Budget Briefing Macquarie University by alicejenny

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									                                                                                                Council
                                                                                                29 06 2007
                                                                                                Item E.1

                                     MACQUARIE UNIVERSITY

                    VICE-CHANCELLOR’S REPORT TO COUNCIL: PART 1
                                                      JUNE 2007

                                          2007–08 Federal Budget
The 2007-08 Budget is regarded as an “Education” budget due to its significant contribution to education and in
particular the University sector. The government committed $5 billion from its surplus to the Higher Education
Endowment Fund and an additional $1.7 billion over 4 years to a range of other initiatives. These can be
classified in four broad categories:
1) The Higher Education Endowment Fund (HEEF)
2) Increased funding and greater flexibility
3) Student support
4) Targeted programs

The Labor Opposition has, for the last six months, emphasised the need to improve the nation’s productivity. A
cornerstone of the Opposition’s attack on the Government has been a supposed failure to provide sufficient
funds for education. The 2007-08 Budget attempted to address this perception and provided a significant boost
to higher education. The present analysis focuses mainly on the budget implications for Macquarie. As is often
the case with new policies, the full effect cannot be determined until the detail is revealed. The impact on
Macquarie will be better understood once DEST has provided universities with more details.




1) The Higher Education Endowment Fund (HEEF)
The Higher Education Endowment Fund was the centrepiece of the education budget. The intention of the
Government is to set aside $5 billion in a perpetual investment fund to serve as a funding source for the major
capital requirements of universities. The HEEF is loosely based on US university endowments which never
spend their capital and always reinvest part of their earnings to maintain and grow the value of the fund. The
remainder of their earnings is used for university purposes.

The government estimates that the HEEF will provide universities with an additional $300 million per annum or
$912 million over the next triennium. This translates to an investment return of six percent per year, which
seems rather conservative. (Please see my paper on endowments elsewhere in this agenda.) The minister has
indicated that the proceeds of the HEEF may eventually replace the Commonwealth’s current capital
development funds, an important reminder what the government gives with one hand, it may well take away
with the other.

HEEF will be managed by an independent board with a requirement to use the proceeds to provide quality
infrastructure and support consistent with government policy in relation to “diversity, specialisation and
responsiveness to labour market needs”. Priority will be given to universities that raise matching funds from
State governments, industry, alumni or members of the public. Private contributions to HEEF will be tax
deductible.




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Steven Schwartz                                                                               June, 2007

For Macquarie, the HEEF offers a funding opportunity for major capital initiatives, particularly those that
involve external partnerships and funding. The specific Macquarie projects that would be suitable for
application under HEEF include:
   Australian School of Advanced Medicine– there is an opportunity to leverage existing private funding to
    acquire major equipment and establish teaching and research facilities.
   Telecommunication Research and Training Centre (TRTC) – this already has a commitment from industry
    of $23 million and so the balance of $16 million may be sought from HEEF.




2) Increased funding and greater flexibility
In future, universities will be allowed to over- or under-enrol by up to five percent—a marked increase from the
current one percent. The government will also make it easier for universities to meet student demand by
allowing universities to move student places between different courses. The government anticipates that
universities will use this flexibility to increase student numbers to the five percent limit. This would result in a
50,000 new student places brining universities an extra $211 million over the next four years.

Macquarie University is currently 0.53% over quota for Commonwealth supported students. However, in some
sub-areas, we are under-enrolled. For example, in 2006, we missed our Engineering and Science target by 245
places or 27.59%. To date, DEST has not required that we refund the money we received for these places; this
is still being negotiated. Needless to say, having the flexibility to move places between courses and having a
larger tolerance band will make it easier for Macquarie to meet our DEST targets.

The government has removed all restrictions over the number of full fee-paying undergraduate places, which
were previously restricted to 35% of Commonwealth funded places (25% for medicine). Macquarie has no
undergraduate programs that are currently anywhere near the existing 35% restriction and therefore this
initiative will have no financial implications for us. It nonetheless allows Macquarie the opportunity to
maximise full fee-paying places once all HECS places have been filled.

The budget reduces the discipline clusters that DEST uses for funding from 12 – 5 as illustrated in Table 1.

                           Table 1. New funding clusters and subsidies
    Disciplines in new clusters                              Old Cluster                 New
                                                             Funding in                  Cluster
                                                             2007                        Funding
                                                                                         in 2008
    Law                                                            $1,642            )   $1,674
    Accounting, Administration, Economics, Commerce                $2,703            )
    Humanities                                                     $4,556                $4,647
    Mathematics and Statistics                                     $5,381            )
    Behavioural Science and Science Studies                        $7,233            )   $8,217
    Education                                                      $7,950            )
    Computing, Built Environment, other Health                     $8,057            )
    Clinical Psychology                                            $7,233            )
    Allied Health                                                  $8,057            )   $10,106
    Foreign Languages, Visual and Performing Arts                  $9,908            )
    Nursing                                                        $10,953               $11,280
    Engineering, Science, Surveying                                $13,411               $14,363
    Medicine, Dentistry and Veterinary Science                     $16,810           )   $18,227
    Agriculture                                                    $17,870           )




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Steven Schwartz                                                                                                             June, 2007

There will be significant changes to the Commonwealth subsidy for different subjects. Changes to the
Commonwealth Grants Scheme (CGS) with a reduction in clusters will result in changes in CGS funding as
summarised in Table 2.

                              Table 2. Changes in subject funding
Accounting, Administration, Economic, Commerce                                                                                  -$1029
Mathematics and Statistics                                                                                                       $2729
Allied Health                                                                                                                    $1889
Engineering, Science and Surveying                                                                                               $ 684
Clinical Psychology                                                                                                              $2729
Education                                                                                                                        $ 109
Nursing                                                                                                                          $ 109
Behavioural Science and Social Studies                                                                                           $ 840
Medicine, Dentistry, Veterinary Science                                                                                          $1081


Table 3 provides an analysis of the changes in the CGS income for 2008 on Macquarie.

                                                                     Table 3.
CALCULATION OF ESTIMATED 2008 COMMONWEALTH GRANT SCHEME INCOME

Post Federal Budget cluster adjustment

Cluster                                                        2007        2007          2007         2007           2008          2008         Variance
                                                            Estimated    Funding      Estimated    Estimated        Funding      Estimated
                                                             Student       Rate        Funding      Student          Rate         Funding       (Includes
                                                            Numbers      Pre-Budg       as per     Numbers         Post-Budg                    CPI Index)
                                                                                       Budget

                                                               (a)         (b)           (c)          (d)             (e)           (f)

                                                                                      (a) X (b)                                   (e) X (d)

Cluster 1 - Law                                                    941       1,642     1,545,122             941        1,674       1,575,234          30,112
Cluster 2 - Accounting, Admin,Econ,Commerce                      2,737       2,703     7,398,111           2,737        1,674       4,581,738     (2,816,373)
Cluster 3 - Humanities                                             924       4,556     4,209,744             924        4,647       4,293,828          84,084
Cluster 4 - Mathematics, Statistics                                555       5,381     2,986,455             555        8,217       4,560,435       1,573,980
Cluster 5 - Behavioural Sciences, Social Studies                 1,801       7,233    13,026,633           1,801        8,217      14,798,817       1,772,184
Cluster 6 - Computing, Built Environ, Health                       506       8,057     4,076,842             506        8,217       4,157,802          80,960
Cluster 7 - Foreign Languages, Visual and Performing Arts          825       9,908     8,174,100             825       10,106       8,337,450         163,350
Cluster 8 - Engineering, Science, Surveying Note 1                 631      13,411     8,462,341             631       14,383       9,075,673         613,332
Cluster 9 - Dentistry, Medicine, Vet Science                       114      16,810     1,916,340             114       18,227       2,077,878         161,538
Cluster 10 - Agriculture                                            75      17,870     1,340,250              75       18,227       1,367,025          26,775
Education                                                        1,414       7,950    11,241,300           1,414        8,217      11,618,838         377,538

Total                                                           10,523                64,377,238       10,523                      66,444,718      2,067,480

                                                                                     Percentage increase                                           3.21%
NOTE: No adjustments have been made for the new Clusters of Clinical Psychology and Allied Health. The University has
not received from DEST the new tables specifying what units are to be included in these new Clusters. When this
information is available it will increase funding but the amount is presently unquantified.


The new system results in an increase of some $2,067,480 or 3.21%. However $1,255,356 would have been
received by the University by way of indexation in any event –so, the real increase is $812,124 or 1.26%. The
reason for the small increase is the reduction in the subsidy for Accounting, Administration, Economics and
Commerce which, because of their large enrolments, will cost the University almost $3 million. However, the
Commonwealth has said that universities may increase the student contribution (HECS) for these subjects to the
amount charged for Law (these are now a combined discipline cluster). If we take up this opportunity, we will
increase HECS for students from $7,188 to $8,333. This matter is the subject of a separate paper in this agenda.
Increasing HECS for business-related courses, combined with the increases in subsidies to other courses, would
provide an overall budget increase of $3,716,081 (5.77%) excluding the indexation that would have flowed in
the 2008 funding.




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Steven Schwartz                                                                               June, 2007


3) Student Support
The Budget includes $222 million targeted towards direct support of students undertaking higher education.
Specific initiatives include:
   Expansion of the Commonwealth scholarship scheme from 8,500 to 12,000 places per year – these schemes
    need to be supported by the University and are usually assessed via the UAC admission process.
   Rent assistance for mature-age students – rent assistance for Austudy students (student 25 years and over).
    The government anticipates that 11,000 students could be eligible for rent assistance in 2008.
   Extension of Youth Allowance and Austudy for professional Masters – the Government will allow these
    study allowances to be available for students enrolled in Masters course-work programs that are required
    for entry to a profession or a pathway to professional entry.
   Indigenous Access Scholarships – DEST will provide a one-off payment of $4,000 when indigenous
    students take up either an undergraduate program or enabling program at a university. It is anticipated that
    this will be available to 1,000 indigenous students targeted at those relocating from remote or rural regions
    of Australia.


4) Targeted Programs
Diversity and Structural Adjustment Funding for Universities – the government has set aside $209 million
over four years to be allocated to universities to support strategies that better meet student and employer
demand. The fund is particularly focussed on addressing the capacity of universities to meet local market needs.
This fund incorporates the previous Collaboration and Structural Reform Fund. It is likely that this fund will be
directed towards regional institutions and newer universities; Macquarie is unlikely to benefit from this scheme.

Year 12 Aptitude Test - DEST will be piloting a national student aptitude test for tertiary admission with the
intention of making it available to 15% of Year 12 students across Australia from 2008 to 2010. The test they
are most interested in is the UniTest, which Macquarie will be testing in collaboration with Monash University
and the Australian National University. The aim of this collaboration is to use the test to find ‘hidden’ talent that
might not always be reflected in the UAI.




Steven Schwartz
VICE-CHANCELLOR




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