Last week the government’s announced the details of how it will meet its election promise of 20,000 additional student places. Many of these details create legal and bureaucratic problems for the government and universities.

General lack of statutory authority

The program guidelines, unsurprisingly given Labor’s election promise, refer explicitly to the allocation of the 20,000 places. While unexceptional in historical policy terms this is not how things work for public universities (‘Table A providers’) under the Job-ready Graduates version of the Higher Education Support Act 2003.

Section 30-10 of HESA 2003, as cut-and-pasted below, does not give the minister the power to allocate student places to Table A institutions except in the case of designation. Only medicine is currently designated. For higher education courses, covering every course except medicine, the unit of allocation is dollars rather than student places.

The wording of the relevant sections of HESA 2003, along with the explanatory memorandum given to Parliament when the JRG bill was introduced, suggest that the goal was to ‘provide Table A providers with more flexibility in how they use the bulk of their CGS funding to meet the demands of students, industry and their local communities.’

The micro-allocation of either student places or resources, as described in more detail below for the 20,000 places policy, was not what was intended by the JRG amendments.

To get around section 30-10 for its short courses the previous government used university funding agreements to specify dollar amounts for named courses, a de facto allocation of student places while avoiding that language. It can do that using section 30-25(2), which gives the government a power to put conditions in funding agreements that are additional to those specified in the statute. However this strategy creates enforcement issues I discuss later in this post.

Misleading statements on institutional eligibility

The 20,000 places guidelines (which are a guide to applicants, not a legislative instrument) give three categories of eligible institution: Australian universities as registered by TEQSA including Table A and B providers, university colleges as registered by TEQSA, and institutes of higher education as registered by TEQSA also listed in the Commonwealth Grant Scheme Guidelines 2020 as receiving teaching and nursing places (so excluding the longer list of providers receiving COVID-19 short course money).

Under HESA 2003, however, no funding rights automatically follow from any TEQSA status (perhaps they should, but the new places guidelines are running ahead of the law).

Historically, new universities have been added to the Table B list in HESA 2003, which gives them access to research grants (although the bill to add Avondale lapsed with the election and so it is still a higher education provider for funding purposes.). However, Table B institutions can only have CSPs in ‘national priority’ areas, discussed below (section 30-1(2)).

University college is not a funding category under HESA 2003. Only one of the four university colleges is listed in the CGS Guidelines 2020 as a higher education provider, Alphacrucis, which means it has to satisfy the education and nursing requirement. It has teaching CSPs allocated for this year but only as part of the short course program, so I think none of the university colleges meet both the current legal and program requirements for the 20,000 places policy. The university colleges could be added to the CGS Guidelines 2020, although other than Alphacrucis I think their discipline interests are mostly outside the objectives of the 20,000 places policy.

These institutional limits and potential solutions to them should have been flagged in the 20,000 places guidelines.

The government is, however, on safe legal ground in allocating student places to non-Table A institutions already authorised for funding under HESA 2003 provided these places are in a ‘national priority’ area.

Expanding course eligibility to new ‘national priorities’

The courses eligible for the 20,000 additional places are taken from the soon-to-be-abolished National Skills Commission’s skills priority list and some industries mentioned on Labor’s election website.

Course examples given in the 20,000 additional places guidelines are nursing, disability care, engineering, digital and cybersecurity, health and aged care, advanced manufacturing, teaching (including early childhood), and clean energy.

Table A universities can deliver Commonwealth supported places in all these fields although there is the issue above with specifically allocating places to them. For other higher education providers the CGS Guidelines 2020 need to be amended to include them, as currently only education and nursing are listed as ongoing ‘national priorities’.

Restricting places to sub-categories of students

As well as being restricted by provider and course, the 20,000 additional places are to go to a list of equity student categories.

The equity categories are regional and remote students, students from low SES backgrounds (normally defined as living in an area classed as lowest 25 per cent by the ABS Index of Education and Occupation), students with a disability, First Nations students, and those who are first in family to study at university. First in family has not previously been used in policy. It is not unusual to be first in family – at least half of students in 2015 – but I’m not sure how often this information is collected in the application process, which may may make it hard to implement.

The specific requirement to restrict places to sub-categories of students has an uneasy relationship with section 19-35 of HESA 2003, which is headed ‘benefits and opportunities must be available equally to all students’ with the merit the main criterion. Section 19-35 envisages something like the 20,000 places scenario in saying that it does not prevent the higher education provider taking into account the ‘educational disadvantages that a particular student has experienced’ (19-35(3), emphasis added). Educational disadvantage is not defined in HESA 2003.

I suspect that section 19-35 is routinely overlooked/read broadly in concessional entry schemes for general classes of equity student. It would be too bureaucratically burdensome for both the university and the applicant to determine whether each applicant has in fact experienced educational disadvantage(s).

But the guidelines seem to require universities to recruit within section 19-35’s legal grey area.

For the non-Table A institutions, HESA 2003 gives as examples of a potential ‘national priority’ ‘increasing the number of particular kinds of persons undertaking courses of study’ (section 30-20). Along with equity funding for Table A institutions there are tensions in HESA 2003 about preferential treatment for particular groups.

Funding linked to specific individuals

The 20,000 additional places guidelines announce something that so far as I know has no precedent, which is linking funding to specific students using their Unique Student Identifier (USI). According to the guidelines, ‘this is to ensure that places are being provided to commencing students only, that places are being used to ensure higher levels of enrolment, and that skills and equity objectives are being met’.

HESA 2003 has no specific student equivalent of the note to section 30-10 on the minister not allocating student places. But if the legislation does not allocate student places to give universities flexibility, then linking the money to specific students seems beyond what was intended by the JRG amendments.

A question for university administrators is how to choose students for 20,000 places USI tagging. It would be hard to identify a student who would not have been admitted except for the policy, given normal fluctuations in applications, admission requirements and commencing students.

The 75 per cent costing methodology

The 20,000 places guidelines say that funding will be ‘pipelined for the duration of the course based on the standard 75 per cent costing methodology’. This means that after the commencing year funding for the next year is 75 per cent of the original amount, and the third year will be 75 per cent of the second year, and so on.

The guidelines observe that this is consistent with long-term practice, but the question is whether it is good practice. I have not seen empirical work on institution-level student load transition from year to year but a 25 per cent decline from first to second year exceeds the 18 per cent national institution-level headcount attrition rate.

There is also high variability in attrition between institutions, ranging from 7.5 per cent to 35 per cent for the 2019 commencing cohort. For universities with low attrition the 75 per cent rule would leave them with student load they will have to support from within their general grant for higher education courses. This will make the 20,000 places program less attractive for universities with low attrition rates.

If funding is linked to specific students it could be argued that ongoing funding should be whatever their actual EFTSL turns out to be. However this is not possible because maximum basic grant amounts are set out in advance in funding agreements.

The risk of stranded funding or student places

The new places have restricted uses on multiple grounds. They must be for bachelor or below courses (contrary to the JRG intent of allowing flexibility from sub-bachelor to postgraduate coursework), for commencing students, and the national priority courses and prescribed equity students discussed above.

As I noted in my post on teacher education, when student places are awarded by micro-allocation it increases the chance of stranded places or funding – the university cannot enrol sufficient students matching all the criteria but also cannot use the money on other students. The more criteria that apply the greater the risk of stranded funding or places.

The 20,000 places guidelines have measures to reduce stranded funding. The Department will ‘assess’ cost neutral transfers between 20,000 places eligible courses and, although some of the wording is ambiguous, provide a combined total of funding which should support a ‘swings and roundabouts’ approach, with ‘over’-enrolments in some courses compensating for ‘under’-enrolments in other courses compared to the original allocation.

Universities can also reduce the risk of stranded funding by USI tagging large numbers of students in the listed 20,000 places courses. Especially at regional universities most students will meet the equity criteria.

What happens if a university fails to deliver sufficient new places against the criteria?

Despite measures to reduce stranded funding or places in a period of relatively weak demand for higher education ‘under-enrolment’ may still occur. If this happens the process will be different for Table A and non-Table A institutions.

Non-Table A institutions can just not be paid for student places not delivered according to their funding agreement specifications, although determining what places delivered were additional to those that would have been provided anyway without the 20,000 places funding may not be easy.

For Table A institutions the government has no legal authority to allocate student places in the first place, which will require a different funding and funding penalty process.

In the funding agreements the process will be something like the short courses – there will be a dollar amount attached to a named course, with details of eligible students added. The provider’s maximum basic grant amount will be increased by the total amount associated with the 20,000 places program.

Under division 33 of HESA 2003 the first funding step will be to multiply the university’s CSP EFTSL by the relevant Commonwealth contributions. Whether or not the EFTSL match the 20,000 places allocation is not relevant because division 33 assumes that the government will have complied with section 30-10. If the total of this calculation equals or exceeds the university’s maximum basic grant amount the university has established its entitlement to the full amount.

Any ‘under-enrolment’ against specific 20,000 places targets would be handled separately. It would be classed as a breach of the funding agreement under section 36-65 of HESA 2003, with the penalty provisions set out in division 54. These allow the minister to reduce a grant or require repayment of a grant.

Before making a decision, the minister ‘may’ consider whether the breach is major or minor, the impact on students, and the impact on the higher education provided. Under section 60, the minister must give the higher education provider notice of the decision and invite it to make submissions within 28 days on why the penalty should not be imposed or should be reduced.

An alternative response from a Table A university would be to seek a Federal Court ruling that the 20,000 place restrictions were invalid due to a lack of statutory authority. A standard clause in the funding agreements says ‘if a court or tribunal says any provision of this agreement has no effect or interprets a provision to reduce an obligation or right, this does not invalidate, or restrict the operation of, any other provision.’ So the additional maximum basic grant amount from a successful 20,000 additional places program application should remain.

Conclusion

The current minister inherited this policy and the teacher education policy I discussed last week, so they may not be typical of his approach. But so far there is a strong continuity with the governing style of Dan Tehan and his successors. This includes policies that are excessively bureaucratic and, at best, lack clear legal authority. Even when the intentions are good, as they are with the 20,000 additional places policy, trying to optimise too many outcomes and solve too many problems leads to complexity and red tape.