The big business of education

Even as we huddle together for warmth this winter – and I’m now Australian-enough to complain about the cold this side of the Equator – I wanted to update you on our response to the Federal Government’s higher education reforms.

I had an opportunity a few weeks ago to put our case before the Education and Training Minister Senator Simon Birmingham. I’d like to share with you what I told him in a speech at the CEDA (Committee for the Economic Development of Australia) higher education review:

“Education is a big business in this State. Higher education in particular. We produce the human capital and workforce for the future prosperity of South Australia. Our international student education constitutes the single largest service export in the State. We employ tens of thousands of people in South Australia and have a collective constituent population well in excess of 100,000 people.

I’m privileged to act as the chief executive of our largest university. I believe that I have one primary shareholder – the people of the state of South Australia. Our institution was constituted in 1991 to be the university for South Australia. We now graduate around 8000 people a year. Our graduate employment rate is the highest in the State. We work very hard to support local business and innovation.

South Australia has achieved 33.1 per cent participation in higher education compared to the Bradley target of 40 per cent national participation. We have a lot of work to do to reach the national participatory target.

The minister has proposed legislation which will expand the demand driven system to support what we call sub-bachelor places. That is to be applauded – it will enable us to prepare students to succeed in higher education. Similarly the minister has proposed to protect the higher education participatory pathway program (HEPPP) in legislation – to provide support for the most vulnerable in our society to attain a university education. The UniSA College is a model in this regard.

Protecting HEPPP is the right thing to do. I applaud that.

The minister has proposed that a percentage of university funding be linked to a focus on outcomes – I welcome that principle, although he and I will doubtless debate the quantum and its implementation  – 7.5 per cent of annual funding being deemed ‘at risk’ will make forward budgeting nigh on impossible. The minister has sought to address inequity in the national allocation of funded postgraduate places – again, a positive step.

But these positive reforms are coupled to elements which I cannot readily endorse.

The students of this nation have and will doubtless continue to voice their concerns around the proposed increase in the amounts they will have to pay for their education as the Commonwealth reduces its contribution to the funding envelope. They will also rightly be vocal about the proposed lowering of the HECS repayment threshold and what equates to a tax increase for the lowest paid graduates in our society.

Mine is a not for profit organisation. It is also a not for loss organisation. We do not run a deficit. Our operational turnover is a shade over $600m which is expended here in South Australia. I am fortunate to have a very competent university council. My finance committee mandates that we run a prudent and fiscally responsible ship. A lean ship. Our targeted operating margin is between four and six per cent annually.

That margin is ‘put away’ for reinvestment in our core business of teaching and research. That margin is not funded by the Commonwealth Government, although I clearly recognise that the contribution made by the  Commonwealth in funding the higher education of the Australian people enables our operation to positively leverage their funds into external and international revenues, which facilitated the generation of our so called surplus.

Let me get back to that operating safety margin: four to six per cent. The last investments made by the Commonwealth Government in higher education infrastructure were back in 2012/13. Five years ago. Our institution was fortunate to receive $40m towards the construction of the Health Innovation Building, currently nearing completion on North Terrace. The University is approaching the end of a cycle of capital development which has been transformational in the city’s West End. We are delivering over $300m of new facilities, coming online in the next 12 months.

$300m of facilities which were financed without debt. Funded from the safety margin we put away for that very purpose over many years. Over $300m of new infrastructure to underpin our competitiveness, to underpin student experience and to attract greater investment to this State. $40m of this came from the Federal Government. The rest was our so called surplus.

And what does that $300m do? Well, aside from the benefits of the infrastructure to the operation of the University, this investment has supported 2000 jobs outside the University during the construction phase. 2000 jobs in South Australia. In a state that needs jobs now more than ever.

There’s $300m from UniSA. There is also $250m next door in the University of Adelaide’s new facility and $120m in Flinders’ new facilities in Tonsley. Well over $600m. That’s 4000 jobs sustained in the wider economy over the past three years. All funded from so called surpluses. Supporting and retaining jobs in this State outside of the universities themselves.

I do not believe in blunt instruments. Another proposed measure of reform is the so called efficiency dividend. Let us call it what it really is. This is a blunt budget cut of 2.5 per cent, which will compound to five per cent and will remain in situ thereafter. It is apparently predicated on the fact that we are overfunded organisations. I have not been asked for any evidence of my operational efficiency or otherwise. My finance committee members would have a view of that. The fact that my institution is positioned among the world’s top 25 young universities would suggest we are doing something right, especially when one adjusts for the funding dollars available per student for the universities which feature on that ‘best of’ list. On that measure we appear pretty efficient.

I do not believe in one size fits all. Australia deserves a differentiated university sector. South Australia relies heavily on the sustainability of its universities, perhaps now more than ever as we transition our economy from manufacturing to innovation. Surely cutting the budgetary envelope as proposed does not ensure sustainability.

The application of the so called ‘efficiency dividend’, the application of a 2.5 per cent funding cut, which compounds to five per cent in 2019, will almost wholly erode the ability of this State’s universities to advance infrastructure programs into the future. It will reduce our competitiveness on the international stage. It will undoubtedly erode our ability to support jobs and innovation in this State – within and outside the universities themselves.

This measure, this legislative sting in the tail, has nothing to do with reform, and everything to do with a budgetary clawback from a system which is already funded at significantly below the OECD average. It takes away – by definition. But more disappointing, it takes away from what could otherwise be seen as steps towards positive reform. It is retrograde in the extreme and it is not good for the future economic prosperity of this nation.”