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May 31, 2010 | by  | in Features |
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Making Ends Meet

New Zealand universities are trying to juggle the competing demands of catering for increased student numbers, while maintaining a high quality of teaching and research. Adequately funding tertiary education is a challenge that must be tackled by universities and the government hand-in-hand. Elle Hunt and Sarah Robson investigate the current state of tertiary education funding in New Zealand.

It is the end of the trimester. Assignments are due. Exams are coming up. You probably have an immense dislike for university right about now. Stress. Pimples. Eye twitches. Sleepness nights. A lot of this probably due to the fact you’ve exceeded the recommended number of energy drinks to consume in a 24-hour period.

Nevertheless, it is at times like these that it is comforting to remember why you’re at an establishment like Victoria University—you’re here to get a tertiary education, an education that will one day hopefully improve your employment prospects and see you contribute positively to New Zealand society. Or, at least that’s the lofty, idealistic reason why you’re at uni that you may not have thought of.

The relatively open access to tertiary education that New Zealanders have enjoyed seems to be under threat. In recent weeks both Victoria and the University of Otago have implemented measures to manage enrolment numbers for the rest of 2010. Vic has closed all new domestic admissions for 2010, while Otago has capped enrolment numbers across a number of programs. Other universities are looking to introduce similar measures to deal with increasing numbers of students in the current limited funding environment.

But why has it come to this? Why has Vic been forced to shut the door on new domestic students, a decision that the University Council itself said it was reluctant to make? A number of factors, including the economic recession, increased demand and limited funding from the government and other sources, have prompted universities to consider new measures to cope with the challenges facing the tertiary sector.

And the door was shut

As has been reported in Salient, the University Council decided not to accept any new domestic undergraduate admissions for the rest of the year at a recent public meeting. The decision came in the wake of predictions that student numbers were going to reach 110 per cent of the cap funded by the Tertiary Education Commission (TEC) under Vic’s investment plan.

Following the council meeting, Chancellor Ian McKinnon explained: “The university has no further capacity for new undergraduate applicants this year. In simple terms, if they [student numbers] go above 100 per cent, the university forgoes funding and incurs costs, and this has an immediate impact on the quality of the university.”

Vice-Chancellor Pat Walsh told Salient after the meeting that “There is no enthusiasm for this decision, it was made to meet our legal obligations and to protect the interests of current students and staff.”

Salient reported that Vic enrolments are 20 per cent higher than they were at the same time last year. Increased student numbers has been a common trend across all tertiary education organisations (TEOs)—not just Vic. To an extent, this increase in student numbers could have been forseen: not only are the products of a baby boom in the early 1990s hitting uni age, job losses caused by the recession have led to many people heading back to tertiary study to upskill. Unfortunately, it appears that the current government has not provided universities with adequate additional support to cater for this influx of students.

Chair of the New Zealand Vice-Chancellors’ Committee (NZVCC) and Auckland University of Technology Vice-Chancellor Derek McCormack understands why Vic made the decision.

“New Zealand universities are committed to maintaining the international quality of their teaching and research,” says McCormack. “That is why they have, unfortunately, had to restrict student numbers—in order to maintain quality.”

Co-President of the New Zealand Union of Students’ Associations (NZUSA) David Do says Vic’s decision is unfortunate, given its impact on prospective students.

“We feel that on a practical level they shouldn’t have done it this way, because students had not been given proper notice that the entry requirements were changing, and that’s going to affect their plans for moving into education.”

VUWSA President Max Hardy, student representative Conrad Reyners and former VUWSA President Fleur Fitzsimons voted against the motion to close admissions. Hardy was reported in Salient as saying that “such an unattractive decision should not have been made without first having all the appropriate information”, while Fitzsimons said the decision “felt very panicked and lacking detail”.

The fact that New Zealand universities are feeling forced into making such decisions has raised concerns about current levels of tertiary education funding. How does the government fund our universities in the first place?

So where does Vic get its funding?

The majority of the university’s funding comes from government grants, with the next greatest proportion coming from domestic tutition fees—then international tuition fees. Figures in the 2009 Annual Report show that Vic received about $137 million in government grants last year. Domestic tutition fees made up almost $65 million of the university’s revenue, while international tuition fees accounted for about $25 million. The university’s total revenue for 2009 amounted to approximately $281 million. The figures show clearly, government funding makes up a significant portion of the univerity’s total revenue.It is the role of the Tertiary Education Commission (TEC) to oversee the allocation of government funding to universities, in accordance with the policies implemented by the government of the day.

The role of the TEC

Established under the Education Act of 1989, the TEC operates the tertiary funding system generally, while also overseeing the planning process and the performance of tertiary education organisations. According to its Statement of Intent, published online, the primary aim of the TEC is “to give effect to the government’s Tertiary Education Strategy (TES)”. The government is required to publish the TES under the Education Act. The TES provides a basis for all the government’s decisions relating to tertiary education. The TEC is bound to ensure that these are implemented across New Zealand’s eight universities, 20 institutes of technology and polytechnics, and hundreds of other tertiary education providers, such as training organisations, wananga, and schools.

The TEC’s board of commissioners provides guidance to the Minister of Tertiary Education about how best to allocate the $3 billion that the government commits each year to funding the tertiary education system.

In order to receive funding, a tertiary education organisation must have an Investment Plan, which it devises in collaboration with the TEC. The plan must outline the following four details: how a TEO will work towards achieving the government’s priorities as outlined in the TES; the TEO’s mission and role in the tertiary sector; the programmes and activities it runs or undertakes; and its proposed outcomes, including performance indicators.

Tertiary Education Minister Steven Joyce says that in terms of allocating funding for places for students at universities, “The TEC will work with universities (and institutes of technology and polytechnics) to determine the areas of high demand. In doing so, the TEC will seek to allocate according to the priorities of the Tertiary Education Strategy.”

In the event a TEO is found to be shirking its responsibilities, outlined in its investment plan, or it is behaving in a manner contrary to agreements made in the plan, the government is within its rights to restrict funding.

The impact of Investment Plans

The limitations placed on Vic by the investment plan with the TEC were one of the reasons behind the decision to close new domestic admissions for the rest of 2010. Vic was rapidly approaching the enrolments cap it was allowed for 2010.

Walsh explains that all universities have an investment plan, which outlines enrolment targets on “not only how many students [can be enrolled], but also how many of those students the government will fund”.

“In our Investment Plan, we give an undertaking to manage domestic student enrolment numbers between 97 per cent and 103 per cent. We will not receive government funding for any domestic students we enrol in excess of 100 per cent.”

Basically, if the university exceeds its cap, it carries the burden of funding those students itself—without extra funding from the government. Walsh reiterates that universities have a legal obligation to implement their individual investment plans.

Through the implementation of individual investment plans with universities and other TEOs, the government effectively manages how many New Zealanders can access tertiary education each year. In the past this appears not to have posed significant problems. However, it seems the government has not adequately prepared for the recent influx of students entering into tertiary education.

Walsh says that universities will have to seek funding from elsewhere in order to deal with the greater numbers.

“Because we are working in a capped funding environment, revenue from the government will be relatively fixed, and this means universities will need to look for additional revenue sources to meet any increase in expenditure.”

Walsh does say that New Zealand has “one of the most generous student support funding arrangements in the world.”

“The government spends a lot of money on tertiary education but it’s about finding the balance between money spent on students and funding for the institutions,” he says.

“Policy frameworks need adjusting to get that mix of funding right. Interest-free student loans, open access and capped funding don’t mix in a recession. In addition, universities work within a maximum fee system which limits how much they increase fees.”

McCormack says “the current system is far from ideal”. He points out that most tertiary programmes take more than one year to complete, “but funding is only secure for one year at a time”.

“The investment plans that universities agree to with the government [via the TEC] are three-year plans,” he says.

“Any decision by a university to accept additional students must take into account the pipeline consequences into subsequent years, in a situation of funding uncertainty over those subsequent years, with no guarantee of funding beyond one year at a time.”

President of the Tertiary Education Union (TEU) Dr Tom Ryan says that the TEU believes that the investment plan cap should be lifted, to allow greater numbers of enrolment into universities and other TEOs during the recession.

“We note that across the ditch in Australia, the government has said clearly that it wants more people getting degrees,” says Ryan. “It’s one of the policies they’ve introduced during the recession as part of their $1 billion extra spending on tertiary education. So it’s a pity that the [New Zealand] government has maintained the cap.”

The Budget: an exercise in treading water

Joyce points out that the changes announced at the recent Budget have allowed for the creation of more places for students at universities.

“We have refocused tertiary education funding to create approximately 4900 EFTS [equivalent full-time students] above previous baselines from 2011—a record number of core tertiary places,” he says.

“For universities, this means 1,735 additional full-time places compared to what was previously budgeted. As a result, the number of places in universities will be 765 greater in 2011 than this year’s record number.”

Joyce adds that the government has also increased spending on tuition subsidies—the Student Achievement Component (SAC)—which is the government’s contribution to the direct costs of teaching, learning, and other costs driven by student numbers.

“Around $40 million per year will be invested to increase tuition subsidies by 2.2 per cent, with approximately $23 million of this funding going to the university sector. The increase will support quality tertiary education.”

Also announced in the Budget was the end of the fee maxima policy, which allowed course fees to increase by a maximum of 5 per cent a year. The policy has been been replaced with the Annual Maximum Fee Movement (AMFM), which will allow TEOs to increase course fees by up to 4 per cent—but it only applies to fees for 2011.

Joyce says the change should give students more certainty about future study costs. He says AMFM removes the “distortive effects of the previous policy, which meant that providers with higher cost courses (with fees at or above the maxima) were unable to make increases in fees to offset the increases in the cost of provision”.

Do points out that AMFM gives no indication of what system will be in place for 2012.

“The minister has only set a fee limit for next year, and I think a lot of students are worried about how high their fees could go if there are no limits.”

Despite Joyce’s reassurances that the government is prepared for the influx of future enrolments, some remain unconvinced.

The 2009 Budget saw a number of cuts made to the tertiary education sector. Finance Minister Bill English backpeddled on prior commitments to increase funding made under the previous Labour government, and various scholarships and other funds were cut to save money.

The cuts have continued in this year’s budget, says Ryan.

“To a large degree, what was announced specifically in this year’s budget continued what the government introduced last year,” he says. “So it’s more the general government’s direction [that] has reduced the spending in tertiary education.”

McCormack agrees. “The 2010 Budget has primarily been an exercise in re-allocating existing money to achieve a limited number … of additional places at our universities.

“At the same time, per student funding is declining in comparison with university cost increases, and money for initiatives to make up for this shortfall, such as the tripartite salary funding, has been withdrawn—as announced in Budget 2009,” he says.

“The cumulative impact is that funding has been decreasing in real terms over time, and this most recent budget does not turn this trend around. Holding the line—or indeed going backwards—makes it harder for universities to prepare their students to be able to make the valuable contributions to New Zealand that are needed to ensure future growth.”

Do says New Zealand is beginning to fall behind Australia when it comes to tertiary education funding.

“The Australian government has put a significant boost of investment into universities and also student support,” he says.

“In contrast, last year’s budget in New Zealand saw cuts to several funds in tertiary education. So we feel the government should be actually increasing investment, and not keeping it stable or reducing it.

“We would have hoped that the government would do further work on addressing underfunding and student debt, but, unfortunately, this budget treads water,” Do says with a sigh. “It’s fairly lacklustre.”

‘Less’ can only go so far

Many in tertiary education have called for increased government investment in the tertiary sector, particularly given the recent emphasis placed on increased funding to be invested in research, science and technology.

McCormack comments, “As New Zealand’s universities constitute the most important part of the research sector, this funding may lead to new opportunities for university research. But is does beg the question, why hasn’t the government also matched this investment with direct funding for university research and teaching capability?

“If knowledge leads to prosperity then surely universities, as creators of knowledge, should be key drivers in the government’s plan. [Instead], the government has been talking about financial constraints, doing more with less, driving efficiency, holding the line, etc. with respect to the budget for our universities.”

NZUSA agrees with the NZVCC about the need for increased public investment.

“Even though the government wants ‘more from less’, there’s only so much you can do with the same amount of money,” Do remarks.

If government funding is not increased to match the demand for places at universities, access to tertiary education could ultimately be restricted, with universities unable to fund places for more students themselves.

NZUSA believes that this denies New Zealanders a basic ‘right’ to access tertiary education. Over time, this will result in fewer skilled graduates emerging from the tertiary education system. Do also points out that limited enrolments will likely affect minority students, or those from lower decile schools or lower socio-economic backgrounds.

“We need to think about the people who might be put at risk,” he says bluntly. “We think that the government is making the wrong choice when it comes to what way it is spending its money.

“It should have increased overall funding so that more New Zealanders can access education.”

The search for a sustainable solution

Joyce defends the actions that have been taken by the government in the tertiary education sector.

“All universities have informed the TEC that they will continue to manage their enrolments according to their current funding levels throughout 2010,” he says. “There is no extra funding available in 2010 and TEOs are all committed to managing within their means.

“In Budget 2010, the government provided a price increase to tuition subsidies. This will mean that universities will receive $23 million more in government funding in 2011 than in 2010.”

Regardless of the Budget’s immediate impact on tertiary education, it’s clear the government still needs to find a viable long-term solution to the continued calls for greater direct investment in TEOs. Universities are already turning to alternative sources of funding to try to cope with the demands of increased student numbers, while maintaining a high level of quality.

If more funding is not forthcoming, will universities be forced to consider more drastic measures to ensure they live within the means outlined in their investment plans? The fact that Vic and Otago have already taken reluctant steps should be a clear signal to the government that action needs to be taken to ensure that New Zealand’s universities are adequately funded—so that those who want to take up tertiary study can do so without worry of restriction.

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About the Author ()

Elle started out at Salient reviewing music. In 2010, she wrote features and Animal of The Week, which an informal poll revealed to be 40% of Victoria students' favourite part of the magazine. Alongside Uther Dean, she was co-editor for 2011. In 2012, she is chief features writer.

Comments (4)

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  1. r4 sdhc says:

    I know that you share useful content that is why I am visiting your site every day so that I can get little bit knowledge from your posts.

  2. Clement McBigglewaddle says:

    You wouldn’t happen to be a Nigerian Prince, would you r4? If so, send me your email address and I’ll forward you my bank details.

  3. Geraint Scott says:

    No way Clement, I want to email him!

  4. The universities have a real dilemma. I studied at Massey University in Palmerston North for 4 years and theres was always an ongoing debate amongst students of what the idea should be regarding international students…

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