The Chancellor's column

April 2009

Changes to the university sector

In the US, the Obama administration has flagged that it will triple the federal education budget in 2010 from US$46 billion to US$128 billion. "In a 21st century world where jobs can be shipped wherever there's an internet connection, where a child born in Dallas is competing with children in Delhi ... education is no longer just a pathway to opportunity and success, it is a prerequisite," Obama said.

This is a dramatic increase in US education funding. It begs the question: what has been flagged for the “education revolution” in Australia, at least for the university sector, and how will these plans affect Monash University?

There were two major reviews prepared for the government in 2008. The first was the Review of the National Innovation System chaired by Terry Cutler and the second was the Review of Higher Education led by Denise Bradley. In recent speeches, Deputy Prime Minister Julia Gillard and Minister Kim Carr have outlined the Government’s response to the reviews, and its intention to:

1. Increase the number of 24-34 year olds with a bachelor’s degree from approximately 30 per cent to 40 per cent by the year 2025.

2. Remove controls on the number of students who can be enrolled in each undergraduate course.

3. Establish a demand-driven system in which funding for fees will follow the students. Fees will be paid directly to the universities; the amount paid for each student will depend on the course.

4. Establish a national regulatory and quality agency to oversee agreed national goals.

5. Negotiate contracts – to be known as “compacts” – with each university to determine agreed fields of research excellence, equity targets, community engagement, collaborations with industry, collaborations with other universities and performance. It should be noted, though, that this aim is not consistent with a separately expressed aim to reduce the level of central control over universities under a policy informally summed up by the Deputy Prime Minister as “Politicians out; students in”.

6. Progressively implement the Excellence for Research in Australia (ERA) performance measurement scheme. This mechanism for assessing research quality will be used to allocate funding on the basis of needs, capabilities and resources. The dual goals are to support excellence in research, and to build human capital.

7. Fully fund the indirect costs of doing research. At present, competitive research funding received from the National Health and Medical Research Council (NHMRC) and the Australian Research Council (ARC) exclusively pays the direct costs of undertaking the research. Across the sector, for every grant dollar received and spent, universities spend an additional 70 cents on indirect costs, of which 20 cents is reimbursed by the government. This leaves a shortfall of 50 cents. The adverse impact is huge: every time Monash University is successful at increasing its research revenue by $10 million we have to find an additional $5 million from other revenue streams to cover the indirect costs of carrying out the research. This is usually cross subsidized from tuition revenue, money that could otherwise be invested to improve course quality.

As yet, these federal government initiatives have not been funded. It is likely that the specific funding commitments will be announced in the May budget, albeit staged over several years. In the shadow of the Global Financial Crisis, cold water is being poured on the university sector’s hopes that long-awaited resources will finally be delivered in this budget cycle. This is despite the fact that investing in universities provides both short-term stimulus through infrastructure projects and long-term gains in productivity.

What will the likely sector responses be? Here are a few.

1. The government’s intention to remove caps on undergraduate domestic student numbers while continuing to prohibit pricing flexibility will lead to perverse incentives to enrol more postgraduate and international students.

2. There will be pressure on larger universities to specialize. For example, some will deliver target programs for remote students, mature-age undergraduates, mid-career professionals or retirees. Online education will increase, but some disciplines such as medicine, engineering and science will require campus based facilities. The end result will be fewer comprehensive, research-intensive universities.

3. There will be pressure on smaller universities to amalgamate.

4. The sector will continue to argue for more funding. The existing indexation system for university grants is punitive. Since 1995 it delivered increases of about 2 per cent or less per year while costs increased at between 4 per cent and 6 per cent per year.

5. Without increased government funding, without the ability to charge for services delivered, student–staff ratios and other fundamental investments in quality will continue to deteriorate.

What will Monash do? We will continue to focus on quality in education. We will continue to focus on quality in research. We will continue to manage our budgets very carefully. All the while, we will analyse and consider the opportunities uncovered by every government decision.

What can you do? Advocate for the sector. If these proposed reforms are to be introduced without causing a consequent deterioration in quality, substantially more federal funds will be required and universities must be freed to charge fees that will allow them to invest in improved facilities and student-staff ratios.

Dr Alan Finkel AM (BE 1976, PhD 1981)
Chancellor
Monash University