Fin de siecle: reengineering New Zealand higher education for life after the global financial crisis
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Fin de siècle? Re-engineering New Zealand higher education for life after the ‘Global Financial Crisis’ Professor Nigel Healey Pro-Vice-Chancellor, University of Canterbury
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New Zealand has a large higher education sector, with one of the highest rates of tertiary participation in the OECD. Under the 1989 Education Act, access to university is an entitlement for all students who successfully graduate from high school and, more uniquely, for all permanent residents, regardless of previous educational attainment, once they reach the age of 20 years. The system of budgetary support for higher education is also unusual, insofar as almost half the total funding goes directly to students (in the form of allowances and interest-free loans) rather than as grants to the providers. Sustained high participation rates have put this funding mechanism under strain over the last decade. The global financial crisis has led to a sharp rise in projected public debt levels. After a major fiscal stimulus package in 2009, the economy is recovering and the government is under intense pressure to cut public spending. New Zealand has very high external debt levels, requiring constant refinancing, and the government needs to restore fiscal stability to retain the country’s AAA credit rating. New government policies are aimed at capping total enrolments in higher education and withdrawing access to loans for under-performing students. Grants to universities have been frozen for 2011 and some related funding lines cancelled. All eight New Zealand universities are currently facing a significant loss of government funding from 2011 and most are in the process of cutting costs and making redundancies. In the years ahead, the demands on the public purse from an ageing population will intensify, forcing the government to make ongoing real terms cuts to spending on higher education in order to control government debt. These cuts will make the present funding model for New Zealand higher education unsustainable. Alumni donations in New Zealand are relatively uncommon as higher education is widely considered a public service and universities have been relatively unsuccessful in very recent years at growing international enrolments as a way of diversifying their revenue base. The only other source of significant revenue is for universities to be allowed to raise domestic tuition fees over time to full cost-recovery rates and for the government to target declining tuition subsidies and student allowances and loans more precisely on degrees with a strong ‘public good’ dimension (like teacher training) and low-income students. These changes would signal an end to affordable and easily accessible higher education for New Zealand students. It is hard to avoid the conclusion that the global financial crisis has exposed flaws in the underlying ‘business model’ of New Zealand higher education and, by so doing, is likely to hasten the transformation of the system to a more expensive and selective system. Higher Education Summit, Auckland, March 2010
Transcript of Fin de siecle: reengineering New Zealand higher education for life after the global financial crisis
Fin de siècle? Re-engineering New Zealand higher education for life after
the ‘Global Financial Crisis’
Professor Nigel Healey
Pro-Vice-Chancellor, University of Canterbury
Overview
Some axioms of higher education Orthodox policy prescriptions for higher education Internal contradictions in the university ‘business model’ Special features of the New Zealand system Where are we? Some possible ways forward
(Linked) axioms of higher education
Investment in (higher) education increases productivity and promotes economic growth – especially in a knowledge economy
Higher education transforms the life chances of those educated – promotes social harmony
The gains to society of an educated population exceed those to the educated individuals (through higher productivity and earnings) – there are positive ‘spillover effects’
Orthodox policy prescriptions
Countries should aim to increase overall participation rates in higher education
Policy should focus on raising the participation rates of socially disadvantaged or under-represented groups – ‘social inclusion’, ‘widening access’
Governments should provide (at below cost) or subsidise higher education to ensure optimal take-up Such support may be targeted at subjects where the positive
spillovers are particularly high (eg, teacher training, medicine)…
…or at lower income groups who are less able/willing to fund an investment in higher education
Proportion of 25-64 year olds who have studied at tertiary level
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 -
5
10
15
20
25
30
35
40
45
OECD
New Zealand
Source: OECD Education at a Glance 2009
New Zealand university participation rates by ethnicity, 2008
10.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
Pakeha 18-19Pakeha 20-24Maori 18-19Maori 20-24Pasifika 18-19Pasifika 20-24Asian 18-19Asian 20-24
Source: Ministry of Education
Internal contradictions in the university ‘business model’
Growing participation and social inclusion increases the cost to the taxpayer of higher education
Higher education is an increasingly international sector, in which NZ universities have to compete for qualified faculty – adding to costs
Public subsidies cannot be increased fast enough to sustain the system
Governments have been forced to: introduce (regulated) domestic tuition fees introduce full-cost international tuition fees
The cost of the NZ tertiary system ($m)
1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Student loansTuition subsidiesStudent allowances
Source: Ministry of Education
Direct Government Funding to Universities
2000 2001 2002 2003 2004 2005 2006 2007 2008$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
Total Government FundingEFTS Vote
Source: Ministry of Education
University domestic versus international tuition fees
Source: Ministry of Education
2000 2001 2002 2003 2004 2005 2006 2007 2008$0
$5,000
$10,000
$15,000
$20,000
$25,000
Average Domestic FeeAverage International FeeAverage Domestic Tuition Fee + EFTS Subsidy
Is the business model sustainable?
The global financial crisis has caused fiscal stress in most developed economies and will severely constrain public subsidies to higher education in the medium term
Raising domestic fees must (at some point) reduce participation rates – especially amongst lower socio-economic groups
Increasing international enrolments in an increasingly competitive, post-Bologna environment requires rethinking university strategy – especially in terms of qualification structures
New Zealand government debt – projections based on historic spending
Source: The Treasury's Long-term Fiscal Statement
New Zealand university international EFTS
2000 2001 2002 2003 2004 2005 2006 2007 20080
5,000
10,000
15,000
20,000
25,000
30,000
Source: Ministry of Education
International student mobility
2000 2001 2002 2003 2004 2005 2006 2007 -
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
Foreign students enrolled worldwideForeign students enrolled in OECD countries
Source: OECD Education at a Glance 2009
Changes in international enrolments 2000 = 100
2000 2001 2002 2003 2004 2005 2006 2007 20080.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
400.00
Foreign students enrolled in OECD countriesForeign students enrolled in New Zealand
Sources: Ministry of Education, OECD Education at a Glance 2009
Structure of universities’ tuition revenue
2000 2001 2002 2003 2004 2005 2006 2007 20080.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Domestic student fees as % of total revenueInternational student fees as % of total revenueInternational EFTS as % total EFTS
Source: Ministry of Education
Graph illustrates current dependence on government funding (44% in 2008) and
disproportionate contribution of international EFTS at the peak in 2004-05
Some special features of the New Zealand system
Open enrolment University entrance at NCEA Open entry at 20+ for domestic students (citizens and
permanent residents)
‘Americanisation’ of undergraduate education Broad general degrees with high degree of flexibility Liberal progression standards
Completion times vs completion rates
Illustrative academic progression policies
The University of Auckland A student who has twice enrolled in, but has failed to be credited with
a pass in, a course is not entitled to enrol again in that course other than in exceptional circumstances approved by Senate or its representative.
Satisfactory progress: a student is required to attain a Grade Point Average of at least 0.8 in the last two semesters in which they were enrolled.
http://www.calendar.auckland.ac.nz/regulations/academic/enrolment-and-programme.html
Victoria University of Wellington Satisfactory progress: passing at least half the number of points
attempted in the last two consecutive trimesters of study, or passing at least 36 points in the most recent trimester.
http://policy.vuw.ac.nz/Amphora!~~policy.vuw.ac.nz~POLICY~000000000900.pdf
Comparative completion rates
Denm
ark
Finla
nd
Fran
ce
Germ
any
Japa
n
New Z
eala
nd
Norway
Unite
d Kin
gdom
OECD a
vera
ge0
10
20
30
40
50
60
70
80
90
100
Completion Rates (at least 5A/5B Programme)Left Without Tertiary Quali-fication
Source: OECD Education at a Glance 2009
Pass and completion rates for bachelors degrees, 2004-08
10%
10%
20%
30%
40%
50%
60%
70%
80%
90%
% courses passed% students passing all courses"% students graduating after 5 years% students passing all courses without graduating after 5 years
Source: Ministry of Education
Some unintended consequences
Costs - increases average cost per graduate Student motivation
Creates a culture amongst weaker students of ‘just doing enough’
In extremis, being a student is a lifestyle choice Top students as good as anywhere, average students may
be less motivated
Staff attitudes ‘Try and try again’ system means that staff do not ‘own’
retention issues – seen as natural consequence of public policy or a problem for support services
Where are we?
The ‘business model’ is unsustainable There is no more public money Domestic tuition fees will have to rise Increased international enrolments do not offer a
short-term ‘fix’ – but may be part of the longer-term solution
Open entry and public funding based on capped enrolments are incompatible (penalties for low completion rates just compound the confusion)
The Way Forward? (1)
Make better use of existing resources Admit only students with the ability and motivation to
succeed to university Revise NZQA UE requirements (in process), end open entry
and separately fund university foundation programmes across the sector
Tighten and align university progression standards with public policy (access to allowances/loans)
Incentivise universities to target support on, and improve participation and completion rates for, underrepresented groups (eg, PhD model)
The Way Forward? (2)
Grow new resources Accept private rate of return is different for different
subjects and levels (business vs history, MBA vs PhD) Allow greater flexibility to universities to charge differential
domestic tuition fees (as HECS) Position New Zealand as a postgraduate provider for
international students Requires radical review of university qualifications for
post-Bologna world: 3+2+3 Melbourne model? 4+1+3 US? 3+1+3 UK?
A paradox to conclude
New Zealand universities are research-intensive, highly regarded internationally
In WUR, they perform well against highly selective universities from higher pc GDP income countries
But they are mass market, open entry institutions Research and advanced study is heavily cross-subsidised by
large level 100 courses with high drop-out and failure rates Need to recognise that moving from open entry and improving
completion rates fundamentally challenges the way New Zealand universities are organised
Herein lies a central challenge, not for government, but for us
