VET funding – past trends and future issues Peter Noonan Gerald Burke Centre for the Economics of Education and Training CEET 9th National Conference Ascot House Melbourne October

Purpose Inform public debate on VET funding issues and options:  Outline trends in VET funding since the ANTA Agreement of 1992  Comparisons with higher education sector  Raise future policy issues and options Recognise problems with data series and limits on collection

Background ANTA Agreement (1992) had two principal objectives:  Support growth in VET participation  Agreed resourcing framework and roles between Commonwealth and the States

Growth in participation Pre 1995 data not strictly comparable but NCVER (2002) reported that:  between 1991 and 2000 publicly funded VET students grew by 77 percent from around 1 million to 1.75 million  that participation rates of year increased by 5 percent to 13 percent over that period Publicly funded VET enrolments continued to grow till 2002 but have started to decline

Funding VET revenue grew (in real terms) from the early to mid nineteen nineties as a result of increased Commonwealth funding but declined in the late nineties and has been virtually static since then The Commonwealth share grew from 22% in 1992 to 28% in 1997, but has fallen to 24%. State share of expenditure has fallen from 62% to 54%, however the pattern varies between the states

End of growth funding

Funding Government funding as a proportion of total VET funding has declined slightly since 1992 Funding outside of the NCVER collection not included and is likely to have risen over this period eg fee based VET programs in private providers Significant and increasing Commonwealth VET funding outside of Commonwealth\State agreement, particularly for apprenticeship related initiatives, ATCs and employer incentives If Commonwealth expenditure outside of the agreement is included Commonwealth share increases Some state expenditure (eg payroll and workcover concessions for apprentices) also outside of agreement and also will have increased

Funding Decline in real terms funding also coincides with:  difficulty in renewal of agreement  absorption of VET agencies within broader education and training portfolios in most states  Commonwealth and State funding priority to schools (see addendum)

DEST VET budget

Funding Also a change in the composition of funding Significant increase in incentives funding relative to recurrent funding Major increase in funding to stimulate demand but not for delivery and infrastructure.

VET and Higher Education Funding Government funding as a proportion of total higher education funding has fallen much lower than VET However higher education revenue has increased significantly through primarily through student fees for international students and HECS\full fees. Higher education revenue has increased significantly relative to VET and this gap is likely to widen

Conclusions ANTA funding agreement worked well in early years but ultimately failed to resolve Commonwealth/State VET funding roles and probably limited investment in VET High levels of growth through efficiency not sustainable in longer term Alternative funding models canvassed (eg Commonwealth to assume responsibility for apprenticeship funding) but are unlikely to be taken up.

Conclusions States must make independent assessments of future VET resourcing needs independent of agreement. VET remains their core responsibility Commonwealth must:  consider system infrastructure needs and delivery costs as well as incentives and apprenticeship support  More effectively target incentives and broaden policy and funding focus eg higher level qualifications

Conclusions If VET is to continue to be heavily reliant on government funding then it should be resourced accordingly If not then providers must be freed up and given capacity to generate additional income from non government sources

Conclusions TAFE Institutes must be positioned to operate far more effectively in commercial training markets to increase non government revenue Industry co-contributions, HECS and Fees Help options must be considered Public funding must be more effectively targetted

Addendum: Changes in student numbers and spending per student: Australia 1997 to 2003 Students Public and private expenditure per student % increase Government schools116 Non-government schools1325 VET19-18 Universities - total26-4 Universities—Australian publicly supported students * 0-7 Income in constant prices *Australian students supported by government funding (excluding international students and full-fee paying Australian students).