Some universities might still get JobKeeper, despite a planned second change of the rules to stop them being eligible

Update 2/5/20: The government has further changed the rules so that university income must be assessed over the six months from 1 January 2020.

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When I first wrote about universities and JobKeeper, at the end of March, I concluded that although they were included they were unlikely to meet the required revenue falls. Especially for the universities with $1 billion plus annual revenue, the required 50 per cent fall in revenue seemed like a financial disaster beyond what COVID-19 issues could trigger.

Since then, the universities and JobKeeper story has had many twists and turns. In early April, universities briefly hoped that they would only have to meet the 15 per cent decline in revenue required of charities (they are educational charities). But the JobKeeper legislative instrument specifically excludes institutions listed in Tables A and B of the Higher Education Support Act 2003, which cover all public and private universities.

This flips the normal funding biases of higher education. Generally, educational organisations that were publicly-funded before 1989 have privileged access to government subsidies. Now, for a brief time, the educational charities that are not in the pre-1989 group have easier access to public funding. They only have to show a 15 per cent decline in revenue, instead of 30 or 50 per cent for Table A and B institutions, depending on their revenue. In 2018, 41 non-university higher education providers were registered educational charities.*Read More »

The first COVID-19 higher education support package – a revised, less speculative post

The government now has a first support plan for higher education. Its key elements are letting universities keep student-related grants and loans for 2020 even if they enrol too few students, funding short courses, and regulatory fee relief.

An earlier post was my inference and guesswork from fragmentary Easter Sunday announcements. This post uses material from FAQs issued by the Department of Education on Tuesday.  For readers who do not need to be across the technical detail of higher education funding I recommend my article for The Conversation rather than this post.

Commonwealth Grant Scheme

The government’s biggest higher education funding program is the Commonwealth Grant Scheme, which pays tuition subsidies of over $7 billion a year. Under the Higher Education Support Act 2003 total payments for the year cannot exceed equivalent full-time student numbers multiplied by the relevant Commonwealth contribution.

Universities are paid fortnightly based on estimates of their CGS entitlement for the year. A few days ago the University of Sydney announced that it was down 5 per cent on its domestic student target. Whether this is due to COVID-19 or tough NSW market conditions is not clear. A number of other universities were struggling before COVID-19 due to demographic factors.

Whatever the reason, universities will now 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 »

The first COVID-19 support package for higher education

Update 15/4/20: This post contains material that has been revised and republished to take into account later information.

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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, media report, 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.

Commonwealth Grant Scheme

The government’s biggest higher education funding program is the Commonwealth Grant Scheme, which pays tuition subsidies of over $7 billion a year. Under the Higher Education Support Act 2003 total payments for the year cannot exceed equivalent full-time student numbers multiplied by the relevant Commonwealth contribution.

Universities are paid fortnightly based on estimates of their CGS entitlement for the year. A few days ago the University of Sydney announced that it was down 5 per cent on its domestic student target (which could include full-fee students, which I will come to below). Whether this is due to COVID-19 or because it was just losing out in a tough NSW market is not clear. A number of other universities were struggling before COVID-19 due to demographic factors.

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 »

What could the government do to stabilise university finances?

There are some pretty high figures circulating about possible university losses due to COVID-19. I have seen no supporting evidence to justify the estimates, and the top-of-the-range numbers are implausible. Nevertheless, 2018 financial data shows many institutions with thin operating margins. We have grounds for concern about how they would manage a major hit to their finances.

On the revenue side, we have actual or potential losses from international students who never arrived, international students who may have gone home, domestic students withdrawing prior to the census date, and domestic students claiming student contribution refunds and HELP remissions because their course delivery methods changed.

On the cost side, universities have had to finance quick transitions to online education for students and working at home for staff, as well as some universities offering students financial support.

This post summarises things that the government can do within existing or announced legislation to stabilise university finances. I have blogged about some of them before and will note them concisely here. Of course, other policies supported by new legislation are also possible. Read More »

HELP remissions and COVID-19 university course changes

Last week I published a blog post on the financial dangers posed by the COVID-19 crisis starting prior to the census date for each subject. It is a critical date for universities. They get no Commonwealth or student contributions for subjects dropped prior to the census date.

As Stephen Matchett reported in Campus Morning Mail yesterday, social media talk about dropping subjects is still at high levels. One of the reasons, that unemployment income support benefits would be more generous than student benefits, seems to have been fixed in Parliament yesterday. Although I think students are better off finishing their course on schedule if they can, we should expect higher drop-outs than usual prior to the census date.

I am also hearing reports of international students heading home before the census date because of family pressure. They might also leave because they can no longer support themselves due to the collapse of the student labour market. Due to an extraordinary new power to widen social security eligibility some international students might temporarily receive benefits, but I think entitlements are too unclear to change short-term behaviour.

If these drop-outs are happening at any scale then, except for the universities on trimesters that are already past their first census date, then serious higher education financial problems are very close, as universities will have to scale back their expected Commonwealth-supported student revenue and international student fee income for the year.Read More »

What happens if a university needs bailing out?

University finances have been in the news this year. As the travel ban on Chinese students was announced some very big financial costs were estimated – since moderated due to the third-country quarantine exception, but still estimated to be well over $1 billion, at least in temporary cash flow issues.

In worst-case COVID-19 scenarios there would be travel bans from many international student source countries, along with campus closures that could require refunds or compensating classes for affected domestic and international students.

While I doubt the worst-case scenario will become reality, the ‘rivers of gold’ era (as Simon Birmingham once described it) for university revenue is over.

Even before COVID-19 international student demand seemed to be softening, while remaining high by historical standards.

On top of this, all public universities are dealing with a decline in the real value of their bachelor-degree student funding, and some are struggling to maintain domestic student numbers due to soft demand.

Cutbacks have been reported at many universities including Wollongong, La Trobe, Sydney, Macquarie, Monash, and in the last day the University of Tasmania.

Fortunately, the universities that are most exposed to the China market are relatively wealthy. They should be able to deal with short-term liquidity issues from a mix of reduced and delayed spending, drawing on reserves and perhaps bank borrowing. But what if a university faces more serious difficulties?Read More »

Universities with good performance may still miss out on performance funding

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 »

Should higher education providers have double academic freedom regulation?

Last week the government released a new legal definition of academic freedom and freedom of speech on campus for consultation,  following a recommendation made by the French review of free speech in Australian higher education. The new legal definitions align with a model university-level policy that French supported and the education minister, Dan Tehan, has been encouraging universities to adopt. I have reservations about the wording that I have explained in another blog post. This post is a more technical one about the definition’s role in the higher education regulatory structure.

The new academic freedom definition would apply to the Higher Education Support Act 2003  (HESA) which is the funding legislation, and the Tertiary Education Quality and Standards Act 2011, which is the main academic legislation. Amendment of the TEQSA legislation, and the consequent changes to the Higher Education Threshold Standards, are the more significant.

To be registered at all by TEQSA, a higher education provider would need to have a clearly articulated higher education purpose that includes a commitment to and support for freedom of speech and academic freedom (currently ‘free intellectual inquiry’). A subsequent section places responsibility on the provider’s governing body to ‘develop and maintain an institutional environment in which freedom of speech and academic freedom is upheld and protected’ (currently ‘freedom of intellectual inquiry’).Read More »

Do students have academic freedom? (And other issues with the proposed legal definition of ‘academic freedom’)

The Government is planning to amend the Higher Education Support Act and the Tertiary Education Quality and Standards Agency Act to strengthen campus protections of academic freedom and freedom of speech. Last week it released for consultation a new legal definition of academic freedom.

While I strongly support freedom of speech and academic freedom (and have a newly-acquired personal vested interest in academic freedom), I have reservations about the proposed definition.

The French review of freedom of speech in Australian higher education, which is the basis of the proposed amendments, recognised that freedom of speech and academic freedom are related but distinct concepts. But the proposed legal definition blurs them.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 »