SUBMISSION TO THE REVIEW OF HIGHER EDUCATION FINANCING AND POLICY
ASSOCIATION OF INDEPENDENT SCHOOLS OF VICTORIA INCORPORATED
20 Garden Street, South Yarra, Victoria
Issues raised in this submission are supported by the National Council of Independent Schools' Associations
APRIL 1997
Executive Summary
The Association seeks to provide input into the Review of Higher Education Financing and Policy on three key issues:
1. The relative resource equity between the schools sector and the higher education sector.
2. The relative equity of the taxation arrangements for schools and higher education institutions.
3. The impact of higher education policies on the efficiency and effectiveness of Australian schooling.
Each of these issues is relevant to themes 3 and 4 of the Review.
1 The relative resource equity between the schools sector and the higher education sector.
Average per capita expenditure from public sources is significantly greater for tertiary students in Australia compared with school age students, be they in government or in non-government schools, i.e. $3,983 per school age student compared with $8,907 per university student.
Evidence from the World Bank suggests that the greatest return on investment in education occurs with primary schooling, followed by secondary, then tertiary. If this evidence is applied to Australia, it would suggest that a radical redistribution of resources between higher education and schooling should occur.
The Association believes that the magnitude of the differential between school and higher education per capita funding requires the Review Committee to make specific comment on this and suggest strategies for reducing this inequity.
2. The relative equity of the taxation arrangements for schools and higher education institutions.
In any analysis of the taxation benefits available to universities as compared to schools, it is clear that a level playing field is not in operation. Universities, unlike schools, are able to attract tax deductions for recurrent gifts. Given the significant percentage of expenditure in education which goes towards recurrent purposes, especially teaching salaries, it is an important financial advantage afforded universities over schools.
The Association is strongly committed to increased private investment in both the public and private provision of schooling and higher education. It would argue, therefore, that the concessions available to higher education institutions should not be removed but rather extended to the schooling sectors, both government and non-government.
While it is acknowledged that recent economic reports including the report of the National Commission of Audit has recommended that there be a move away from the use of tax concessions, in order to contain government outlays in this area, this does not preclude an examination of alternative taxation arrangements which would deal equitably with the compulsory and post-compulsory sectors of education.
3. The impact of higher education policies on the efficiency and effectiveness of Australian schooling.
Alternative funding models such as the voucher which have the student, not the institution, as the focus of the resource allocation, open up more diverse opportunities for students to dictate their learning preferences and to discriminate in their choice of institutional approach.
Given the demonstrated capacity of providers of one type of learning to expand to meet new markets, especially those which emerge under an increasingly deregulated consumer-oriented market, it is feasible that schools and tertiary institutions will become active competitors for students and their funding.
Such developments would highlight even more starkly the need for an effective competitive neutrality policy between schools, TAFEs and universities in relation to taxation reform and public resource provision.
The Role of AISV
The Association of Independent Schools of Victoria has a membership of 169 Victorian independent schools, enrolling 83,000 students. AISV was established in 1949 to represent and promote the interests of Victorian independent schools.
Each independent school is an autonomous and legally incorporated body, responsible at law and to its school community for its philosophy, structure, management and operation, including the expenditure of private and public income and the employment of staff. As such the Association is not a system authority, rather it is a non profit service organisation to its membership, all of whom pay annual subscriptions for the Associations' services.
The objectives of the Association, as defined in its Statement of Purposes, include the following:
i) the right of a school community to decide its constitution and form of government;
ii) the right of a school community through its governing body to determine school policy including school enrolment, staffing, curriculum, co-curricular programs and discipline.
AISV is a Member Association of the National Council of Independent Schools' Associations.
INTRODUCTION
The economic, social and demographic trends facing Australia justify a far reaching, creative and positive review of the higher education sector’s funding and policy platforms.
With the ageing of the Australian population, increasing global competition and rapidly developing communications technology, the focus on the role of education and teaching and learning in assisting and managing these changes continues to intensify. However, the expectations of many that governments will provide expanding pools of public resources to meet the growing demands for "free" education, as well as the community’s expectations of life long learning opportunities have been dashed over recent years.
Increasingly, the role of governments is being refined, altered and restructured to accommodate changed philosophical, economic and social expectations about government responsibilities. As governments move to become funders rather than providers of a range of community services, the community has to adjust its attitudes and perspectives on the role and responsibilities of the private sector in the provision of services which were once the sole domain of government.
In education, particularly schooling, there has been a colourful history of both public and private provision of schooling in Australia. Despite the fact that State governments still have legislated obligations to provide "free, compulsory and secular education" to school age children, there is a renewed interest in the debate about funding alternatives and delivery mechanisms for schooling.
In part this interest is generated by the Commonwealth Government’s review of non-government school funding in particular, the Education Resources Index (ERI). For the Association, however, the interest in the broader questions of funding students’ learning has become the focus of its policy and strategy research project Funding Students' Learning for the Next Millennium, launched in May 1996. A copy of the Overview is contained as Attachment I.
The Project has four broad objectives:
There are a number of factors, apart from a change of Commonwealth Government in 1996, which led the Association to develop these goals and initiate the Project. These include:
While is it not the intention of this paper to explore each of these issues in detail, it is important to highlight the relevance of tax reform pressures and National Competition Policy because they relate to the key points AISV wishes to make to this Review.
KEY ISSUES
The Association seeks to provide input into the Review of Higher Education Financing and Policy on three key issues:
1. The relative resource equity between the schools sector and the higher education sector.
2. The relative equity of the taxation arrangements for schools and higher education institutions.
3. The impact of higher education policies on the efficiency and effectiveness of Australian schooling.
Each of these issues is relevant to themes 3 and 4 of the Review.
Relative Resource Equity Between the Schooling and the Higher Education Sectors
According to the ABS publication Expenditure on Education, Australia, 1994-1995,
"... approximately 55% of total government outlays on education in 1994-95 was spent on primary and secondary education and 35% on tertiary education. The distribution of government outlays has shifted over the past six years with an increased proportion allocated to tertiary education and less to primary and secondary education. Over the period, outlays on tertiary education rose 45% whilst the corresponding rise for primary and secondary education was 22%." 1
Average per capita expenditure from public sources is significantly greater for tertiary students in Australia compared with school age students, be they in government or in non-government schools, i.e. $3,983 per school age student compared with $8,907 per university student. 2
While no one would dispute the importance of tertiary education, in terms of both its individual and community benefits, it is important to question the relative equity and merit of providing much greater per capita expenditure at the top end of the education structure, than is provided in primary and secondary schooling.
Complaints sometimes levelled by the higher education institutions at schools about the literacy and numeracy standards, as well as independent living, research and study skills of undergraduates could indicate that schools are not being adequately resourced to meet the expectations of tertiary institutions. Attachment II provides excerpts from a World Bank publication Priorities and Strategies for Education which outlines this evidence.
Beyond this observation is evidence from the World Bank which suggests that the greatest return on investment in education occurs with primary schooling, followed by secondary, then tertiary.3
If this evidence is applied to Australia, it would suggest that a radical redistribution of resources between higher education and schooling should occur.
Even if it is unacceptable to see an overall reduction in expenditure on tertiary education, it could well be argued that there should be a significant change in the mix between private and public resource contributions in this sector.
Even with the modifications in the Higher Education Contribution Scheme (HECS), it would appear that university students are still receiving subsidies from the public purse of the order of $4,000- $14,000 per student per annum. 4
This level of public subvention, when compared with the average government school recurrent cost of $4,451 (1993/94 figure) for a government school student and government funding for a non-government school student ranging, for example, from $752 (Category 1 school) to $2,731 for a Category 12 school (based on 1997 Commonwealth and Victorian State recurrent grants for a primary student) would appear to be an excessively generous amount.
The Association believes that the magnitude of differential between school and higher education per capita funding requires the Review Committee to make specific comment on this and suggests strategies for reducing this inequity.
Relative Equity of the Taxation Arrangements for Schools and Higher Education Institutions
Public costs for education are not restricted to the direct financial assistance programs. There are other important sources of income forgone by government, via tax concessions for eligible education expenditure.
In an era when the concept of a level playing field is accepted as a legitimate feature of international trade, it is important that the concept be applied to education delivery.
In any analysis of the taxation benefits available to universities as compared to schools, it is clear that a level playing field is not in operation. Universities, unlike schools, are able to attract tax deductions for recurrent gifts. Given the significant percentage of expenditure in education which goes towards recurrent purposes, especially teaching salaries, it is an important financial advantage afforded universities over schools.
The Association is strongly committed to increased private investment in both the public and private provision of schooling and higher education. It would argue, therefore, that the concessions available to higher education institutions should not be removed but rather extended to the schooling sectors, both government and non-government.
While it is acknowledged that recent economic reports including the report of the National Commission of Audit has recommended that there be a move away from the use of tax concessions, in order to contain government outlays in this area, this does not preclude an examination of alternative taxation arrangements which would deal equitably with the compulsory and post-compulsory sectors of education.
Such equality would involve creating similar access to taxation concessions or rebates for donations to any registered education institution, regardless of whether the students were school aged or tertiary students.
If Australia is to meet its economic, social and international challenges, reforms to the tax system would seem necessary, in order to promote greater savings and investment. Given the demands for life long learning, coupled with the challenges mentioned above, an investment culture needs to be fostered in the education industry.
To become a leading producer of internationally acclaimed films, documentaries and movies, Australia had to create a film industry which it achieved through a radical tax incentive scheme. This scheme, offering significant tax rebates on investments in the film industry, was a bold, creative and productive initiative.
It would seem sensible then, if we want to promote Australia as "the clever country", that a similarly radical proposal for facilitating and encouraging investment in education should be developed by the key sectors within the education industry.
The Impact of Higher Education Policies on the Efficiency and Effectiveness of Schooling in Australia
As reforms occur within the higher education sector, their effects filter downwards into the schooling sector. It is rare that reforms in schooling result in significant changes in the tertiary sector. This hierarchical relationship between tertiary institutions and schools could be altered over time as government policy shifts its focus of resourcing from providers to consumers.
Alternative funding models such as the voucher which have the student, not the institution, as the focus of the resource allocation, open up more diverse opportunities for students to dictate their learning preferences and to discriminate in their choice of institutional approach.
Given the demonstrated capacity of providers of one type of learning to expand to meet new markets, especially those which emerge under an increasingly deregulated consumer-oriented market, it is feasible that schools and tertiary institutions will become active competitors for students and their funding.
For many schools, with modern facilities, extensive pastoral care programs, experienced and committed staff, the attraction of offering tertiary programs has been demonstrated in initiatives such as Year 13.
Equally, universities have seen attraction in entering into secondary programs, in conjunction with schools and in the provision of foundation year programs for full fee paying overseas students.
The challenge for both universities and schools would be making the necessary adjustments that would be associated with the introduction of student focussed funding models, such as vouchers.
Increasingly, under such models, hierarchical relationships between schools, TAFE colleges and universities will be replaced with interdependent strategic alliances, focussed on the needs of the learner. This would represent a significant advance on the existing model.
Such developments would highlight even more starkly the need for an effective competitive neutrality policy between schools, TAFEs and universities in relation to taxation reform and public resource provision.
REFERENCES
1. Australian Bureau of Statistics, Further data on enrolments 1994-95, Cat. no. Educ.5510.0, ABS, Canberra, p. 3
2. Australian Bureau of Statistics, Expenditure on Education Australia 1994-1995, Cat. no. 5510.1, ABS, Canberra, p.6 and Australian Bureau of Statistics, Education - Australia at a Glance, ABS, Canberra
3. World Bank, Washington DC 1995, Priorities and Strategies for Education, p.22
4. Minister for Employment, Education, Training and Youth Affairs, The Hon. Senator Amanda Vanstone, Higher Education Funding Report for the 1997-1999 Triennium, 1996, DEETYA