Higher Education Legislation Amendment (2007 Budget Measures) Bill 2007

Date introduced:  24 May 2007

House:  House of Representatives

Portfolio:  Education, Science and Training

Commencement:  Sections 1-3, Schedules 1, 3 parts 1, 6 and 9 commence on Royal Assent. All other Schedules commence on 1 January 2008.

Purpose

The Bill will amend the Higher Education Support Act 2003 (HESA) to:

The Bill also amends the Australian Research Council Act 2001 to update annual caps on funding and add the financial years 2009-2010 and 2010-2011.

Background

In April 2002 the Minister for Education, Science and Training, the Hon. Dr. Brendan Nelson, announced that a review of higher education policy would be undertaken over the remainder of the year. The review culminated in the higher education policy package, Backing Australia’s Future, which was announced as part of the 2003-04 Budget. The Government’s reform package was introduced with the passage of the Higher Education Support Act 2003 (HESA). The legislation introduced major funding changes in 2005, including the Commonwealth Grants Scheme (CGS).[1] Some of those changes are amended by the 2007-2008 Budget measures for which the Bill provides.

Financial implications

The Explanatory Memorandum states that in relation to the Higher Education Support Act 2003, the Bill:

The estimated financial impact of these measures on the Higher Education Loan Programme (HELP) over the forward estimates period (2007-08 to 2010-11) is $5.989 million on the fiscal balance, expenses amount to $55.238 million and headline cash is -$204.068 million.

In relation to the Australian Research Council Act 2001, the Bill:

Main provisions

Schedule 1 – Amounts relating to grants

Item 1 amends the level of maximum grants under the Commonwealth Grants Scheme (CGS) for the years 2008-2010.

As listed in the Explanatory Memorandum the increased funding will

Item 2 amends the maximum payments for Other Grants for the years 2008-2010.

The 2007-08 Budget measures funded under Item 2 will

Item 3 amends the maximum payments for Commonwealth Scholarships for the years 2008-2010.

The increased funding will

Schedule 2 – Funding clusters

University student places are funded through the Commonwealth Grants Scheme (CGS). Under the CGS the Government funds each higher education provider for an agreed number of Commonwealth supported places (previously called HECS places) in particular disciplines. The disciplines are currently grouped in twelve funding clusters with both the Commonwealth and the student contribution amounts varying across the clusters.

Items 1 and 2 reduces the number of funding clusters from 12 to 7 and increases the funding for mathematics and statistics by $2729 per place, allied health by $1889, engineering, science and surveying by $684, clinical psychology by $2729, education by $109, nursing by $109, behavioural science and social studies by $840, and medicine, dentistry, and veterinary science by $1081.[6] The significant increase in funding for mathematics and statistics meets the findings of the National Strategic Review of Mathematical Sciences Research.[7] Accounting, administration, economics and commerce disciplines will be moved to the law cluster and their CGS funding reduced by $1029 per place. Changes to the funding clusters and the reduced Commonwealth funding for accounting, administration, economics and commerce require amendments to the maximum student contribution amounts which are dealt with in Schedule 7. For this reason Schedule 7 is to follow to assist the reader.

Schedule 7 – Maximum student contribution amounts

Schedule 7 sets the maximum student contribution amounts (previously HECS fees) for places in a unit of study. Item 2 substitutes a new table in section 93-10 to reflect the reduction of funding clusters from twelve to seven. Item 2 also sets the new maximum student contribution in accounting, administration, economics and commerce disciplines to align them with the law discipline. This will bring them into the highest level alongside dentistry, medicine and veterinary science where the maximum student contribution will be $8,499. Student contribution rates are based on graduates’ potential earnings, and the Government’s decision is based on the higher salaries and competitive nature of the labour market for the business disciplines.[8]

The increased student contributions for accounting, administration, economics and commerce will bring approximately thirteen per cent of HECS-HELP liable places into the top contribution band.[9] The Minister has stated that universities do not have to increase the student contribution for these disciplines, but considering that all universities, except the University of Tasmania, took the opportunity of increasing HECS by the maximum twenty-five per cent in 2005 it could be expected that commencing students in accounting, administration, economics and commerce will have an increased HELP (previously HECS) debt.[10] As students studying prior to 2008 ‘will be able to continue under the existing arrangements until the end of 2012. There will be a transition fund to compensate universities for students who continue under the existing arrangements’.[11]

Schedule 3 – Term of funding agreements

Schedule 3 provides for three year CGS funding agreements which will be introduced from January 2009. Item 11 of Part 2 repeals subsection 30-25(1) and substitutes a new subsection to enable the Minister to enter into such agreements. The Government states that such agreements ‘will reduce administrative costs, provide greater scope for universities to plan ahead and contain improved requirements for university governance, financial accountability, quality and data reporting’.[12] However there will be scope for higher education providers to ‘renegotiate Commonwealth supported places on an annual basis’.[13]

Schedule 4 – Adjustment of basic grant amounts

Amendments in Schedule 4 allow more flexibility for universities in enrolling students in Commonwealth supported places. Universities will now be able to over-enrol Commonwealth supported places by five per cent (previously one per cent) and receive CGS funding for the over-enrolments. Further, the amendments will remove the penalties for over-enrolments above the five per cent and will allow universities to receive the full amount of student contributions from all Commonwealth supported students they enrol. In 2005 the Government agreed to fund 409,393 Commonwealth supported places, thus the amendment will provide for about 20,000 fully funded over-enrolments and help further reduce the unmet demand for university places which has declined from a peak of 36,100 in 2004 to 13,200 in 2007.[14]

Current arrangements on under-enrolments will continue with funding reduced for under-enrolments beyond the first one per cent of funding. However there will be no CGS funding reductions for under-enrolments beyond five per cent of funding.[15]

Schedule 5 – Removal of restriction on number of fee-paying places

Item 1 repeals section 36-35 thus removing the cap on the number of domestic full-fee places universities can offer, which until now has been capped at 35 per cent of course enrolments (and 25 per cent for medicine).[16] This amendment in conjunction with those in Schedule 4 which relax penalties on over-enrolments allows universities greater flexibility in meeting student demand. While universities will be required to deliver specified Commonwealth supported places in nursing, teaching, medicine and engineering they will now be allowed ‘to adjust student numbers and course mixes to meet student demands and employer needs.’[17] Included in this mix will be the ability to offer an uncapped proportion of domestic full-fee places. The Minister’s press release states universities ‘will still be required to offer their Commonwealth funded places before offering full-fee places.’[18] However such a requirement will apply to the agreed number of Commonwealth supported places within a cluster. This would allow for example a university to offer all the Commonwealth funded places in the law cluster to accounting, administration, economics and commerce and create a full-fee only law course.[19]

The effect of both removing the cap on full-fee places and creating greater flexibility in the course mix has the potential for universities with high demand courses to ask for fewer Commonwealth-supported places and replace them with full-fee places, particularly in courses where revenue from full-fee places is higher than that from Commonwealth grants.[20] The Department of Education, Science and Training (DEST) estimates that this measure may increase the number of full-fee places by twenty per cent.[21] However the University of Technology Sydney’s Vice-Chancellor, Ross Milbourne, predicts the number of domestic full-fee places might actually fall due to the ‘expansion in commonwealth-supported offers and the fact universities can move commonwealth-supported places to high-demand areas.’[22]

Schedule 6 – Grants to assist with the costs of changes to maximum student contribution amounts

Item 1 amends the table in subsection 41-10(1) to add a new table item 12 to provide grants from the proposed transition fund. The fund of $83 million will provide grants to compensate higher education providers for the estimated 40,500 accounting, administration, economics and commerce students enrolled before 2008 who will continue under the existing HECS arrangements until 2012.[23]

Schedule 8 – Commonwealth scholarships

Schedule 8 deals with the proposed new scholarships which will enable recipients to receive direct payments of certain Commonwealth scholarships such as the new Indigenous Access Scholarships for an approved enabling course.

Schedule 9 amends the Australian Research Council Act 2001 to update annual caps on funding and add the financial years 2009-2010 and 2010-2011.

Schedules 10 and 11 deal with ‘Other Grants’ under Part 2-3 of the HESA. The proposed new section 41-10 (1) inserts new table items 8A, allowing grants to assist with cost of providing the practical component of teacher education, and 9A providing grants to support diversity and structural reform.

Concluding comments

Since the 2003 higher education reforms which introduced the Commonwealth Grants Scheme, the Government has encouraged the sector to move from a ‘one-size-fits-all’ model through policies aimed at greater diversity and flexibility. In 2005 the then Minister for Education, Science and Training stressed ‘the need for a diverse range of higher education institutions servicing different communities and varied requirements’.[24] Similarly the current Minister in a wide-ranging speech on the need for diversity called for ‘the development of a diversified higher education sector, made up of universities which differ from each other in terms of mission, discipline mix, course offerings, modes of delivery, management and in academic structure.’[25] The 2007-2008 Budget which increases funding by $1.7 billion over four years to the higher education sector is strategically directed to implement such change. Critics of the measures have interpreted moves to diversity and specialisation as pushing the sector to a more privatised, stratified and less equitable one.[26]

The proposed changes to the CGS and the removal of the cap on domestic full-fee places will encourage competition for students and an associated development of different course offerings. There is a perceived benefit to universities such as those in the Group of Eight whose courses are in high demand and which attract the majority of full-fee paying students at public universities although the uptake in full-fee places will be constrained at some universities by the a lack of facilities and a shortfall in infrastructure funding.[27] The ‘one size fits all’ model will be further eroded by the increased student contribution rates for accounting, administration, economics and commerce that are predicted to soften the demand for those disciplines at regional universities and attract students to full-fee places at ‘market leading institutions’.[28] Regional universities will need to devise course mixes that are both attractive to students and meet regional needs. Provisions in the Bill to fund the Charles Sturt University Dental School will further assist that university meet local needs. Other regional universities will need to access the proposed Diversity and Structural Adjustment Fund to assist with implementing changes and avoiding under enrolment of their agreed Commonwealth supported places.[29]

Endnotes