Are mini-demand driven systems a good idea?

In their second submissions to the Universities Accord review Universities Australia and Innovative Research Universities both call for extending the existing demand driven system for regional and remote Indigenous students to all Indigenous students.

Mini-demand driven systems support increasing enrolments from a target population, or potentially in a target course, without risking (from a government perspective) a major cost escalation under a full demand driven system.

Although I support a return to full demand driven funding I doubt that mini-demand driven systems are a good idea.

The risks of restricted-use funds

From a government perspective the attraction of mini-demand driven systems is their apparent pursuit of some desirable outcome at low cost. Only funding for the estimated additional student places is likely to be ‘new’ money.

If so, in the transition to a new mini-demand driven system each university would lose from its overall maximum block grant amount estimated funding for current students meeting the mini-demand driven criteria – in the UA/IRU case, probably the Commonwealth contribution value of their existing student load of Indigenous students living in metropolitan areas.

As a result, ‘old’ money that could once be used flexibly for any domestic student could after the clawback only be used for about four per cent of the population.

If in practice the university attracts fewer Indigenous students than expected, or these students enrol in subjects valued at less in Commonwealth contribution terms than forecast, then the university is left with stranded resources. It has student funding that is theoretically available but in practice cannot be used.

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