Author: Andrew Norton

How profitable is university teaching?

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Last month the government released the latest teaching and scholarship cost data, which is for 2018. The bachelor degree data by field of education is here, and Deloitte Access Economics also provides a detailed report. The Deloitte report looks at costs compared to discipline-level funding rates, but does not aggregate these up to analyse teaching’s contribution to sector finances. This post tries to do that.

As Deloitte’s report notes, teaching cost numbers should be used with some caution. Universities are multi-purpose institutions, carrying out teaching, research, community engagement and other activities. Staff and facilities are often not dedicated exclusively to a single purpose, and so costs need to be attributed to different activities. University accounting systems differ in their design and their ability to allocate costs in a detailed way.

Because of joint production, any ‘profits’ on teaching are not necessarily cash left over that universities can decide how to use. The money may already be spent on the research time of staff employed on a teaching and research basis, or in the capital and running costs of university buildings used for teaching and research.

With these caveats, across the sector Deloitte estimate that 52 per cent of university expenditure is attributable to teaching and scholarship. Based on the university finance report for 2018, that means Table A universities spent about $16.7 billion on teaching in 2018.Read More »

Should ‘undergraduate certificates’ be added permanently to the AQF?

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As of this morning eight universities are offering 43 ‘undergraduate certificates’ in the government’s university short courses program. Last week I outlined the then multiple legal and funding difficulties of ‘undergraduate certificates’.

But as I was writing that blog post a band aid legal fix was being applied. Undergraduate certificates have been temporarily added to the Australian Qualifications Framework. They can be awarded between this month and December 2021. This gets universities, and the Department, which otherwise lacked legal authority to pay Commonwealth Grant Scheme or HELP money to universities, off the legal hook.

Apart from highlighting AQF governance weaknesses  – it is just an agreement between education ministers – this leaves the question of what happens to undergraduate certificates after December 2021.

The links between short courses and qualifications

In answering this question we are not starting with a blank sheet of paper. The AQF recently had a major review, which reported in October last year. The review was sympathetic, as I am in general, to helping students build towards a credential. Students don’t necessarily want or need a formal qualification, but where they do we should, where we can do so efficiently with low integrity risks, help them achieve their goals incrementally and cost effectively.Read More »

University JobKeeper hopes dashed again

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A week ago, when I last reported on the saga that is university eligibility for JobKeeper, the government had just announced that its grants would be counted in university revenue, making it harder for universities to get the required 30 or 50 per cent (depending on their size) drop in their income.

Despite this, I thought that some universities might still be eligible. The University of Sydney believed that it was. This was because while no university is likely to be down 30 or 50 per cent on its annual revenue, the timing of when international students pay their fees could mean that, in certain months, the cash flow reductions were that large.

The amended JobKeeper rules dash that hope. While other organisations can calculate their revenue losses over a monthly or quarterly period, for universities the relevant period will be the six months starting 1 January 2020. Over a six-month time period, the fortnightly payments of Commonwealth grants are likely to push university revenue losses back below 30 or 50 per cent. Read More »

The legal problems of ‘undergraduate certificates’

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Update 4/5/20: It seems that State education ministers have agreed to temporarily putting ‘undergraduate certificates’ on the AQF.

Update 5/5/20: My take on whether ‘undergraduate certificates’ should stay on the AQF.

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The COVID-19 higher education ‘short courses’ – four subjects at discount student contributions – are now appearing on CourseSeeker. As of this morning, there are 64 courses from eleven universities.

Most of them are graduate certificate courses. While letting the minister announce lower student contributions sets a bad precedent, these courses are not otherwise problematic. A graduate certificate is a credential listed in both the funding legislation and the Australian Qualifications Framework.  The university can legally receive Commonwealth Grant Scheme payments and the student is eligible for HECS-HELP.

The same cannot confidently be said for the other short courses. Although the minister’s early terminology of a ‘diploma certificate’ is not used, as of this morning there are 17 ‘undergraduate certificates’ (such as an Undergraduate Certificate in Information and Communication Technology) from three universities and a Professional Certificate in Aged Care from a fourth institution. Read More »

Some universities might still get JobKeeper, despite a planned second change of the rules to stop them being eligible

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Update 2/5/20: The government has further changed the rules so that university income must be assessed over the six months from 1 January 2020.

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When I first wrote about universities and JobKeeper, at the end of March, I concluded that although they were included they were unlikely to meet the required revenue falls. Especially for the universities with $1 billion plus annual revenue, the required 50 per cent fall in revenue seemed like a financial disaster beyond what COVID-19 issues could trigger.

Since then, the universities and JobKeeper story has had many twists and turns. In early April, universities briefly hoped that they would only have to meet the 15 per cent decline in revenue required of charities (they are educational charities). But the JobKeeper legislative instrument specifically excludes institutions listed in Tables A and B of the Higher Education Support Act 2003, which cover all public and private universities.

This flips the normal funding biases of higher education. Generally, educational organisations that were publicly-funded before 1989 have privileged access to government subsidies. Now, for a brief time, the educational charities that are not in the pre-1989 group have easier access to public funding. They only have to show a 15 per cent decline in revenue, instead of 30 or 50 per cent for Table A and B institutions, depending on their revenue. In 2018, 41 non-university higher education providers were registered educational charities.*Read More »

Government benefits for domestic students during the COVID-19 crisis

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At least temporarily, some domestic students are financially better off due to the government’s COVID-19 measures. This is due to increased income support payments and JobKeeper exceeding their likely pay if they had been working.

JobKeeper

Eligibility for JobKeeper is a two-stage process. First the employer has to be eligible, with a 30 per cent reduction in revenue for businesses with revenues below $1 billion, and a 50 per cent reduction for business with revenue above $50 billion. Most charities have a lower threshold of a 15 per cent reduction in revenue.

I have no direct data on how many students are employed in eligible firms, but student employment is concentrated in industries that we know have been hit hard by COVID-19 shutdowns.

Second, the student has to be an eligible employee. In the ABS Characteristics of Employment Survey for August 2019, about two-thirds of employed students aged 17-30 years who are studying full-time meet the criteria. They have either on-going employment (using the entitlement to paid sick leave proxy) or are casuals who have been with their current employer for 12 months or more. This analysis includes all students, not just higher education students.

[Update 25/4/20: The Treasurer has announced that full-time students aged 16 and 17 years will not be eligible for JobKeeper, adding an age condition that slightly affects my analysis.]

If these tests are satisfied, there is a flat payment from the government, but paid by their employer, of $1,500 a fortnight. This is likely to be much more than full-time students usually earn. According to the Characteristics of Employment Survey, their median earnings are $320 a week, or $640 a fortnight. JobKeeper is likely to more than double earnings for eligible students until it expires on 27 September 2020. Read More »

How much is the 2020 higher education assistance package worth?

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Update 28/04/20: It now seems likely that there won’t be additional higher education places beyond 1000 places for non-university higher education providers. This would revise down the potential value of the package by about $100 million, to around $500 million – but noting the substantial uncertainty in the original post.

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In today’s media, there are some very large estimates of likely international student fee losses. The federal government is not compensating universities directly for falling international student revenues, but as outlined in my blog post on Wednesday they have announced measures focused on domestic students.

Calculating the financial impact of these measures is not easy. We don’t know what impact COVID-19 has had on domestic student numbers, although some universities had soft demand before COVID-19 disrupted on-campus classes. The University of Sydney has reported that its domestic numbers are down nearly 5 per cent on expectations, but that could be due to a tough NSW market.

Many universities have delayed the census date at which Commonwealth and student contributions are triggered, and so they won’t know for sure what their first semester situation is until that day has been reached. Nor do we know what will happen in later semesters. It may depend on whether campuses can re-open. Read More »

The first COVID-19 higher education support package – a revised, less speculative post

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The government now has a first support plan for higher education. Its key elements are letting universities keep student-related grants and loans for 2020 even if they enrol too few students, funding short courses, and regulatory fee relief.

An earlier post was my inference and guesswork from fragmentary Easter Sunday announcements. This post uses material from FAQs issued by the Department of Education on Tuesday.  For readers who do not need to be across the technical detail of higher education funding I recommend my article for The Conversation rather than this post.

Commonwealth Grant Scheme

The government’s biggest higher education funding program is the Commonwealth Grant Scheme, which pays tuition subsidies of over $7 billion a year. Under the Higher Education Support Act 2003 total payments for the year cannot exceed equivalent full-time student numbers multiplied by the relevant Commonwealth contribution.

Universities are paid fortnightly based on estimates of their CGS entitlement for the year. A few days ago the University of Sydney announced that it was down 5 per cent on its domestic student target. Whether this is due to COVID-19 or tough NSW market conditions is not clear. A number of other universities were struggling before COVID-19 due to demographic factors.

Whatever the reason, universities will now be paid their original estimated funding rather than their legal entitlement. This also suspends the need to meet performance funding criteria, which is sensible. Read More »

The first COVID-19 support package for higher education

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Update 15/4/20: This post contains material that has been revised and republished to take into account later information.

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The government now has a support plan for higher education. The key elements are letting universities keep student-related grants and loans in 2020 even if they enrol too few students, funding short courses, and regulatory fee relief.

In this era of government by tweet, media report, media release and media conference the details of how this might work are lacking as of today. I will revise this post as more detail comes to hand. For now, I will focus on the broad outline and pursue my pedantic interest in the legal basis of government policy.

Commonwealth Grant Scheme

The government’s biggest higher education funding program is the Commonwealth Grant Scheme, which pays tuition subsidies of over $7 billion a year. Under the Higher Education Support Act 2003 total payments for the year cannot exceed equivalent full-time student numbers multiplied by the relevant Commonwealth contribution.

Universities are paid fortnightly based on estimates of their CGS entitlement for the year. A few days ago the University of Sydney announced that it was down 5 per cent on its domestic student target (which could include full-fee students, which I will come to below). Whether this is due to COVID-19 or because it was just losing out in a tough NSW market is not clear. A number of other universities were struggling before COVID-19 due to demographic factors.

Whatever the reason, the minister now says that universities will be paid their original estimated funding rather than their legal entitlement. This also suspends the need to meet performance funding criteria, which is sensible. Read More »

COVID-19 could have a high fatality rate in the private higher education sector

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If things look bad for public universities in the COVID-19 era, they look much worse for many providers in the private higher education sector.*  Not all are likely to survive a significant downturn in the international student market.

Although there are some commercially very successful players in private higher education, that is not the universal experience. When TEQSA reported on financial risk last year, it rated 12 per cent of for-profit providers as high risk, and 44 per cent as moderate risk. For not-for-profits, the corresponding risk ratings were 5 per cent and 40 per cent. This equates to more than 60 providers at high or moderate risk. As of April 2020, there are 134 non-university higher education providers.

The private higher education sector is diverse, with 37 providers having no international students in 2018 (based on not having a CRICOS registration). Generally speaking, however, the private higher education sector is more exposed to the international student market than public universities. About half of private sector students are internationals, compared to 31 per cent in the public universities. The true number is likely to be higher, as the statistics only include providers that have signed up for FEE-HELP, a domestic student loan program.  Providers aimed exclusively at the international market have no need for FEE-HELP.Read More »