Universities demand ‘No more cuts’ after AU$4bn saved

As Australians prepare for the release of the annual federal budget on 9 May, universities point out that over the past six years they and their students have faced cuts that have contributed AU$3.9 billion (US$2.95 billion) to help rein in the ever-increasing government deficit.

A new analysis published by Universities Australia shows that students and their institutions have contributed nearly AU$4 billion in net savings in government spending between 2011 and 2017 – all as a result of cuts to programmes or changes to the way federal money is allocated.

Releasing the analysis on Monday, the Chief Executive of Universities Australia, Belinda Robinson, declared that “enough was enough: universities and their students have already done more than their fair share of budget repair”.

“In this context, it is difficult to justify further cuts that would affect student affordability and put at risk the quality of education and research on which Australia’s prosperity depends,” Robinson said.

According to the analysis, major government reductions imposed on universities include AU$1.4 billion as a result of changes to the student start-up scholarship scheme; AU$650 million from cuts to the sustainable research excellence programme; almost AU$700 million by dropping performance funding for universities; AU$300 million by abolishing the capital development pool; and another AU$91 million from the higher education participation and partnerships programme.

The government has also announced it intends to 're-purpose’ – that is reallocate – a further AU$3.7 billion that had been earmarked for university infrastructure from Australia’s Education Investment Fund, along with previously announced cuts that are yet to take effect.

“Beyond the impact on Australian students and research, further cuts would put in jeopardy our success as a powerhouse provider of international education, which contributes AU$22.4 billion dollars a year to the Australian economy and is our third largest export,” Robinson said.

“Universities are a critical part of the productive infrastructure of the nation – and should be acknowledged as an investment rather than a drag on the budget. Our future economic strength hinges on universities producing enough graduates with the right skills. It will also rely heavily on university research to develop new products, industries, start-ups and technologies.”

She said universities were educating a record number of Australian students, including an extra 40,500 from financially disadvantaged backgrounds who would otherwise not have gone to university. But the institutions did not have the capacity to absorb further cuts and were not "posting excessive surpluses". In fact, these had been declining in recent years yet were required to keep universities financially secure.

“Universities are not-for-profit – but they shouldn’t be for loss either,” Robinson said. “Every dollar received is reinvested back into the sector. Our analysis confirms that further cuts – whether to government supported places, funding for programmes that help students from disadvantaged backgrounds, the last remaining capital funding programme, or research programmes – could push some of Australia’s public universities into a precarious financial position.”

In last year’s budget, the government announced it faced a deficit of AU$37 billion – this despite imposing overall cuts and savings of AU$144 billion since its election in 2013. The underlying cash balance was projected to improve from a deficit of AU$37.1 billion in 2016-17 to a deficit of AU$6 billion by the end of the forward estimates.

“The government has made careful and responsible choices in the 2016-17 budget to ensure that the overall impact of new policy decisions is an improvement to the bottom line of AU$1.7 billion over the four years from 2016-17 to 2019-20. All increases in spending have been offset by reductions in payments elsewhere – the government is not relying on new or higher taxes to pay for new spending.”

A report of the analysis by Universities Australia, The Facts on University Funding, notes that spending on universities is complex and, as a result, the sector’s true financial position is not always well understood in public discussion. It says the aim of the paper is to highlight common claims and misunderstandings about spending on universities while providing more complete and accurate data on their true financial position.

“[The analysis] also confirms that Australia’s universities and students have contributed significantly in recent years – under governments of both political persuasions – to help rein in the budget deficit. Our analysis of the net effect of 89 budget decisions in higher education and research finds that universities and their students have contributed AU$3.9 billion to budget repair since 2011-12,” the report says.

“For students already under financial pressure, an increase in their debt burden would further exacerbate their financial stress [while] further cuts to universities would compromise their ability to skill and re-skill millions of Australians through their working lives and to deliver the world-leading research we need to create new industries and achieve breakthroughs that improve lives and contribute to our economic strength.”

International education 'at risk'

Further cuts in public investment would also put at risk the international education aspect of Australian universities, which is now the nation’s third-largest export industry, contributing a record AU$22.4 billion to the Australian economy, the report says.

“Australia’s public universities do not have excessive surpluses to cushion further cuts. As not-for-profit organisations, public universities reinvest surplus funds into higher education and research, including capital development.

“The published surpluses from universities (in compliance with accounting and reporting standards) include funds already committed in subsequent financial years. This is non-discretionary income that comes on to a university’s balance sheet in one financial year but is spent over several years – including on multi-year research and major infrastructure projects.”

The report says an independent study in 2009 estimated that universities had to find an additional 85 cents from other sources for every dollar of competitive grant funding they received, to cover indirect costs not met by research grants. Despite previous government commitments to lift support for the indirect costs of research to 50 cents for every dollar received in competitive grants, it remains static at around 23 cents per competitive dollar.

“Universities Australia estimates that in 2014, universities had to cover a gap of AU$1 billion to conduct the research for which competitive grants had been secured. This is more than double (in real terms) the 2002 figure of AU$450 million.”