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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
Main Provisions
Endnotes
Contact Officer and Copyright Details

Passage History

Higher Education Funding Amendment Bill 1998

Date Introduced: 11 November 1998

House: House of Representatives

Portfolio: Education, Training and Youth Affairs

Commencement: On Royal Assent

Purpose

To make amendments to the Higher Education Funding Act 1988

• to vary the maximum amounts of grant that can be made to higher education institutions under a range of grant categories,
• to enable the Minister to determine the maximum amounts payable by the Commonwealth to promote Australian education and training services overseas, and
• to provide triennial operating grants to the University of Notre Dame Australia.

Background

Background to this legislation

This Bill replaces two bills which lapsed when the election was called on 31 August 1998.

1. The Higher Education Legislation Amendment Bill 1997 was introduced into the House of Representatives on 26 November 1997. It was debated and passed by the House of Representatives on 9 March 1998. On 12 March 1998 it was introduced into the Senate but was not further debated. The purpose of the Bill was to make amendments to the Higher Education Funding Act 1988 :

The Bill also proposed to make minor amendments to the Maritime College Act 1978 for the sake of consistency with the student fee regime prevailing at other higher education institutions.(1)

Only the first purpose, that of providing funding to higher education institutions, is picked up by the current Bill.

2. The Higher Education Legislation Amendment Bill (No.1) 1998 was introduced into the House of Representatives on 1 July 1998. It was not debated. Its purpose was the same as the current Bill.

In addition, it proposed to amend the Employment, Education and Training Act 1988 and the Higher Education Funding Act 1988 to reflect the name change of the James Cook University. These proposed amendments are not picked up by the current Bill.(2)

Background to higher education funding

The higher education system is funded on a calendar year basis under the provisions of the Higher Education Funding Act 1988. Funding is provided on a rolling triennium basis, which means that the level of funding is known for the next three years. This provides greater certainty to institutions and enables better forward planning. Although some see triennial funding as a strength of the current system, others argue that in future it is likely to act more to insulate universities from student demand and the need to be innovative and competitive, than to protect the quality of higher education.(3)

Cost supplementation is another feature of current education funding, whereby grants are adjusted to cover increased costs. This Bill appropriates funds for 1999 and 2000, and provides supplementation for price movements and additional superannuation expenses incurred by institutions in 1998.

The Commonwealth funds institutions for a maximum number of student places. The level of Commonwealth funding is negotiated between the universities and the Department of Education, Training and Youth Affairs (DETYA). This framework for financing higher education was criticised in the Final Report of the West Committee's Review of Higher Education Financing and Policy which was published in April 1998. Under the heading 'The Way Forward' the Committee stated that:

• responds to students' preferences about study options and the location, content and mode of delivery of education, and provides high quality learning experiences which meet the particular needs of individual learners;
• protects students and taxpayers and is accountable to students and taxpayers for the investment that they make in higher education;
• facilitates effective investment by the Government in research and research training; and
• enables Australian universities to become major players in a world-class education industry that can play a direct role in driving the growth of our economy.

The Committee recommended a funding model where the number of students for which a university receives funding would be determined directly by student choice, rather than by negotiations between universities and DETYA. In public comment which followed the release of the Committee's Discussion Paper the model of student centred funding was referred to as 'vouchers'.

Although the Government has yet to make its formal response to the West Committee's report, the then Minister for Employment, Education, Training and Youth Affairs, Hon Dr David Kemp MP, said in a Press release dated 12 November 1997 that 'the Federal Government had no intention of introducing a voucher system for universities'.(5)

Current levels of funding

The major decisions for funding higher education for the current three year period were announced in the 1996-97 Budget. This reduced the forward estimates for higher education operating grants by 1 per cent in 1997, by a further 3 per cent in 1998 and a further 1 per cent in each of 1999 and 2000. The maximum grants for general teaching and research purposes will decline in 1999 and 2000 as follows:

 

 

1995	3,652 million
1996	3,803.5 million
1997	3,855.5 million
1998	3,858 million
1999	3,266.5 million
2000	3,124.5 million

In addition to operating grants, the total revenue available to higher education institutions includes students' contributions through the Higher Education Contribution Scheme (HECS), revenue from fee-paying students, capital grants, and funds from research and development, investment earnings, donations and bequests. In 1997, the total revenue available to higher education institutions from all sources was estimated to be $8.4 billion. This is forecast to increase to $8.6 billion in 2000.(6) Higher education programs are described in detail in the Department of Employment, Education, Training and Youth Affairs publication, Higher Education Funding Report for the 1998-2000 Triennium, published in December 1997.

Overseas students

The Commonwealth has been encouraging universities to develop full fee services for overseas students since 1985, when a full fee program was introduced alongside a limited program for part-subsidised overseas students. The former Government's view was that overseas student services should be treated as an education export, except where scholarships would advance government aid or international objectives.(7)

The total number of overseas students in Australia has grown from around 21,000 in 1988 to 140,000 in 1996. In 1996 it was estimated that international students contributed over $3 billion to the Australian economy, an increase of nearly 50 per cent in just two years.(8) The Government estimates that the total number of overseas students studying in Australia is expected to rise from 151,464 in 1997 to 181,000 in 2001 - a 19.5% increase. This is expected to increase total revenue from overseas students by 39%, from $3.22 billion in 1997 to $4.49 billion in 2001. (9)

At the end of August 1998 there were 85,900 overseas students studying at Australian universities. This was an increase of 13.7% on the previous year, despite the Asian economic crisis. Overseas fee-paying students now comprise about 10% of Australian university enrolments.(10) In an emerging trend, almost 30% of Australia's overseas students are studying by distance education or at overseas campuses linked to Australian universities.(11)

Australian Education International

The Australian International Education Foundation (AIEF) was established in 1994 as a government-industry partnership. Its role was, in part:

• to establish a broad range of Australian international education, training and research activities, and
• to develop a marketing strategy to enhance the perception of Australia as a major contributor to and provider of high quality education, training and research internationally.

The AIEF was financed through a Trust Fund. Contributions to the Trust Fund were initially on a 2:1 government to industry basis. This was reduced in the 1996-97 Budget to 1:1 for the two years 1996-7 and 1997-8, and the Government allocated $3 million for each of the two years. The Government also foreshadowed withdrawing all funding from the program by 2000-01.(12) The universities were dissatisfied with the AIEF and in 1997 most did not pay their full subscriptions to the Trust Fund.(13)

In 1996 the Allen Consulting Group was commissioned by the then Department of Employment, Education, Training and Youth Affairs to review the role of the AIEF and to provide an assessment of the appropriate roles for government and the education and training industry in facilitating further growth in education and training exports. The review was completed in 1997.(14)

On 11 May 1998, the then Minister for Employment, Education, Training and Youth Affairs, Hon Dr David Kemp MP, announced that the Government would provide $21 million over the next four years for an international marketing campaign to promote Australia's education and training services overseas.(15) The amounts in this Bill total $7.367 million for three years 1998-2000. According to press reports the $21 million does not represent net extra spending - it has been taken from other higher education areas, including the Australian National Training Authority national project funds.(16)

Dr Kemp also announced that the marketing campaign would focus on traditional Asian markets as well as relatively untapped student markets such as India, China, Europe and North and South America. It would help to minimise the impact of the Asian economic crisis on the number of overseas students studying in Australia.(17)

At the same time Dr Kemp said that the AEIF would be renamed Australian Education International (AEI). It would be more fully integrated with the operations of the Department of Employment, Education, Training and Youth Affairs and wholly funded by government. Its role would be to act as a link between the overseas promotion of Australian education and training and the broader Government objectives for foreign affairs and trade.(18)

Funding of the University of Notre Dame Australia

The University of Notre Dame Australia is a private institution based at Fremantle in Western Australia. In 1997 it had around 1000 students, with a future enrolment target of 2500 students. All students attending the University pay tuition fees. For Australian students enrolled in undergraduate and graduate courses in all Colleges except Law, the fee is around $3,360 per semester, while the average cost of the law course is approximately $4,900 per semester. Students attending the institution do not qualify for the Higher Education Contribution Scheme (HECS) although the institution provides access to a private loan scheme to assist students financially.

In 1994 the university opened a campus in Broome which caters for students from the Kimberley Region. The campus is on five hectares of land provided to Notre Dame by the Bishop of Broome and offers a selected range of certificate and diploma level courses as well as degree courses through the College of Arts, Business, Education and Law. Students are encouraged to transfer between Broome and the main Fremantle campuses for periods of one or more semesters. There are around 150 students on the Broome campus, although only half are doing higher education courses.

The Kimberley Centre at the Broome campus has received direct financial support from both Commonwealth and State governments for its aboriginal education programs. In 1997 the University of Notre Dame Australia received $200 000 under the national priority projects program provided for by the Higher Education Funding Act.

As it was originally presented, the Bill would have included the University of Notre Dame Australia in Table B of subsection 4(1) of the Act. However, on 11 November 1998 the Parliamentary Secretary to the Minister for Education, Training and Youth Affairs, Hon. Trish Worth MP, moved an amendment that would have the effect of shifting the institution to Table A of subsection 4(1). The amendment was said to be required because of a drafting error.

The institutions listed in Table A are able to receive operating grants under section 15 of the Act. These grants are provided on a triennial basis and include components for capital projects and research activity. Institutions in Table B receive limited operating grants under section 16 of the Act. Generally, these grants are provided on an annual basis for teaching activities, although expenditure on equipment and minor building works is permitted. This distinction had its genesis in the establishment of the Unified National System (UNS) in 1989: institutions which met the criteria for membership of the UNS were listed in Table A, while those which did not meet these criteria (generally because of their small size or specialised courses) were included in Table B. These criteria have since been relaxed and a number of institutions (Batchelor College, the Australian Maritime College) have been moved from the B to the A list. Only two small private institutions (Avondale College and Marcus Oldham College) remain on the B list. All listed institutions are required to report statistical data to the Department and this is published in the annual Selected Higher Education Statistics.

The inclusion of Notre Dame in Table A may be seen as a shift in policy. All other institutions in this category are public institutions which must provide HECS subsidised places to Australian students and which can only charge tuition fees in accordance with sections 13 and 18 of the Act. Other private institutions are either on the B list (and thus receive limited operating grants) or are not listed at all (eg. Bond University). The rationale for maintaining two lists (and two grant categories) now seems to have diminished. It would appear inconsistent to provide Notre Dame, but not Avondale College, with access to full operating grants. Avondale is a private institution operated by the Seventh Day Adventist Church. Avondale education students qualify for HECS and it is larger and no more specialised than several other A listed institutions (Batchelor College and the Australian Maritime College).

Consistency would also seem to demand a reassessment of the status of the Sunshine Coast University College, a public institution similar in size to Notre Dame. Although the College is not regarded as a separate institution by the Commonwealth, it was established as such under Queensland legislation. The Sunshine Coast University College Act 1994 establishes the College as a body with its own governing Council, Chancellor and Vice-Chancellor. The Act also provides for the College to be affiliated with the Queensland University of Technology for the purpose of meeting Commonwealth requirements for access to funds under the Unified National System and to negotiate with the Commonwealth about the College's educational profile and funding (Section 37[1]).

In his second reading speech, the Minister for Education, Training and Youth Affairs stated that this Bill confirms the overall funding levels detailed in the Higher Education Funding Report for the 1998-2000 Triennium. However, that report contains no details of Notre Dame's operating grants. It is not yet known whether these funds will be obtained by transferring resources from existing programs.

Main Provisions

Amendments to the Higher Education Funding Act 1988

Item 1 adds the name of the University of Notre Dame Australia to the list of higher education institutions covered by the Higher Education Funding Act 1988. The list is in two parts. Table A lists the institutions that receive triennial operating grants. Table B lists the institutions that receive grants for limited operating purposes only. Generally, grants to institutions listed in Table B are provided on an annual basis for teaching activities, although expenditure on equipment and minor building purposes is permitted. For more detail on the distinction between Tables A and B, refer above to the Background section under 'Funding of the University of Notre Dame Australia' (page 6). For both Tables A and B, the Minister has the power to determine the amount of the grant to each institution, taking into account the educational profile of the institution.

The original Bill proposed including the University of Notre Dame Australia in Table B. However, an amendment moved on behalf of the Government on 11 November 1998 will have the effect of placing the University in Table A.

Item 2 changes the heading of Chapter 2 of the Act from 'States Grants for Higher Education Assistance' to 'Grants for Higher Education Assistance'.

Item 3 amends Section 17 of the Act which sets the maximum level of funding grants payable to higher education institutions for operating purposes in a given year. Operating purposes is defined in section 3 and includes the general teaching purposes and general research purposes of the institution, the provision of courses of continuing education, and the purchase of equipment and minor building projects associated with general teaching and research purposes. The proposed amendment reduces the maximum level of grants payable in 1998 by $2 million from $3,860 million to $3,858 million, and legislates amounts of $3,266.5 million for 1999 and $3,124.5 million in 2000.

Item 4 amends the section of the Principal Act that deals with the conditions applying to operating grants and grants for limited operating purposes. The effect of item 4 is to exempt the University of Notre Dame Australia from the condition that it does not charge any student fees. This will ensure that full fee paying students may still enrol at the University of Notre Dame Australia.

Item 5 amends Section 20 of the Act which provides for grants to institutions for superannuation expenses. The amendment increases the maximum amount payable for 1998 by over $5 million from $103.6 million to $108.7 million, and inserts amounts of $112.7 million in 1999 and $116.3 million in 2000.

Item 6 deals with grants to open learning institutions and ceilings on those grants. A maximum amount of $221,000 is proposed for each of 1999 and 2000, compared with $218,000 in 1998.

Item 7 amends Section 23C of the Act which operates to limit the amount payable for an aggregated group of grants. The section caps the total cost of grants made under the following categories: national priority, innovation, promotion of equality of opportunity, special research assistance, advanced engineering centres, and co-operative multimedia centres. An additional $6 million is available in 1998, up from $475 million. A consolidated amount of $468 million is prescribed in 1999 and $418 million in 2000.

Item 8 amends Section 24 of the Act which provides for grants payable to teaching hospitals attached to higher education institutions. The proposed amendment increases by $1,000 the maximum amount payable for the year 1998, and prescribes an amount of almost $5 million for each of the years 1999 and 2000.

Item 9 amends Section 27A of the Act which provides for grants for special capital projects. The amendment increases the maximum amount available in 1998 by $9,000 and prescribes an amount approaching $39 million for each of 1999 and 2000.

Item 10 deals with expenditure on the international marketing and promotion of education and training services provided by Australian institutions. The proposed amendment is inserted in Section 27 which enables the Minister to issue guidelines relating to expenditure on special purpose projects. The proposed new section 27D allows the Minister to determine the maximum amount payable by the Commonwealth for the international promotion of Australian education and training services. In 1998 this amount is to be $1.016 million, increasing to $2.468 million in 1999 and to $3.883 million in 2000.

Item 11 exempts fee paying students at the University of Notre Dame Australia from paying HECS.

The amendment proposed by Item 12 has the effect of providing for the Minister to table in each House of Parliament, determinations of the maximum amounts payable by the Commonwealth for international promotion of Australian education and training services.

Endnotes

 

2. For more detail on the provisions refer to Bills Digest No. 128 1997-98 Higher Education Legislation Amendment Bill 1997 30 January 1998.

3. For more detail on the provisions refer to Bills Digest No. 9 1998-99 Higher Education Legislation Amendment Bill (No.1) 1998 20 August 1998.

4. Learning for life: final report, Review of Higher Education Financing and Policy, April 1998, Dept of Employment, Education, Training and Youth Affairs, Canberra, 1998, 114.

5. Ibid, 21-22.

6. 'Education and training vital for our future', Dr David Kemp MP, Press release K76/97, 12 November 1997.

7. Higher Education Funding Report for the 1998-2000 Triennium, Department of Employment, Education, Training and Youth Affairs, 1997, 1.

8. The Australian International Education Foundation: Review of the government-industry partnership, consultancy report to the Department of Employment, Education, Training and Youth Affairs by the Allen Consulting Group Pty Ltd, March 1997, 12.

9. Ibid, i.

10. '$1.2 billion growth in education export industry', Dr David Kemp MP, Press release K33/98, 11 May 1998.

11. 'Overseas students defy crisis', Australian, 4 November 1998, 2.

12. 'Australian universities unaffected by crisis in Asia', Dorothy Illing, Age, 5 November 1998, A4.

13. Portfolio Budget Statements 1996-97, Department of Employment, Education, Training and Youth Affairs, Program BM75, (Budget Related Paper no. 1.4), 157.

14. 'Reduced AIEF gets green light', Australian, 21 January 1998, 37.

15. The Australian International Education Foundation: Review of the government-industry partnership, op cit.

16. '$1.2 billion growth in education export industry', op cit.

17. 'Govt backs foreign student boom', Michelle Grattan, Australian Financial Review, 12 May 1998, 8. and 'Reduced AIEF gets green light', Dorothy Illing, Australian, 21 January 1998, 37.

18. '$1.2 billion growth in education export industry', op cit, 1.

19. Ibid, 2-5.

Contact Officer and Copyright Details

Rosemary Bell and Kim Jackson
17 November 1998
Bills Digest Service
Information and Research Services

This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document.

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ISSN 1328-8091
© Commonwealth of Australia 1998

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Published by the Department of the Parliamentary Library, 1998.

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