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Budget verdict – meagre for universities

NZVCC Electronic News Bulletin Budget Special 27 May 2008

Budget verdict – meagre for universities

The NZVCC has described the 2008 Budget as meagre in its impact on the university system with relatively modest amounts assigned for operating, capital and research requirements.

SAC funding
Student Achievement Component (SAC) funding for universities in 2008/09 totals $870.2 million which is GST exclusive but includes a CPI adjustment (2.6 per cent). A table published by the Tertiary Education Commission shows the CPI adjustment contributing an additional $11.3 million for 2008/09 with a further $10.8 million in SAC funding for access in priority areas.

Capital funding
More significant is new capital funding of $95 million over three years for the tertiary education sector, which when coupled with re-prioritised funding, means that a total $112 million is available through to 2010/11. At this stage indications are that the money will support infrastructure maintenance and development investment.

University salaries
The tripartite process involving the Government, universities and university unions has secured an additional $15 million a year for university salaries which is shown in the Budget as “Priorities for Focus: Strengthening Universities”. This amount is less than the Government has contributed in the previous two years ($20 million and $26 million). NZVCC chair Professor Roger Field described the $15 million as small in relation to the size of the problem, particularly the increasing gap between New Zealand and Australian academic salaries.

An increase of $7.2 million for 2008/09 (3.2 per cent above baseline) to the Performance-Based Research Fund will be followed by a further $35 million to be added over the following three years to bring the fund to the targeted $250 million by 2012. Professor David Skegg, chair of the NZVCC Research Committee, pointed out that the size of the fund’s increase for 2008/09 had to viewed alongside inflation currently running well above three per cent.

Base grant
A TEC fact sheet describing how the 2008 Budget affects universities says the Public Provider Base Grant will now include CPI adjustments and will increase “to reflect growth in SAC volumes”. A table identifies the grant as $116.4 million in 2008/09, rising to $123 million in 2009/10.

TEC now refers to CPI adjustments as “indexation” in its Budget tables which raises the issue of the difference between the Consumer Price Index and the actual annual inflation that universities face. The universities’ price index has been established as 1.6 times the rate of CPI, largely from the need to keep university academic salaries remotely competitive on an international basis.

Fees maxima
In previous years the fees maxima policy has been adjusted for CPI so this point was of interest to university representatives who attended a TEC briefing on the Budget. They were told that no decision was available on the level of tuition fees that could be charged in 2009 and that an announcement would probably be made in June.

Revenue controls
This situation underlines the difficulties universities face with Government policy which restricts their revenue growth through controls on tuitions fees and SAC funding adjustments around the rate of inflation. A NZVCC media release commenting on the Budget picked up on this point with Professor Field noting that the eight universities would need a revenue increase of $230 million a year to recover from under investment in the past 15 years.

Student aid
The student vote again got a Budget nod with the age for student allowance parental income testing lowered from 25 to 24 years, and the allowance parental income threshold increased by 10 per cent. The living costs component of the Student Loan Scheme will now be adjusted for CPI on an annual basis, with an initial increase from $150 to $155 per week. The number of bonded merit scholarships available through StudyLink will increase from 1000 to 1500 for the 2009 academic year.

On this aspect of the Budget, Professor Field noted that further increases in financial support for students, while benefiting some individuals, did nothing to address the investment imbalance which saw Government spending more than twice as much as the OECD average on financial assistance for students. That imbalance meant that the university system’s infrastructure was being progressively run down as governments under invested in the institutions.

As far as Vote: Research, Science and Technology is concerned, the Budget contained modest increases in research funds of interest to universities. While the Marsden Fund will grow by $13 million over four years, only $2 million of that is available in 2008/09. The boost to health research is more immediate, increasing by $4 million a year with a further $2 million for diabetes and obesity research, $1 million of that from Vote: Health. New funds will be allocated for high-technology platforms and energy research – the first of the Transformational Research, Science and Technology (TRST) areas - with $24 million over four years for the platforms and $18.5 million over the same period for energy. An addition $4 million over four years goes to scholarships through the Rutherford Foundation, a charitable trust established by the Royal Society to provide funding for PhD education, postdoctoral research and early career development in science.

The three main output classes administered by the Foundation for Research, Science and Technology received significant boosts from the Budget. Research for Industry increases by $14 million in 2008/09, Environment by $7.5 million and the New Economy Research Fund, $6 million.

Commenting on the Budget’s impact on university research, Professor Skegg said the immediate increase to the Marsden Fund would barely keep up with inflation at a time when 90 per cent of fund applications were unsuccessful. Further, universities had limited access to the major output classes administered by FRST.

“Recent proposals to increase the level of negotiated funding and Budget moves to earmark funds for national databases and long-term, outcome-based investment funding, reduce the size of the contestable pool for universities. These developments should be viewed in the context of universities remaining the largest providers of research in New Zealand and will limit their ability to contribute to the Government’s innovation and economic transformation agenda.”

The Budget also saw a boost for the capability building fund associated with KAREN (Kiwi Advanced Research and Education Network). The amount involved for 2008/09 is $5 million, of which $3.8 million has been earmarked for e-science.

Skills Strategy
Universities have been trying to establish what part they should play in the Government’s Skills Strategy, given their role in training the bulk of the professional workforce. With the Budget investing $168 million over four years in the strategy to build literacy and numeracy in the workplace, TEC has advised that some of that funding might be available to the colleges of education now embedded in universities.

Health workforce
Vote: Health contains an additional $60 million over four years to improve the health workforce. Three areas are targeted; workforce development, Māori nursing workforce development and Pacific health provider and workforce development. At this stage it is not clear to what extent universities will be involved in this initiative.


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