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Higher Education Review ProcessHigher Education at the Crossroads: An Overview Paper4. a framework for consultation84 How do we ensure that our higher education system can capture the new opportunities to improve learning experiences and outcomes, contribute to national innovation and problem solving, and have international impact? Do we have too many universities trying to do the same thing? Do we have any institutions that are considered world class? How sustainable are the current arrangements for an increasingly competitive future? Should we continue to have a system comprising mostly public universities or open it up to more diverse forms of provision? What do we need to do to enable our universities and other tertiary education providers to meet varying needs and expectations? 85 These, and many others, are the key questions which need to be articulated in public discussions on future policy directions of higher education. Over the coming months a series of discussion papers will be issued to examine in more detail the issues covered in this paper and options for taking Australian higher education into the future. Submissions will be considered, consultations held and debate encouraged. 86 One can identify nine groups of related matters. a. learning experiences and outcomes
87 Given the trend of policy and the initiatives of institutions, the time is opportune for a renewed focus on the centrality of learning. This is to highlight the need for flexibility in approaches, modes and settings for learning in higher education. The quality of teaching is not a new concern. Indeed, it has been a recurring theme in a number of policy statements and strategies over the past decade. The repositioning of learning at the centre of higher education reframes conceptions, priorities and expectations of outcomes. Opportunities for enriched learning and fulfilling teaching are considerable, at a time when online, experiential, problem-based or collaborative learning, are available methodologies in the tertiary teacher’s repertoire. 88 The changing characteristics of the student body are associated with changing forms of student involvement in higher education. Even many full-time students are working considerable hours in part-time jobs (Long and Hayden, 2001). The needs of these as well as part-time students necessitate flexibility in learning approaches, modes and settings. Students are changing their periods of attendance on campus and patterns of usage of campus facilities and services. McInnis (2001) suggests that students should be able to negotiate their engagement in ways that best suit their circumstances. This has profound implications for the organisation of the academic year, the practices and times of operation of universities, the packaging of learning experiences and courses, and investment in campus facilities. 89 Australian universities have achieved significant efficiency gains over the past decade but much of the cost reduction over the last five years has been through constraints on staffing levels. There have been claims that these attempts to achieve efficiency savings have compromised quality. Many of the submissions to the 2001 Senate Inquiry into the Capacity of Public Universities to Meet Australia's Higher Education Needs focused on this issue. 90 Staff:student ratios increased between 1993 and 2000 by over 40 per cent from15:1 to 19:1. It is argued that this increase has added to the teaching-related workloads of many staff. New technologies and more sophisticated approaches to teaching large classes are being adopted. Nevertheless, student bodies have claimed that the increased number of casual and part-time staff, a prevalent means of achieving efficiencies, has significantly reduced the ability of students to access academic staff outside of lectures and tutorials. On the other hand, staff involved in web-supported course delivery indicate they are spending more time and interacting more frequently with students. 91 There is no hard evidence available to suggest that the quality of teaching in public universities has actually declined. Mr John Mullarvey, Chief Executive Officer of the Australian Vice-Chancellors’ Committee has noted:
92 Indeed, student satisfaction as measured by the Course Experience Questionnaire (CEQ) has actually improved over recent years. This appears to be associated with greater attention to aspects of teaching, for example through induction, professional development and recognition of good teaching through awards and in promotion considerations. It may also reflect the improved quality of teaching support infrastructure, including purpose-designed buildings, high quality presentational systems and interactive courseware. 93 Despite considerable revitalisation of the importance of teaching within universities, there are still concerns about the perception and status of teaching in higher education. Some argue that teaching is perceived to be of less significance within the academy than research, and that the status of teaching thus needs to be enhanced. Rupert Murdoch has argued that there is a need to elevate the capacity of universities, ‘the standards and rewards for their teachers, and their international reputations as centres of excellence’. He has suggested the introduction of:
Some measures that have been already introduced to improve the quality and status of teaching include programmes to promote the scholarship of teaching and the formation of teaching skills, continuing professional certification requirements and performance-related pay. 94 The notion of ‘learning productivity’ may be a useful way to frame a discussion of the issues related to teaching and learning. Johnstone (1992) has argued that a learning productivity model is a more valuable way to address calls to increase productivity in higher education institutions than one that merely reduces inputs. He developed his concept with the objective of assisting students in achieving a higher level of skill and knowledge attainment in the most cost-effective manner. He worked from the assumption that ‘the average student is not learning as much and/or as fast as he or she can, and that some manipulation of how we organize and reward both teaching and learning can yield more learning for the resources invested and paid for by the taxpayer, parent and student’. 95 The current ‘packaging’ of learning in higher education tends to be restricted to enrolment in a course with a prescribed pathway through one institution with particular subject requirements. Teaching and learning are also packaged into fixed units of time—semesters or terms, generally of about 15 weeks of effective teaching. Some would suggest that more of undergraduate teaching and learning could be individually paced, allowing more rapid student progression. In contrast to the current approach where the span of time is set as a critical given and actual learning is allowed to vary, an alternative approach may be possible. This involves clearly specifying learning objectives, developing assessment instruments that can test for mastery of content and skills, allowing students varying time to achieve mastery, and then enabling them to move on when ready to tackle new learning objectives. The new education technologies now make individualised learning practicable. 96 The typically tight structure of course requirements could also be made more flexible. In 1990 the Higher Education Council proposed a limited modular approach in which students could choose modules to suit their particular needs and aggregate modules to satisfy degree requirements. Given the acceptance of lifelong learning, calls for continuous learning pathways and increased TAFE-university articulation, there may be scope within the Australian Qualifications Framework for a customised portfolio approach that recognises modules of learning completed through different providers, at different times. A student may take some subjects at a TAFE college, some through a private provider, gain Microsoft certification and complete a number of subjects in a university, but have the total package of learning experiences recognised in the award of a credential such as a bachelor degree. The risk of such a ‘smorgasbord’ approach is that piecemeal, superficial learning may result and curriculum coherence could be lost. One approach to safeguarding learning integrity may be to ensure the formation of sound learning foundations skills in initial study units. A complementary approach is for the degree awarding institution to ‘capstone’ the modules the student has constructed with a number of integrating study units at an advanced level.
97 Over the years there have been allegations that university standards are falling. Some critics contend that some universities now offer courses lacking intellectual rigour and that there has been a ‘dumbing down’ of universities. There are also concerns about a deterioration in the calibre of students entering university but the available evidence does not support this. There have been claims that ‘softmarking’ has become common practice, and the quality of education has generally been compromised. These are serious accusations. In contrast all Australian higher education institutions state that they provide their students with a high quality educational experience. Teaching remains a core activity for all higher education institutions. All accept that it is vital that the desired educational outcomes are achieved and that institutions have the evidence to assure all stakeholders to that effect. 98 Educational outcomes can be assessed in terms of the knowledge and skill sets achieved by learners at the conclusion of a subject or course. Such learning includes knowledge transfer outcomes and graduate capability outcomes. Graduate attributes are sets of generic capabilities that all graduates should possess at the conclusion of their studies. They may be discipline or profession-specific attributes, as well as generic capabilities. Rigorous internal unit and course assessment should address both sorts of outcomes. Currently, external validation of course outcomes is provided by some professional bodies, which monitor courses and accredit both courses and graduates. Until relatively recently, there were few means of determining the outcomes of an entire educational process experienced by students in higher education institutions. There was assessment within individual subjects, responses from employers about the quality of graduates, but very little that provided comparable benchmarks of the quality of graduate outcomes. 99 In 1999 the Commonwealth commissioned the Australian Council for Educational Research (ACER) to develop an instrument to test the generic skills of graduates. The Graduate Skills Assessment (GSA) aims to enable students to verify their academic claims for acceptance into further studies, assist graduates to obtain employment and measure ‘value-adding’ by universities. There are currently four dimensions tested by the GSA—critical thinking, problem solving, interpersonal understandings and written communication. The GSA framework has the potential to be expanded to include additional generic skills. The Course Experience Questionnaire (CEQ) also provides information about broader educational outcomes but these are self-assessed by the student in that they make a judgement about the degree to which their course has improved their generic skills. 100 The question of academic standards is a recurring one through higher education policy, both nationally and internationally. In the UK in 1997 the Dearing Committee argued that quality and standards underpin all forms of learning and recommended that the external examination system and threshold levels should be reinvigorated. In Australia, external examination is rare in undergraduate education and little is known about relative standards across institutions or between different courses within institutions. According to the AVCC, many of the allegations about standards have related to debates about a ‘minimum level’ or standard (AVCC Submission, 2001, p.9). Currently the Australian Qualifications Framework outlines ‘characteristics of learning outcomes’ at each of the qualification levels, but not a minimum level for each qualification. One way of addressing the issue of standards for a bachelor degree and other higher education qualifications may be to stipulate a minimum standard or level expected for that qualification. The challenge would be in reaching consensus on what that minimum standard might be. 101 In recent years,
the Commonwealth and State and Territory Governments have taken consultative questions
b. access on an equitable basis
102 While the number of students with an equity group background has increased significantly over the last decade, their share of the student population has remained relatively stable. This may be in part attributed to student aspirations, which play an important part in educational decisions. This is a particular issue for Indigenous students and those from rural or socioeconomically disadvantaged backgrounds. Thought needs to be given to what incentives are appropriate to encourage students from these groups to participate in higher education. 103 It is difficult
for the higher education sector to remedy educational disadvantage 104 While foundation learning is an issue, there are steps that higher education institutions can take to improve access for students from a range of backgrounds. The perceived costs of higher education may be a factor in some people’s decisions not to participate. Many students are lost to higher education early in secondary school, in part because they are not aware of all their options. Higher education institutions might consider becoming involved with school students much earlier than they currently do, helping to broaden students’ horizons. 105 There may be value in exploring more innovative course structures, such as one-year and two-year workforce entry programmes, that reduce the period of income foregone while studying. It may be useful to reassess how well course articulation and credit transfer arrangements are actually working and, in that context, consider more diverse, flexible pathways into higher education. 106 Already the Commonwealth has taken some initiatives. Targeted funding to facilitate equitable access has been made available to universities on a performance basis through the Higher Education Equity Programme and Indigenous Support Funding Programme. The Commonwealth has also funded enabling courses for students from designated equity groups as part of undergraduate load, and these have been HECS free. 107 More broadly, the Commonwealth’s equity policy has been based on HECS, which ensures that up-front tuition fees do not prevent an individual attending university. This has now been extended to the postgraduate sector with PELS. Nevertheless some evidence is emerging that older students who have not previously participated in higher education may be reconsidering study because of the impact of HECS. 108 Some might argue that consideration should be given to placing a funding premium on student groups whose participation the Government seeks to increase. It has also been suggested that it may also be appropriate to expand opportunities for a wider range of school leavers and ‘second-chance’ older students by rationing the number of years that undergraduate students can have a HECS tuition subsidy. consultative questions
c. engagement of universities with their communities
109 Higher education institutions need to be responsive to the social, economic and cultural needs of the communities in which they are located and foster a more active engagement with these communities. The obligation for community engagement is one that rests with all higher education institutions, but regional institutions and campuses clearly have a special responsibility to their communities. Their locations present particular challenges. 110 Regional campuses now make up one-third of the campuses in the system and over 20 per cent of students attend university outside the major metropolitan areas. Some argue that there is a danger that metropolitan universities with auxiliary regional campuses may fail fully to comprehend the wider significance of higher education to the local community. The best regional universities have a strong relationship with their communities, beyond employing people and purchasing goods and services. This form of relationship, based on the mutual recognition of community service obligations, contributes strategically to the economic and social viability of both the institution and the community. 111 This can be achieved in a variety of ways, such as making university facilities available to the community, becoming involved in local projects, tailoring specific courses for regional needs or providing research expertise in partnership with local farmers and businesses. Universities could become a mechanism for ensuring that Australia’s regional communities are not bypassed by the knowledge economy by offering technology and expertise to both community members and businesses to increase competitiveness and sustainability. They can become active in raising the expectations and aspirations of the community and in the upgrading of regional skills. Engagement needs to become an integral part of what the regional university does, not an adjunct to its existing functions. It should be part of the core business, seen as being academically relevant and recognised as an important contribution to the overall role of the university. 112 Engagement is a two way process. Both parties need to agree on mutual objectives, which may include job generation, business and investment growth and increased participation. The University of Tasmania, for example, has signed a Memorandum of Understanding with the State Government that includes provision for the University to carry out all public sector agricultural research in the state. The University has made itself an integral part of what happens in Tasmania. There may be similar prospects in other areas to have a positive influence on state and regional development, perhaps with State governments or with parts of the armed forces as well as with small and medium sized enterprises. 113 A number of strategies might support greater active community engagement by institutions. Some suggest that it may be possible to maintain existing funding levels at a lower level of student enrolment to release funding for an agreed set of activities. It is argued that a social premium could be paid to particular universities to deliver community service obligations within their region. Universities could carry out some aspects as fee-for-service. State governments could contribute to the costs under this scenario. Regional community bodies might be funded directly to purchase the higher education services they need, and not necessarily from the local institution(s). Indeed, engagement could comprehend a new compact of mutual obligation, involving active partnerships between institutions, their staff, students, government, employers and the community. consultative questions
d. institutional specialisation
114 Australia needs to focus on its international strengths in teaching and research and build its competitiveness through strategic collaboration. The reforms to research and research training flowing from Knowledge and Innovation and Backing Australia’s Ability are acting to concentrate the public investment in research and promote critical mass in research capability. 115 Even so, Australia is at best just keeping pace internationally. The Reserve Bank Governor, Ian Macfarlane, observed in his recent speech to the Melbourne Institute that:
There have been a number of recent calls for Australia to aim to have one or two ‘world-class’ universities. Whether this is an appropriate goal, whether it is achievable and how it might be achieved, are questions that need to be addressed. 116 We have been ‘punching above our weight’ in a small number of fields such as mathematics, astrophysics and agricultural sciences. Overall, our publications output and citation rates reflect well on the quality of Australian researchers. However, investments in research capability (infrastructure and expertise) in North America and Europe and parts of Asia are now of a far greater scale. We risk being left behind, especially in the new areas of scientific discovery and technological application. 117 We have relied in recent years on a policy approach that leaves it largely to higher education institutions to respond to the structure of incentives in ways that best suit their interests and circumstances. However, the ‘one-size fits all’ incentives have encouraged uniformity rather than differentiation. Institutions themselves have largely converged to a predictable spread of teaching, research and research training at the risk of compromising quality. The results do not necessarily distribute resources efficiently. For example, is Australia best served by having 34 universities offering MBAs? 118 The new performance-based funding formulae for the Research Training Scheme (RTS) and the Institutional Grants Scheme (IGS) are causing universities quite quickly to channel their efforts into areas where they have genuine prospects of winning and to divest from other fields. Research performance is already highly skewed as shown in attachment d—indicators of diversity among australian universities. As the RTS and IGS formulae continue to take effect, the majority of institutions will be able to attract competitive funding only for strong niche areas of research and research training. 119 Notwithstanding this increasing concentration, some have argued that there may be a need to shift the policy thinking from ‘unplanned’ to ‘planned’ differentiation, for example, the Government could designate and resource a small number of institutions, or a few distributed networks across a range of fields, for world-class research intensity. Alternatively, some suggest that different packages of funding measures could enable institutions that are not research intensive to reorient and reorganise. Universities could variously focus on high quality undergraduate teaching, professional development, industry partnership or community service. 120 There are several international models that might be explored for their applicability in this regard. These include the liberal arts colleges of the USA, the community colleges of Canada, the Fachhochschulen of Germany and the Grandes Ecoles of France. Such models are outlined in attachment c—some different national structures in higher education. There are also some emergent Australian models that could be further developed, including dual sector institutions, graduate schools, multi-sector educational precincts, as well as strategic alliances with businesses and other education and training providers. The challenge is to find a means to allow Australia’s universities to establish their own areas of excellence, whether it be institutional research, teaching or regional service. consultative questions
e. efficiency and effectiveness
121 The Senate Committee report Universities in Crisis pointed to inadequacies in external funding of universities as the basic cause of concern. It gave little consideration to some of the perceived inadequacies in the internal operations of universities. These include variable teaching loads of staff, non-productive research, inflated course offerings, cumbersome administrative systems and process inefficiencies. 122 Given the level of public investment in higher education it is reasonable for the public and the Government to expect that higher education institutions will make cost-effective use of the resources provided to them. The challenges posed by this goal are considerable. Universities need to take hard decisions to increase their output and to reduce the cost of their inputs while maintaining quality. 123 There is much debate about how to determine the efficiency of university operations. Several indicators give cause for concern. Some 30 per cent of students who commence a course fail to complete it. The year on year student-attrition rate for undergraduates is on average 22 per cent. Administrative overhead costs account for around 23 per cent of universities’ expenses. Universities often have poor knowledge of their costs and cost drivers. Capital assets are often under-utilised. Performance varies widely among institutions against efficiency and effectiveness indicators. However, various inferences can be drawn from the indicators. There are data deficiencies. Institutional circumstances vary. 124 The issue of student progression rates has been discussed in part 4a in relation to learning productivity. It can also be considered in relation to student wastage. We do not have consensus as to what an acceptable wastage rate would be. While only 70 per cent of commencers complete, only 10 per cent of all units undertaken are failed. There are educational and social benefits to students who successfully complete subjects, even if they do not go on to complete their course. The majority of student withdrawals occur in the first year of study and many of these students eventually return to studies and successfully complete a qualification – not necessarily in the same field or the same institution or at the same level. It is clear that attention to initial student admission, course selection and induction is warranted by both students and universities. 125 There is need for better management of university course offerings and the associated issues of staff and capital utilisation efficiencies. Some 20 per cent (20 681) of units of study on offer annually have fewer than five students. There may be some coding ‘noise’ in these figures but not loud enough to drown out the problem. Yet some universities also have crowded classes, especially in first year, in popular subject areas where they are attracting growing numbers of students. Yet they persist with unviable subjects with miniscule enrolments and indeed continue to proliferate such courses. A reduction in resources devoted to small enrolment offerings, including through collaborative arrangements, may release additional resources to service the areas of growing student demand. 126 Perhaps universities continue to offer subjects with low student demand because of industrial rigidities (it is hard to shift staff) and cultural traditions (many academics like to teach their research specialisation). Some argue that students ought to have access to an increasing range of units as they progress through to their final year, recognising the right to choice and the need to specialise. However, resources are not unlimited. Student demands change, as do realms of knowledge. Doing something new means eliminating something old. 127 The inefficiencies within each university accumulate to become a significant problem at the national level. There are concerns of a lack of systemic responsiveness with little indication that universities are continuously reviewing and refreshing their offerings. 128 These issues could be addressed without constraints on student choice if there were greater flexibility in delivery and greater collaboration between universities. However, there is a lack of incentives to collaborate in teaching activities. Yet there is scope for considerable efficiency gains by reducing the extensive duplication of courses, sharing the development costs of courses and materials, enabling students to take a subject in another university where the home institution cannot sustain that subject (such as in a foreign language), and through articulation agreements and industry partnerships. 129 Attention also needs to be given to staff productivity. It varies widely across fields, faculties and institutions. It varies in terms of student numbers, teaching loads, graduates per teacher and quality of teaching. It varies in terms of research outputs (publications and other works), competitive grants won and income attracted. Only a couple of universities can tell whether their staff members’ outputs have earned their salaries. As discussed later, most cannot report even on staff attendance let alone their workload and output.
130 Attention needs to be given to the efficient use of capital assets. There are substantial investments tied up in fixed capital assets of universities. There could be further exploration of the options for leveraging those assets to enable investment in emerging technologies. Knowledge of facilities’ utilisation rates is varied. In many institutions there is often little connection between decisions on the use of space for teaching with decisions on budget allocations, decisions on student admissions, and decisions on course scheduling and other activities. Some facilities are over-booked while others are under-utilised. Semester breaks and holiday periods often leave assets idle. Most universities are fully operational for only 150 days a year. Weekend usage of facilities is minimal. Shared usage by community organisations or other providers in university downtimes appears to be rarely utilised. 131 There is also scope for efficiency gains and collaboration in ‘back office’ administration, for example, through well-established bulk purchase arrangements and shared service agreements. consultative questions
f. governance, management and workplace relations
132 Universities have become complex, multi-million dollar organisations responsible to a diverse range of stakeholders. They are facing new management challenges. 133 Universities receiving public funds are expected to use these funds in an effective, efficient and accountable manner and also to provide identifiable social and economic returns to the nation. Universities’ reliance on non-government income is increasing. The diversification of income streams of universities involves fluctuation in revenue flows and the management of this requires sophisticated skills and systems. Universities need to demonstrate their business competence and transparent management practices to current and potential investors. The success of commercial ventures will depend on the ability of universities to contend with issues such as commercial alliances, risk management, public liability and other legal matters. 134 Australia’s higher education sector has seen the entry of non-university providers and has become part of an international market. Students are making greater contributions to the cost of their education and are becoming increasingly discerning as customers of educational services. Universities have experienced a broadening availability of educational resources, especially in the area of information and communications technology. The key resource of universities remains their staff, both general and academic. Human resource management practices, including performance management and the operation of enterprise bargaining are pivotal to the success of universities. 135 Hoare (1995) found that while some universities were meeting these new challenges, many were facing difficulties and needed to address the structure and operations of their governance and management. Some commentators have suggested that little has changed since that review and that similar views would be expressed if the review were done today.
136 Responsibility for the governance and management of a university is typically vested in a governing body such as a Council or Senate, which may delegate some of its powers. The key challenge for governing bodies is to formulate, articulate and ensure implementation of strategic directions within a framework of complex obligations. 137 There is support for governments in establishing governing bodies and legislating their powers to clarify the responsibilities of members, whether appointed or elected, to act at all times as trustees of the university rather than as delegates representing sectional interests. Universities need to ensure that their governing bodies have the necessary organisational skills and business acumen to fulfil their responsibilities. The recruitment and development of members should reflect the capabilities required of them.
138 The promotion of leading academics to senior management positions also needs more considered attention. Management responsibilities should be professionally exercised. There is scope for improving policies and processes for selection, induction, training, structured placements and some succession planning for senior management positions. Such a need may well fall beyond the capacity of institutions themselves to address adequately. Cooperative activities among institutions and with State and Commonwealth governments could be explored. 139 Some critics have suggested that rigidities in university staffing structures lead to continuation of a supply-side approach to educational offerings rather than one responsive to student demand. There is a perception in the public arena that academics and faculties design their courses and research activities to meet their own needs and interests rather than meeting the priorities and needs of the students, the institution or society more generally. There is little flexibility in the university as a workplace. Inflexible operating arrangements fail to meet the changing needs and circumstances of students and impede the efficient use of campus facilities. 140 Workplace flexibility is increasingly necessary to enable universities to compete in the education marketplace. For universities to be innovative, responsive and able to differentiate their services they have to be able to make timely decisions, deploy their resources as required to meet the circumstances and, where necessary, forge alliances with others to fill capability gaps. 141 Traditional academic cultures and industrial structures can operate together to restrict the ability of universities to make the most of new opportunities. A culture of pattern-type union bargaining restricts management discretion and induces uniformity of conditions. Pattern-type bargaining is counterproductive when it results in pay increases that universities cannot afford without doing damage to their viability. When locally agreed enterprise bargaining outcomes can be over-ruled by the union’s national office operating as a gatekeeper, the very basis of enterprise bargaining is undermined. 142 Both public sector and private sector organisations have changed the way they operate over the past fifteen years. Universities need to recognise that they too are businesses and that they should be subject to similar accountability and productivity measures as other organisations. Part of the issue of appropriate stewardship of resources, particularly for publicly funded organisations, is the capacity of universities to report on productivity and accountability of both the institution and individual faculties, for both qualitative and quantitative outcomes. 143 Some progress has been made in recent years towards increased workplace flexibility. However several major challenges remain. There is a serious ‘lock-in’ of the salaries budget of many institutions for senior staff. New staff hiring patterns are consequently constrained and opportunities to develop an academic career are being restricted. More serious attention needs to be given to implementing staff performance management. While the great majority of university staff work hard and for long hours, lax practices in monitoring staff attendance and record keeping of leave allow a few to exploit the arrangements. Students continue to complain that staff are not sufficiently available for consultation. Under-performing staff need to be identified, given feedback about their deficiencies and provided with structured opportunities, as required, to improve their skills. Persistent under-performance should be dealt with through fair and proper processes, including demotion or dismissal as appropriate. consultative questions
g. revenue diversification
144 Overall revenue for Australia’s universities has significantly increased, by $3.8 billion or 70 per cent between 1991 and 2000. To a large extent this reflects a substantial diversification of their revenue sources. Revenue from the commercial sector, or from full fee-paying students, has assisted universities in meeting increased demand for educational services and innovation. 145 Appropriately managed, non-government revenue raising in higher education produces a number of benefits. Sharing the cost of education reduces the relative burden on taxpayers who currently carry a significant funding responsibility for subsidised higher education, in which individual students gain a large share of the economic benefit. Importantly, revenue diversification strengthens institutional autonomy. 146 During the mid-1980s the Commonwealth encouraged universities to seek supplementary funding from non-government sources. Universities have responded positively with the portion of revenue acquired from sources other than Commonwealth grants and HECS (or ‘earned income’) rising from 27 per cent in 1991 to 37 per cent in 2000. Increased earned income has helped sustain the expansion of the higher education sector. 147 Income earned from full fee paying overseas students and domestic postgraduate students has underscored the overall growth in earned income. In 2000, 12 per cent of all universities’ revenue was raised through these fees. Substantial scope exists for further increases in earned income. Additional areas of potential income growth include fees from continuing education, investment income, bequests and donations, research income, consultancy service fees and research commercialisation. 148 At this stage growth in fees from provision of ‘continuing education’ appears to have been somewhat modest in the context of calls for ‘lifelong learning’. The potential of this revenue source has scarcely been tapped by universities and alternative providers are capturing this market. 149 The ability to raise substantial funds from investment incomes has generally been limited to older established universities. Investment incomes have tended to be quite volatile. Some institutions fall under legislation that restricts particular investment growth opportunities and some institutions have sacrificed return flows in favour of redirecting income to other uses. 150 Income growth from donations and bequests has been modest. Universities in other countries enjoy significant financial support from alumni. There may be scope for Australian universities to increase earned income by enticing philanthropic interest within their communities and among their former students. Time and effort, together with cultural changes and possibly taxation incentives, are needed to grow philanthropic sources of income. Even then, however, results may be unevenly distributed and limited. 151 Growth in research income from industry has been significant, but its growth rate has been little more than that for all research income. Not all universities have benefited from industry-funded research, and indeed some have experienced declines in this source of revenue. Universities have scope to attract more research and development funding from industry. 152 The amount of income earned by universities through the provision of consultancy services and academics’ paid outside work is not clear. Issues raised with respect to this revenue source include the nature of the relationships between universities, individual academics and clients, how charges are determined, how income is shared between contributors, monitoring labour inputs and managing professional indemnity insurance. More profoundly, it raises questions as to the relationship between the intellectual property of the individual scholar and the host institution, and about how that property can best be harnessed to improve revenue returns to both. 153 Commercial involvement in research funding may reduce the time between the inception of knowledge and its broader transmission or practical application. It can assist universities in making more immediate the social and economic benefits of their work, and may improve responsiveness to new opportunities. 154 However, there is considerable variation in the capacity of different universities to participate in commercial ventures. There is also concern that faculties and departments within universities have disparate capacity to attract commercial interest and that this could result in the devaluation of particular fields of teaching and research. This may also generate tension within universities about their institution’s mission and how best to allocate resources in achieving it. Clear policies need to be developed for balancing the rewards for staff involved in entrepreneurial activities and cross-subsidising other areas in order to sustain the broader mission and reputation of the institution. 155 Industry support for university research and teaching offers considerable potential for revenue supplementation, as does the commercialisation of university activity. The challenge will be to reconcile the traditions of academic integrity and freedom with the more profit driven demands of the commercial world. There is concern that commercial forces could act upon university teaching such that students will receive a more focused, vocationally orientated education, while access to a liberal education may become limited. There are fears that corporate sponsorship of research could influence research outcomes. Relationships within academia may change where commercial considerations restrict the sharing and open discussion of methods and results. Such changes, if they were to eventuate, may run contrary to calls for greater collaboration between researchers. 156 Conversely, greater engagement by universities in profitable enterprise may provide the funds to enhance teaching options, support applied research, and improve the return to academics. While there are clear financial and probity risks associated with generating funds contingent on market demands and profitability, revenue diversification and its benefits cannot be abandoned. Appropriate management of the risks can lead to a higher education system that optimises the various opportunities presented to it. 157 This would
require the universities to develop or enlist people with entrepreneurial 158 Diversifying income is important for the higher education sector in Australia. Universities have an opportunity to profit from the dual interest of public and private sectors in their activities. It is important that universities are not constrained inappropriately in realising this opportunity. consultative questions
h. allocation of public subsidies159 Recent calls for more adequate funding of higher education variously reflect concerns to expand access, safeguard quality and improve international competitiveness. Claims have been mostly for increased government funding for the public higher education system and have focussed on raising the index for the salaries component of operating grants, effectively increasing the funding rate per student. Some have argued for selective funding increases targeted to particular institutions or activities, such as to upgrade research capability, to expand student access on a regional basis and/or to provide training for particular occupations. Others have called for the extension of public funding to private institutions in order to level the playing field for competition, such as through subsidies for tuition or income-contingent loans. 160 The adequacy of public funding for higher education is relative to the scale and cost-effectiveness of the system, the public/private mix of institutions and the share of costs between general taxpayers and students. The scale of the system is influenced by incentives for student participation and by policies for the establishment of institutions, whether public or private. 161 A fully demand-driven system in which all persons seeking access could gain a subsidised place is unlikely to be affordable in the foreseeable future, even if it were considered desirable within the higher education sector alone (as distinct from the wider post-compulsory education and training sector). Publicly subsidised access could be rationed according to ability to benefit. Rationing could occur on the funding allocations of student places to institutions or the availability of tuition subsidies and loans to students. Tuition subsidies can be rationed by dollar amounts or by number of years of study. Loans not including a tuition subsidy can be made more widely available with borrowing limits set. 162 Funding requirements of higher education institutions are affected by pressures on costs, scope for productivity gains and opportunities to raise revenues. Some cost-drivers have been increasing. In particular, people point to the increase in salaries, and the increase in the cost of journals and some other elements of infrastructure. The operating results of universities reflect a faster rate of growth in expenses than in revenues. 163 While cost structures have changed, this factor does not in itself justify a call for additional public funding. Productivity improvements, combined with alternative sources of revenue, may ensure that quality can be maintained at present levels of Commonwealth funding. Indeed, while the staff:student ratio has increased from 15:1 to 19:1 between 1993 and 2000, over the period from 1996 to 2001, the results from the Course Experience Questionnaire indicate an increase in overall satisfaction of students. The significant investment that universities have made in ICT can be expected to result in savings in administrative expenses as well as improvements in the quality of teaching and learning. As noted earlier, considerable scope may exist for efficiency improvements through course rationalisation and inter-institutional collaboration, and increased student progression and better asset utilisation. 164 If adjustments are made to the price of higher education offerings or volume of students, the question arises as to who should pay. This issue needs to be thought of in a dynamic sense. Labour costs will continue to rise in line with general movements in the professional labour market. Australian universities cannot be insulated from movements in the exchange rate and the trend of increasing library costs. Thus mechanisms need to be designed to ensure that quality is at least maintained over time. These necessarily involve university, government and student contributions. 165 The wage levels of higher education sector employees will be determined over the longer term by the wage levels of skilled workers in general. While no index reflecting wage movements of skilled workers exists, the Australian Bureau of Statistics has produced an index reflecting community wide wage movements—the wage cost index (WCI). A comparison of this index with the Safety Net Adjustment (SNA) gives an indication of the extent of productivity improvements that the sector would have had to find to fund increases in line with community wage movements. Over the period from August 1997 to August 2001 the WCI increased on average by 3.25 per cent per year compared with the SNA average of 1.55 per cent. Over this same period total average weekly earnings increased on average by 4.00 per cent per year. 166 Actual wage outcomes have tended to be higher than the wage cost index indicating that university employees have had greater market power than the community average. University certified agreements delivered salary increases of approximately 11–12 per cent in the period 1997–1999 and a further 12–13 per cent over three years from 2000–01. funding schemes167 Four general approaches to higher education funding have been proposed in recent years:
168 These four approaches are not necessarily alternatives. Some argue that each could be modified according to the extent of regulation involved, affecting pricing and student volumes. For example, prices can be fixed at normative rates per type of student place, allowed to vary within a band, or be unfettered. Similarly, student numbers could be fixed or permitted to vary within a range or as demand determines. Each of the models could operate in the context of limiting eligibility to public subsidies to a select group of institutions or extending public subsidies to private providers. It is also possible to add to each of the basic models an element of mission-oriented, negotiated funding for particular institutions. Such variations are discussed later. 1. modified status quo 169 A number of modifications to the current system of allocating subsidised places to universities are possible. The funding rate per place could be varied by institution to reflect different circumstances. In a fixed budget context this would require variations to student load targets. Marginal payments for over-enrolment could either be discontinued or limited to say a maximum of 5 per cent to protect quality. Adjustments for over- and under-enrolment could be made over a triennium rather than annually to recognise fluctuations in student demand. 170 HECS rates could be increased and the revenue directed to institutions through operating grants. A rise of $100 per student on average would generate around an extra $47 million per annum in sector revenue. Variations in HECS rates could be negotiated with institutions in consideration for agreed measures of quality enhancement, value adding or performance improvement. HECS tuition subsidies could be limited to either an initial higher education qualification or a period of time. Setting limited subsidies, which has already been done at the higher degree by research level, would improve progression rates and provide for increased access to Commonwealth funded places without the requirement for increased funding. Such limits would, however, have an impact on students undertaking double degrees and honours programmes, and those in particular disciplines including medicine, psychology, and veterinary science where study beyond five years is often required for professional recognition. 171 Eligibility for HECS places could be extended to accredited private providers, though this would require a redistribution from public institutions unless there was funded growth and/or price deregulation. Eligibility for PELS-style loans could be extended to all undergraduate fee-paying students on grounds of equity. Such loans could be fixed at the HECS borrowing limit per unit of study, or some other limit, or be unlimited like PELS. 172 They could be made available to students undertaking programmes with TAFEs or private providers, where the programmes studied articulate into university courses. 173 The indexation arrangements for Commonwealth funding could be amended with additional funding being conditional on productivity and efficiency gains as measured by agreed performance indicators. 2. learning entitlements 174 Interest in learning entitlements or vouchers reflects a shift in policy emphasis towards recognising the value of individual choice. Voucher systems can vary widely. In general though, to be considered a voucher scheme, students must be provided with a resource (either monetary or in the form of some other entitlement) that they can use at the institution of their choice. At one end of the spectrum is a basic demand driven model without any actual funds provided to students and at the other is the full voucher model with a specific monetary entitlement (or equivalent) provided to students and under their control. Issues relating to such a proposal include:
3. performance-based funding 175 Performance-based funding models fund institutions on the basis of what is achieved. Performance can be assessed using measures of efficiency (the relationship between inputs and outcomes) and effectiveness (the extent to which the desired outcomes are achieved). 176 A performance-based funding model could be applied to all of an institution’s public funding or to a set component of it. It could be used either as a major allocative mechanism (as with the Research Training Scheme (RTS)) or operate at the margin in rewarding good performance (as with the Higher Education Equity Programme). Performance funding models range from a formula approach (as for research block funding at present) to a ‘contract’ type approach, where satisfactory performance is made a condition of funding with suitable rewards or penalties applied. They could be applied system-wide or within individual institutions (such as for improving performance on a set of indicators over a period). 177 Generally, where put into practice, performance based funding has been used to achieve a specific target, for example to increase research output or raise the learning standards of graduates from particular backgrounds through ‘value adding’. It is likely to be difficult to construct a performance based funding model that can fully capture and recognise the complex combination and interaction of a large number of activities that make up university performance. When output measurement is difficult, high-powered incentives could shift effort away from hard to measure yet important activities (such as development of creativity) towards more measurable activities (units passed, courses completed). While it may be useful to have incentives that improve student progression and completion rates, a simple formula could have adverse consequences for other objectives for the system, such as greater innovation and diversification. The principal concern is how to safeguard quality within a system that rewards high progression and completion rates. Overseas countries with performance-based approaches use a combination of external examinations and central curriculum controls. 4. competitive tendering 178 Competitive tendering is the process of selecting a preferred supplier from a range of potential contractors by seeking offers and evaluating these on the basis of value for money criteria. Competitive tendering and contracting offer the advantages of increasing flexibility in service delivery and encouraging suppliers to develop innovative and efficient ways of providing services. Outcomes and outputs can be specified and funds can be directed to those providers offering the most cost-effective ways and means. Competitive tendering may best be used for specific-purposes, such as to obtain additional output of graduates in particular fields or regions, or to effect a reallocation of historically distributed student places. Competitive tendering can also be an explicit mechanism for encouraging the entry of new providers, especially private providers. In a contestable market the threat of new entrants can drive existing providers to operate at levels approaching that expected in a competitive market. 179 In vocational education and training the User Choice policy aims to create a more direct, demand-driven market relationship by allowing employers and their New Apprentices to select their Registered Training Organisation, whether public or private, and negotiate aspects of training including content (within the framework of the relevant Training Package or accredited programme), timing, location and mode of delivery. Public funds then flow to the chosen provider. Dual-sector universities have experience of this approach. 180 In terms of ‘market oriented’ approaches to the allocation of funding, a competitive tendering model remains at the more centralised end of the scale. It is a model in which a central purchasing authority buys a service on behalf of consumers. The role accorded to direct ‘consumer’ demand is limited. Demand is factored in through proxies such as changes in demographic variables or measures of unmet demand. Depending on the methods used, competitive tendering and contracting can involve substantial preparation and compliance costs for providers, especially where there are multiple tender rounds. There are also administrative costs associated with specifying, awarding and monitoring contracts. model variants181 Within the four models outlined above, some variants have been suggested to focus the outcomes of each model or to achieve particular policy objectives. fee deregulation182 Whereas fees for overseas students and Australian postgraduate students are effectively deregulated (universities are expected to at least recover costs from overseas students), the Government sets the price per student place at the same rates (within three bands by course type) for all HECS-based courses. Allowing institutions to vary their prices may give universities increased flexibility, promote greater responsiveness and encourage innovation and diversification. In a more global labour market, to prevent the best students and staff from switching from a local to a foreign university, quality differentiation may be achieved by allowing universities to set their own fees. Students are both consumers and producers of education. Universities may want to consider discounts to students who raise the quality-level of an education programme. Pricing flexibility may enable universities to attract the best students. 183 Within a deregulated system, real prices could rise or fall. Universities could offer a merit scholarship price discount, a premium for quality, a choice of extra services (such as for a semester overseas or additional tutoring), or a ‘no frills’ service. Such an approach would be consistent with the policy objective of diversifying the system so as to widen choice and enable specialisation but it would require strong quality assurance and consumer protection mechanisms, as well as better information to guide student choice. However, price differentiation would not necessarily increase the quantum of funds for the sector overall. Some institutions could well find their operating margins squeezed in a fee-deregulated market, especially if access were driven by demand and student choice of institution. 184 Concerns about fee deregulation include the risk that institutions in prestige or local monopoly positions may put up prices without improving service, leading either to unreasonable burdens on students or to their deterrence from participation. The costs to government of extending interest-free loans and covering doubtful debt also have to be considered. Another potential criticism relates to the advantage given to historically well-endowed universities over newer institutions and the consequences of loss of market share for the viability of some institutions. Reputational effects could erect entry barriers for potential new providers and so frustrate the competitive process. 185 If adopted it would be prudent to phase in any move to greater deregulation of tuition fees. Some institutions may be better placed than others to compete in a substantially fee-deregulated environment. Unfettered deregulation is likely to be unacceptable. The Government has indicated its intention to ensure that students are not faced with additional barriers to participation and do not accumulate disproportionate debts. Current students ought to be able to complete their studies on the basis upon which they commenced. 186 It is argued by some supporters of deregulation that some capping of fees may be required. However, if the cap above the current price were to be set too low then the risk is that all institutions would raise their prices to the new cap. The same result may be achieved by raising the HECS contribution rates and passing the revenue on to universities, but that would not provide an incentive for improved university responsiveness and differentiation. On the other hand, students and the community may have concerns that they will lock themselves in beyond their capacity if the cap were set too high. The availability of income-contingent loans where fees are charged would help to remove up-front barriers to student participation. mission-oriented funding187 Higher education institutions are variously situated, have diverse structural features and serve different community needs. Given that diversity, a shift from the current one-size-fits-all model of funding institutions through the allocation of student places could be considered. One possible scenario could see a small number of institutions in special circumstances paid a premium for the students they enrol (or complete). Alternatively, institutions could be directly funded to undertake a range of activities in accordance with their community service mission. They could be paid to undertake an agreed set of core activities, including the provision of regional economic and cultural services as well as teaching. The funding rate for community service obligation activities could be negotiated periodically to reflect institutional cost and scale factors as well as performance. On top of that core, these institutions could also compete for funding for research and other activities from various sources, including through collaborative ventures. 188 There are several possible variants on this broad approach. An institution might initiate an approach to both the Commonwealth and State governments to have itself designated as a ‘charter institution’ with particular regional responsibilities. Such an approach may be made either for a limited period or on an ongoing basis. For instance, an institution might seek to establish itself as a principal provider of teachers or nurses for a region. A tripartite agreement would be negotiated with the institution, including contributions from the Commonwealth and the home State of the institution, in recognition of the social and economic significance of the institution to regional development. The institution could agree to perform a range of activities to certain service standards for a price. The charter could include provision of student, business and community services. It could include commitments to organisational and management improvement. a flexible approach189 A plurality of financing approaches is appropriate for the balanced development of a diversified system. However, the total approach must have overall coherence with regard to policy intentions and incentives. It should also be balanced. The argument for students contributing to the costs of higher education rests on the personal benefits they derive through higher rates of employment and income on average, and the normally higher social status positions they come to occupy. However, education also provides enormous economic and social benefits, building skill levels, increasing knowledge and underpinning innovation. The appropriate balance of contributions as between students and general taxpayers is for political determination. There is also the contribution that universities themselves need to make to responsiveness and cost effectiveness. 190 Several combinations of the above approaches are possible. For instance, the government for its part might adjust the index for the salaries component of operating grants; tuition subsidies could be allocated through a performance-related formula in order to improve university performance; institutions could be given discretion to vary their prices within a band; and income contingent loans could be made available to fund the gap between the price charged and the government subsidy. Within such a system, funded places might be allocated from time to time through competitive tenders for specific purposes. Several institutions might operate within such a framework against a charter of institution-specific activities for which a funding quantum has been negotiated. 191 A wide range of other combinations is possible. The AVCC (2001), for example, has called for a new distributive model of funding to permit individual universities to ‘choose from a set of options to suit its particular circumstances and its ambitions’. The main elements of the suggested model include:
192 Whatever the options chosen, President of the AVCC, Professor Schreuder, emphasises the need for an integrated package that allows individual institutions greater flexibility:
consultative questions
i. cutting bureaucratic red tape
193 Higher education institutions should be publicly accountable for their activities and performance because they are the recipients of public and private investment. Monitoring and regulation are essential to meet the spirit and substance of that public accountability. However, there have been claims that Australian higher education institutions are currently burdened by excessive bureaucratic controls, unreasonable compliance costs and that the systems monitoring their behaviour and performance are not sufficiently rationalised. 194 There are currently numerous levels of financial and performance reporting imposed upon higher education institutions. Under the Higher Education Funding Act 1988, institutions in receipt of grants for operating purposes are required to submit to the Commonwealth a range of statistical and performance data, including that required for the Student Collection, Staff Collection, Finance Collection, Higher Education Research Data Collection, Australian Tax Office HECS Collection, and the Educational Profiles Collection. The 2001 Educational Profiles Collection sought documentation and data relating to strategic planning, research and research training management, resource management, outcomes and performance, quality assurance and improvement, equity, indigenous education and on-line courses and support. In addition, from 2002, the Australian Universities Quality Agency will be auditing institutions on a five yearly cycle and institutions will be required to submit a self-assessment portfolio as part of the audit process. 195 There are also reporting requirements tied to targeted funding programmes, such as the Systemic Infrastructure Initiative, Cooperative Research Centres, and Australian Universities Teaching Committee projects. There are other levels of reporting and accountability required from individual academics, faculties and institutions if they receive funding from Commonwealth agencies such as the Australian Research Council and National Health and Medical Research Council. The Commonwealth, States’ and Territories’ Auditors-General audit the annual financial statements of the universities within their jurisdictions. Dependent upon the State or Territory legislative framework for statutory authorities or bodies, the institution is also required to table an annual report in the responsible Parliament, have strategic plans signed off by the Minister, report on management of land and other facilities, and to comply with other reporting requirements dictated by State or Territory legislation. 196 Higher education institutions do not deny that some level of accountability and reporting is both appropriate and necessary. What is contested is how to ensure that the level of reporting and regulation is appropriate, rationalised as between the various regulators and data collectors, and that unreasonable compliance costs are not generated for institutions. consultative questions
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