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Balancing act by universities can neutralise the effects of funding cuts

 28 August 2014

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Fairfax Media  reported on 26 August on “leaked modelling” presented to a “confidential briefing” conducted by the LH Martin Institute that would see elite universities (the Group of Eight)  reap massive benefits from higher education deregulation, while less elite universities, particularly regional universities, would struggle.  Not quite so: the briefing was conducted at a public forum and a description of the modelling is posted on the LH Martin website.  The point that the authors of the modelling sought to make is that the götterdämmerung scenario of sky rocketing fees and crippling student debt doesn’t necessarily follow from the deregulation package (a point also made by soon to be Go8 director Vicki Thornton in an interesting exposition on the vomit theory of political communication).  Of course, the package creates that possibility and, over time, that may happen.  In this article Andrew Faulkner, Lea Patterson and Leo Goedegebuure, who did the LH Martin work, offer concrete workable options to steep increases in student fees to offset budget cuts and financially sustain universities.

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We have recently critiqued the government’s higher education reform package and questioned the logic suggesting steep increases in student fees. While we stand by our view, we agree that we need to offer concrete workable options.

Our alternatives are based on the work we did for a recent workshop on fee deregulation. The objective was to help universities determine the impact of the proposed reforms and what strategies could be explored to not only survive the changes but thrive in a deregulated environment.

Building on our experience of modelling numerous Australian universities, we created three realistic models covering these distinct university types: Group of Eight, metropolitan and regional.

These models are quite detailed, containing a full curriculum and workload profiles at the unit and course level. As with any modelling, these are simplified institutions where changes are smoothly implemented and results are shown without the associated costs of transition. This is the whole purpose of modelling, highlighting the “what if” possibilities and taking them to their logical conclusions. It’s an approach we believe is helpful in today’s complex policy environment.

The models include full university costs and resources for all faculty, research, and service and administration areas. Modelling the impact of the proposed cuts is straightforward. Within the metropolitan university, for example, the 20 per cent cuts result in a loss of $28 million in revenue.

The options below are indicative only but are steps universities could take to offset this loss:

  • Reclaim lost revenue in each funding cluster by the amount cut. This results in large fee increases for the likes of science and engineering ($4893 a year) and small increases for the likes of accounting and law ($166 a year).
  • Reclaim lost revenue evenly across all clusters, resulting in a fee rise per cluster of $1478 a year. This is done by simply dividing the $28m in lost revenue by the 18,940 full-time domestic students.
  • Set all student fees to the same amount after applying the remaining government grants, resulting in tuition fees of $9470 a year.
  • Set fees based on the cost of teaching plus required surplus of ongoing capital investments, increasing fee levels based on the level of capital investments.
  • Mixtures of the above.

This clearly shows the impact of the proposed policy changes need not be as dramatic as portrayed in the current discussions.

The models can also be used to examine other options, looking at how universities might distinguish themselves while minimising the cost impact on students. These can range from increasing research effort to making the quality of teaching the primary reputational driver of the university while maintaining a focused research effort. Taking the latter model and applying it to regional universities, it would be realistic to cap student levels at 15 for laboratory sessions and tutorials, at 20 for studio classes and at 50 for seminars.

This strategy requires an additional 52 full-time academics plus support staff, totalling $13m. Combining this with doubling class preparation hours to enable better content results in another 92 full-time academic plus support staff, totalling $23m. The $36m in extra expenses could be charged to students at $2116 a year.

Alternatively, it could be offset with a reduction in the time spent on research by staff. Reducing research time from 32 per cent to 15 per cent in the regional university model results in academic staff requirements decreasing by about the same amount they had just been increased by. This leaves the university where it started, but with the workforce devoting a greater portion of their time to teaching. However, the university is still investing $120m (26 per cent of its total expenditure) into research through its research-only staff and research institutes.

The point is that options exist. There is not one quick fix, as there is no requirement to hike up student fees or make large cost cuts. It is a careful balancing act, taking into consideration the mission of the university as well maintaining a sustainable business model.

 

 This article was first published in The Australian on 28 August 2014.

 

 See
Why high fees are not necessarily the answer

 

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