Will uni finances be washed away by the floods?

We should of course be a little sceptical when Julia Gillard talks about cutbacks. But if cuts need to be made, who will take a hit?

Step forward, Australia’s vice-chancellors. Higher education has long been near the top of the list when money needs to be saved. And in recent times, higher education spending has been out of control. As I noted last year, massive over-enrolments have forced multiple large upward revisions of federal spending on higher education. Postponing the decision to ‘fully fund’ these places (unis receive only student contributions if they exceed their funding agreements by more than 10%), promised for 2012, could produce nine figure savings.

If this does happen, it will confirm my view that there have been some reckless decisions to take so many students. And there is little sign in this month’s offers figures that there has been any attempt to bring numbers under control. In NSW and the ACT, where much of the 2010 over-enrolment is concentrated, offers are up 2.6% on last year (acceptances may be higher or lower, so we can’t directly infer commencing student numbers from this figure). In Victoria, offers are up 1.1%.

The 2011 intake will ‘replace’ (in terms of total student load) smaller commencing cohorts from 2008 and preceding years who have now completed, so total over-enrolments are likely to be well-up on 2010.

Unless unis really do have very low marginal costs, cutbacks could mean that the ‘irrational exuberance’ of 2010 and 2011 enrolments leaves some universities with students they cannot afford.

15 Responses to “Will uni finances be washed away by the floods?

  • 1
    Son of the Ratpack
    January 21st, 2011 06:26

    What is the marginal cost of a student? Instead of 300 students in a lecture, there are 301. Big deal. No increase in cost there. For one more student, there’s one more exam and a couple more essays to mark. Assuming a student does 8 subjects in a year, it takes 15 minutes to mark an essay or exam, they do one exam and 2 essays or equivalent per subject – that’s 6 hours of marking. At a cost of $25 per hour, that’s $150 of marginal marking cost per year.

    OK, there’s obviously a few other marginal costs, but still, I’d be surprised if it all adds up to the fees that students pay, let alone once you add the Commonwealth contribution.

  • 2
    Andrew Norton
    January 21st, 2011 06:43

    1 more would be no big deal, I fully agree. But we already have 7 unis sitting on 17% or more above the funding agreement number, so 7% above what they will be funded for.

    And unis do pay academic staff a lot more than $25 an hour, and I hope put a lot more tmie than that into every student.

    As I noted in the original post last year, it matters a lot what discipline these students are in, and we have no data on that due to abysmally slow reporting by the Department.

  • 3
    Son of the Ratpack
    January 21st, 2011 06:54

    Even if it’s $100 per hour and 2 hours per exam, it still doesn’t add up to that much.

    But I take your point. It seems to me that universities are like airlines. It costs very little to add a passenger to a plane that is not full (which is why you can get dirt cheap fares at the last minute; some revenue for a plane that is flying anyway is better than none). But if you add a lot of passengers, then the airline has to buy another plane, which really does cost.

    It also beats me why the students don’t rebel. Crowded and dilapidated lecture halls; tutorials with 30 students in them – these are the consequences of over enrolment. I suppose we haven’t quite reached what happens at the US mega-versities, with 5000 students sitting in a sports stadium listening to a lecture delivered by video on the big screen, but that will no doubt come.

  • 4
    conrad
    January 21st, 2011 07:05

    “And unis do pay academic staff a lot more than $25 an hour, and I hope put a lot more tmie than that into every student”

    You can work out the reality. If you have ratios of 1:30 (many universities do if you exclude research staff and include just those that teach), and each student does 4 subjects with 2 assignments and an exam, that means each member of staff has 30 * 12 bits of assessment to think about in 12 weeks. If each of those took an hour to mark, it would cost you 360 hours of time — or about 10 weeks of work. This would be impossible, in that time since you also have to give the lectures, do the admin (some of which is essential, e.g., hours spent catching malingering), do marketing (can waste most of a day), go to planning meetings, and do all the other things you are asked to do.

  • 5
    Club Troppo » Missing Link Friday – 21 January 2011
    January 21st, 2011 12:39

    [...] Australian blogosphere’s higher ed expert Andrew Norton asks Will uni finances be washed away by the floods? "Higher education has long been near the top of the list when money needs to be saved" he [...]

  • 6
    glyph
    January 25th, 2011 14:51

    Hey, a request for Andrew, or someone.

    Could they provide a really simple primer for how HECs funded university students are funded in Australia. Ie for every law student X dollars is received from the govt, as the system is very confusing.

  • 7
    Andrew Norton
    January 25th, 2011 17:39

    Glyph – The language used these days is ‘Commonwealth-supported place’ (CSP). Each CSP within the university’s maximum located number of CSPs has two components, what is called a ‘Commonwealth contribution’, paid by the government, and a ‘student contribution’, paid by or on behalf of the student.

    The disciplines are organised into 8 ‘funding clusters’ for the purposes of the Commonwealth contribution, and 4 student contribution ‘bands’. With the different possible combinations, there are 13 price points for universities.

    For the student contributions you can pay upfront to the university, and you get a 20% discount if you do. The government pays the value of the discount to the university.

    Otherise students can take out a HECS-HELP loan, and the government pays that money to the university. The government then (in theory) recovers the money from the student via the tax system.

    The 2011 funding rates are here.

  • 8
    Shem Bennett
    January 25th, 2011 18:21

    Andrew, do you know off the top of your head what the range of Commonwealth contribution funding clusters are like?

    In Arts last semester I “paid” $663/ subject (deferred through HECS-HELP)- how much does the government add that’s not repayable to, for example, an Arts subject?

  • 9
    Andrew Norton
    January 25th, 2011 18:29

    Shem – Presuming that was a linguistics subject you were doing (Commonwealth contributions vary within Arts), the subsidy would have been $613 for the unit.

  • 10
    Peter Patton
    January 25th, 2011 18:51

    And unis do pay academic staff a lot more than $25 an hour, and I hope put a lot more tmie than that into every student.

    I was under the impression that a tutor gets something like $120 an hour, plus $75 an hour for repeat tutes of the same material.

  • 11
    Shem Bennett
    January 26th, 2011 00:01

    So Andrew- basically HECS students get degrees “half price” (not entirely accurate considering to repay the HECS debt you will also generally be paying tax- but in terms of direct costs…)?

  • 12
    Andrew Norton
    January 26th, 2011 04:05

    Shem – It varies a lot between disciplines. Commerce and law students pay more than 80% of the total CSP funding for their place, but science students pay less than 20%. Constructing a weighted average, students pay about 40%. Adjusting further for the cost of running the HELP scheme, I estimate the real student share is more like 35%.

  • 13
    Shem Bennett
    January 27th, 2011 11:29

    So instead of all these people complaining about unemployable Arts students being a drain on the system they should be complaining about unemployable Science students?

  • 14
    Andrew Norton
    January 27th, 2011 16:35

    Shem – Science students have considerably better labour market outcomes than arts graduates, but they are probably a considerably greater drain on the taxpayer, especially after Labor’s crazy decision to cut their student contribution amount.

  • 15
    Andrew Norton » Blog Archive » A low quality higher education spending cut
    January 28th, 2011 06:32

    [...] I was right that universities would be high on the list when budget cuts were called for, but wrong about what would get cut. [...]