Will the number of Commonwealth supported student places fall?

A couple of opinion pieces about university performance funding last week suggested that the government’s policy is aimed at increasing student places with population growth. That may be the impression the government is trying to give, but their policy provides a financial incentive to decrease the number of student places.

The government’s promise is to increase nominal funding for bachelor-degree places in line with increases in the population aged 18-64, for those universities that meet performance targets. But because percentage population increases are likely to be below inflation,  total Commonwealth Grant Scheme funding will decrease in real terms each year, even if universities get 100 per cent of their performance funding.

Although maximum CGS payments will probably increase at less than the rate of inflation the underlying Commonwealth contributions are still being indexed to the CPI. As noted last week, the demand driven funding calculation is still going on as well, so that universities receive the lesser of their demand driven or maximum grant amount. The practical effect of this is that universities can decrease the number of Commonwealth supported places each year and still get their maximum CGS funding amount.

The chart below illustrates the logic, using nursing as an example. Under the Wellings review recommendations, universities are pretty-much guaranteed 60 per cent of their maximum performance funding. So on the left-hand side of the chart below I have indexed the maximum funding amount to that and divided it by the indexed Commonwealth contribution. Next year a university could offer 4 per cent fewer nursing places than in 2017 and still get its maximum funding amount. 100 per cent performance funding does not make much difference. Read More »

The legal basis of performance funding

In December 2017, the Commonwealth froze maximum Commonwealth Grant scheme funding for bachelor-degree places for the next two years. In subsequent years, the maximum payment will increase in line with growth in the 18-64 year old population, conditional on universities meeting performance indicators.

Just before the 2017 announcement, I outlined its legal basis. It used university funding agreements to set the maximum amount, with the method chosen because it did not need parliamentary approval.

At least initially, performance funding will be administered via the funding agreements, which include a standard statement that should the university meet its performance targets it will be advised of a new maximum funding amount.

A drawback of this method of allocating performance funding is that there is no performance fund. The underlying demand driven funding system is still operating, and under section 33-5(5) of the Higher Education Support Act 2003 universities receive the lesser of their demand driven funding amount (bachelor-degree full-time equivalent student places times the relevant Commonwealth contribution) and their maximum funding amount.

All the Commonwealth is doing is promising universities it will pay a little more of what they would have been entitled to anyway under demand driven funding. Read More »

Is vocational education of lower status than higher education?

Earlier this month, Scott Morrison said that he wanted to raise the status of TAFE, declaring that “TAFE is as good as uni”.

On common status indicators, TAFE seems to come second to university education. There is status associated with academic ability, and TAFE requires lower school results for admission than university. The chart below shows the ATARs of students admitted to the two systems since the mid-1990s according to LSAY. Although almost all high-ATAR students go to university, the two sectors have long recruited in overlapping ATAR ranges. But the regular media stories about low-ATAR university admissions might have narrowed the historical status gap. ATAR range

Higher education also benefits from being the gateway to high- prestige and highly-paid occupations. But as graduates find it more difficult to find high-prestige or well-paid jobs, and  increasingly fall behind people with some vocational qualifications on employment and earnings, perhaps higher education’s status is slipping.

And there is some survey evidence that the status gap between the systems is not necessarily very large.Read More »

Current higher education policies are the unsatisfactory result of political misjudgements in 2017. There are better ways of balancing the interests of students, universities and taxpayers.

Higher education is one of the sectors most affected by Saturday’s surprise election result. Labor’s biggest promise, restoring demand driven funding from 2020, would have delivered universities funding for all bachelor-degree students, with Commonwealth  contribution rates 5.3% higher than they were were in 2017. This did not require legislation; the current funding freeze was imposed through university funding agreements and could have been ended the same way.

By contrast, if the Coalition’s current policies stay in place there will be no demand driven funding and most universities face limited nominal increases in total Commonwealth Grant Scheme funding for bachelor-degree students (a few unis have special deals that will deliver larger increases). The best-case scenario for most universities is an annual total CGS funding increase linked to growth in the 18-64 year old population, if they meet yet-to-be-announced performance criteria.

The mention of population gives the impression that the policy will respond to demographics, but this is not correct. As the chart below shows, the projected increase in the 18-64 year old population is below even recent low CPI increases. In real terms total funding for bachelor-degree students will continue to decline.

population funding

If universities decide to maintain per student funding they would provide fewer student places each year (the logic is explained in this submission). It’s not clear to what extent this will happen. Commencements were down in 2018, but quite possibly due to weak demand for student places rather than a reluctance to supply them.  Existing enrolment projections, based on numbers universities give to the Department, suggest modest growth to 2022. But whether this would be sustained long-term with annual real funding cuts is unclear.Read More »

Young people were less likely to enter higher education in the years after Whitlam than before. Demography and deficits were against them.

The three politicians with the greatest impact on higher education participation were Robert Menzies, John Dawkins and Julia Gillard. Yet I never hear anyone say, depending on their age, that “I only went to university because of Menzies/Dawkins/Gillard”.

Yet for Gough Whitlam the story is different. Last week USQ VC Geraldine Mackenzie was reported in the Australian saying “I was very fortunate to go to university after the Whitlam years when it was all free. Otherwise I may not have had that same opportunity.” And in February shadow education minister Tanya Plibersek told the Universities Australia conference that “it feels like every week, I meet someone in their 60s or 70s who reminds me about how Gough Whitlam was responsible for them going to university.”

I have argued before that Whitlam, Prime Minister 1972-1975, was very significant in the history of Australian higher education and has some lasting legacies. But I think the lesson from Whitlam’s time for now is that the biggest drivers of participation are supply-side policies on student places, and in particular how they interact with demography and fiscal policy. Because both these factors were significant in the free education era, the long-term trend towards increased higher education participation was interrupted.

Free education lasted from 1974 to 1986 (there were small charges in 1987 and 1988, before HECS started in 1989). The chart below shows that 19-year-old participation rates went up in 1976 but then fell and did not return to the previous peak until 1986. At the low point in 1982, the 19-year old higher education participation rate was 2 percentage points lower than it had been in 1975 (unfortunately, my data source starts in 1975).

19 year old participation

Read More »

The proposed law against commercial cheating and the Constitution

Successive Commonwealth governments have been creative in finding ways to by-pass the Constitution. That has been very necessary in education, which was originally intended to remain a State responsibility.  The Commonwealth has no direct power to legislate on an education topic other than in the territories. This creates legal issues for the Commonwealth’s attempts to ban commercial cheating. Draft legislation was released at the weekend.

The Commonwealth’s main vehicles for education policy have been section 96 tied grants to the States (no longer used for higher education, but still used for school and vocational education), the section 51(xx) power to legislate on foreign, trading and financial corporations (which relies on universities being trading corporations; this power could collapse if they went back to full public funding) and section 51 (xxiiiA), the ‘benefits to students’ power, which is the main legal basis of Youth Allowance, the Commonwealth Grant Scheme, and HELP.

Because the Commonwealth can fully legislate for the territories, the draft bill would be effective in the ACT and the Northern Territory. But in the states the legal situation is more difficult.

Read More »

Why is mature-age university demand trending down?

In 2018, applications from school leavers for university entry were much the same as in 2017. But from non-Year 12 applicants, demand dropped by more than 5 per cent. Full 2018 enrolment data is not yet available, but first-semester domestic commencing undergraduate enrolments fell by 1.8 per cent. Various media reports suggest that demand in 2019 will be lower than in 2018.

As the chart below shows, the largest absolute drop in applications is for people aged 20 to 24, but in percentage terms the older groups dropped at around the same rate. decline by age

Looking at the data on prior education for the non-Year 12 group, application numbers are holding for people with sub-bachelor and vocational qualifications. But the no prior tertiary education and repeat-customer higher education groups are both in decline.

People changing courses or taking another course have long been a significant component of each year’s commencing students, but during the demand driven era they increased from 23.5 per cent in 2008 to 29 per cent in 2016.

Because repeat customers are such a large part of each year’s commencing students, this hid the fact that the number of new-to-higher education students started decreasing in 2015, three years before the total number of commencing students went down.  As with the more recent data, the decline was concentrated in the older age groups, as the chart below shows.Read More »