The Job-ready Graduates student places debate

Update 30/9: The minister has announced $326 million over an unspecified period, but starting in 2021, for additional student places. This would have a a significant effect on the calculations below. I will update again when I have more detail.

————————————————————————————————

One of the many disputed points in the Job-ready Graduates Senate inquiry was over the number of student places it would create. The Department of Education’s answers to questions on notice provided new detail, including annual estimates, shown in the chart below.

Over the longer-run, there are multiple mechanisms in JRG that could require or encourage universities to deliver more student places than now. However, the Department does not explain how it arrived at most of its numbers. They do explain the assumptions behind their 2021 forecast. For the reasons given below, I doubt that these justify a claim of additional places compared to status quo policies remaining in place.

Funding envelope

Of the 15,000 additional funded places, 7,000 are said to come from ‘increased flexibility for universities within the funding envelope’. This refers to ending three separate Commonwealth Grant Scheme grants for sub-bachelor, bachelor and postgraduate coursework places. Instead, universities would have a single ‘funding envelope’, within which they could freely move resources between qualification levels.

This can generate funded places because universities may not use their full allocation in one category, and so return funds to the Commonwealth, while being over-enrolled or turning applicants away in another category, because they have reached their maximum CGS allocation.

This situation is not uncommon. In my analysis of 2018 outcomes, 22 of the 37 public universities mixed under- and over-enrolled categories.

While I generally support this policy – with reservations about letting universities move undergraduate places to postgraduate – it is not new to the Job-ready Graduates policy. The 2020 revised funding agreements already allow it, though the JRG version is legally and bureaucratically tidier.

The policy also does not necessarily mean that newly funded student places are additional student places. Take the example, under 2019 policies, of a university that could not use $1 million of its postgraduate allocation, while delivering $1 million more in bachelor-degree places than its maximum grant for bachelor-degree students permitted. It would not get any funding for the postgraduate shortfall, and would receive student contributions only for the ‘over-enrolled’ bachelor-degree students. Under a funding envelope, the university would get its $1 million, but not have to deliver any additional places.

As the funding envelope is already in place, the 7,000 places estimate should be revised down to zero as additional funded places for 2021. However, the government should get some credit for ending the sub-bachelor/bachelor distinction.

CPI places

3,000 places are said to come from CPI indexation of grants. In a normal year, indexation would matter. Because Commonwealth contributions are indexed to CPI under the statute, while maximum Commonwealth Grant Scheme grants are not, universities can deliver fewer places each year and still get their maximum funding (this post explains the logic).

2021 was likely to get close to CPI indexation in any case on status quo policies – actual CPI for ‘designated’ (sub-bachelor, medical, postgraduate coursework) places and population-linked increases for bachelor funding.

But if JRG passes 2021 starts a complex process of reducing Commonwealth Grant Scheme funding, and then rebuilding it on different criteria.

A major reason why the CGS will fall is that money is pulled out of it for the NPILF industry engagement fund, along with the regional and enabling loadings being transferred to IRSLAF.

NPILF may, for the most part, just require universities to report on industry engagement that happens already. Apart from the administrative costs of filling in more bureaucratic forms, it may not lessen resources available for students.

But it does reduce the number of student places a university is obliged to deliver to receive its maximum CGS funding.

But with or without the NPLIF, I cannot on publicly-available information get to a scenario in which CGS funding is even maintained at 2021 status quo levels (chart below; loadings excluded from both time series).

Again, the government’s estimate of newly funded places for 2021 should be revised down to zero. If maximum grants are indexed to inflation in the long run this will avoid a policy that lets universities reduce places while still getting their maximum grant. However, as many others have noted, indexation of maximum grants is not in the JRG legislation.

New places

It follows from the chart above that there is no extra money for the 4,000 additional growth places, or the 1,000 additional places for regional Indigenous students and national priority students, that the Department mentions in its reply to questions on notice.

In the spreadsheets being sent to universities, there is money branded by the Department as additional. But what is going on here is that CGS grants are being reduced, and then rebuilt on a different basis to historical allocations. The main effect will be that regional institutions get a larger share of the funding pool than under status quo policies. This is because they get a higher rate of ‘growth’ funding, off their new lower base.

The institutional funding reported in the Department’s answers to questions on notice shows this. Regional institutions by 2023 have more CGS funding in nominal terms than in 2021, plus their NPILF money. By contrast, many metropolitan universities will have less funding, even including their NPILF allocation.

Again, the Commonwealth’s estimate of 2021 places created by JRG should be revised down to zero at a system level.

In the longer term, universities will have to deliver more student places for each $1 million in CGS funding. As this process is phased in, by replacing graduating grandfathered students with commencing students on lower average Commonwealth contributions, even stagnant CGS funding will deliver more nominally fully-funded places. However, for reasons explain in the next section, this won’t happen in 2021.

2021 commencing places

I have argued before that JRG will exacerbate the squeeze on commencing places in 2021.

This is caused by the government’s decision to not grandfather all continuing students. This means that some continuing students move on to new, higher Commonwealth contribution rates before the compensating cuts to Commonwealth contributions in other fields are fully implemented – these only apply to commencing students. The effect of this is that CGS payments in 2021 for continuing students are higher than they would be under status quo policies.

My analysis of this has slightly changed since the changes flowing from the National Party compromise on professional pathway psychology and social work courses. Unfortunately I still have to use 2018 enrolment data, as the 2019 student data is not broken down in sufficient discipline-level detail.

The $250 per EFTSL decreases in Commonwealth contributions for a range of courses to pay for higher subsidies in the pathway courses has a small positive effect on this problem, i.e. continuing students will consume less of the available CGS funding. But on 2018 EFTSL I estimate that continuing students will consume about $120 million CGS funding more than under status quo policies. That is money not available for commencing students.

However, the increased Commonwealth contributions for commencing professional pathway social work and psychology – up from $1,100 to $13,250 – have the opposite effect. They consume more of the reduced amount of CGS funding available for commencing students. Again based on 2018 EFTSL, and using Department answers to questions on notice to estimate pathway numbers, the weighted average Commonwealth contribution by about 6 per cent. This means fewer places per $1 million than under the original JRG.

If there is no change in the disciplinary pattern of commencing enrolments – I realise there are increasing numbers of assumptions and maybes here – I estimate there would be nearly 10,000 fewer fully-funded commencing places in 2021 under Job-ready Graduates compared to status quo policies.

Discipline change and student contribution only places

Total CGS funding and transition policies will be a drag on student place creation in the early years of JRG – while my precise numbers are sensitive to discipline mixes, it is hard to see how these features of JRG could be anything but net negatives.

The comparison between JRG and status quo policies therefore depends on their respective capacities to generate over-enrolments.

The $14,500 student contributions create the potential for a de facto demand driven system for law, business, communications, and arts except languages courses. Enrolments are limited only by demand, along with each university’s teaching capacity and willingness to lower entry requirements.

However, the low student contributions as a percentage of funding rates in other courses, although slightly improved by the $250 increases in many fields under the National Party compromise, make over-enrolments less attractive than under status quo policies.

The paradox remains that JRG’s growth objectives will only succeed to the extent that its national priority ambitions fail.

From what universities are saying, there will be over-enrolments in 2021, whether JRG passes or not. The education minister principally responsible for this outcome won’t be the incumbent, but rather Brendan Nelson, who 17 years ago legislated the separate student contribution that improved the economics of over-enrolment.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s