Universities alarmed by further cuts to government funding

The federal government has confirmed university fears of further cuts to higher education spending and sharp increases in student fees.

Education and Training Minister Simon Birmingham announced the cuts last Monday night after noting that university funding was at record levels and had grown “above and beyond the costs of their operations”.

Birmingham pointed to a report by Deloitte Access Economics showing that university revenues were growing faster than costs.

Under the government plans – yet to be approved by the two houses of parliament – two successive cuts of 2.5% will be imposed on university grants in 2018 and 2019 as part of what the government calls ‘efficiency dividends’.

Birmingham estimated this would result in an increase in student fees, on average, of between AU$2,000 (US$1,500) and AU$3,600 (US$2,700) for a four-year degree by 2021 while saving the government AU$2.8 billion (US$2.1 billion) over the following four years.

In other measures, 7.5% of university funding for student places will be tied to each institution’s ‘accountability’ and ‘performance’ according to graduate outcomes in terms of student completion rates, satisfaction and employment success.

In addition, under Australia’s current student loan system graduates must start repaying their government loan when their annual salary reaches almost AU$56,000 (US$42,000). But next year the repayment level will be cut to AU$42,000 (US$31,600), forcing an additional 200,000 students to begin repaying their loans who might otherwise have avoided the charge.

The total debt owed by current and former students who do not earn enough to start repaying their loans, or who have died or left Australia, has ballooned out to more than AU$60 billion since the scheme was set up in 1989.

Birmingham said that funding of university students had essentially grown at twice the rate of the economy. But Universities Australia Chief Executive Belinda Robinson said the latest budget announcements came on top of AU$3.9 billion in cuts borne by universities and students since 2011, and were in addition to a AU$3.7 billion proposed cut to university infrastructure funding.

Robinson said the data on university teaching costs listed in the Deloitte report, used by the government to justify its cuts, could not be compared with an analysis undertaken in 2011, nor be used to draw conclusions about growth over time. She noted the report itself stated that its figures could not be compared “as direct growth or decline in costs relative to funding over the five years to 2015, given the differences in the sample, and differences in cost collection approaches”.

“In any event, the report only examines the costs of teaching and does not take account of the costs on universities to meet their other legislative obligations to conduct research, maintain buildings and support their local communities,” Robinson said. “It cannot be used to justify further major cuts to public investment in universities.”

The government’s base funding to universities needed increasing more than ever because of a decline in other sources for university infrastructure and equity programmes over the past six years. This was on top of what the institutions and students had already contributed to budget repair since 2011.

'Ample operating surpluses'

Referring to claims by federal Treasurer Scott Morrison that some universities were posting “ample operating surpluses” and could afford to absorb further cuts, Robinson said universities were required to maintain surpluses as a buffer against external shocks and to ensure they could maintain their facilities and assets.

“Published surpluses also include funds that are tied to multi-year research and building projects. Remaining funds are reinvested into educating Australians for skilled jobs in our changing economy, doing research that leads to new jobs and industries, and growing Australia’s prosperity by sustaining Australia’s third largest export – international education – worth AU$22 billion a year,” she said.

Fees from foreign students are increasingly propping up many universities and some could not survive if this income were ever to disappear. Out of some AU$30 billion in estimated total revenues for universities this year, foreign students are likely to contribute nearly AU$6 billion with some universities more heavily reliant on their fees than others. With cuts to government spending, the money from foreign student fees becomes even more important.

It is so important, in fact, that the income from overseas students now exceeds that paid by Australians. Figures compiled in 2015 show that foreign students contributed AU$5.3 billion in fees while fees from locals amounted to only AU$4.6 billion and the gap could be widening.

In its response to the federal government announcement, the National Tertiary Education Union said the further squeeze on funding would result in higher student to staff ratios, cancellation of more classes, and an even greater reliance on casual staff who already delivered up to 70% of classes in some courses.

“These cuts will not only compromise the quality of teaching, research and community service our universities can offer, they will also contribute to de-professionalising academic work, and placing our much-envied international reputation at risk,” said the union’s National President Jeannie Rea.

“Under these arrangements, tenured teaching and research academics’ positions will become increasingly precarious as universities resort to the use of teaching or research specialists employed on a casual or short-term basis to reduce costs. The government’s plan to hike student fees, lower the loan repayment threshold, and cut funding means students will be paying more for less,” Rea said.

“It is another significant burden on the next generation already struggling under mounting cost-of-living pressures, and it will further squeeze university staff already struggling to fulfil the expectations of an expanding sector, but with increasingly insecure employment.”

University leaders, however, may take some comfort from the fact that the government has a knife-edge one-seat majority in the House of Representatives and is in a significant minority in the Senate. Legislation authorising the proposed cuts and other changes to university operations requires a majority of votes to pass both houses. With the Labor Party expected to oppose the cuts, it seems highly unlikely the bill in its current form will gain parliament’s approval.