Friday, November 14, 2008

More on funding!

I have had quite a bit of feedback about the recent ODT article - all positive at this point, and some genuine enquiry as to what exactly is going on with tertiary funding. Actually, I tell a fib - one lot of feedback wasn't so complementary - that which came from TEC itself!

Now, it is understandable that TEC is sensitive to criticism about the funding of the sector - afterall, government votes the funding and they merely administer it. And they tell me they have set out to administer funding in a fair and transparent way. So, there are two issues for us to think about: is there enough money to fund an effective, high quality tertiary sector? Is the money that has been allocated to the sector wisely distributed?

Let's look at the adequacy question first of all. My view is a resounding "NO" - the sector suffers from systemic underfunding, and cannot even sustain its core business of teaching and learning, let alone meet a host of other objectives which government has set for us. How do I know this? Simply because there is hard (2007) data now available that shows that on average polytechnics lose money on core business - an average loss of nearly 9% in 2007, although I understand that one or two institutions may have managed a very small surplus. Overall, several institutions did return a small surplus in 2007, but this was a result of things like one off grants, interest earned on retained earnings and cafetaria profits! Bring on the polytechnic weekly cake stall! Actually, if every staff member at Otago Polytechnic baked a cake every week and assuming we could sell all of them we would get a surplus of $200,000 for the year!!

But I digress! No institutions in the polytechnic sector in 2007 actually came within a bulls roar of a surplus of 3% -5%, which the wise men in TAMU constantly cite as our target. Now, it is possible that EVERY polytechnic in the country is extremely inefficient, and that is the reason for the deficits. This is, of course, the view which pervades TEC, but it is simply not credible. Most institutions have been reviewing every activity and pruning costs and laying off staff for nearly 5 years now. And every year costs increase at a rate in excess of the inflation adjustments which government reluctantly grants us, enforcing "productivity " gains as a matter of routine management.

So, the evidence speaks for itself, and has done so for several years. Indeed, just over three years ago the then Minister of Tertiary Education ( or was it the Associate Minister of Education - Tertiary) Mallard called together the CEOs and Council Chairs of the sector to acknowledge that the sector was in some considerable difficulty, to urge us not to take precipitate action ( aka laying off staff) and to announce that Government was setting up a significant fund to help polytechnics through problems he recognised as not of our making. These were problems such as low class sizes and the costs of delivery to regional communities. The fund was the now infamous "Quality Reinvestment Fund".

Less than a year later the then CEO of TEC, Janice Shiner, assured the CEOs in the sector that "once we have right sized you, we will fund you properly" - and went on to clarify that "properly" meant being funded for a surplus. Well, we have all been "right sized" - that is what the "investing in a plan" process is all about. But alas, the funding cupboard is bare, the deficits pile up and the polytechnic infrastructure continues to deteriorate.

I think this bit of potted history is important, because it reminds us that our funding problems have been acknowledged in the recent past. It is also inconvenient, because someone forgot to budget the resources to fix the problems. And none of the underlying problems have gone away. Class sizes in polytechnics generally remain below the optimum, and our regional populations have continued to live in the regions! Jolly unreasonable of them don't you think.

But has TEC done a good job in administering the funding system? Actually, no! First of all, TEC has vigorously held to the view that " there is plenty of money in the sector" and all that needed to happen was for this to be redistributed. Those who had too much would get less, and those who were short on funds would get more. This has not proven to be the case at all. What's more TEC has continued to advise government that there was plenty of money overall, thereby undermining the case for improved funding. It is true that TEC did persuade government to increase funding to the sector this year by some $20m - gratefully received, but short of the mark.

Actually, it is not a huge amount of extra funding that is required - about $40m/$50m pa ( an increase of around 7%/8%) will do the trick. Is this reasonable to expect? Yes, in my view, and especially if we consider that Labour was prepared to increase student support funding by $200m pa, and National is on record to increase research funding to universities by over $300m pa.

We should also highlight that TEC has managed to waste a fair bit of precious funding as well. The central bureacracy has increased exponentially, and whilst the basic investment planning/management process is sound, the stakeholder management process is not. There is literally an army of bureacrats roaming the country with a mission to improve the relationships amongst all of the players in the sector. And micro management is alive and well. It is difficult to get an accurate handle on what money could transfer from the TEC bureacracy to direct funding of provision, but $15m pa will not be far off the mark - about a third of what is needed to fix the sector!

Well, this may read like a bit of a whinge - apologies if that is so. However, funding IS the big issue. If we cannot convince our owners - government- to get the funding right we will never realise the enormous potential our sector has. So, join me - lobby a politician or two, and ensure a few concerned citizens understand the situation polytechnics are in!


Sarah Stewart said...

How do you feel our new government will affect our every day business?

Leigh Blackall said...

Its not a whinge at all Phil, for me it is shining a light (all be your perspective) on a government agency and its recent history where there was largely no light before. I mean, sure I could spend a few days, maybe weeks browsing their websites, reports and meeting minutes, but to be honest I prefer to spend 15 minutes reading your perspective and use that as a basis to investigate from there. To this end it would be very helpful if you could provide hyperlinks to the things you reference.

Another thing relating to funding of tertiary education that I would like to hear managerial comment on is to do with a longer historical sample. Say 1970 til now. The free education afforded to baby boomers compared to the user pay system today. To be honest, I don't exactly know how it worked in NZ, but in Australia there was this big population known as boomers, and they got free education (or the government funded it to the hilt to be precise). Now there's relatively small student population we might call Ys and Zs and they pay high fees and are left with hefty debts. And in NZ, those study loans accrue interest! Where did all the boomers end up? Well we have a lot of teachers now don't we... maybe not though, as you say - we've been resized.

My main question is, how could the government of the day back in the free education years afford free education for so many boomers, while the government of the day today makes kids pay. The population of NZ in 1975 was 3,143,700. Today it is just over 4 million. Was there like 600% more funding to education in the 70s? Or has the cost of education increased 1000s of percent? What could we do to get back to free education and not just enough to get by?

phil said...

Sarah -I don't think there will be much of an impact on our everyday business as a result of the change in government, and that is because National is on record stating their agreement with the broader tertiary funding/investing in a plan approach. If they do go for a reduction in the TEC bureaucracy that will be helpful at one level, but is not likely to affect what goes on in our classrooms. The only thing that will affect that is a change in funding!

Interesting questions , Leigh, about the good old days of "free" education. The decisions to make students pay for a share of their tertiary education were as much a consequence of ideology as of national economic necessity. And both the ideology - education is not just a public good, but also is a private good - and the economic imperatives are shared by most parties across the political spectrum.
How could we return to the good old days? Only by making some cold hard choices! What areas of government spending would we give up, because we would need to give up about $500million worth ( assuming my maths and memory is correct). Now this was a goer a couple of years ago when government surpluses were so high, but would be a pipedream now. Also, if we return to no fees for all, what do we do with all of that accumulated student debt - several billion dollars of which relates to money borrowed for fees.
Personally I would be a fan for no student fees ahead of a universal student living allowance, because I believe this would give a better result in terms of institutional viability. But there is also the counter argument that what we do not pay for we do not value so much!

Sarah Stewart said...

It's funny how my opinion on the matters of funding has changed since my kids got to the age where they can/do go to uni/polytech. My daughter is very rapidly accumulating a good size student loan for her media degree, but very unsure how/if she'll get a job at the need of it. And my son has refused to go to college/uni because of the same reason. What makes it especially hard for them both is that they do not know what they want to 'do' as in work, so getting a huge debt in the mean time while they work this out is problematic.

Leigh Blackall said...

"Problematic" puts it a bit lightly Sarah.

I think your suggestion is a good one Phil. As it is now, we have some young students who are clearly only doing a course so as to access the student allowance. They clearly don't care about the debt. I think our sector is borderline guilty of exploiting that age group's naivety. They are after all a pretty much captured market so long as we are the gate keepers to their employment.

So having young kids enroll in courses without much of a motivation to actually do the course, is a real downer for the course itself. I don't think there actually is much of a sense of user pays, and I don't think its hard to show that that sort of rationalism has failed. despite the recent kiwi election results.

So, I think now is the time to organise a lobby back to the "good old days". We have a student union voice that is pretty motivated, and we have all the managers who happen to be boomer's and would likely feel some level of empathy and shame for the rot that set in on their watch. We wait any longer and there will be no one left to remember the "good old days", and then we'll have no chance.

phil said...

This issue of young people not knowing what they want to "do" is an interesting one. Why do we suppose that studying is the right thing to undertake while making up one's mind about future employment? Why not encourage them to work for awhile, and return to
study when it has more of a purpose.I think we generally provide poor career advice to school leavers in particular, because we promote more study as the default position.For many this will be OK but for significant numbers more school is not the answer at all. What we then get is the lack of motivation that we hear so much about.
And as for that lack of motivation - perhaps there are answers in how we construct and deliver our programmes and the courses within them.Do we have some responsibilities here, both to ensure that what we offer is genuinely inspiring, and to design programmes with a lot more flexibility so that students who change their minds( or make up their minds and refocus their study in another discipline or vocational area )do not lose the academic credit they have built up already. But we seem to vigorously resist building the necessary flexibility into our programmes, especially in the first and second semesters of study. We also vigorously resist having common elements across our programmes, even when the same learner capabilities are being developed. I put this down to a form of academic preciousness - learning must be done our way!! Have the americans got something right here - where they insist on a liberal general education as a core part of all programmes?
My view is that we have no show of winding back the user pays clock, and returning to fully government funded tertiary education, so we may as well focus our energies on what we can change ie what we do!

Sarah Stewart said...

I have to say that I have come to the concolusion that my kids should work first before deciding about higher ed, but of course, they've got to get a job first. But I believe its much easier to study when you're young, free and single which is why I try to encourage kids to go to higher ed asap. But I'm not sure how helpful their careers advisers are at school.

Leigh Blackall said...

Agreed Phil, 100%.. right up to not being able to wind the clock back. The flexibility you describe is what we are working towards, but the academic pressiousness you describe is a significant hurdle. In some ways, the use of the wiki - with its inherent collaborative features and global audience, is helping us to open that space for discussion.

I had hoped to see a front page spread of our boss using the boomers to lever the funding argument, but I see the line in the sand. I think fees are a significant barrier, and as the generation of students get out there and start realising the interest and limitations of their debts, their word of mouth will do exactly what you say.. convince possibly 70% of our current students to go into work first. At least 30% of them will not go into training or higher education, and many of their employees will offer them in house training instead of using the Polytechnics.

Wayne said...

Hi Phil, A thought provoking post and equally interesting comments coming in.

The macro-economics and socio-political economy of post-secondary education is a fascinating an intriguing field -- both at national and international levels.

We all know that tertiary education is not a perfect economy --- i.e. it does not behave strictly according to the market rules of a pure economy. For example, at an international level given that demand for education far exceeds supply one would expect to see significantly more providers entering the market and driving the price of education down. But of course, this doesn't happen and is one of the reasons state intervention is necessary to subsidise education -- an investment in human capital for the future. Similarly (and paradoxically) we all know that rising unemployment and times of economic recession are good for education as people try to re-skill for employability. Gee -- we live in a crazy world ;-).

The reference to the baby boomers and "free" education is also significant. The shift from elitism to massification of tertiary education is a relativity new phenomenon --- a post World War II achievement. As late as 1973 Trow's taxonomy set the threshold for classifying the gross enrolment ratio from elitist to mass education at 15% for the relevant age cohort! I don't have current figures, but NZ's gross enrolment ratio for tertiary must be in the region of 90%. So while countries have succeeded in expanding participation during the Baby Boomer years -- Governments have not found ways to effectively fund the increase in sustainable ways :-(. Hence the increase in student debt and rising student fees. In the US the fee increases have exceeded the inflation index for the last two decades! Fundamentally -- not a very sustainable system.

Otago Polytechnic's strategy concerning sustainability in education and OER sketches a promising future. We've got to get a lot smarter in how we operate and leverage the potential of technology and OER in reducing cost, widening access and improving the quality of educational provision.

I think Otago Poly is on the right path -- and will provide the world with examples worth emulating :-)