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Future directions for funding tertiary orgs.

4 April 2006 Media Statement

Ensuring quality and relevance – future directions for funding tertiary organisations

It is vital the tertiary education sector does better in producing the quality graduates we need to drive economic transformation, Tertiary Education Minister Michael Cullen said today.

Dr Cullen today outlined the objectives for the next stage of reforms that the government began in 2000.

"We have already made significant progress in improving quality and increasing participation in the tertiary education sector.

"This government has improved access to the sector by increasing funding for institutions. We have reduced the financial burden on students through interest free student loans. And we have revitalised industry training, increased funding for research and improved linkages between businesses and institutions.

"Now is the time to take the next steps to ensure the sector produces more of the kinds of skilled graduates we need to help drive the transformation of New Zealand into a high wage, knowledge-based economy.

"We want to put in place new incentives and mechanisms so that tertiary institutions are driven to improve the quality of courses and ensure they have greater relevance to the needs of the economy.

"Funding will no longer solely be driven by what students decide to enrol in. Rather we are moving to a system driven more by the outcomes we need so the government can achieve its economic and social priorities.

"We want a system that will also be flexible enough to cope with the changing skill needs of the economy.

"The changes will mean, for example, that courses that may have a low return to the organisation, but the potential for high uptake and be of great relevance, will be allowed to prosper.

The way forward involves:
- Defining the distinctive contributions of tertiary organisations and ensuring different parts of the sector work together in more complementary ways. We want to stop organisations operating in a fragmented way and ensure they play more to their strengths;

- Designing an alternative to the demand driven, simplistic Student Component funding system (EFTS). We want to invest in organisations based on plans agreed with government. These will build on existing profiles, but will be more detailed so we can be assured our investment is channelled into the highest priority areas;

- Developing a better quality assurance and monitoring system that focuses on outcomes. No longer will success be measured by the numbers of students enrolled, but by progress in lifting quality and meeting agreed goals. We need better ways of assessing the quality of the teaching and learning experience to ensure our investments have the highest return.

"The new arrangements will be designed to give both the government and organisations greater certainty about funding over the medium term. Therefore plans will be of a multi-year nature," said Dr Cullen.

Over the next three months the Tertiary Education Commission, New Zealand Qualifications Authority and Ministry of Education will consult with organisations and other key stakeholders. We expect to make decisions by the middle of the year with the aim of rolling out the new arrangements from 2008.

Dr Cullen stressed the changes will not mean less funding or fewer students.

"This is about achieving better accountability, quality and relevance. We spend $2.5 billion dollars a year on the tertiary sector. It is important for taxpayers, for students and their families that we are getting value for money. We are determined to ensure funds are well spent so the economic and social benefits of a tertiary education are maximised."


What changes are being proposed?

Organisations will be given more certainty about funding. A multi-year funding system will be introduced to avoid income fluctuating on the basis of changing student numbers.

This is likely to comprise base funding for agreed types and quantities of teaching and learning, using a formula with a more sophisticated range of weightings and more refined measures of participation and achievement than the current system.

Existing charters and profiles will be the mechanisms used to guide investment plans. Organisations will have to show they are meeting the skill and education needs of their region. That is why it is essential that at the heart of each profile there must be evidence that organisations have consulted with industry, researchers and the local community, and that their plans are aligned with the government’s economic strategies.

What do the changes mean for government funding?

The government wants greater certainty so that the money it invests in tertiary education delivers results. We want value for money for the taxpayers' investment and we want to have greater certainty than we have had in the recent past regarding the total level of government spending on tertiary education.

The government needs to be able to make explicit investment decisions, and to ensure that funds are not diverted into other lower priority areas. That means that we need to move away from the concept of ‘funding’ places towards one of ‘purchasing’ outputs.

What happens to the EFTS formula?

The government is moving to a funding system that places far less stress on student numbers and more on what institutions need to do to deliver agreed priorities.

Does this mean students won’t be able to study what they want to in the future?

The government is committed to a tertiary education system that offers access to high quality, relevant education and training so, overall, the opportunities to succeed will improve.

We want to maintain a broad and inclusive tertiary education system, but we want individual providers to focus on what they are good at. Not all providers will offer the same courses - therefore some institutions may not offer a particular qualification whereas others might.

Why the need for further reform?

Reforms since 2000 have helped the sector to head in the right direction, but further, more fundamental, change is necessary to make sure that the funding and quality and monitoring systems support a focus on quality, relevance and value-for-money.

It is important to note that we have made some major gains in tertiary education since 2000. We have provided the sector with a clear direction, increased expertise, improved relationships, and encouraged better relationships with business.

We have revitalised industry training, invested more money in research, and recently, we have limited courses that are of poor quality and lack successful outcomes for students.

The next set of changes will see the government adopt a more active approach in stating what we want to fund rather than just focusing on what we will not.

Will this mean more centralised control by the Tertiary Education Commission?

The TEC will, through working with organisations and the sector, seek to ensure that both providers and the tertiary education system as a whole are more focused on achieving national and regional goals.

In doing this it will be important for the TEC to support organisations to identify and analyse the information they need to assist them in their strategic planning, so that they can align their provision more closely to national and regional needs.

The TEC will negotiate and approve profiles (as it does now) that show how provision is aligned to these needs. It will monitor an institution’s performance against what is agreed in the profile, to ensure that outcomes are being achieved and public money is being well spent.

What about a funding increase?

Any new funding system will recognise that not all organisations are the same and that some face different costs. Any new funding system will aim to ensure that organisations are both educationally and financially sustainable.

Funding will be more differentiated across the sector in order to account for the different costs associated with different provision.

It will also take into account a particular organisation's situation. For instance a rural polytechnic may have more difficulties in attracting large numbers of students than a city-based polytechnic, so it may be given additional money to support smaller classes.

Will fees come down?

The new funding system is not part of the fee setting process, which is expected to remain as it is, with institutions setting fees within the maxima and a cap on the amount of increase each year.

A review of the Fee and Course Cost Maxima policy was due to be carried out this year. The current policy will be rolled over, for another year while the next step in the reforms take place.

What happens to Wananga?

Wananga play an important role in the sector as a distinctive type of tertiary institution. Their contribution to tertiary education is valued just as much as any other provider. These changes are about how the whole sector works together.

How much is this going to cost?

The cost of making these changes is not yet known as what will be implemented is still subject to consultation and yet to be decided.
These changes will ensure that the amount will be fiscally certain for both the government and organisations and that taxpayers are getting value-for-money.

How will the government deal with the likely financial impact on organisations?

The new funding system will aim to ensure that organisations are both educationally and financially sustainable.

Tertiary education agencies will continue to work with those organisations that are facing financial difficulties.

The Quality Reinvestment Programme is also currently available to polytechnics and wananga, to help them shift direction and align their certificate and diploma qualifications with the STEP and the needs of learners, employers and the community.

What happens next?

Over the next few months the three tertiary education agencies will consult with the sector in the areas of distinctive contributions, capability building, funding, quality and monitoring, and improving collaboration across the sector.

Following the consultation, cabinet papers will be developed and presented mid-year and, following approval of the intent of any policy change, more detailed work will be carried out.

The aim is that any changes to the way the sector operates will start to be rolled out in 2008.

The timeline is as follows:

- Consultation with the sector and its stakeholders – April-May 2006
- Implementation work within government agencies from the second half of 2006
- Demonstrable change underway in 2008

How will consultation take place?

Detailed information will be sent to stakeholders shortly. The TEC, Ministry of Education and NZQA will meet with stakeholder representatives over April and May. There will be opportunities to provide verbal as well as written feedback.

We want to hear what the sector has to say, as we want to get the next phase of policy development right.


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