FUNDING MECHANISMS, INSTITUTIONAL AUTONOMY AND DIVERSITY
PETER KARMEL
Diversity
The policy discussion paper of Minister John Dawkins which launched the major reforms in higher education of 1987-88 claimed, approvingly, that "diversity among institutions will be encouraged rather than an artificial equalisation of institutional roles"(1). Once the reforms were well under way, the importance of diversity was further underlined in Minister Peter Baldwin’s policy statement of 1991 on quality and diversity. This statement supported strongly the diversification of courses, students and delivery modes but made no attempt to analyse in depth the concept of diversity and the reasons for supporting it(2). Indeed, the application to Australian higher education of concepts such as diversity, quality and performance indicators has been dogged by the superficiality of their treatment.
There is nothing new in advocating the diversification of higher education in Australia. The development, from 1965 onwards, of the advanced education sector within the binary system of higher education which resulted from the recommendations of the Martin Committee (3) was a deliberate (and successful) diversification of higher education by the creation of new types of higher education institutions that persisted for more than 20 years. Indeed, when the Tertiary Education Commission was formed from the existing commissions for universities, advanced education and technical and further education, the pursuit of diversity was written into the establishing legislation. The Tertiary Education Commission Act 1977 laid down that one of the objectives of the Commission was "the diversifying of opportunities for tertiary education" (4).
In my view, advocacy of diversity rests on three desiderata:
Diversity can be found in:
The actual operation and performance of an institution may be at variance with the institution’s ostensible mission, values and goals as expressed in documents for public consumption such as mission statements and strategic plans. Diversity has to be judged on outcomes.
As far as strategies are concerned differences among institutions may relate to management arrangements, the range of course offerings and the range of services provided (including research activities where appropriate).
Inputs may relate to resources, students and staff. Outcomes include the characteristics of graduates, the nature of community services and the effectiveness of research activities. Some outcomes are not within the control of institutions. For example, the employability of graduates not only depends on the qualities that inhere in the degrees they have earned but also on the state of the local employment market.
Much discussion of diversity has concentrated on readily measurable indicators. For example, the two reports on diversity that were included in the Higher Education Series of the Commonwealth Department of Employment, Education and Training (DEET)in 1994 and 1996 contained some 50 and 68 indicators respectively relating to students, staff, resources and research (5).
Certainly, these indicators show differences in the characteristics of enrolments and staff and in the volume of resources and research, but they are purely statistical series and it is by no means clear how they relate to significant differentiation among the institutions. The reports contain little conceptual analysis of the meaning of the indicators. Many of the activities or outcomes that they measure are not under the control of the institutions and do not reflect differences in institutional roles. Moreover, it is necessary to look at changes in the indicators to see whether the activities and outcomes of the institutions are becoming more or less differentiated. There has been little or no attempt at this type of analysis.
The real differences among institutions that relate to the three desiderata mentioned above lie in the institutions’ perception of their missions, values and goals and in the strategies employed, especially in course offerings and services. In the terminology of the Evaluation and Investigations Program (EIP) project with which this paper is associated, diversity in the missions, values and goals of institutions give rise to systemic diversity, and diversity in course offerings and services to programmatic diversity. I shall concentrate on these two aspects of diversity. Structural diversity, relating to historical and legal differences, seems to me to be of less importance.
There can be little argument about the need for programmatic diversity, but the question arises as to whether systemic diversity is necessary to achieve programmatic diversity. Could not institutions, relatively homogenous in respect of missions, values and goals, offer appropriate diversity in their programs and services - diversity arising within institutions rather than between them?
The question calls for two comments. First, heterogeneity within institutions sufficient to meet the wide range of courses and services required by the community in its various manifestations implies very large institutions. It is by no means clear that scale is an unambiguous advantage in universities. Scale brings with it problems of management for the administration and of alienation for the faculty and students - indeed some of the world’s most distinguished universities are of relatively small size.
Secondly, specialisation among institutions is likely to produce a range of courses and services that is more effective in meeting needs and more efficient in the use of resources. Without such a division of labour, institutions will need to be all things to all people - an inherently inefficient arrangement.
For these reasons systemic diversity seems likely to be necessary for an effective and efficient programmatic diversity. It is important, however, that diversity should be seen as a means of making higher education more effective, not simply as differentiation for its own sake. Its pursuit should involve engineering the education system and its programs so that a better fit of outcomes to objectives is produced.
Autonomy
In Australia, higher education institutions are autonomous bodies, in most cases constituted by Acts of Parliament, legally responsible for the conduct of their affairs. The governing bodies of the institutions are able to determine their missions, values, and goals. In principle, they have control over:
The Acts that constitute universities can provide for ministerial approvals and directions (and in some cases do) and Governments are able to amend Acts and disallow statutes and regulations made under them. However, the institutions are bodies corporate and, subject to their establishing legislation (or their constitutions in the case of non-statutory institutions), they have a great deal of freedom. Nevertheless, their autonomy is inevitably circumscribed where there is dependence on Governments for funding. Governments can, and usually do, attach conditions to grants that restrict or limit institutional autonomy. For example, a Government can exercise control over the number of students it will fund, the type of student it will fund (for example, through equity and access programs), the range of courses, the fees that may or may not be charged. There is little doubt that the principal threat to university autonomy rests in the manner in which university funds are made available.
Universities are extremely jealous of their autonomy, especially in relation to such academic matters as the admission of students, the appointment of staff, the content of courses, the examination of students, the selection of research topics and the right of staff to express their views, but also in relation to their capacity to make decisions on the raising and allocation of resources, including financial and asset management.
Autonomy is clearly a matter of institutional self-interest, but there is also a strongly held view (and certainly one which I share) that institutional autonomy is in the national interest. Thus in 1975 in its Sixth Report, the Universities Commission expressed its views on university autonomy in the following terms:
"The Commission’s commitment to university autonomy ... stems from a conviction that universities will in general better achieve their purposes by self-government than by detailed intervention on the part of the public authorities. The purpose for which universities are founded and for which society continues to maintain them include the preservation, transmission and extension of knowledge, the training of highly skilled manpower and the critical evaluation of the society in which we live. No university performs its functions perfectly; and it is not difficult to criticise aspects of university teaching and administration. Nevertheless the Commission is convinced that society is better served if the universities are allowed a wide freedom to determine the manner in which they should develop their activities and carry out their tasks.
In a free society, universities are not expected to bend all their energies towards meeting so-called national objectives which, if not those of a monolithic society, are usually themselves ill-defined or subject to controversy and change. One of the roles of a university in a free society is to be the conscience and critic of that society; such a role cannot be fulfilled if the university is expected to be an arm of government policy. Moreover, universities must prepare their students for life in a world the characteristics of which are necessarily imperfectly foreseen. An institution which geared its activities to known requirements could hardly provide an education appropriate to meet as yet unknown problems.
None of the above implies that universities would make their full contribution to social life if they were unresponsive to community needs ..." (6).
An implication of this statement is that institutions following a plurality of priorities are more likely to promote a creative and innovative atmosphere for higher education than the articulation of a single set of national priorities determined by central government fiat. The national interest may best be served by such a plurality in the same way as an individualistic market economy is likely to be more effective in producing a strong and prosperous economy than one controlled by a central command structure.
Autonomy and Diversity
It is difficult to imagine a range of institutions with diverse goals and activities responding creatively and flexibly to the needs of individuals and the wider society without their possessing a high degree of institutional autonomy. A highly centralised and regulated system tends towards rigidity and uniformity. On the other hand, while institutional autonomy may be necessary for diversity, it does not appear to be sufficient for it, at least not in the important dimensions of mission, values, goals and strategies.
Until 50 years ago, there were only six universities in Australia. The Australian National University, the seventh, was established in 1946. The original six were not only autonomous and independent of each other but they had no common source of funding, were widely separated geographically and were in no sense a university system. Yet their ethos, style and activities were very similar. They were bound together by a largely common view of themselves (they had like missions) and by an academic staff educated in and socialised to a single tradition (the academics shared common values). The original six could hardly be said to have been a set of diverse institutions.
Moreover, apart from the Australian National University (established as a research-only institute with a special mission), the new universities that developed in the 1950s and 1960s were distinguished more by their similarities to than their differences from the older universities. The University of New South Wales and Monash University were founded with the intention of exhibiting a technological bias, but the dominant view of a university prevailed almost from the beginning at Monash and somewhat later at the University of New South Wales. Macquarie, Flinders and Latrobe experimented with novel academic structures, but the institutions viewed themselves as being in the mainstream and in fact the novel structures were eroded over time. Thus, self-concept tended to work against diversity of any fundamental kind and autonomy proved not to be sufficient for differentiation.
There is another factor that can work against differentiation in spite of autonomy. It is the tendency for institutions to copy other (especially neighbouring) institutions. There is a number of examples of duplication of specialist programs unrelated to the demand for their products on the principle of "anything you can do, I can do better." This tendency is exacerbated where there is keen competition among institutions, particularly for students. It is a force against diversity. The recent spread of law schools, MBA and Ph.D programs illustrates this, as well as the multiplication of specifically named centres for research activities. In this situation some degree of central regulation may, perhaps surprisingly, be the best means of preserving a degree of diversity. Certainly, the consequences of the reduced emphasis on the coordination of major academic developments since 1987 tend to confirm this conclusion.
The possibility of manufacturing diversity by government decision was, as pointed out above, illustrated in the creation of the advanced education sector by the deliberate act of the central government. The sector’s mission was to concentrate on vocationally directed undergraduate teaching with only minor involvement in postgraduate work and applied research. Many of the colleges of advanced education (CAEs) strove to enlarge their postgraduate work and their research involvement in order to compete with the universities and share in their prestige. Strong control over the introduction of new courses and in relation to funding was necessary to maintain diversity between the university and advanced education sectors. It proved effective for nearly twenty years.
Funding Mechanisms
Governments can provide funds to higher education institutions in many ways. Set out below are seven mechanisms which illuminate the Australian situation.
Line item budgeting. A line item budget sets out the items on which funds may be spent. It represents a highly regulated way of providing government funds. Governments in Australia have not used line item budgeting for funding higher education institutions, although in some States teachers colleges prior to their becoming CAEs were treated this way; and it used to be a common mechanism for funding State universities in the United States of America. It is mentioned here as an example of an extreme form of government regulation of funding.
Block funds to individual institutions. The provision of block funds to individual institutions on the basis of agreements and understandings between the Government and the individual institutions was the funding mechanism used by State Governments in funding their universities prior to World War II. The State Governments did not become greatly involved in the affairs of the universities, mainly because State Government grants represented on average only a little more than one third of universities’ funding. Prior to World War II there was virtually no Commonwealth involvement in university finance.
Grants earmarked for specific purposes. The earmarking of grants for specific purposes became a common practice after World War II. However, earmarked grants were not used extensively. In 1972, the Australian Universities Commission warned that "the recommending of earmarked grants is contrary to the autonomy of the universities and is not conducive to good university government" (7). The argument was that the provision of earmarked grants inhibited the universities in making decisions on the use of their resources. The Commission supported earmarked grants only in special cases. Earmarked grants have been used fairly freely since 1988 as a way of supporting national priorities, although the sums involved have not been large. The 1987 policy discussion paper on higher education indicated that 22 per cent of operating grants would be reserved for selective allocation among institutions to respond to specified Commonwealth objectives in teaching and research(8). Earmarked grants have been used to support national priorities through the National Priority (Reserve) Fund, the Evaluations and Investigations Program, the Equity Program and the Aboriginal Participation Initiative, all administered by DEET.
Systemic funding through a funding authority. The Australian Universities Commission, during the first 12 years or so of its existence and the Commission on Advanced Education, recommended grants for individual institutions within their sectors. These recommendations related to the size and tasks of the institutions and involved the funding authorities in making judgments as to the appropriateness of the grants. These judgments were based on written submissions from the institutions, visits to them and discussions with their representatives.
Systemic funding through a funding authority based on a non-public formula. From 1970 onwards the Australian Universities Commission was guided in its judgments on funding individual institutions by a formula relating to enrolments in the faculties represented in the institutions. The Commission did not apply the formula rigidly, using it as a guide to achieving fairness across institutions. In the Commission’s words:
"The method of assessment used by the Commission has involved estimation of the fixed elements of expenditure on the teaching and research components of total expenditure for each major faculty and the marginal expenditures (that is the extra expenditure involved in enrolling an additional EFTS) in major faculty groups. The remaining items of expenditure covering central administration, the library and the maintenance of physical facilities, etc., have been assessed in terms of a fixed component and a component varying with expenditure on teaching and research .... While the Commission has had regard to student numbers and faculty mix in determining the grants .... the Commission has not imposed a high degree of precision on this process and has recognised the historical circumstances of a number of universities" (9).
The Commission’s formula was quite complicated and was not made public because it was not applied precisely and because, in the Commission’s judgment, its publication would have reduced the flexibility with which university administrations would be able to make decisions on the internal allocation of resources.
Systemic funding based on a public formula. Since 1988 funds for the teaching-related activities of higher education institutions have been determined by DEET. The abolition of CTEC lead inevitably to pressure for a publicly known funding formula, if only to demonstrate that funding was not politically influenced. In 1989 DEET conducted an extensive investigation into the relative costs of funding the various higher education courses and, after extensive consultation, published a formula which provided a model for estimating the extent of the over- or under-funding of individual institutions - the Relative Funding Model (10). For the teaching component of the Model (originally some 94 per cent of total operating grants excluding capital) student load was classified into five discipline categories of relative cost and multiplied by the relevant relative cost factors. No allowance for economies of scale was made.
The Relative Funding Model was calculated once-off in respect of 1990; over a period most institutions were brought to within plus or minus three per cent of the model, by a combination of load and operating grant adjustments. Additional enrolments have generally been funded at an across-the-board average cost figure, with the number of students determined by DEET as part of the discussions with States and institutions relating to the universities’ profiles of their teaching activities. While educational factors, including considerations of diversity, have been taken into account in these decisions, political considerations (for example, support for regional institutions, equity of treatment among States) have also influenced the allocation of growth among institutions.
Approximately 6 per cent of aggregate operating grants was set aside for research-related activities. This constituted the "research quantum". In the Relative Funding Model the research quantum was distributed among institutions in proportion to an index reflecting an institution’s success in attracting Commonwealth competitive research grants. In 1994 a composite index was developed reflecting an institution’s output of publications and its enrolment and graduation of research students as well as its success in attracting all competitive research grants; and this composite index has been used for the allocation of the research quantum since 1995.
Funding through students. Over the last five years or so suggestions have been made that higher education should be funded through students rather than through direct grants to institutions (11). Such an arrangement would involve the award to students of entitlements to subsidised higher education (variously called awards, entitlements, scholarships, vouchers). Students would carry these entitlements to the institutions at which they enrolled. The institutions would charge fees and the entitlements would be a partial offset to the fees. Most recent proposals have assumed that the difference between the fee and the entitlement would be covered by arrangements equivalent to the current higher education contribution scheme(HECS). Under these arrangements higher education would be deregulated. There would be a market for higher education services. Research funding would need to be separately funded, possibly on a similar basis to that obtaining under the present Australian Research Council and research quantum arrangements.
The funding mechanism that has operated over the past several years has been virtually one of formula funding. It is worth noting that performance-based funding is a sub-set of formula funding, in which an institution is able to modify the funds it receives by changing its performance. The research quantum for an individual institution is, in fact, determined by performance-based funding: if an institution is able to increase the competitive research grants it receives or to raise the number of publications produced by its staff or enrol more Ph.D students, it will receive a greater share of the quantum.
The purpose of performance-based funding is to encourage certain kinds of activity and/or reward certain levels of performance. Performance-based funding involves the application of formulae incorporating specified variables. Unless these are carefully defined the application of performance-based funding may lead to perverse results (12). For example, if operating grants are determined in relation to the number of students passing examinations rather than the number of enrolments, institutions will be tempted to lower standards; or if the research quantum is influenced by the quantity of publications, institutional behaviour will be influenced by strategies to optimise research quantum outcomes and quality may be sacrificed to sheer quantity.
I now propose to examine the impact of funding mechanisms, first on autonomy and then on diversity, for three mechanisms relevant to the Australian situation:
For convenience these three mechanisms will be referred to as "1958 to 1987 funding mechanism", "post-1987 funding mechanism" and "market funding mechanism".
Funding and Autonomy
I have already pointed out that in Australia the constraints on the autonomy of higher education institutions stem, in practice, from funding arrangements. These constraints first became significant on a systemic basis with the involvement of the Commonwealth Government in university funding in the post World War II era and especially after the establishment of the Australian Universities Commission in 1958.
1958 to 1987 Funding Mechanism. Over the years 1958 to 1987 the funding authorities lent strong support to university autonomy. Nevertheless, the Commissions were conscious of the requirement in their legislation to promote the balanced development of the institutions. The original legislation establishing the Australian Universities Commission had required it to "perform its functions with a view to promoting the balanced development of universities so that their resources can be used to the greatest possible advantage of Australia" (13). The stipulation for balanced development was carried through into the legislation establishing the Tertiary Education Commission, which required to commission to promote "the balanced and coordinated development of the provision of tertiary education in Australia" (14).
As far as the universities were concerned, the Commission exercised a number of controls. In particular the universities were required to submit to the Commission their plans for new academic developments so that the Commission could offer advice to the Government on them. The Australian Universities Commission had recognised that "the introduction of new activities is a normal part of university development and essential to the maintenance of healthy and vital institutions" (15). It did not wish to interrupt this normal process. However, it was concerned that major developments involving considerable expenditure or the introduction of courses not normally taught at universities or the unnecessary duplication of specialised activities should not go ahead without its imprimatur.
In practice the various commissions exercised control over new developments in a relatively relaxed way; for example, for the 1976-78 triennium the Universities Commission received over 300 proposals for new developments, but it commented on only 19 of them and categorically opposed only a handful (16). Apart from exercising some control over major new developments, the Commission required universities to go through detailed approval procedures when constructing buildings. Approval was also required for expenditure on equipment and minor works funded from grants earmarked for these purposes; however, these approvals were largely a formality. As far as operating expenditure was concerned, institutions were funded in respect of specified numbers of equivalent full time students, although some over and under enrolment was tolerated and there was no rigorous enforcement of the targets of student numbers (17).
The CAEs were more tightly regulated than the universities. The introduction of new courses had to be approved and courses required accreditation and periodic re-accreditation. In each State there was an advanced education authority which had significant influence on the colleges’ plans but was not involved in their internal management.
To sum up, control over the institutions was exercised mainly in respect of major new developments, but this did not involve detailed interventions in the management of their affairs. To a high degree, institutions determined their own priorities. It could be said that there was central government control, but in a relatively light-handed manner.
Post-1987 Funding Mechanism. The changes of 1987-88 included a number relevant to the issue of autonomy.
First was the abolition of the Commonwealth Tertiary Education Commission. This meant that there was no longer a body to act as a buffer between the Government and the institutions. Moreover, the funding of institutions had been based on recommendations made publicly by CTEC to the Minister whose decisions on individual institutions were embodied in States Grants Acts. From 1989 the Minister acquired the power to determine grants to individual institutions within a total sum legislated in Higher Education Funding Acts. This change involved empowering the Minister with a greatly increased discretion and rendered the determination of grants to individual institutions significantly less transparent.
Thus the abolition of the Commission exposed the institutions to more direct political and bureaucratic influence. This was particularly evident in relation to new developments that had implications for electoral politics (for example, the establishment of new campuses, especially in non-metropolitan areas). This change worked both ways. Individual institutions could deal directly with Ministers and senior bureaucrats. This may have worked to their advantage but was not necessarily in the interests of the balanced development of higher education as a whole. Government policy and priorities were more actively brought to the institutions’ notice; these often had a shorter time horizon than that to which the institutions had been accustomed and required quick responses. The institutions were less understood and less respected than formerly. Government decisions were made on the basis of less knowledge and with less deliberation than had been the case when the Commission had given the Government advice in public reports.
Secondly, although CTEC had had regard to national priorities expressed by the Commonwealth Government, national priorities began to assume a more important role in determining institutional priorities. There was a shift from a plurality of priorities on an institutional basis to centrally determined ones. The Government’s pressure on institutions to conform to these priorities was manifested in a stream of reports and statements about higher education emanating from the Minister, his department and advisory bodies to which the institutions were expected to respond. For example, in the five years from 1986 to 1990 there were some 45 reports of this nature (18).
Thirdly, the Government, through DEET, began to police student numbers much more strictly, penalising institutions that failed to meet their targets, even in cases where meeting targets would have implied greatly lowering entry standards.
Fourthly, the formula, including relative disciplinary costs, used for determining relative funding adjustments for teaching purposes was made public. This was done in the interests of transparency. However, the unintentional, but quite predictable, consequence of publication was the adoption of the formula’s parameters for the internal allocation of funds within institutions. DEET made clear that the formula was not intended to be used for this purpose; however, the dynamics of the internal competition for funds within institutions resulted in its widespread adoption as a management tool. A consequence of adopting externally derived formula funding within institutions is an erosion of managerial prerogative and a reduction in flexibility. It was for this reason that the Australian Universities Commission had avoided publication of the formula used as a guideline for its recommendations.
Fifthly, DEET did not exercise a coordinating role in the development of higher education. Institutions were free to move into whatever academic areas they chose (with the exception of medicine). The previously mentioned proliferation of law schools, MBA programs and research training illustrates the freedom exercised by the institutions.
Sixthly, the institutions no longer needed to seek detailed approval for equipment and minor works programs. More importantly, funding for capital works was rolled into operating grants and approvals were no longer needed for most physical developments.
Seventhly, institutions were required to charge full fees for overseas students and were encouraged to expand the enrolment of such students. In addition institutions were progressively permitted to charge Australian students fees for certain classes of courses.
Finally, the Government encouraged the institutions to adopt an entrepreneurial approach to their activities.
Of these eight changes, the first four militated against university autonomy whereas the last four diminished government intervention and expanded autonomy. Comparing the post-1987 situation with that which had obtained for the preceding 30 years, it is not possible to say categorically that autonomy has increased or decreased. There is now less intervention with the internal management and decision making of the individual institutions, particularly in relation to expenditure decisions (for example, buildings and equipment) and to academic developments. This has enhanced autonomy. On the other hand, the Commonwealth Government’s policies for higher education, especially with respect to national priorities, have borne more heavily on the institutions as the Government has come to treat them as agents serving its national objectives. Also, the publication of funding formulae has unquestionably eroded managerial capabilities within institutions.
Market Funding Mechanism. Funding institutions via the students in a deregulated market would certainly strengthen institutional autonomy. They would be able to determine the fees they charge and the number of places offered to students, and therefore have some control over their income; there would be less government intervention in respect of priorities so a plurality of priorities would develop; and finally they would operate as corporations largely independent of the Government. On the other hand, they would be subject to the discipline of the market which, for some institutions, might turn out to be more severe than a supportive and, to a degree, protective Government.
Funding and Diversity
1958 to 1987 Funding Mechanism. I have already pointed to the lack of diversity in the missions and values of the pre-1987 Australian universities, both in respect of the original six State universities and of the new ones created in the 25 years after World War II. From the mid-1950s onwards, enrolments in the universities began to grow rapidly. Whether the development of more universities and the expansion of existing ones were the most appropriate ways to respond to the rising demand for higher education was the issue that led to the establishment of the Committee on the Future of Tertiary Education in Australia (Martin Committee) (19). As mentioned previously, the Martin Committee recommended a deliberate diversification of Australian higher education. This resulted in the establishment of CAEs, with missions clearly differentiated from those of the universities, and the rapid growth of the advanced education sector.
The differences between universities and CAEs were maintained through to 1987 by funding them on different bases. The universities were funded to undertake research and were encouraged to expand their involvement in research and research training. For these purposes they were funded at higher levels than the CAEs (20). The size of the institutions was also taken into account and smaller universities were funded at somewhat higher per capita levels than larger ones. The CAEs were not prevented from undertaking research but were not financed for it and were seen as mainly undergraduate teaching institutions, funding being provided only for approved courses. Funding was tied to enrolments in approved courses rather than to equivalent full time student numbers.
By 1975 - only one decade after the conception of the advanced education sector - there had been a great diversification. CAEs enrolled 135,000 students compared with 147,000 enrolled in universities. The university and advanced education sectors displayed many differences although there was some overlap (21). Some diversification within universities had taken place but the advanced education sector included a considerable variety of institutions. Sir Bruce Williams, in the report on education and training to which his name is attached, discussed CAEs under a five fold classification (22).
By the 1980s some of the larger multi-disciplinary CAEs had moved closer to the universities in their range of activities and their interest in research. On the other hand, some universities had made changes in the direction of the more liberal entry requirements of the CAEs. However, a fairly high level of diversity persisted, held in place by structural arrangements for the funding of the two sectors and the different funding principles applied.
As late as 1986, the Review of Efficiency and Effectiveness in Higher Education summarised the differences between the two sectors as follows:
" universities are expected to concentrate on teaching-and-research, whereas advanced education institutions are expected to concentrate on teaching;
CAEs have a substantial commitment to sub-degree offerings, at the diploma and associate diploma levels, whereas universities concentrate their teaching at degree level, leading to honours degrees and postgraduate activity; and
universities are funded on the basis that academic staff undertake research; grants to universities reflect the need for substantial libraries, special equipment and technical staff to support their research activities; per capita student costs are thus higher than for CAEs"(23).
The review assumed that the binary system would continue and recommended only minor changes to it (24).
In brief, the arrangements for funding higher education institutions over the period 1965 to 1987 were designed to establish and maintain diversity. In addition, earmarked grants were used to support specific developments in given institutions, thus engineering some further diversity in activities.
Post-1987 Funding Mechanism. Seven major elements of the higher education changes of 1987-88, have impinged on the diversity of the higher education system. In general, they have operated against diversity, although this was certainly not the intention. The seven factors were:
The abolition of the binary divide, and its replacement by the "unified national system", signified unification rather than diversification. The decision that all institutions should be funded for teaching on a level playing field basis with grants broadly proportional to weighted student numbers made it necessary to eliminate the smaller institutions by merger into larger ones. The general encouragement for institutions to become larger by merger and/or growth engendered an atmosphere of growth at all costs among many of the universities. This inevitably reduced diversity. Moreover, the very act of designating the institutions as "universities" imported into them the values of the established universities to which prestige was attached. Indeed, the push of the larger CAEs to become universities was precisely aimed at achieving this. Pressure from and inducements by the Commonwealth Government for institutions to conform with its priorities and policies have also tended to reduce differentiation among institutions.
In marked contrast to the position of only a decade ago, research activity has become a major objective of virtually all the institutions. Universities are rewarded for success in applying for competitive research grants not only by the grants themselves but by the contribution they make to the research quantum. Prestige attaches to attracting large research grants both for the institution and the academic concerned. In this respect systemic diversity has been reduced. This is illustrated by the fact that, whereas in 1988 some 36 per cent of academic staff occupied teaching-only positions, the corresponding figure in 1996 was 4.3 per cent (25). The issue of whether Australia can afford 36 public universities all placing high value on research and research training has not been addressed. Moreover, given that the original policy discussion paper, which heralded the changes of 1987-88, placed great emphasis on teaching - "the primary focus of the higher education system is its teaching role" (26), it is ironic that in many institutions the status of research has been elevated at the expense of teaching (27).
There has also been a narrowing of the levels at which courses are being offered. Sub-degree level work had been a feature of the CAEs - indeed it was their original raison d’ˆ tre. However, courses at diploma level are rapidly disappearing. In 1988 almost 17 per cent of commencing students enrolled in non-degree undergraduate courses; by 1996 the proportion was down to three per cent (28).
The lack of coordination of the disciplinary offerings of institutions, combined with DEET’s desire to provide for expanding student numbers, has meant that most institutions have sought to cover all areas. Comprehensiveness all round rather than specialisation and diversity seems to have been the result.
The process of reviews of quality which have been conducted on a whole institution basis with rewards for those with good reports has, itself, encouraged institutions to conform to the perceived values of the Committee for Quality Assurance in Higher Education. The tendency to comply with the views on process and outcomes that have been endorsed by the Committee is a unifying rather than a diversifying influence. Moreover, by grading all the universities on a common scale, irrespective of their missions and goals, rather than by comparing like with like, the Committee has reinforced community perceptions of similarity rather than diversity.
Finally, the publication of the Relative Funding Model has greatly increased the likelihood of similar treatment of the various disciplines within different institutions; it is certainly not a force for diversity. Similarly, the index used for the distribution of the research quantum is an incentive towards similar behaviour in different institutions.
In general, the forces at work over the past seven years or so have been toward a system which, in its totality, is less diverse than it was. In my judgment the systemic diversity of the unified national system, especially in relation to the institutions’ overt behaviour, is less than it was under the old binary system. Programmatic diversity may have been maintained, although the reduced emphasis on teaching and the near elimination of undergraduate diploma courses are clear negatives. The encouragement of a more entrepreneurial approach to higher education has created a range of activities in relation to overseas education, non-award courses and university/industry relationships, which constitute major elements of diversity not previously present.
Market Funding Mechanism. The establishment of a market for all the teaching services of universities seems likely to be conducive to greater diversity not only in meeting student needs but in responding to research opportunities and community needs. Institutions would need to set fees and tailor their services to meet a variety of market demand in order to survive. Less popular institutions may have to set fees at lower levels or offer differentiated courses or services to attract students. The ensuing degree of differentiation would be the result of the community’s demand for educational and other services; accordingly, an amount of diversification appropriate to this demand would occur. Likewise, the independent operation of institutions would allow for the development and generalisation of useful innovations in courses and modes of teaching. There would also be the possibility of new types of institutions, including the development of private ones.
The market system would not be impervious to Government priorities. The Government could continue to express national priorities by seeking responses from institutions to offers of financial support on a contractual basis for particular projects (as has happened with special research centres, key centres, cooperative research centres, equity programs) and by encouraging student interest in particular courses through special scholarships.
Basic research is, in practice, unlikely to be market driven. Generally, it requires public subsidisation as well as philanthropic support from private sources. Funding for research infrastructure would presumably continue to be provided by the Government although some concentration in particular institutions, perhaps on a disciplinary basis, would be needed in order to ensure sufficient strength for long term risk-taking curiosity-driven research. Concentration of research effort would itself be an expression of a diverse system of higher education.
Special support may be needed to ensure the survival of regional institutions if their survival is deemed to be in the national interest. Such support would best be given in the form of lump sum subsidies.
Thus, the funding of higher education through students and the deregulation of the higher education system would not eliminate the Government’s involvement in higher education. The Government would influence the size and quality of the system by the number of students it supports and the level at which it supports them, by its subsidisation of basic research infrastructure and research activities in general, by funding special initiatives, and by its subsidisation of weak institutions to ensure their survival if this were desired.
Since the market system might stimulate the creation of new institutions through private initiative, the Government might also need to establish a system for the certification of institutions as eligible for the enrolment of students supported by government funding.
In a market system institutions would determine their priorities in the context of the market they serve and the government support available. There would be a plurality of priorities and a diversity of missions, values, goals and activities. This diversity would emerge from the very nature of the market for educational services and from national priorities expressed through contractual arrangements between the Government and the institutions.
Conclusion
Over the past fifty years the Australian higher education system has been subject to a variety of funding mechanisms and systems of government control. Arguably, the period of greatest diversity, and perhaps of greatest institutional autonomy, was when government influence was mediated through buffer bodies and when distinctions among institutions were maintained by coordinating mechanisms administered by these bodies.
Direct government involvement over the past decade has seen a marked reduction in systemic diversity, partly because of the reluctance of the Government to make the politically difficult decisions involving drawing the distinctions necessary to maintain systemic diversity.
Given the political realities, any return to a system of regulated diversity administered by buffer bodies seems unlikely. In these circumstances a market based approach of funding students rather than institutions offers the best hope of maintaining a diverse system of university education in Australia.
NOTES
(1) The Hon. J. S. Dawkins M.P., Minister for Employment, Education and Training, Higher Education - a policy discussion paper, AGPS, Canberra, December 1987, p.28.
(2) The Hon. Peter Baldwin M.P., Minister for Employment, Education and Training, Higher Education: Quality and Diversity in the 1990s AGPS, Canberra, October 1991, pp.39-49.
(3) Committee on the Future of Tertiary Education in Australia (Sir Leslie Martin, Chairman), Tertiary Education in Australia, Vol.1, Commonwealth of Australia, August 1964.
(4) Tertiary Education Commission, Statement to Joint Parliamentary Committee on Public Accounts: Inquiry into Funding of Tertiary Education, September 1979, para. 1.49.
(5) Department of Employment, Education and Training, Diversity and Performance of Australian Universities, Higher Education Series Report No. 22, April 1994, and Diversity in Australian Higher Education Institutions 1994, Higher Education Series, Report No.26, February 1996.
(6) Universities Commission, Sixth Report, AGPS, Canberra, May 1975, para.s 4.22 - 4.25.
(7) Australian Universities Commission, Fifth Report, AGPS, Canberra, May 1972, para. 8.9.
(8) op. cit. p.44.
(9) Fifth Report, para.s 9.8 - 9.9. See also Sixth Report, para.s 13.11 - 13.12.
(10) The Hon. Peter Baldwin M.P., Minister for Higher Education and Employment Services, Assessment of the Relative Funding Position of Australia’s Higher Education Institutions, August 1990.
(11) For example, Peter Karmel, "The Australian University into the twenty first century," The Australian Quarterly, Autumn 1992, Volume 64, No. 1, pp 64-70; Peter Karmel, "Policy Perspectives on Higher Education Financing - A Comprehensive Plan for National Scholarships," Centre for Economic Policy Research Discussion Paper No. 360, The Australian National University, February 1997.
(12) See Don Anderson, Richard Johnson and Bruce Milligan, Performance-based Funding of Universities, Higher Education Council, Commissioned Report No. 51, AGPS, November 1996, p.56; Hazel Rowley, "Universities are losing on points," The Australian, December 18, 1996 p.13; and Brian Crittenden, "Minding their Business - The Proper Role of Universities and Some Suggested Reforms," Academy of Social Sciences in Australia, Occasional Paper Series 2/1996, Canberra, January 1997, pp 14-16.
(13) Fifth Report, para. 8.1.
(14) Tertiary Education Commission, loc. cit.
(15) Fifth Report, para 8.2.
(16) Sixth Report, Chapter 6.
(17) Fifth Report, para. 9.11.
(18) These are listed in Report of the University Administration Review Committee (Professor David E. Caro, Chairman), The Australian National University, February, 1991, para. 2.2.
(19) See op. cit.
(20) Tertiary Education Commission, Report for 1982-84 Triennium, Volume 1, Part 1, February 1981, paragraph 6.40.
(21) Australian Universities Commission, Report on the Proposal of the Government of Victoria for a Fourth University in Geelong, Ballarat and Bendigo, AGPS, Canberra, December 1973, para. 3.4.
(22) Report of the Committee of Inquiry into Education and Training (Professor B. R. Williams, Chairman), Education, Training and Employment, Volume 1, AGPS, Canberra, February 1979, para.s 6.27-6.40. See also Peter Karmel, "The Context of the Reorganization of Tertiary Education in Australia - A National Perspective," Melbourne Studies in Education (Edited by Imelda Palmer), Melbourne University Press, 1984, pp 169-188.
(23) Review of efficiency and effectiveness in higher education (Hugh Hudson, Chairman) AGPS, Canberra, September 1986 para. 6.11.
(24) op.cit. para.s 6.31 and 6.33.
(25) Australian Bureau of Statistics, Education and Training in Australia 1996, Catalogue No. 4224.0 and Department of Employment, Education and Training, Selected Higher Education Staff Statistics 1996.
(26) op. cit. p.42.
(27) See Don Anderson, Richard Johnson and Bruce Milligan, op.cit. p.63.
(28) Department of Employment, Education, Training and Youth Affairs, Selected Higher Education Student Statistics, Preliminary 1996.