Institutional Autonomy, Institutional Diversity and Student Participation

Matt Brett, Manager (Higher Education Policy), La Trobe University

9th Annual University Governance and Regulations Forum, Melbourne 2014

The pressures for transformational higher education policy reform have been building progressively

over many years. These pressures will continue to shape higher education irrespective of whether

the Higher Education and Research Reform Amendment Bill that is currently before Federal

Parliament is passed, passed with amendments, or blocked by the Senate. This paper and

presentation will explore these underlying pressures, the policy choices made by government in

response, and the potential impact of these policy choices on institutional diversity and student

participation.

Demand for higher education has grown significantly over recent years. Increased rates of

participation have almost exclusively been met by enrolments in public universities. The funding

rates for undergraduate enrolments in public universities are fixed by government and sector

expansion has placed significant pressure on government’s capacity and willingness to meet the

costs of increasing participation. Underfunding of the sector has contributed to the pursuit of

additional revenue through a variety of means, including the enrolment of student cohorts where

funding rates are not regulated by government. Claims that undergraduate funding rates were too

low did not prevent universities from enrolling more students and generate additional revenue

following the post-Bradley removal of caps on student enrolments. The inability of government to

cover the costs of increasing student enrolments through either reprioritisation of expenditure or

increased taxation led to a steady decline in government higher education per student funding. The

recent efficiency dividend and conversion of student income support grants into student income

support loans are a continuation of a long-term trend that commenced with the Dawkins’ reforms.

Since the end of free higher education in the late 1980s, increases in participation in higher

education have been financed through apportioning an ever- increasing share of costs to students.

The challenges of financing the expansion of higher education are not unique to Australia, and are

evident in higher education systems across the world and across time. The explanation provided by

Martin Trow and his model of expansion in higher education remains as current today as it was in

1973

…a rapid and potentially almost un-limited growth of higher education, at the per capita cost

levels of the former small elite systems, places intolerable burdens on national and state

budgets that are also having to cope with growing demands from other public agencies, such

as social welfare, preschool education and child care, primary and secondary school systems,

housing, transportation, and defense.i

The higher education reform package proposed by the current government is ostensibly intended to

be a policy circuit breaker which will enable further expansion in higher education participation at a

variable rather than a unit cost. Market based competitive forces and the extension of

Commonwealth Supported Places to non-university providers and sub-bachelor programs will

reshape the distribution of students across the sector. It will encourage institutional diversity and

enable the next wave of increased student participation without significantly shifting the proportion

of government expenditure allocated to higher education. Policy intent and policy outcomes do not

always align perfectly and there are significant risks associated with the government’s proposed

circuit breaker which have been outlined by Vice-Chancellorsii, higher education peak bodiesiii and

the opposing parties in Parliamentiv.

A corollary of increasing student participation, and notwithstanding decreasing per student

government funding, is an increase in the total cost of the higher education budget. Even with the

recent announcement of a 20% cut in Commonwealth contributions for Commonwealth Supported

Places, the higher education budget continues to grow over forward estimates. The response of

previous governments to managing increased higher education outlays has been to expect some

demonstrable return on investment. In broad terms, Australia’s post-Dawkins expansion of higher

education coincided with changes to public administration. ‘New public management’ sought to

make public services more accountable and responsive to the views of tax-payers and politicians.

Increased higher education funding has at various points and at the behest of various governments

come with more strings attached. Compacts, Teaching and Learning Performance Funding,

Excellence in Research for Australia, MyUniversity and Higher Education Workplace Relations

Requirements illustrate government attempts to influence the university activities through the

imposition of conditions of funding. It is a rare event for a university to reject a condition of funding

on principle, and generally the funding has flowed with institutional responsiveness to the priorities

of the government of the day. Australia’s public universities may be established as self-accrediting

autonomous institutions, but have been increasingly been treated as instruments of government

policy where autonomy has been conceded to a build-up of funding requirements, red tape,

reporting obligations and regulation. As with the pressure associated with the higher education

financing, an increase in regulation and reporting would eventually reach a tipping point.

The establishment of TEQSA as a national regulator, and with it perceptions of over-reach and an

onerous administrative burden, contributed to be that tipping point and contributed to a stronger

voice for the reduction of regulation and reporting obligations. The present Government has

enthusiastically accepted the recommendations of the Labor commissioned Phillips KPA Review of

Reporting Requirements for Universities, and the Lee Dow Braithwaite Review of Higher Education

Regulation. The impact on regulatory burden by implementing Review recommendations remains to

be seen. There is much detailed work to be done at a Department level and systems level, and an

ongoing need for legislative change. If the Higher Education and Research Reform Amendment Bill

2014 and Tertiary Education Quality and Standards Agency Amendment Bill 2014 were to pass the

Senate a partial but welcome reduction in the regulatory burden faced by the sector would result.

Australian higher education is at an important juncture, where the Commonwealth seeks to

introduce financing and regulatory reforms into a complex multi-billion dollar higher education

system. The intended consequences of reform are clear. These are: to enable institutional diversity,

build demand for sub-bachelor qualifications, widen participation, and reduce regulation, whilst

freeing institutions to play to their strengths across teaching and research. Just how the Australian

higher education system will respond to these reforms is unclear.

The dominant institutional form, the public university, is generally established by State legislation,

and with a clear separation between the Federal Minister responsible for funding and State Minister

responsible for governance. There are signs that this separation may narrow, with the 2013/14 Mid-

Year Economic and Fiscal Outlook signalling negotiations between the Commonwealth Government

and New South Wales Government for the Commonwealth to take over governance responsibilities.

In this light, one cannot assume that Australian universities will engage with financing and regulatory

reform within a stable governance framework, adding to the difficulty in predicting what will happen

to Australian higher education over coming years.

Before delving into analysis of reform impacts on institutional diversity and participation, it is worth

considering the reference points invoked in making the case for change, and in understanding the

impact of change. Whilst the experiences of the United States of America and England are pertinent

for framing analysis of the Australian context, the social, economic and political histories of these

international reference points can be over stated. They provide useful intelligence rather than

evidence for direct extrapolation of likely effects.

The American system operates as a collection of mature state-based and market-based higher

education systems with significant structural diversity in terms of size, curricula, sources of financing,

and academic standards. There are high institutional start-up and failure rates that are similar to

small business establishment, success and failurev. The approach is markedly different to the

deliberate public university establishment processes to which Australia is accustomed to and largely

reliant upon. The following table highlights the diversity of the American higher education system

and is derived from the Carnegie Classification that classifies higher education providers by their

course and enrolment profile rather than regulatory standingvi.

Table One. US Colleges By Carnegie Classification, Fall 2009

Associate's Colleges

Doctorate-granting Universities

Master's Colleges and Universities

Baccalaureate Colleges

Special Focus Institutions

Tribal Colleges

Number of Institutions

1,920 297 724 810 851 32

Enrolments 8,185,725 5,785,078 4,656,600 1,423,275 657,296 19,686

Enrolment Share 40% 28% 23% 7% 3% 0%

% Public 55% 60% 37% 17% 5% 75%

% Private non-profit

6% 37% 52% 66% 67% 25%

% Private for profit

39% 4% 10% 17% 28% 0%

The American system has been variously cited as either a model to emulatevii or avoidviii, depending

on the commentator. There is some evidence to suggest that diverse higher education systems

perform better than more homogenous alternativesix which suggest that emulation rather than

avoidance is a preferred policy objective. The American system cultivates institutional diversity, and

concentrates resources in research universities. Expenditures per student are around 7 times higher

in America’s private research universities and around 4 times higher in America’s public research

universities than in associate degree community collegesx. Even with institutional diversity and 40%

of students enrolled in lower cost providers, the financial sustainability of higher education in

America is challenged, with student debt exceeding $1 trillion. Research university appetite for

income to fund research can test the capacity of financing systems to accommodate, even in

institutionally diverse systems.

Australia’s higher education sector is highly concentrated when compared to America. If overlayed

against the Carnegie classification, we would find that all but 4 Table A providers would be classified

as Doctorate-granting Universities by exceeding the classification threshold of 20 doctoral graduates

per reporting year. The 34 Table A universities that would be considered Doctorate-granting

Universities are all Public institutions, and account for 90% of all enrolments and student load. Of

Table B and C providers, only one institution would exceed the threshold for classification as a

Doctorate-granting University based on their Australian operations. The non-university providers are

spread across institutional types and governance structures and account for only around 5% of

enrolments.

The maturity of the American higher education system gives some cues as to the long-term

equilibrium which may be eventuate if diversity centric and market based policy settings are to be

maintained over time. Policy reform in the English system serves as a better reference point for the

shorter-term implications of a policy agenda that will reduce government subsidies, extend

government subsidies to non-university providers, and allow for a significant cost shift to students. A

significant difference between recent English reforms has been the removal of government subsidies

for non-science disciplines, and the imposition of a cap on tuition fee increases. The effects of these

reforms have been significant.

United Kingdom student enrolments declined in 2012/13. Enrolment declines were sharpest in part-

time non-science programs, although falls in enrolments were evident across all enrolment

categoriesxi. Institutional income increased however, with falling enrolments more than offset by

tuition fee increases. The most recent 2013/14 analysis from the Higher Education Funding Council

for England suggests that the 2012/13 drop in enrolments was temporary, with strong enrolment

growth in 2013/14.xii This report interrogates the drop in 2012/13 part-time enrolments, and

identifies the significance of policy changes that reduced government support for students

undertaking programs equivalent to sub-bachelors qualifications who already held an equivalent or

higher qualification. The report identifies that programs equivalent to Australian sub-bachelor level

are now more likely to be provided in Further Education Colleges, and Higher Education Institutions

are more likely to offer first degrees such as Bachelor of Arts and Bachelor of Sciences. Differential

subsidies are also found to have had an impact, with enrolment growth evident in STEM programs,

and enrolment decline evident in modern languages. Whilst England maintains a significant gap

between the participation of school leavers from the most advantaged and disadvantaged areas, the

gap is narrowing, and continues to narrow on the latest 2014/15 application data.

It is to early to assess the long term impact of policy reform in England, but it would appear that the

equivalent of Australia’s non-university providers are playing a more significant role in sub-bachelor

degree provision. More established universities have been able to grow their income without

needing to grow enrolments, and are maintaining a high level of research output and impact. The

relationship between scale and income has been shifted.

Whether the quality of the English higher education system is improved or weakened by these

reforms is unclear, but closer to home, Australian debate around the primacy of the teaching-

research nexus and the quality of provision in non-university providers has been strong. These issues

will be central to changes in the structural dynamics of the sector and governance challenges facing

regulators and institutions alike. Commentators have raised concerns about the extension of

subsidies to non-university providers. The Kemp Norton Review stated that:

Many of the jobs to which bachelor-degree graduates aspire do not need academic brilliance, just

knowledge and skills which can be acquired, with good teaching and student effort, by a wide range

of people. Minimum standards must be relevant to the aim of the course, not set against a

benchmark appropriate only for the most academically able students.

After exploring the underlying policy challenges, government policy choices, and international

reference points attention is now focused on the likely impact of policy reform on institutional

diversity and student participation.

The capacity for higher status institutions to raise fees is implicitly accepted in the policy reform

package, and 20% of tuition fees levied above preserved student funding rates will be diverted to an

institutional scholarship program. It is unlikely that institutions that charge high tuition fees will

pursue a high load growth strategy, and in some cases may be able to fulfil strategic aspirations

around a scale of operations which is smaller than today. There is likely to be a redistribution of

enrolments across the sector as institutions grow and contract in line with strategic objectives and

market realities.

Reducing the concentration of enrolments in public universities is an overt intention of the policy

reforms. A question which emerging from this policy intent is whether the public university sector

can withstand policy reform and retain its institutional make-up. There are already universities

which run on thin operating margins, or at an operating loss, which would appear vulnerable to

increased competition. The experience of the Victorian TAFE sector to private competition has been

decreasing market share and significant pressure for institutional reform, and in some cases, merger,

to avoid the risk of institutional failure. The increasing demands of the market will undoubtedly

influence the strategic choices of universities and sharpen the resolve to avoid a similar outcome.

Mergers are not always a result of weakness, and it is feasible that mergers or acquisitions may arise

between public universities, with a net loss to public university institutional diversity. The recent

establishment of Federation University, and amalgamation with Monash Gippsland may be the first

of many changes to the composition of the university sector.

The Higher Education Standards Panel is about to consult with the higher education sector on

Provider Category Standards, again bringing international reference points such as the Carnegie

Classification into the frame. A new provider category framework could, if, aligned with funding and

regulatory reform, recast Australian higher education in ways that segment the sector in ways that

supersede the current university/non-university binary.

The Higher Education and Research Reform Amendment Bill 2014 signals that distinctions between

Table A, B and C providers will become less relevant for the bulk of Commonwealth funding. It also

sets the Commonwealth subsidy non-university providers at 70% of university rates, for reasons

which relate to research and community service activities. Overseas Table C universities do not

appear to have thrived in the Australian context, but are more likely to be competitive with equal

access to Commonwealth Supported Places. A more equal competitive footing may see an increase

in the number of overseas universities operating in Australia.

There is likely to be an increase in the number of accredited non-university providers. There is

already some evidence of institutional start-up and failure which approximates the American

experience, which may escalate over time. Examination of FEE-HELP advance payments between

2009 and 2013 identified thirty three non-Table A providers as receiving payments in 2013 who were

not listed in 2009, and eight providers listed as receiving payments in 2009 that were not listed in

2013. The TEQSA Provider Register identifies nine inactive registrations; in five of these cases the

registration was withdrawn by the provider, in two cases registrations expired, and in two cases the

registration was not renewed by TEQSA. The challenge for the regulator, and for institutions keen to

keep an eye on the market, is keeping abreast of institutional change, renaming, re-branding and

mergers. For students, there will be a continuing challenge in assessing the history and future of any

given provider. Public universities with histories that span decades offer more certainty for students

in this regard. The establishment of Quality Indicators for Learning and Teaching will have to

contend with these challenges as it provides students with readily accessible information on which

to inform their decision-making. Current performance measures in higher education are not

consumer friendly.

Non-university higher education providers do not operate outside of public interest or public

ownership. 2012 analysis of the non-university provider segment identified 22 of the 132 non-

university providers as being government owned, 24 as church owned and 86 as privately owned.xiii

The analysis puts forwards a scenario that in addition to a proliferation of providers, that there will

be consolidation of ownership through the formation of private education conglomerates. This was

already evident through the formation of Navitas. More recently Vocation has listed on the

Australian Stock Exchange, diversifying from its vocational education holdings through the

acquisition of the Australian College of Applied Education, Australian School of Management, Real

Institute, and Endeavour College of Natural Health.

The emergence of ASX listed for-profit higher education providers reveals an emerging tension in

Australian higher education governance. Public providers have generally been accountable to a

broad suite of stakeholders through the oversight of parliament, with opaque day-to-day

governance processes generally occurring beyond the public gaze. For profit ASX listed companies,

accountability is to investors, and continuous reporting obligations mean that key strategic and

operational matters are communicated to existing and potential shareholders. Some commentators

may object to the profit motives of some providers, but in ASX listed cases, in addition to a focus on

offering students with a valuable product, there is arguably greater real time transparency in

operational decision making than what applies to public providers. As the sector diversifies, public

and private may have much to learn from each other as stakeholder, shareholder and student needs

are accommodated.

The government has outlined the predicted impact of these reforms on student participation

through information associated with the reform package, including the regulatory impact statement.

The experience of government in predicting patterns of student participation after the Bradley

Review suggests that sector’s capacity to innovate and attract students is high when furnished with

the right policy settings. It took several budget cycles for the government to align enrolment

estimates with actual enrolments, and it is likely that the estimates in the 2014 budget

announcement will again underestimate enrolments across the sector. Australia may see a

temporary dip in enrolments, as England has, but the long-term trend for more rather than less

higher education participation is likely to continue.

Students are likely to see increasing competition for their custom. They are likely to be presented

with more choice in the qualifications they can access across a greater range of institutions. In facing

these choices, student’s decision-making-calculus will, on average, become more complex. Factors

such as cost, quality, experience and graduate outcomes will increasingly be put before students as

they weigh their choices. In many cases students will be ill-informed or unable to appreciate the full

consequences of their choices. The distribution of students across the sector will change, and this

will place increasing pressure on governance structures to devise appropriate strategies, to monitor

the execution of these strategies in a competitive market and assess the progress of the sector as a

whole.

i Trow, M (1973) Problems in the Transition from Elite to Mass Higher Education, Carnegie Commission on Higher Education http://www.eric.ed.gov/PDFS/ED091983.pdf page 35 ii Parker, S (2014) Some REALLY big ideas for higher education reform. The Conversation. 13 June 2014.

http://theconversation.com/some-really-big-ideas-for-higher-education-reform-27791 iii Universities Australia (2014) Changes needed to Federal Government's higher education budget measures, 6 August https://www.universitiesaustralia.edu.au/news/media-releases/Changes-needed-to-Federal-Government-s-Higher-Education-budget-measures iv For example the Leader of the Opposition’s response to the Higher Education and Research Reform Amendment Bill 2014 Second Reading, 2 September 2014, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2Fdae248ad-93bb-4fb3-8ba5-e5b566b992ad%2F0011%22 v Trow, M (1989) American higher education – Past, present and future. Studies in Higher Education, 14:1, 5-22

vi 2010 Carnegie Classification; National Center for Educations Statistics, IPEDS Fall Enrollment (2009)

http://classifications.carnegiefoundation.org/ vii

Bebbington, W (2014) Australia must ignore vested interests and seize chance for change. Times Higher Education 17 April 2014 http://www.timeshighereducation.co.uk/comment/opinion/australia-must-ignore-vested-interests-and-seize-chance-for-change/2012778.article viii

Parker, S (2014) University reforms are a looming disaster. The Canberra Times 23 July 2014 http://www.canberratimes.com.au/act-news/university-reforms-are-a-looming-disaster-20140723-zvyv2.html ix Williams, R., de Rassenfosse, G., Jensen, P., and Marginson, S (2013). The determinants of quality national higher education systems Journal of Higher Education Policy and Management, Volume 35, Issue 6, 2013 http://www.tandfonline.com/doi/abs/10.1080/1360080X.2013.854288 x Delta Cost Project (2014) Trends in College Spending, 2001-2011: A Delta Data Update. http://www.deltacostproject.org/sites/default/files/products/Delta%20Cost_Trends%20College%20Spending%202001-2011_071414_rev.pdf xi Higher Education Statistics Agency https://www.hesa.ac.uk xii Higher Education Funding Council for England (2014) Higher education in England 2014. Analysis of latest shifts and trends April 2014. 2014/08 http://www.hefce.ac.uk/media/hefce/content/heinengland/2014report/HEinEngland_2014.pdf xiii

Ryan, P (2012) Growth and Consolidation of the Australian Private Higher Education Sector. The ACPET Journal of Private Higher Education, Volume 1 Issue 1 pp5-11 http://www.acpet.edu.au/uploads/ACPET_HE_Journal_Vol_1_Issue_1_June%202012_WEB.pdf