Budget Review 2020–21 Index
Dr Hazel Ferguson
Funding trends
According to Budget
Strategy and Outlook Budget Paper No. 1: 2020–21 (p. 6-17) higher
education expenditure is expected to increase by 17.2 per cent in real terms
from 2019–20 to 2020–21, then decrease in real terms from 2020–21. Parliamentary
Library analysis (Figure 1 below) shows that by 2023–24, real higher education
funding (in June 2020 dollars) is projected to return to approximately the same
level it was in 2010–11.
This analysis includes higher education course subsidies for
domestic students through the Commonwealth
Grant Scheme (CGS), Research Block Grants
(RBG) to support higher education research, and a range of smaller grants for
other purposes such as equity
funding. It does not include research funding not administered by the
Department of Education, Skills and Employment (DESE), such as Australian
Research Council (ARC) competitive grants, or DESE expenditure on research
capacity.
The 2020–21 funding increase primarily reflects temporary
additional research funding in 2020–21, which is being provided in response to
financial challenges caused by the COVID-19 pandemic. The cessation of transitional
funding provided as part of changes to the CGS introduced in the Higher
Education Support Amendment (Job-ready Graduates and Supporting Regional and
Remote Students) Bill 2020 (the JRG Bill), also contributes to declining
funding after 2023.
Figure 1: Australian Government estimated expenditure on higher education,
2003–04 to 2023–24 ($ million)
Sources: Parliamentary
Library estimates based on Australian Government, Budget strategy and outlook: budget paper
no. 1: 2020–21; Australian
Government, Final budget outcome, various years.
Note: Real funding
has been calculated by the Parliamentary Library by deflating the nominal
expenditure figure by the June quarter CPI, this methodology may differ to that
presented in the Budget papers. Figures are in 2019–20
dollars, the last available year of actual figures.
Research funding
Background—questions about the
sustainability of university research funding
The Australian Government
operates a ‘dual funding system’ for university research, made up of:
While this approach is generally supported, funding levels
have long been debated. For example, the 2018 Inquiry
into Funding Australia’s Research by the House Standing Committee on
Education, Employment and Training reported
(among other things) concerns about what some see as a long-running problem
of insufficient funding for the indirect costs of government-funded research. Attempts
to improve funding levels, including a new block grant component announced
in the 2009–10 Budget in response to a recommendation of the 2008 Review of Australian Higher Education (p.
83), have not led to sustained funding growth in real terms, according to data
compiled in the Science, Research and Innovation Budget Tables.
Universities ordinarily make up any gap between Australian
Government research funding and their overall research investment predominantly
from general university funds. In 2018, 56.1 per cent of all higher education
research and experimental development expenditure (or $6.8 billion of a total
$12.2 billion) was from this source.
Overseas student fees make up a large part of general
university funds, and have been estimated to account
for around 27 per cent of total university research expenditure, or about
$3.3 billion, based on 2018 figures. In 2020, however, border closures due to
COVID-19 interrupted global student mobility. Modelling
from the Melbourne Centre for the Study of Higher Education (p. 1) suggests
that as a consequence, universities face a shortfall of discretionary income
available for research of $6.4 to $7.6 billion from 2020 to 2024,
resulting in a possible reduction of the university research workforce by
11 per cent.
Australian Government funding for teaching domestic students
is also used to partly subsidise university research. As outlined in the 2011 Higher
Education Base Funding Review: Final Report (p. 2), this has
historically been regarded as an important mechanism to provide universities
with ‘a base capacity to undertake research, in appropriately resourced
facilities’. The latest
estimates (p. xiii) show universities spend, on average, approximately 10
per cent of teaching funding on non-teaching functions (including, but not
limited to, research). The JRG Bill, which passed the Senate on 8 October 2020,
seeks to change this arrangement by reducing average per-student funding for
teaching and aligning funding more closely to average teaching costs.
At the same time, the Higher
Education Legislation Amendment (Provider Category Standards and Other
Measures) Bill 2020 also seeks to introduce a framework to impose research
quality requirements as a condition of university registration.
Budget research package
The centrepiece of the 2020–21 Budget for higher education
is the anticipated
university research investment, outlined in the JobMaker Plan—Research
Package in Budget
Measures Budget Paper No. 2: 2020–21 (p. 79) ‘to safeguard Australia’s
research sector against the impact of the COVID-19 pandemic’.
Additional funding through the
Research Support Program in 2020–21
The largest component of the research package is a one-off
$1.0 billion increase in RBG funding through the RSP in 2020–21, slightly more
than doubling estimated RSP expenditure for the year, as shown in Table 1 below.
The RTP is not affected by this measure. Recipient institutions are responsible
for determining which projects, researchers, equipment and infrastructure to
support with RSP
funding.
Table 1: Research Block Grants,
estimated expenses, 2019–20 to 2023–24
| $ million |
2019–20
|
2020–21
|
2021–22
|
2022–23
|
2023–24
|
| RSP |
902.1 |
1 918.3 |
926.5 |
929.3 |
938.1 |
| RTP |
1 036.3 |
1
055.0 |
1 064.4 |
1 067.6 |
1 077.7 |
Source: Australian
Government, Portfolio budget statements 2020–21: budget related
paper no. 1.4: Education, Skills and Employment Portfolio, p. 57.
RBG
funding is distributed between all public and private universities. However,
as shown in Table 2 below, RBG allocations have historically skewed heavily
towards the research-intensive Group of Eight
(Go8) universities: the Australian National University; University of
Adelaide; University of Melbourne; Monash University; University of Queensland;
University of Sydney; University of New South Wales; and University of Western
Australia.
This is largely due to the performance-based
funding methodology, which rewards past success and makes it challenging
for less-successful universities to build capacity. In recent years, a ‘RSP
safety net’ has also maintained stability in allocations by guaranteeing that
no university receives less than 95 per cent of its funding for the
prior year. The DESE RSP webpage
indicates that the safety net will not be applied to the additional RSP funding
announced in the Budget.
Table 2: Research Block Grant
allocations by university affiliation, 2016–20
| $ million |
2016 |
2017 |
2018 |
2019 |
2020 |
| Go8 |
1 145.7 |
1 194.8 |
1 212.4 |
1 207.8 |
1 228.4 |
| Go8 % of total |
63.1 |
63.2 |
63.1 |
62.9 |
62.8 |
| Innovative Research Universities (IRU) |
171.7 |
178.4 |
182.0 |
183.0 |
184.2 |
| IRU % of total |
9.5 |
9.4 |
9.5 |
9.5 |
9.4 |
| Australian Technology Network (ATN) |
136.4 |
142.8 |
144.5 |
146.4 |
151.0 |
| ATN % of total |
7.5 |
7.6 |
7.5 |
7.6 |
7.7 |
| Regional Universities Network (RUN) |
56.4 |
57.1 |
57.9 |
58.8 |
61.0 |
| RUN % of total |
3.1 |
3.0 |
3.0 |
3.1 |
3.1 |
| 16 non-aligned universities |
304.3 |
317.8 |
324.3 |
325.1 |
331.1 |
| Non-aligned % of total |
16.8 |
16.8 |
16.9 |
16.9 |
16.9 |
| Grand total |
1 814.4 |
1 890.8 |
1 921.1 |
1 921.1 |
1 955.7 |
Source: DESE, RBG
allocations time series, last
modified 18 December 2019 and Parliamentary Library estimates.
Other measures
The research package also contains a number of relatively
smaller measures:
- $20.0 million over four years from 2020–21 for the University of
Adelaide to establish a Centre for Augmented Reasoning
- $61.1 million over three years from 2020–21, for new research
infrastructure investments, as part of the 2020
Research Infrastructure Investment Plan, to continue implementation of the
2016 National
Collaborative Research Infrastructure Strategy
- $41.6 million over four years from 2020–21 for a Strategic
University Reform Fund (SURF) for university industry partnerships and
-
$5.8 million in 2020–21 for DESE to scope possibilities for a University
Research Commercialisation Scheme (URCS).
According
to DESE, both the SURF and the possible URCS will aim to improve university
to business collaboration. This is part of a history of efforts to address
Australia’s level of business funding of R&D performed by higher education,
which is consistently below
the OECD average. For example, the 2015 National
Innovation and Science Agenda included changes to the RBG funding
calculations (implemented from 2017) in response to the 2015 Review of Research Policy
and Funding Arrangements (pp. 16–26) recommendation that the block
grants provide more incentive for engagement with businesses and other ‘end
users’. Despite this, larger scale collaboration incentives for business, such
as the proposed collaboration premium for the
R&D tax incentive, have not been included in the Budget. The R&D
tax incentive is discussed in detail elsewhere in this Budget Review.
Learning and teaching funding
Commonwealth supported places
Significant changes to higher education funding for teaching
were announced in the Job Ready
Graduates Package (JRG Package) in June 2020, and included in the July 2020
Economic
and Fiscal Update (pp. ). The Budget does not substantially alter
these arrangements.
As discussed in the Parliamentary Library’s Bills
Digest for the JRG Bill, the JRG Package aims to provide a means to
increase the number of Commonwealth
supported places (CSPs) funded through CGS. However, some policy experts,
such as Andrew
Norton (p. 2) and Mark
Warburton (pp. 2–4), have expressed doubts about the prospect of additional
places being provided by these changes in the short term.
Additional places have been announced in the Budget as outlined
in Budget
Paper No. 2 (pp. 77–8):
- Funding of $298.5 million over four years from 2020–21 is
provided for 12,000 additional CSPs. However, these will be limited to students
studying in ‘national priority areas’. Budget
Paper No. 1 (p. 1-24) identifies these as undergraduate places,
with study areas to be ‘prioritised according to labour market need, skills
gaps, industry engagement and expected student demand’. Information on the DESE Budget webpage suggests
these places could be provided as part of the JRG
Package investment in national priorities, which will see the additional
CSPs allocated through a competitive application process.
- Short course funding, originally announced as part of the April
2020 COVID-19
Higher Education Relief Package, will also be expanded, with $251.8 million
over two years from 2020–21 provided for 50,000 more short course places. Budget
Paper No. 1 (p. 1-24) says that these will be provided online, ‘in
areas such as teaching, health, science, information technology and agriculture
and will provide faster training pathways and alternative study options for
workers looking to retrain or upskill’.
However, as shown in Table 3 below, CGS funding is projected
to fall below its 2019–20 level in 2023–24, once the transitional CGS funding
arrangements in the JRG Package conclude at the end of 2023.
Table 3: Commonwealth Grant Scheme,
estimated expenses, 2019–20 to 2023–24
| $ million |
2019–20
|
2020–21
|
2021–22
|
2022–23
|
2023–24
|
| CGS |
7
137.1 |
7
545.3 |
7
531.0 |
7
208.7 |
7
117.9 |
Source: Australian
Government, Portfolio budget statements 2020–21: budget related
paper no. 1.4: Education, Skills and Employment Portfolio, p. 44.
Student mobility
Funding of $2.0 million over four years from 2020–21 has
also been provided to support short-term student exchanges (once borders
re-open) between universities in Australia and 16 countries in Asia (Budget
Paper No. 2, p. 76).
Stakeholder response and concluding
comments
There have been major upheavals in Australian higher
education in 2020, largely as a consequence of COVID-19. This Budget goes some
way to addressing the most urgent issues, such as short-term research funding shortfalls
and demand for CSPs. Key sector interest groups such as Universities
Australia (UA), the Go8,
and the IRU
have welcomed the additional research funding, while UA and the ATN
are supportive of the additional subsidised places.
Budget
Paper No. 1 (p. 2-6) indicates that this Budget assumes a gradual
return of international students ‘through the latter part of 2021’. If borne
out, this may improve the sector’s stability. However, many issues remain
unresolved, not least the longer-term sustainability of research funding, the
possible effects of the JRG Package, and the exact shape and size of
international education in coming years.
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