look for other jobs. For those who do pursue academia anyway, short-term employment contracts make it harder to take on big financial commitments, such as buying a house or starting a family.

4. Academic freedom

The government is concerned about freedom of speech and academic freedom. But employment security is one of the foundations of academic freedom. A reason why academics have historically had a special role in challenging conventional wisdom is that doing so is not grounds for dismissal.

Despite the occasional controversial sacking, such as the Peter Ridd case, academics are very rarely directly dismissed for their views. But if they are casuals or on a fixed term contract they can just quietly not be renewed. Concern about future employment must have a substantial ‘chilling effect’ on academic freedom and campus freedom of speech.


The solution is to add to section 30-27(1) a clause that parallels the old demand driven guarantee, that the maximum payable grant cannot be less than it was in the previous year, except in cases where too few student places were delivered.

This clause does not preclude all future funding cuts. But it does mean that a decision to cut has to go through the Parliament, where it can receive proper scrutiny.

*The nature of the floor would be slightly different between medical and non-medical students. Medical student places will still be ‘designated’, that is specifically allocated to universities. Their floor is the legislated Commonwealth contribution amount for medical student places multiplied by the number of places allocated. For all other courses the floor will be set in dollars, with no precise link to student places.

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