Melbourne University VC Cautions "Mind the Gaps: how should we fund public universities?" (November 8, 2006)

    On November 3 The University of Melbourne's vice-chancellor, Glyn Davis, addressed "Making the Boom Pay", a conference hosted by the Melbourne Institute and The Australian, where he addressed the issue of how should Australia fund public universities. A full transcript of the address is available here.

Click on the image to go back a year and see if Vladimir and Estragon make any sense.

Professor Davis sums up the issues:

Australian university students pay among the highest tuition charges in the world, but universities receive less than it costs to provide their education. The problem is a funding model that takes no account of the actual expenditure required to provide an adequate standard of higher education.

The funding model is also an obstacle to achieving the policy goal of greater diversity in the higher education system. All universities must offer courses that generate the revenue needed to cross-subsidise disciplines that cannot reliably finance themselves under the current funding model. Specialist institutions are not possible in under-funded disciplines.

A new funding model is needed that avoids these cross-subsidies. The Productivity Commission could do a review of the necessary funding levels. Politically sensitive decisions will need to be made about how much students pay.

Australian higher education is living through yet another moment of change. This time the transition challenges the Whitlam national consolidation of the mid-1970s and the later Dawkins national unified system of the late 1980s. The remaining legacies of both eras - Commonwealth control over how much government-subsidised students pay, and convergence on a single model of higher education institution - are being called into question.

Yet system change may founder on an obscure impediment: the disparity between costs and revenue for Commonwealth-supported students.

And he fleshes out his argument contending that while the Federal Government is demanding the universities diversify it also requires them to find the funding to do so. But "in practice the two direct sources of funding for tertiary education - a public contribution by Canberra and a private payment by students - do not meet the total cost of the education provided. At the University of Melbourne, for example, the gap between income and cost for a commonwealth-supported place is calculated to average $1200 a student each year."

And how is the gap filled? "Across the sector this gap has been met by attracting hundreds of thousands of international and domestic fee-paying students. Popular courses that attract fee-paying load, such as business administration, provide income for universities to redistribute to struggling programs with a higher proportion of commonwealth-supported places, such as many health sciences or the visual and performing arts courses."

Accordingly Professor Davis is suggesting that as matters stand in order to make ends meet ALL universities must run the popular courses to attract enough soft money to subsidise the rest. In short he's telling the Federal Government that they are sandwiching the universities between a rock and a hard place. 

To cut the Gordian Knot the vice-chancellor suggests:

One option to advance these proposals is to engage the Productivity Commission, which has the skills and the independence to determine a minimum level of funding required to deliver courses at an adequate standard.

Once minimum costs are clarified, the debate must move to the always embarrassing question: who will pay? The minimum amounts involved are certain to be higher in some if not all disciplines.

There are five players who may contribute to the cost of higher education: the commonwealth government, students, universities, business, and the states and territories.

[But] realistically... most income for tertiary education relies on just three partners: the commonwealth, individual students and universities.

And after suggesting the Commonwealth could fill the gap and appearing to realise he's got Buckley's, he settles on what he was getting to all along:

Alternatively, the commonwealth could lift the cap on student charges completely or to a level reflecting the real cost of a course.

But follows it with a classic bit of hand waving:

A more radical approach may ask whether estimating public good and future earnings is the only sound basis for setting student contributions. Perhaps the economic circumstances of the student may be another starting point.

In closing his address Professor Davis told his audience:

Institutional diversity is a worthwhile goal, but will be difficult to achieve while the legacy of the uniform national system still shapes funding decisions. The impediments to change are less conceptual than political. We know what is required, but any discussion of student contributions becomes awkward and tongue-tied. The contribution of each player – government, student and university – is at the centre of any meaningful discussion of system change. Until we mind the gap and address its meaning, reform will remain a noble ambition.

So just where have we come?

1. Let the Productivity Commission decide just what does the education in a given tertiary course cost.

2. Then fight it out as to who will pay for it.

Well, if you're a serious student and have yet to matriculate, consider learning German or French and then apply to one of the Swiss universities. And if you have matriculated consider a crash course.

And once there you can ruminate about diversification and the Melbourne Model.