VET & TAFE
campusreview.com.au
VET funding analysis
Five policy reasons driving
cost shifting.
By Craig Fowler
A
mong a mini-blizzard of reports and opinions on reforms
to the nation’s tertiary education system, both in higher
education and especially the VET sector, the KPMG report
Reimagining Tertiary Education: From Binary System to Ecosystem
is commendable by going beyond analysis and proposing reforms.
Universities Australia agrees with its broad diagnosis but strongly
rejects the cure.
The KPMG report has 10 recommendations, making clear the
first is likely the hardest and fundamental to all others, being that
by negotiation with states and territories (S&T), the Australian
government over time takes primary responsibility for a single tertiary
education funding framework across all AQF levels.
The trend decline in public funding for VET relative to its growth in
schools and universities has been graphically exposed by the Mitchell
Institute. What’s not been explained is the confluence of policy
decisions collectively driving this decline in VET funding. Funding
outcomes especially in the period 2012–16, as shown in Figure 1, help
explain the year by year changes.
Fee for service government agencies include revenues received
directly from Australian and state and territory government
departments, generally on a tendering/bidding basis. Tendering/
bidding would generally involve shorter term, individual project/
course-specific contracts, arrangements and payments (NCVER
Financial Information 2016, p.8).
The major contributions to VET funding are ‘revenues from
government’, being S&T revenues and those of the National
Agreement for Skills and Workforce Development (NASWD) set up in
2009 under the Intergovernmental Agreement on Federal Financial
Relations, being funds from the Commonwealth of Australia. Using
2009 as the base year, the then contribution split (S&T funds versus
NASWD funds) was 74.0 per cent S&T and 26.0 per cent NASWD.
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By 2016 the split was 66.5 per cent and 33.5 per cent respectively.
In 2016, had the S&T ‘maintained’ their proportionate 74:26 share,
they would have invested collectively (on a nominal basis) about
$1.24 billion more in 2016 than they did. Assuming the same base
year, over the multi-year period 2009–16, the S&T ‘proportionate gap’
in funding (in nominal terms) is less, being about $1.18 billion. The
reason this is less than 2016 alone is that for part of the earlier period,
being 2009–12, some S&T revenues exceeded the 74:26 ‘benchmark’
ratio, especially by larger jurisdictions.
This emphasises jurisdictional differences. The size of S&T VET
systems is very wide ranging. Some jurisdictions have stayed closer
or exceeded in any year the 74:26 split over 2009–16 and others;
particularly the larger more populous jurisdictions have shown
greater fluctuation. Critically, jurisdictions recently show significant
funding declines, especially from 2012 onwards. Hence the national
picture in Figure 1.
Why is this so? There are five potential contributing reasons.
1. The NASWD had no ‘maintenance of proportional funding effort’
obligations; it’s not a contract but rather an agreement that is in
effect unenforceable and where no parties are held accountable.
So the annual Report on Government Services retrospectively
and benignly shows graphically that NASWD targets are not
even close to being on track and show negative change.
To the Commonwealth’s credit, it has stuck by NASWD’s terms,
indexing contributions at ~ 1.4 per cent each year (no higher
education-style two-year funding freeze). The NASWD funding is
over $1.5 billion 2018/19. There was no indexing requirement for
S&T funds.
2. The smaller National Partnership on Skills Reform (NPSR)
(Figure 1) injected more Commonwealth funding starting in
2012. It was a ‘reform’ agreement of about $1.75 billion over five
years (2012/13 to 2016/17), variable each year and on average
about $350 million per annum. The early years and bulk of
funds were for ‘structural reforms’ to push TAFEs into greater
arm’s-length governance from governments (some TAFEs
notably in Victoria were mostly there already) as well as driving
VET market ‘efficiency, responsiveness, quality, transparency’
reforms supporting “public providers to operate effectively in an
environment of greater competition”. The funding in the later
years of the NPSR was predominantly for VET training. All this
pushed more Commonwealth funds into S&T systems. With
the closure of the NPSR in sight by 2017, there was a flurry of
political and stakeholder agitation to renew it. Belatedly a new
national partnership, the Skilling Australians Fund, emerged but
only some jurisdictions have so far signed on.
3. The NPSR helped unleash the VET FEE-HELP ‘finance bubble’.
The program was uncoupled from direct links to a higher
education articulation pathway. This change installed higher
education-style financing for VET diplomas and above, but
precipitated dire training quality, rorting of students and
collateral reputational harm for the sector, caused by a small
group of rogue providers, inept program management and
ineffective regulation. The program was closed at the end of
2016. The Commonwealth is now a far more prudent investor
in VET diplomas, financed under VET Student Loans, so re-
affirming the Commonwealth’s ongoing financing of higher
level VET qualifications.
4. Demand-driven funding for higher education revved up before
and took off beyond 2012. University participation has climbed