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Working through the Budget implications – Davis

30 May 2014

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Student fees at Melbourne University will need to rise by up to 61% in some courses to manage federal budget cuts, federal government’s increasingly controversial overhaul of higher education. In an email sent to staff members on Friday 30 May, Melbourne University Vice-Chancellor Glyn Davis estimated fees across the university would soar, as he outlined the university’s plan to work through the budget.

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Glyn DavisIt has taken some weeks to tease out the implications of the radical change to higher education policy proposed in the Commonwealth Budget.

Not surprisingly, initial attention focused on the deregulation of fees and the introduction of new private providers. Few commented on the 20 per cent cut to the Commonwealth Grants Scheme, along with cuts or abolition of small funding schemes supporting teaching excellence and participation initiatives.

Changes to cluster funding rates were rarely mentioned in coverage of the Budget. Yet by reducing clusters from eight to five, and removing more than $1 billion in Commonwealth support for student places, the Budget has significantly changed the allocation of public money across disciplines. There are some winners – mathematics and humanities – and many losers. Funding for social sciences will fall by around 40 per cent, for engineering, science and surveying by around 30 per cent, and visual and performing arts by around 25 per cent.

The Budget removes the cap on borrowing for higher education through the HELP scheme. Even more significant is the proposed shift in interest rates to be applied on HELP debt. In the future interest will be based on the 10 year government bond rate (capped at 6 per cent) rather than the Consumer Price Index.

Efficiency measures will be applied to a range of spending affecting universities, including the indexation rate for university and research funding. Two new spending initiatives, for ARC Future Fellows and the national collaborative research infrastructure program, will return some research funding to the sector.
Taken together, the reductions for universities in the 2014 Budget compound the large cuts under Minister Craig Emerson in 2012 and 2013.

This is the essential context for understanding the public argument about student fees. Much public funding will likely be removed from tertiary education. Universities are invited to make up this gap through higher fees. Initial analysis shows the gap is momentous indeed – fees would need to rise by 45 per cent to make up lost funding in social science disciplines, by 54 per cent in Science, and by 61 per cent in Engineering. Students would get nothing new for this increased debt. The requirement for additional equity scholarships only applies after price rises mitigate cuts to the Commonwealth Grants Scheme.

Some ‘known unknowns’ remain about the Budget initiatives, including proposals for a student contribution to doctoral training, and a pending review of postgraduate Commonwealth supported places.

The University has begun the challenging work of framing a response to the Budget. The first meeting on budget issues with elected student leaders has occurred. Academic Board and University Executive have been briefed about the likely gap in Commonwealth revenue, and how the University will develop its response.

The University has established a Funding Reference Group to model the impact of policy scenarios flowing from the Budget. The Group will be led by Deputy Provost Professor Susan Elliott, and is asked to develop recommendations for wider consultation with the University community.

At this stage, it is impossible to know what aspects of the Budget may survive the parliamentary process. Some funding cuts are included in appropriation bills, and so are likely to pass. Yet the majority of the higher education funding initiatives, including changes to the student contribution, involve legislative amendment to the Higher Education Support Act 2003. This requires the support of the Senate.

In the complex negotiations now underway, the Commonwealth Government has agreed to consult further with the sector. This is welcome, and we might hope that core aspects of the package worth supporting – such as extension of the demand driven system to sub-bachelor degrees, greater competition, and access by more young Australians to higher education – endure. We should urge the Government to moderate the interest rate imposed on student debt and reconsider deep cuts caused by the change in funding clusters.

It will be impossible to settle the contentious issue of future fees until Senate approval of the final package of reforms to higher education policy and financing. When this happens, there are difficult tasks ahead for the University.

Everyone on campus, student and staff member alike, understands we are now entering an unprecedented era in higher education. There are challenging issues involved in setting fees that cover the real costs of university education, yet minimise debt levels for the next generation.

As we take the next steps, let me thank all staff for your outstanding and ongoing commitment to the institution. Your contribution will be vital in the months and years ahead as we work through the implications of the 2014 Commonwealth Budget.

 

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