Funding and the Broader Tertiary Sector Peter Noonan and Gerald Burke

2 Purpose: review HE and VET funding Update 2005 analysis Compare growth and composition Note differences in funding arrangements Identify implications for broader tertiary sector Identify issues for future CEET work Note – analysis is preliminary

3 Background Issues in 2005 CEET paper on VET funding: 1.Relative decline in VET funding compared to schools and higher education 2.Faster growth of private funds in HE  Overseas students fees  Domestic fees (including HECS) 3.Growth in Commonwealth funding outside of Commonwealth State Agreement 4.States make independent decisions on VET funding alongside Com/State Agreement

4 Revenue for schools and HE continues to increase at a faster rate than VET ($ billion constant prices, public institutions +)

5 These is a growing gap between HE and VET operating expenditure

Large and growing private HE funds 6

7 Much smaller--though growing--private revenue in TAFE

8 Changing composition of VET income, $million, constant prices (NCVER data) Shares in 2004 Shares in 2008 Increase Fee-for-service %15%51% Student fees/charges %4%-3% Other % -10% Commonwealth 1,651 1,580 1,69927%26%3% States 3,281 3,299 3,22553%50%-2% Total 6,191 6,267 6,472100% 5%

9 Not the full picture: expenditure outside of the national VET agreement (not in NCVER VET finance data) Examples ▫Employer incentives -- Commonwealth and States ▫Apprenticeship centres and other Commonwealth programs Also ▫Revenue of private RTOs except for public monies for user choice, Skills Vouchers, PPP ▫Student assistance –Youth Allowance, Abstudy, Austudy ▫Employer training expenditure that does not go to public RTOS

Projected Commonwealth VET related $bill ( NCVER data shows $1,700 billion 2008) Expense Expense Budget Estimate Estimate Estimate DEEWR2,7152,4492,3401,8241,8541,860 TREASURY 7071,7261,6621,7431,770 TOTAL2,7153,1564,0663,4863,5983,630 Index

Projected additional Commonwealth funding for HE and Innovation 11

Funds per student or per hour HE Commonwealth funding per subsidised student in 2008 was about 10 per cent lower in real terms than in 1996 Future indexation, funds for low SES students, performance funding - may stem HE decline per student VET Government recurrent expenditure per hour of publicly funded training fell 8.5% 2003 to 2007 real terms Future Commonwealth money for VET is largely for infrastructure and extra students

Differences in funding arrangements between VET and HE (examples p.1) 13 Higher EducationVET Public funding  Commonwealth States fund providers, Commonwealth provides part of funding to states Quotas/limits to number of public supported places  Limits at present  Demand driven provision to all qualified students by 2012 at least for undergraduate courses  Limits in all states but Victoria  Demand driven in Victoria, progressively from July for qualifications at higher level National partnerships and infrastructure funding  New research and other programs affecting teaching resources  Indexation of grants from 2012  Education Investment Fund (EIF)  Productivity Places Program …  National Partnership on Youth  Teaching and Learning Capital Fund and Infrastructure through EIF Changes in real funding per EFTSL or hour Funding lower than mid 1990s but some relief through new funds and proposed (nearly) full indexation. Recurrent funding per hour of publicly funded training may decline if only partial indexation. Forward commitment Forward commitment to additional funding to Commonwealth PPP funding; Victoria to fund entitlement No forward commitment other states

Differences in funding arrangements between VET and HE (examples p.2) Higher EducationVET Gov ’ t funding to private providers Funding generally to public providers though particular exceptions  PPP to public and private providers  User choice etc to public and private  Extensions occurring under National Partnerships especially Vic Fees  Specified range for supported places  No full fees for domestic undergraduate in public universities  Full fees for most private providers.  Fees vary across states ---lower than HE  Full fees in private and possible for public providers depending on state policy. Loans  HECS-HELP available to supported students and FEE-HELP to full fee students including private providers.  FEE-HELP for approved providers of full-fee courses and for supported students in Diplomas/Ad Dip in Victoria. Equity funding New support eg for the enrolment of low SES students, funds to reach 4 per cent of teaching and learning grants  University program for low SES includes partnerships with schools, VET providers and adult education Student Start up Schols For university students eligible for student assistance -- $2,254 in 2010 Not available to VET students

Summary Funding gap between VET and HE has widened State funding has fallen in real terms Commonwealth funding has increased Extra Commonwealth funding to states without requirements for matching state funding Commonwealth funding for HE teaching and learning to grow from but static for VET State funding for VET uncertain -- and likely variations between states 15

16 Implications for broader tertiary sector ▫Extent to which differences in funding arrangements influence student choice particularly if upfront TAFE fees increase ▫Implications of demand based growth in HE and equity targets:  Cooperation or competition with VET?  Future of articulation arrangements and higher level VET qualifications ▫Future balance of growth between the sectors:  Potential for major differences to emerge between the states

Future CEET research Full analysis of financial data including forward estimates Individual state/territory analysis Impact of differences in funding arrangements on students and providers Options for a new funding framework for VET in the context of broader tertiary sector 17