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UM president weighs in on access, funding, and future of public …


One of the big topics during this week’s Mackinac Policy Conference is higher education: how to help schools turn out the workforce that Michigan’s businesses need, while also tackling funding challenges.

University of Michigan President Mark Schlissel is attending the Mackinac Policy Conference. The University Research Corridor  – consisting of Michigan, Michigan State and Wayne State – recently released its latest report on contributions those schools make to Michigan in the areas of life, medical and health sciences.

One of every eight Michigan jobs is related to those fields, and Schlissel says it’s one of the few sectors of Michigan’s economy that gained jobs during the economic recession. The University of Michigan is also an enormous provider of healthcare in Michigan, with clinics and hospitals in Ann Arbor and other areas of the state.

However, President Trump’s proposed federal budget slashes funding to the National Institutes of Health and the National Science Foundation. Sclissel says investments in research by those and other government agencies is what has made the United States a leader in research, particularly in biomedical research.

“Investment in research, especially biomedical research, is amongst the best investments we can possibly make,” Schlissel said. “I’m puzzled how an administration that wants to grow American strength is thinking about underinvesting in an area where it is a global leader.”

Schlissel says in talking with Michigan’s political leaders, Schlissel believes there is broad support and belief in the value of higher education and research universities. Yet he says the state has not made “adequate” long-term investments in those areas. Schlissel says U of M receives the same amount of funding from the state of Michigan it received in 1997.

Listen to the entire conversation with University of Michigan President Mark Schlissel above.

(Subscribe to the Stateside podcast on iTunes, Google Play, or with this RSS link)


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Higher ed takes biggest WV budget hit, but how much is too much?

CHARLESTON, W.Va. — When West Virginia, up against budget struggles, reduced funding to its higher education system by $16 million for the coming fiscal year, it was far from the first state to do so.

“The quick overview is that higher education is sometimes referred to as the balancing wheel in state budgets in that it is the largest single program in state budgets that is not formula driven,” said Arturo Perez, fiscal affairs program director for the National Conference of State Legislatures.

“When things get tight in state budgets, whether it’s a recession or a fiscal situation, higher education tends to be the first to go to in terms of making reductions in spending. When states find themselves on the recovery side it often is the program that finds an acceleration in spending.”

That’s how it was in West Virginia, where legislators ended a special session with no agreement on raising more revenue and so looked to cuts to balance the budget.

The three greatest areas of spending for West Virginia’s budget, as with most states, are education, healthcare and higher education.

Public K-12 education amounts to about $2 billion in general revenue spending in West Virginia. The state school aid formula limits the cuts that can be made, although this budget has $5 million in cuts to education programs such as technology specialists and school innovation programs.

The Department of Health and Human Services amounts to a little more than $1 billion in state spending, mostly for Medicaid. The Legislature tried to shore up Medicaid, which is subject to federal match, through transfers and expected surpluses.

So that left higher education, with about $400 million in annual state spending, as the biggest remaining target.

Larry Rowe

Some lawmakers, particularly Democrats, said they were aghast that the state would cut higher education during a time of economic transition. In particular, they objected to increasing reliance on student tuition.

“To balance the budget on the backs of these students and these families who are drowning in students loans is wrong,” said Delegate Larry Rowe, D-Kanawha. “It’s worse than that; it’s immoral.”


West Virginia University takes the biggest reduction at about $7.4 million in reduced state spending from the prior year. WVU goes from $110 million in state funding this past year to about $103 million for the coming year.

The WVU medical school is subject to a spending reduction of $1.4 million. It goes from $21.4 million in state funds to $20 million.

That’s a portion of WVU’s overall budget. Counting tuition and fees and other revenue sources, WVU brings in about $1 billion in total revenue.

So compared to overall revenue, the state funding cut amounts to a little less than a percent.

WVU is expected to announce this week how it will handle the state cut.

Gordon Gee

In a letter sent out last week, President Gordon Gee said the university budget, working in the new numbers, will be presented to the university’s Board of Governors for approval in a few days.

“Clearly, we had hoped for less of a reduction, but we will make the most of the investment we have been provided,” Gee wrote.

Marshall University is cut from $48.4 million in fiscal 2017 state spending to $44.5 for the coming year. That’s a $3.9 million cut — or about 8.1 percent — of state funding.

Marshall’s medical school funding is reduced by $267,000, or 2 percent.

Marshall’s total revenue, counting tuition, fees and other revenue, is about $266 million a year. So the total percent cut is 1.58 percent.

Marshall’s Board of Governors is set to meet this Wednesday. In April, the board approved three different possibilities to raise tuition to match state funding cuts.

Based on the three scenarios, the board seems likely to finalize a tuition increase of 8 percent. That would generate $2.4 million in revenue but would not fully make up for the decreased state funding.

Among West Virginia’s smaller schools, Glenville State College is already making plans for how to absorb reduced state funding.

Glenville’s state funding is going from $5.9 million last fiscal year to about $5.6 million for the coming fiscal year. The $268,000 decrease is a 4.6 percent reduction.

Glenville’s total revenue, counting tuition, donations and other sources, is a little more than $24 million. So the state funding decrease is, in the larger scheme, a little more than 1 percent.

College leaders say they’re going to hold the line on tuition at Glenville. For in-state students, tuition, fees, room and board are about $17,000. Mostly symbolically, Glenville actually dropped tuition by a dollar.

Glenville is sensitive to student costs, said college board chairman Gregory Smith. He said Glenville has sought efficiency and also refinanced some debt, allowing the school to pay only interest for a couple of years.

“We’re gonna cut everything we can to make it more affordable to the student,” Smith said during a news conference last week.

Delegate Brent Boggs, a Democrat whose district includes the Glenville area, said he is concerned about the state funding reduction even though the Glenville State is preparing to handle it.

“I’ve taken to the floor on many occasions calling out the leadership and many of the members of the Legislature simply for what I believe are shortsighted cuts to higher education simply because at a time when our economy is changing we should be doubling down on higher education and community and technical colleges, not cutting,” said Boggs, a former Finance Committee chairman.

“Our schools have gone years sustaining cuts because there’s only three or four areas you can actually cut in the budget — DHHR, public education and higher education. It seems like every year for the past several we’ve gone to higher education for more and more and more, and it’s just not there any more.”

That’s the situation many states have found themselves in.

Since the Great Recession in 2008, states have provided less and less funding for higher education per student, according to figures compiled by the Center on Budget and Policy Priorities. That’s true of every state except Montana, North Dakota, Wisconsin and Wyoming.

Arizona is at the top of the list with a 55 percent reduction in higher education spending per student between 2008 and 2016. West Virginia is 13th on the list with a 23.6 percent reduction in spending per student over the period since the recession.

Schools have made up the difference through tuition increases, cost-cutting or a combination of both.

“Higher education is the one program in the state budget that is viewed as having its own source of funding, which is tuition and fees — which, put in the big mix of decision-making, results in the reduction of state funding from past years,” said Perez of the National Conference of State Legislatures.

“You can’t really increase spending on Medicaid fees. You can’t do the same for corrections. You can’t increase public education fees for public education students. There’s no such things. That combination is a balance wheel in state budgets. All that combined is what often drives higher education funding decisions among the states.”

Brad McElhinny

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Higher ed leaders tout TOPS funding in pitch to keep Louisiana …

Louisiana’s higher education leaders, tired of having top faculty and students picked off by empires like the University of Alabama, are touting TOPS funding in a goal-line stand against more poaching.

“You can rest assured that all of our schools are reaching out to students and making sure they know TOPS is fully funding and using it as a competitive advantage,” University of Louisiana System President Jim Henderson tells the USA Today Network of Louisiana.

Henderson, LSU President F. King Alexander and others have testified countless times about losing ground to other states as funding for TOPS and university operating budgets declined. They often invoke the hated University of Alabama as a point of emphasis.

“Yes, well, we are spending thousands less per student than our competitors, including Alabama,” Henderson says, laughing.

In April, Alexander said, “We’ve got to do something to keep from being a poaching ground.”

Though next year’s higher education funding isn’t exactly flush, it is, as Alexander tells the USA Today Network of Louisiana, “the best higher education budget we’ve been able to get in perhaps a decade.”

Just after the state budget won final legislative approval last week, the LSU Alumni Association sent the following email: “LSU is going to try to recruit some of those high school seniors who chose to go out-of-state because they were uncertain about TOPS.”

More than 50,000 students rely on Louisiana’s popular college scholarship program, which costs about $300 million when fully funded. This year, for the first time in its 20-year history, TOPS funding was cut by 30%, forcing students to come up with as much as $1,800 to $2,000 to make up the difference.

Enrollment didn’t suffer as some had feared, but Henderson believes that was because the reduction of the scholarship award was back loaded in the second semester.

Read the full story.

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Higher Education Seeks Answers to Leaner Years

That is not only true in Georgia. Other colleges and universities across the country are also responding (albeit sometimes slowly) to challenges threatening their traditional role in society if not their survival.


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Because of a dip in the number of 18- to 24-year-olds, among other reasons, for example, enrollment has been dropping for five years, meaning that there are about 300,000 fewer undergraduates to divvy up among America’s campuses than there used to be.

Changes to immigration policies, and resulting resentments, threaten the crucial supply of international students, which the consulting firm DrEducation predicts could cost universities in the United States a quarter of a billion dollars in the coming academic year.

To fill seats, colleges are engaged in an arms race of discounts that they increasingly cannot afford — discounts so deep that, while their sticker prices appear to be rising ahead of the inflation rate, the schools are actually seeing their net tuition revenue decline. Many small, private nonprofit colleges are giving away a record 51 percent of their tuition income in the form of discounts, according to new figures from the National Association of College and University Business Officers.


Students writing code at the Holberton School in San Francisco, a nontraditional two-year program that prepares students to work in software engineering. Programs like this are adding to the financial strains on traditional colleges and universities.

Jason Henry for The New York Times

While public funding for higher education is rising again in some states, it is still an inflation-adjusted $9 billion behind where it was before deep cuts were imposed during the last recession, the Center on Budget and Policy Priorities reported.

One reason is that many states face large pension obligations for public employees, including those who work at universities; for some universities, the impact is becoming more immediate, as states shift this burden directly onto them. More than half of the $4.1 billion allocated for state universities and colleges in Illinois, for instance, now goes not to teaching or research, but to pay retirement costs, the Illinois Policy Institute says.

“There’s always been a kind of a wishful thinking that when the economy gets back to normal, things will get better. And that is not happening anymore,” said James A. Hyatt, associate director of the Center for Studies in Higher Education and former vice chancellor for budget and finance at the University of California, Berkeley.

On top of that, public universities face political pressure to keep tuition flat. And the Moody’s bond-rating agency calculates that long-term returns from private university endowments are falling far short of what they need. A Department of Education list of financially troubled institutions now has more than 500 universities and colleges.

All of these pressures mean something has to give, and that includes upkeep. Colleges and universities face a combined shortfall of $30 billion for needed repairs and renovations, according to the APPA, formerly the Association of Physical Plant Administrators.


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But in another bid to attract students, they keep building more, spending $11.6 billion last year on new construction, the private firm Dodge Data and Analytics says. That is adding not only more space the universities will have to maintain, but billions of dollars in debt on which someone will have to pay the interest.

Meanwhile, universities’ monopoly on credentials is being threatened by alternative forms of education like software coding academies. Some employers are rethinking whether going to college is even necessary: 14 percent of hires at Google have no college degree, according to the company’s senior human-resources officer. Nearly half of Americans surveyed last year by Public Agenda — a nonpartisan policy organization that focuses on education and other topics — said a higher education is no longer necessarily a good investment. And about the same proportion of graduates in a Gallup poll released last year said they were less than certain their degrees were worth the money.

“There’s a fundamental lack of understanding about the strains that higher education is under,” said Susan Fitzgerald, who tracks them as a senior vice president at Moody’s.

James Soto Antony, a professor at the Harvard Graduate School of Education who focuses on education leadership, said that people imagine that all universities look like the one where he works. “They see this $36 billion endowment and the manicured lawns and they impute that onto all colleges and universities,” Mr. Antony said. “And most of them are not like that. They are dramatically struggling for enrollment.”


Hunter College in New York.

Drew Angerer/Getty Images

Fifty-eight percent of colleges and universities surveyed by the business officers association said their number of students has declined. The problem is worst for small private, nonprofit and second-tier public institutions in the Midwest and Northeast, where the college-age population has fallen fastest. The slide is projected by the Western Interstate Commission for Higher Education to continue through at least 2023.

This has sped up the practice of offering discounts to fill seats. “I don’t think universities have a choice not to,” said Luke Behaunek, dean of students at Simpson College in Indianola, Iowa. He presented a sobering paper about the trend in April at the American Educational Research Association’s annual meeting. “The discount rate is a symptom of the larger things they’re facing,” Mr. Behaunek said. “The margins these institutions are operating at are much thinner than the public understands.”

Here’s how thin: Thanks to rising discounts, small colleges reported an average revenue increase per freshman of just two-tenths of a percent last year, which means they lost ground when inflation is accounted for.

Ken Redd, director of research and policy analysis at the business officers association, said: “Are there enough students out there? Is there enough money out there in a time of declining enrollment to support all of those schools. Based on what we see now, you’d have to say the answer is no.”


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Chief business officers on campuses agree with him. More than four in 10 don’t think their current financing models are sustainable. “Hearing that from the chief business officers is very telling,” Mr. Redd said.

One solution they’ve tried: building or renovating space in the hope of luring students, especially high-income ones. But many smaller institutions that borrowed money to do this have smaller enrollments now than they did then, meaning more debt and less tuition revenue to pay it back, according to the higher-education construction consulting firm Sightlines. This even as their existing buildings need a collective billions of dollars worth of long-postponed repairs, the company says.

So universities and colleges are getting serious about other kinds of reforms. Some, as in Georgia, are dramatic — and controversial. Several campus mergers there were announced only days before they were voted on by the Board of Regents, without enough notice for the public to sign up to comment. A similar proposal was put on the table in April by the Connecticut State Colleges and Universities (which does not include the University of Connecticut) in the wake of an enrollment drop and state budget cuts, only to be protested by faculty and students.

“Change is not easy, particularly when you’ve got institutions that have been around for 100 years” said Charlie Sutlive, vice chancellor for communications and governmental affairs at the University System of Georgia.

Some of this change is being pushed from the outside. Several higher education associations, with money from the Bill Melinda Gates Foundation, have set up a group of 31 colleges, universities and systems called the Frontier Set to exchange ideas that have worked to lower costs and improve success rates — mostly around improving student retention, including through technology, which saves institutions money.


Callie Rittweger, left, and Ashley Owen at the University of Georgia Franklin College of Arts and Sciences. The state’s public university system is turning to a strategy of consolidations and mergers to improve efficiency and cut costs.

John Roark/Athens Banner-Herald, via Associated Press

That “is tied as directly as possible to institutional financial health,” said George L. Mehaffy, vice president for academic leadership and change at the American Association of State Colleges and Universities, which is involved in the project. “If you increase the number of students you retain and graduate, it dramatically affects your bottom line.”

He cites one program pioneered at Georgia State University that gives “microgrants” from a few hundred dollars to $2,000 to help financially struggling students overcome setbacks that often derail their educations. It costs the university $2 million, but more than pays for itself by avoiding the even higher price tag of replacing dropouts. (Retention rates nationally have edged up by two percentage points since 2009 as colleges and universities invest more resources in student support.)

“We know what works,” said Travis Reindl, senior communications officer at the Gates Foundation, “and we know there is a core set of diverse institutions with pockets of solutions and innovations going on, but they’ve never been brought together like this.”


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Another such consortium, the University Innovation Alliance, ties together 11 public research universities that share ways to cut costs and raise productivity.

Other universities and colleges in places where there are a lot of them — Boston’s Fenway neighborhood, for instance, and southwest Atlanta — share administrative services, campus security, shuttle buses and even libraries, and are expanding offerings at a lower cost by doing it jointly or allowing cross registration. More such strategic alliances like these are likely in response to the “competitive and financial sustainability challenges” of higher education, a new report from the TIAA-CREF Institute says.

Even the organization that represents boards of trustees, the Association of Governing Boards of Universities and Colleges, has spun off a new division called AGB Institutional Strategies to help colleges come up with new forms of revenue, and The Guardians Initiative to encourage those trustees — often successful private-sector business executives — to bring new ideas into their university boardrooms.

Richard D. Legon, president of the association, said that fixing higher education “requires a collaborative partnership that benefits from some of the creativity and ingenuity board members bring to the table, working with institutional leadership to ensure that students, who are really in a customer mode, want to shop at your place.”

Not everyone is doing this work. “There are some colleges that are very realistic about the challenges they’re facing,” said Ms. Fitzgerald of Moody’s. “There are others that still have their heads in the sand and think that things are going to get better.”

But the activity that is underway represents “a sea change,” Mr. Mehaffy said. “There was an era when institutions sort of just moved on. The funds were relatively good, the students were standing in line. And today’s environment is dramatically different. It is a time of enormous strains, but the good news is that it’s a moment of growing action.”

Correction: June 7, 2017

Because of an editing error, an earlier version of this article misstated the name of a college at the University of Georgia. It is Franklin College of Arts and Sciences not Franklin College of Arts.

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What made the cut in House, Senate K-12 and higher ed budget

Under the budget, students at the highest-funded districts would see a per pupil increase of $60, while the ones with the lowest-funding would receive a boost of $120 per pupil.

With the increases in effect, total per pupil funding for the lowest funded schools would rise to $7,631 and $8,289 for the highest-funded ones.

Associations representing public schools praised the increase, as well as the move to pump more funding into less affluent districts. The move, they say, helps close the funding gap between districts across the state.

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Guest Column: Will Illinois get an F in higher education this year? – The State Journal

As the special session of the General Assembly continues, Illinois’ students wait, hands tied, as the funding for their futures is held hostage.

Several failures in leadership brought Illinois to this point. The House passed emergency funding for higher education and social services, but did not pass a full budget. And, throughout the legislative session, Gov. Bruce Rauner vowed to veto various proposals to address the budget crisis. The special session is a critical opportunity for Illinois’ leadership to address the state’s needs before the new fiscal year begins July 1.

For students, the necessary outcomes of the special session are clear: The state must pass a full-year budget that restores higher education funding to fiscal year 2015 levels, meet Monetary Award Program grant commitments for the thousands of students who rely on state aid to finance their educations, and prioritize higher education moving forward. We urge the General Assembly to pass a budget that includes a meaningful investment in higher education and ask Governor Rauner to sign it. Not doing so could result in students forgoing school for the 2017-18 academic year and schools defaulting on their operating expenses and, in dire cases, shutting down.

Students like Catie Witt at Eastern Illinois University daily feel the tension caused by the budget stalemate. EIU’s enrollment decreased by 17.3 percent this year and the school has laid off more than 200 staff members. Constantly worrying about whether she’ll receive the promised MAP grant that helps pay her tuition makes it difficult to be optimistic about her educational future, and seeing reduced enrollment around campus doesn’t help.

Almost 200 miles away at the University of Illinois at Chicago, Marvin Slaughter shares many of the same concerns. His research supervisor left UIC for better financial opportunities outside Illinois, causing him to lose an important fellowship. The loss of this opportunity in a “work-experience needed” economy was just another casualty of the state’s trend of disinvestment. For Marvin, the budget stalemate and continued disinvestment go hand-in-hand in making it harder for young people to pursue degrees and successfully begin careers.

Catie’s and Marvin’s stories serve as our warning: As the state disinvests in students, students will disinvest in the state. Student enrollment has plummeted at regional universities, and 45 percent of Illinois’ high school graduates who enroll in higher education do so outside of the state. This exodus hurts already struggling schools in the near term, and the brain drain threatens the state’s long-term economic growth.

The state has not met student needs for too long. In-state tuition at Illinois’ four-year universities has skyrocketed by 57 percent during the last decade, making it the fifth-highest nationally and unaffordable for young Illinoisans, in an economy where 65 percent of jobs will require post-secondary education by 2020. As a result of state disinvestment state-based MAP grants — which in 2002 covered 100 percent of the costs of public school — today only cover 47 and 32 percent of community college and public four-year university costs, respectively. For many students, this grant is the difference between finishing a degree or being forced to abandon higher education altogether.

Illinois does not have the option of investing modestly in its students: The state economy depends on bold commitment to the educational futures of Illinois’ young people. The key to keeping students here, preparing them to fill skills gaps, and to contribute to the state’s economy is restoring higher education funding to pre-recession levels so that schools can begin lowering costs and ensure that financial aid supports completion. The special session is not a time for politics, it is a time for urgency and bipartisanship. The state must pass a full budget that brings higher education funding up to FY15 levels and Governor Rauner must sign it.

Illinois cannot progress if its young people are forced to stand still. We hope our leadership will choose to allow them to move forward.

— Erin Steva is the Midwestern regional director for Young Invincibles, a national non-partisan research and advocacy organization that works to expand economic opportunity for the millennial generation, with a team in Illinois working to advance higher education, health care, and workforce opportunities for Illinois’ young people.

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Sri Lanka Gets $100M in Higher Education Funding

The World Bank has approved a grant for $100 million to support higher education in Sri Lanka, according to a recent World Bank press release. Here’s a closer look at where the funds will go, along with how stakeholders expect the investment will both improve higher education and spur economic growth in Sri Lanka.

Key Focus Areas

The World Bank financing will be designated for several key areas, including increasing enrollment in priority subjects; improving the quality of degree programs, and promoting research and innovation throughout the higher education sector.

According to figures provided by the World Bank, Sri Lanka was ranked 88th out of 115 in terms of higher education with higher education rates of 21 percent — well below the 23 percent average of middle-income countries. Specifically, Sri Lanka student participation rates fell short in STEM disciplines deemed essential to economic development.

According to Harsha Aturupane, Lead Education Specialist and Task Team Leader, “Promoting research, development and innovation will be essential to expand knowledge and technology-intensive industries and services to meet Sri Lanka’s aspirations to become an Upper Middle Income Country.”

A First of Its Kind Initiative

Sri Lanka’s Accelerating Higher Education Expansion and Development (AHEAD) Operation Project represents the first time Sri Lanka has used the World Bank Program-for-Results (PforR) financing instrument, a program aimed at helping countries build capacity, enhance effectiveness and efficiency, and produce sustainable results.

Said Idah Z. Pswarayi-Riddihough, World Bank County Director for Sri Lanka and Maldives, “Sri Lanka’s aspiration to rise to an Upper Middle Income Country status depends on how skilled and versatile its people are.”

Continued Pswarayi-Riddihough, “The higher education system must produce a pool of highly skilled scientists, engineers, doctors, entrepreneurs, policy makers, academics, and teachers, who can contribute to sustainable economic development of the country. Improving competitiveness and growth of the country is a key focus of the Sri Lankan Government and we are pleased to be supporting them in this endeavor.”

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Australian HE reforms need further vetting

Public debate about the Australian government’s higher education reforms, which are currently before Parliament, have largely focused on measures that would have an immediate impact on universities, students and graduates. These include reductions in course subsidies, increased tuition fees, the introduction of performance-related funding for universities and lower repayment thresholds for income-contingent loans.

Largely missing from the debate – and from the government’s own defence of its proposals – is any recognition of the key decision not only to retain the demand-driven higher education funding system, but to extend it to sub-bachelor’s programmes.

The decision to retain the demand-driven system was to some extent unsurprising as the current minister responsible for higher education, Simon Birmingham, had previously expressed his support for it. Moreover, enrolment growth in government-funded places has declined substantially in recent years, easing doubts about the system’s affordability. Yet a number of prominent commentators, and even some within higher education, continued to voice doubts. Capping the system at current enrolment levels, or providing for growth in only a small number of priority areas, was a clear policy option for a government intent on reducing the level of higher education funding growth as part of the overall process of shrinking the budget deficit. After all, this was the path chosen by the previous Liberal-National Coalition Government, in office between 1996 to 2007.

The opposition Labor Party has indicated that it will oppose the government’s savings and revenue measures in the Senate. The shadow minister, Tanya Plibersek, has previously indicated that Labor would also retain the demand-driven system – which it introduced in 2012 – presumably under current funding settings.

Retaining demand-driven funding is important because it provides capacity for continued enrolment growth in higher education to meet the demands of Australia’s growing population and the need to provide new skills for the existing workforce. Based on modelling undertaken by the Mitchell Institute at Victoria University, almost 180,000 additional higher education enrolments will be required by 2030 just to maintain current participation levels.

However, as the modelling also demonstrates, participation in the vocational education and training (VET) sector is where Australia has a serious problem. Participation in the VET sector’s tertiary-level courses (Certificate III to Advanced Diploma) fell from almost 5.5 per cent in 2012 to 4.4 per cent in 2015. The number of students is likely to have fallen even further since as the states have cut funding for VET and the sector has suffered serious reputational damage from the operation of rogue private providers. Hence, almost 300,000 additional enrolments are required in VET by 2030 just to maintain 2015 participation levels.   

In its recent budget, the Australian government introduced a new Skilling Australia Fund, to be financed by revenue from skilled migration visas. This replaces a lapsing five-year agreement with the states, and, unlike the previous agreement, will require matching contributions from them. However, overall state and federal funding for VET is likely to continue to fall, and VET students on most courses will continue to face upfront fees, either because they cannot access the new VET Student Loans scheme or because caps on loan amounts are less than course fees, requiring them to pay the difference upfront. This creates a strong incentive for students to enrol in higher education instead.

Labor capped funding for sub-bachelor’s degrees in higher education for fear that those students who currently pursue such qualifications in the state-funded VET sector would switch to the federally funded higher education sector. As Gavin Moodie has pointed out, that risk is now very real, creating a further threat to the VET sector. But it is not clear how many universities will significantly expand sub-bachelor’s courses in response to the removal of the cap; they may be cautious about enrolling students with lower completion and graduate outcome prospects. Besides, capping sub-bachelor’s courses made little sense as it merely created incentives for universities to enrol students directly on to degrees instead.

All this serves to underline a point that I have previously argued in Times Higher Education. Australia needs a broader debate about funding for tertiary education as a whole. Demand-driven funding in higher education alone will distort both provision and student choice, and is not likely to be sustainable into the future. 

Peter Noonan is professor of tertiary education policy at the Mitchell Institute, Victoria University, Melbourne.

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Guest Editorial: Find funding for State System of Higher Education schools

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Queen’s Speech: review of English tertiary funding left out

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