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AUS Tertiary Update Special Budget edition

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Special Budget 2002 edition 24 May 2002
Welcome to this special Budget edition of AUS Tertiary Update

The main points of interest for the university sector in this year's Budget include:
„h A 4.5% increase in the level of government tuition subsidy for those institutions that agree to maintain student fees at 2000 levels
„h An Integrated Funding Formula (IFF) with the following components:
1. A student component to replace the Universal Tertiary Tuition Allowance or EFTS system. This will have a performance-based component built in.
2. A research component distributed through the Performance-Based Research Fund. The criteria for this will be based on output as well as peer assessment of researchers.
3. A Strategic Development Fund.
„h The Tertiary Education Commission, which will monitor institutions and allocate funding, will be established on 1 July 2002.
„h Regulations will enable government to prescribe maximums for fees with effect from the 2004 academic year.
„h Three-year funding will be introduced. Its introduction will be staggered.
„h A funding category review will be undertaken, to ensure that funding is aligned with strategic priorities.
„h Funding for Private Training Establishments (PTEs) will be capped next year at $146 million, and the PTE Student Component will not include the nominal 9.5% for capital costs available to public institutions. This is in recognition of government¡¦s role in funding capital investment in the public sector.

Comment on the Budget from the university sector

The Association of University Staff (AUS) says the new funding formula to be introduced from 2004 is a profound change and hopes it will mark a turning point for tertiary education in New Zealand. AUS National President, Dr Grant Duncan, says that while there is not a lot of new funding being invested in the sector in 2003, some of the results of the lengthy reform process are now starting to show through. "We¡¦re hopeful that the future developments for university funding revealed in this Budget will assist universities and their staff to develop more fully their capabilities and to contribute their best to our society," he says. Highlights of the Budget for university staff include the emphasis placed on quality and research productivity rather than just student numbers in determining future funding levels ¡V an improvement, the union says, on the "bums on seats" funding model of the past. It also welcomes the introduction of mechanisms to align funding with strategic priorities as well as the shift to giving public institutions priority in public funding. Until now, private training establishments have been funded in the same way as public institutions, without taking account of some of the special responsibilities of the public sector. The result was a huge flow of funds from the public-sector into a relatively unregulated private sector. Dr Duncan also sees the government¡¦s Skills Forecasting Plan as a positive development and emphasised the need to apply this to the university workforce.
While welcoming the general tenor of the Budget, Dr Duncan says there is also room for caution. "There are still a lot of unanswered questions about the details of the proposed funding formula, and AUS looks forward to contributing constructively to its development." That included contributing to the monitoring and evaluation mechanisms that will be used by the Tertiary Education Commission when it begins operations in a little over a month's time. "It is imperative that genuine and effective partnerships be established with the sector to determine critical issues such as how to evaluate teaching quality and research excellence," Dr Duncan says. "The worst outcome would be to end up with a bureaucratic model that does not reflect the sector¡¦s capabilities and values."
AUS also has reservations about the potential impact of the Performance-based Research Fund, especially on academics who are in the early stages of their career and who may find it difficult to initiate research projects while managing high teaching workloads. Women academics have also been disadvantaged by similar schemes in other countries.

On funding levels, AUS says the 4.5% increase in the government subsidy per student announced yesterday is a small improvement, but not enough. There is still a long way to go to even return to the funding levels of the early 1990s. When the effect of the fees freeze is taken into account, AUS says the net gain for universities is only 3% and the figure barely makes an impact when inflation forecasts of 1.7% to 2.5% are taken into account. Dr Duncan says the increase also goes no way towards making up the funding cuts of the 1990s. "Whatever good ideas this Budget may introduce", he says, "the universities will not be able to deliver their best without significantly increased reinvestment. If the government can muster the resources and the foresight to deliver substantial new funding to the sector, then it will have real social, cultural and economic pay-offs in the future." AUS has estimated that it would take cumulative annual increases of 12% in the government¡¦s tuition subsidy over three years to make any real progress in rebuilding institutional capacity and bringing investment in the universities and their staff up to internationally comparable levels.

Even though the level of funding is not enough to replenish university coffers after more than a decade of underfunding, AUS believes the 4.5% increase announced in the Budget is an improvement on the last two years. It should allow management to produce better salary offers when negotiations resume later this year in most universities, allowing staff to recoup some of the losses of the 1990s. The last round of negotiations for the 2002 year resulted in settlements that were mostly in the 3% to 4% range.
AUS also believes the trend towards centralised control of university funding through regulations to cap student fees should result in salary settlements being pre-determined as well. The government proposes introducing the fees cap in 2004, taking away from university councils any discretion in setting fees. Dr Duncan says the government may now just as well regulate for a more collaborative mechanism to set university staff salaries nationwide rather than on a institution-by-institution basis as happens now. "The removal of discretion from university councils and managers effectively means that the employers¡¦ ability to pay for salary increases is determined from the centre," he says. "If government wants the capability to ¡¥steer¡¦ the sector from the centre, then it will not be able to avoid steering the salary-setting process. After all, salaries are the biggest budget item for universities." AUS supports the idea of a national collective agreement and a more centralised bargaining process for university salaries, but to date the government has refused to discuss the idea.

AUS Tertiary Update is produced weekly on Thursdays and distributed freely to members of the union and others. Back issues are archived on the AUS website:

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