Bills Digest no. 175 2008–09
Higher Education Support Amendment (2009 Budget
Measures) Bill 2009
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Concluding comments
Contact officer & copyright details
Passage history
Date
introduced:28 May
2009
House: House of Representatives
Portfolio: Education
Commencement:
Schedule 2, Schedule 4
item 1, and Schedule 5 commence on 1 January 2010. The remainder
commences on Royal Assent.
Links: The
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
The Bill amends the Higher
Education Support Act 2003, the Act , to implement the initial
stage of the Government s reform of the higher education sector.
The Bill:
- increases funding to eligible providers for the Commonwealth
Grants Scheme (CGS) in the years 2010 and 2011
- increases funding to eligible providers for Other Grants to
2013
- revises the funding for Commonwealth Scholarships to 2013
- includes a funding cluster for education and provides increased
funding for all clusters
- changes maximum student contribution amounts and
- gives effect to budget decisions on the Higher Education Loans
Program (HELP).
The Higher Education Support Act 2003 is the
legislative basis for Australian Government funding of higher
education. It sets out the eligibility of higher education
providers for public funding and the details of Australian
Government funding which is provided largely through:
- the Commonwealth Grant Scheme which provides for a specified
number of Commonwealth Supported places at public universities each
year
- the Higher Education Loan Programme (HELP) previously called
Higher Education Contributions Scheme (HECS) arrangements providing
financial assistance to students
- the Commonwealth Scholarships and
- a range of other grants for specific purposes including
quality, learning and teaching, research and research training
programmes.
While in opposition the Australian Labor Party (ALP) expressed
concerns on the decline in public expenditure to the higher
education sector particularly in comparison to other OECD countries
and as a percentage of GDP; the increasing red tape and
micromanagement of the sector; the erosion of equity of
opportunity; and the reliance of universities on student fees for
revenue.
In a 2006 white paper on higher education and research the ALP
promised a substantial increase in public funding and a program of
long-term reform if elected to government.[1] The fulfilment of these promises was
delayed in Government whilst the Review of Australian Higher
Education was undertaken in 2008 with Professor Denise Bradley as
chair of the panel. The review commonly referred to as the Bradley
review reported in December 2008.[2] Among the 46 recommendations made by the Bradley
review, some significant recommendations were that the Australian
Government:
- set a national target of at least 40 per cent of 25- to
34-year-olds having attained a qualification at bachelor level or
above by 2020
- set a national target that, by 2020, 20 per cent of higher
education enrolments at undergraduate level are people from low
socio-economic status backgrounds
- introduce a package of reforms to the student income support
system
- increase the total funding allocation for the Research
Infrastructure Block Grants program by about $300 million per year.
This represents an increase from about 20 cents to 50 cents in the
dollar for each dollar provided through competitive grants
- increase the value of Australian Postgraduate Awards to $25 000
per year and increase the length of support to four years, as
recommended by the National Innovation Review, to provide greater
incentives for high-achieving graduates to consider a research
career
- after further consideration of current problems with regional
provision, the Australian Government provide an additional $80
million per year from 2012 in funding for sustainable higher
education provision in regional areas to replace the existing
regional loading. This should include funding to develop innovative
local solutions through a range of flexible and collaborative
delivery arrangements in partnership with other providers such as
TAFE
- establish by 2010, after consultation with the states and
territories, a national regulatory body
- increase the base funding for teaching and learning in higher
education by 10 per cent from 2010
- maintain the future value of increased base funding for higher
education by an indexation formula that is based on 90 per cent of
the Labour Price Index (Professional) plus the Consumer Price Index
with weightings of 75 per cent and 25 per cent respectively
- introduce a demand-driven entitlement system for domestic
higher education students, in which recognised providers are free
to enrol as many eligible students as they wish in eligible higher
education courses and receive corresponding government subsidies
for those students
- quarantine 2.5 per cent of the total government funding for
teaching and learning for each provider to be allocated on the
basis of achievement against a set of institutional performance
targets which would be negotiated annually
- implement an approach to tuition fees for domestic
undergraduate students in which all providers are able to offer
courses on a full-fee basis where public subsidies are not received
for any students in that particular course
- establish a new Structural Adjustment Fund amounting to about
$400 million in funding over a four-year period from 2009 10 to
assist the sector to adapt to the reforms recommended in this
report
- negotiate with the states and territories to introduce a
tertiary entitlement funding model across higher education and
vocational education and training (VET) commencing with the upper
levels of VET (diplomas and advanced diplomas) and progressing to
the other levels as soon as practicable and
- negotiate with the states and territories to extend income
contingent loans to students enrolled in VET diplomas and advanced
diplomas.[3]
- The Minister for Education, Julia Gillard, responded in broad
terms to the review in March 2009 but the substantial response,
accompanied by significant structural change and policy
initiatives, was given in the 2009 10 Budget.[4] The Budget committed $5.7 billion
to higher education, innovation and research over four years. Less
than half of the additional funding ($2.2 billion) will provide
additional recurrent funding for university teaching, learning and
research.[5]
The policy reform is based on a number of key principles
including:
- the importance of quality university education to the community
and the individual
- broadening access to higher education (especially groups
traditionally under-represented) and
- basing access on merit not the ability to pay.
The Government has adopted two key targets recommended by the
Bradley review. First, a national target of at least 40 per cent of
25 to 34-year-olds having attained a qualification at bachelor
level or above by 2025 (Bradley recommended achieving the target by
2020). Second, that by 2020, 20 per cent of university enrolments
at undergraduate level are for people from low socio-economic
status (SES) backgrounds.
The Bill gives effect to budget measures that implement initial
reforms and increased funding to student places, revised indexation
arrangements, institutional performance targets, indirect costs of
research and a new quality and regulatory agency.[6] Full implementation of the reforms
and associated funding will occur in 2012.[7] The Bill appropriates funding for the
provisional reforms in 2010 and 2011.
On 4 June 2009, the Senate referred the Bill to the Senate
Standing Committee on Education, Employment and Workplace Relations
for report by 22 July 2009. The Selection of Bills Committee
requested that schedule 1, item 5 of the Bill (relating to
Commonwealth Scholarships) be examined specifically.[8] Details of the inquiry
are at the
Committee website.[9]
The higher education budget measures were widely welcomed by
universities particularly the Government s support for a majority
of the Bradley review s recommendations, the commitment to an
improved indexation rate, the move to full funding of research,
significant infrastructure announcements and the reform of student
income support.[10]
The measures relating to student income support changes which will
be implemented in amendments to the Social Security Act
1991 have drawn the most criticism from other sources, mainly
the Coalition, the Australian Greens, affected potential Youth
Allowance recipients and rural and regional interest groups.
However, some broader concerns have been raised: some regarding
funding commitments, and others related to the structural reform of
the sector. Criticisms centre on the Government s rejection of the
10 per cent increase in the base funding rate of student places
recommended by the Bradley review, the failure to fully fund the
reforms at the rates recommended by the review some estimate that
the funding commitment is as low as 30 per cent of the figure
recommended in the review and the delayed start of the full
increases to funding until 2012.[11]
The Bill:
- increases the appropriation for the Commonwealth Grants Scheme
(CGS) by $416.3 million for the years 2010 and 2011
- increases the appropriation for Other Grants by $398.5 million
for the years 2010, 2011 and 2012
- appropriates funding, to a maximum of $2067.3 million, for
Other Grants for 2013
- decreases the appropriation for Commonwealth Scholarships by
$355.8 million for the years 2010, 2011 and 2012 and
- appropriates funding, to a maximum of $275.1 million, for
Commonwealth Scholarships for 2013.
In relation to HELP, the Explanatory Memorandum states the
estimated financial impact over the period 2009 10 to 2012 13 is
minus $156.132 million.[12]
Schedule 1 deals with appropriations for
Commonwealth Grants, Other Grants and Commonwealth
Scholarships.
Subsection 30-5(1) of the Higher Education Support Act
2003 defines the maximum annual amounts payable to higher
education providers for the Commonwealth Grants Scheme (CGS). The
CGS provides funding for undergraduate and some non-research
postgraduate higher education places according to the funding
cluster in which a unit of study is classified.
Item 1 proposes repealing paragraphs
30-5(1)(f), (g) and (h) and substituting new paragraphs (f)
and (g) for the years 2010 and 2011. The new maximum
amounts appropriate an extra $416.3 million for the CGS.
The Government has accepted the Bradley review s recommendation
to introduce an uncapped student demand-driven system (sometimes
called a voucher system) for the funding of university
undergraduate places. This is a major policy change to the
allocation and funding of student places which to date have been
funded through agreements with universities on a set or capped
number of places. Over-enrolments have been penalised and
universities have resorted to uncapped overseas and domestic full
fee places to meet demand and provide revenue. The new system of
allocating student places is estimated to cost $490.6 million over
the next four years and provide an additional 50 000 student places
by 2013.[13] The
Government estimates $36.4 million will be needed in 2009 2010 and
$74.3 million in 2010 2011 to allow universities to over-enrol
student places by 10 per cent in anticipation of the
introduction of the new student demand-driven system of funding in
2012. Proposed paragraph 33-25(7)(b) in Schedule 3
of the Bill allows the adjustment of funding for the 10 per cent
over-enrolment.
Additional CGS amounts will fund new university performance
targets agreed to in compacts made between the Government and
individual universities. In 2011 transitional payments will be made
for agreeing to the first year of institutional targets but will be
paid in 2012. The Government states that unlike the previous
Teaching and Performance Fund (which will be abolished and the
funds redirected to the new compacts), the new performance funding
will not be distributed on the basis of relative performance to
allow all institutions to be rewarded for achieving improvements
.[14] Performance
payments of approximately 2.5 per cent of total government funding
for teaching and learning will be provided.[15]
A major concern of the higher education sector has been the
indexation formula used for teaching and research grants and
student payments. The present formula was introduced in 1997 and,
despite a review in 2005, has remained unchanged. Universities have
lobbied for a new index in which the salary component of the index
is changed from the present Safety Net Adjustment (SNA) which makes
up 75 per cent of the current index to the Labour Force Index
(Education), previously known as the Wage Cost Index
(Education).[16]
The Government has promised the Safety Net Adjustment index will be
replaced with a wage price index discounted by 10 per cent that is
comparable to the Labour Price Index (Professional) recommended by
the Bradley Review. An amendment to the Act will be required for
the new index to operate in 2012 when all programs funded under the
Act (including grants for teaching and learning and research) will
be indexed by a revised rate which will cost $578 million over four
years. The Government estimates that the new index will be around
1.8 percentage points higher than the existing index , will better
reflect professional salary movements and maintain the real value
of the Commonwealth s funding and student contributions .[17] In 2011 the increase
in indexation relating to non-research funding will be provided as
conditional funding tied to agreements covering the achievement of
institutional performance targets. Conditional funding in 2010-11
will be $58.3 million.[18]
Subsection 41-45(1) of the Act specifies the maximum annual
payments for Other Grants to support and enhance a range of higher
education functions including capital projects, research and
teaching. Grants are provided to promote productivity, quality,
equality of opportunity, collaborative reform and structural
reform.
Item 4 proposes amendments to the table of
payments to increase the maximum payments for Other Grants for
2010, 2011, 2012 by $398.5 million. It also appropriates funding of
$2067.3 million for 2013.
The additional funding will support a number of measures to
assist in the reform implementation. These measures include $202.1
million to establish the Structural Adjustment Fund, including $64
million redirected from the existing Diversity and Structural
Adjustment Fund. Structural adjustment grants will be authorised by
the amendment to the table of eligibility for grants under
proposed subsection 41-10(1) dealt with in
Schedule 4 item 2. Funding will be available to
institutions, both regional and metropolitan, to develop diverse
missions , consider their strategic direction and focus on
achieving long-term sustainability .[19] No further details are provided, but
the Government is encouraging collaborative efforts, including
those between universities and vocational education and training
providers, and through possible mergers. A feasibility study for a
possible merger of regional providers, Charles Sturt University and
Southern Cross University, will receive funding of $2 million.
Additional funding of $436.9 million over four years will be
targeted at supporting increased participation for low SES
students. The funds (calculated as a percentage of teaching and
learning grants) will reward universities that attract more
students from low SES backgrounds, that assist those students once
enrolled and to fund partnerships with schools and VET providers
that will encourage retention of low SES students in pre-tertiary
education. This is an important measure in the Government s aim to
boost participation of low SES students to 20 per cent of
enrolments by 2020.[20] However the bulk of the funds will be provided in 2011
12 and 2012 13. The appropriation for 2009 10 of $29.4 million has
been criticised as inadequate to significantly increase the number
of disadvantaged students.[21]
Subsection 41-10(1), items 7 and 8 of the Act, authorise grants
to support the research capability of universities and the training
of research students. A significant boost to research was announced
in the Budget with an additional $200 million to 2013 to fund
universities for the indirect costs of research, such as capital
and administrative costs.[22] The Government expects this initiative will take total
support provided to universities by the Australian Government to
meet the indirect costs of competitive research grants from about
20 cents in the competitive research dollar in 2009, to about 30
cents in 2011, and over time to approach 50 cents in the
competitive dollar .[23]
Funding of $52 million will aim to assist small and regional
universities build collaborative research networks and adapt to a
more performance-focused research environment.
Grants to support the training of research students are paid
through the Research Training Scheme (RTS). The RTS funds
Australian Postgraduate Awards (APAs) for doctoral and masters
students. The Government will increase the stipend of APAs from $20
427 in 2009 to $22 500 in 2010 at a cost of $51.7 million.[24]
Item 5 deals with the payments for Commonwealth
Scholarships. Proposed section 46-40 (table items 7 to
9) decreases the appropriation for Commonwealth
Scholarships by $355.8 million for the years 2010, 2011 and 2012
and appropriates funding, to a maximum of $275.1 million for 2013.
The amended payments implement Government budget decisions. The
first abolishes the Commonwealth Education Costs Scholarships
(CECS) and the Commonwealth Accommodation Scholarships (CAS).
Funding will be redirected to two new scholarships: an annual
Student Start-up Scholarship and a Relocation Scholarship. From
2010 the Student Start-up Scholarship will replace the current
Commonwealth Education Costs Scholarships (CECS), while existing
CECS recipients will be grandfathered . University students
receiving Youth Allowance or ABSTUDY who have to live away from the
family home for study will be assisted by a Relocation Scholarship.
It will replace the Commonwealth Accommodation Scholarship (CAS)
for new students, while existing CAS recipients will be
grandfathered .
The second budget decision moves the new scholarships which will
be awarded to all students receiving Youth Allowance and ABSTUDY
into the student assistance program. Appropriations for student
assistance are made under the Social Security Act
1991. Indigenous scholarships and grandfathered
Commonwealth Scholarships will continue to be funded from
appropriations made under section 46-40 of the Act with required
appropriations falling to $15.98 million in 2012 13.[25]
The amount the Commonwealth Government provides for each
Commonwealth supported place varies according to the funding
cluster in which a discipline is classified under section 30-15 of
the Act. Commonwealth contribution amounts for each cluster are
listed in section 33-10.
Proposed section 30-15 amends the funding
clusters by placing Education in its own cluster.
Proposed section 33-10 updates the Commonwealth
contribution amounts for each cluster. All are increased reflecting
increased indexation and the transfer of funding from the Workplace
Reform Program. Education will receive additional funding due to
the redirection of funding from grants made under the cost of
providing the practical component of teacher education which will
be abolished under proposed subsection 41-10(1)
dealt with in Schedule 4.
Maximum student contributions vary according to disciplines. The
maximum amounts students can be charged by their university is
specified in subsection 93-10(1) of the Act. Item
1 proposes a new subsection 93-10(1)
which will increase the annual maximum student contributions for
all disciplines. Annual contributions for Nursing and Education
will increase from $4162 to $5310 a greater percentage increase
than that of other disciplines as they are moved from the current
national priority rate to Band 1. The increases will apply to
commencing students in 2010. Existing students will continue under
existing arrangements dealt with under proposed amendments in
Item 3.
The increased student contributions will provide additional
funding to the providers of teaching and nursing courses. However
the cost of students deferring their contributions through the
Higher Education Loan Program (HELP) is met by the Commonwealth
Government which expects the impact on the fiscal balance to be
$32.9 million over four years.[26]
The Minister has announced that the HECS-HELP Guidelines made
under section 238-10 of the Act will be amended to reduce HECS-HELP
repayments for graduates of teaching and nursing degrees by $1536
for each year in which graduates go on to work as teachers and
nurses, up to a maximum of five years. The Government expects this
measure will cost $82.6 million over four years. [27]
OS-HELP is a loan scheme to assist Australian undergraduate
students to undertake some of their course of study overseas. A
loan fee of 20 per cent is applied to each OS-HELP loan and the
OS-HELP debt is added to the student s accumulated HELP debt.
Proposed subsection 137-15(2) will remove the 20
per cent loan fee. The Government estimates that a student who
takes out the maximum loan of $5523 will save around $1,100 and has
allocated $17 million to this measure.[28] The Government expects that removing
the loan fee will encourage more Australian students to undertake
overseas study and increase take up of OS-HELP loans .[29]
Schedule 7 deals with the method of indexation
of maximum student contributions for 2011. The amendments will
apply the revised indexation arrangements for funding (to be
introduced in 2012) to maximum student contribution amounts in
2011.
The Bill acts as a significant first step in the implementation
of the Government s reform agenda for Australian higher education.
It appropriates additional funding to meet a commitment made in
opposition to address the decline in public expenditure on higher
education. The degree to which this decline is arrested will not be
evident until 2012 when the significant input from the new
indexation formula will occur. However the funding appropriated in
the Bill should make some change in the percentage of university
revenue derived from Commonwealth Grants which in 2007 was 41 per
cent and reduce dependency on the cross-subsidisation from overseas
enrolments.
The reform to the allocation of student places the student
demand driven system will also commence in 2012 but the measure to
allow and fund over-enrolments in 2010 and 2011 will provide an
indication of the increased demand for places and the impact on
individual universities. The use of the new structural adjustment
funding will assist universities to adapt to the impacts of the new
system and could result in a more diversified system emerging by
2012.
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library on (02) 6277 2709.
Coral Dow
23 June 2009
Bills Digest Service
Parliamentary Library
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