The current university funding agreements change the nature of performance funding. Previously performance funding was configured as a reward scheme, providing additional funds in exchange for meeting performance-related criteria. Now it is a penalty scheme, deducting money from teaching grants if universities don’t meet performance criteria. The performance benchmarks are assumed to align with the pre-Job-ready Graduates performance funding policy, but this has not been publicly confirmed.
This post explores whether a performance deduction from teaching grants is legally permissible under the Higher Education Support Act 2003. It is clearly not the kind of performance incentive envisaged by HESA 2003, and there are grounds for thinking that a court might find that it is partially or entirely invalid.
The maximum basic grant amount and the performance penalty
The most important grant provision in HESA 2003 is the maximum basic grant amount (MBGA) for higher education courses. This establishes the maximum amount the government will pay from the Commonwealth Grant Scheme (CGS) for Commonwealth supported student places in coursework courses, other than demand driven enrolments for regional and remote bachelor-degree Indigenous students and medical courses. The total value of this grant for 2021 is about $6.8 billion.
Under HESA 2003 each university is to be paid the lesser of the higher education courses MBGA, as set out in their funding agreement, or the total Commonwealth contribution value (relevant discipline funding rates * full-time equivalent students) of student places delivered. Any enrolments above the cap are funded at the student contribution rate only.
The 2021-23 funding agreements between universities and the government, the first of the Job-ready Graduates era, were put on the DESE website earlier this year. In this post I compare them to the pre-JRG agreements.
My main concern is that the funding agreements are being used for matters that should be based on clear legal rules, not DESE discretion based on a one-sided ‘agreement’.
My concern reflects both the general political principle that policy decisions should be subject to parliamentary scrutiny and the practical problems caused by lack of certainty. Important funding conditions or criteria are not included in any legal document and DESE is given wide scope to interpret vague terms.
A broader scope
The most immediately obvious change is that the new funding agreements include more content than previously. They contain an overall summary of Higher Education Support Act 2003 institutional funding, including the Commonwealth Grant Scheme (CGS) funding that is the legal purpose of the funding agreements; rules around course closures, professional training, and the provision of information on costs and admissions; research, engagement and equity funding; and some background information and principles. The research, engagement and equity material is new and derives its legal standing from separate legislativeinstruments.
Putting key information in one place is helpful, and I would encourage the government to collate the summary funding tables combining teaching, research, equity and engagement funding for each university into a publication. But funding agreements with parts of varying legal status are not desirable. A mixed document makes it less clear for universities what they must do according to law and what is just the government/Department taking advantage of the sector’s culture of compliance. With such a large share of their income depending on their funding agreement, universities are reluctant to push back against the government’s demands.
How performance funding will work under Job-ready Graduates remains unclear, to me at least. Some recently published FAQs on Job-ready Graduates, which are a cut-and-paste from a previous statement, indicate that performance funding will continue:
From 2021, the PBF scheme will be adjusted to make approximately $80 million amount of growth funding per year contingent on performance requirements. Performance funding will grow each year to a total equivalent to 7.5 per cent of funding for domestic, non‑medical bachelor places to incentivise university performance. This measure is in line with the PBF model implemented in 2020. [emphasis added]
Is performance funding a condition of other announced CGS increases?
Update 15/4/20: This post contains material that has been revised and republished to take into account later information.
The government now has a support plan for higher education. The key elements are letting universities keep student-related grants and loans in 2020 even if they enrol too few students, funding short courses, and regulatory fee relief.
In this era of government by tweet, mediareport, media release and media conference the details of how this might work are lacking as of today. I will revise this post as more detail comes to hand. For now, I will focus on the broad outline and pursue my pedantic interest in the legal basis of government policy.
Whatever the reason, the minister now says that universities will be paid their original estimated funding rather than their legal entitlement. This also suspends the need to meet performance funding criteria, which is sensible. Read More »
I’m sceptical enough of this in normal times. But COVID-19 means that, despite the extraordinary efforts of academics and other university staff to provide continuity of education and student support, three of the four performance indicators – graduate employment, student satisfaction, and equity group enrolment share – will or are likely to worsen compared to recent years. The fourth – attrition – will probably show a positive trend that also has little to do with university performance.
Due to the total amount of performance funding being linked to population growth, COVID-19 driven changes to migration levels will also reduce how much performance money is on offer.
Last week the government released more detail about how its university performance funding scheme is to work (in the same week that the re-badged Department of Education, Skills and Employment’s administrative arrangements, showing some very dry bureaucratic humour, listed as one its responsibilities ‘reducing the burden of government regulation’).
Last week’s document confirms that the legal basis of performance funding will change from 2021. As I pointed out last year, at the moment there is performance funding but no performance fund. For 2020, all the government offers is to pay universities a bit more of their demand driven funding entitlements.
If a university’s demand driven entitlements (bachelor-degree EFTSL * the relevant funding cluster rates) don’t reach the performance funding maximum grant (2017 demand driven funding + special deals done since + population-growth based performance-contingent increment) it will not get the performance funding, or will get only part of it. Read More »
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.