A new report launched today by the Tertiary Education Union (TEU) at Manukau Institute of Technology (MIT) calls on Education Minister Chris Hipkins to restore a decade of lost tertiary education funding to at least 2.7 per cent of GDP by 2021, and to replace National’s failed market model with a public good, quality education model (1,2,3).

Government funding of tertiary education was effectively frozen by National as an austerity measure between 2009 and 2017. Public tertiary institutions have not been able to keep up as the real costs of running the sector have continued to increase over that time, creating a cumulative hole in the tertiary education budget of $3.7 billion, which equates to a $661 million hole this year. Based on Treasury figures, the funding hole will increase to more than $6 billion over the next 3 years.

Sandra Grey, TEU National President, said: “We know what the impacts of the $3.7 billion funding hole have been in the tertiary education sector. It has been paid for by tertiary job cuts, caps on salaries and an unsustainable reliance on income from overseas students. The $5.5 billion surplus recently announced by Treasury shows the economy is strong and the Government can afford to restore that lost tertiary funding by filling the estimated $661 million annual cost of the hole.” Gus Gilmore, Chief Executive of the Manukau Institute of Technology, the location for today’s launch, said: "The Manukau Institute of Technology supports this new report written by the TEU into the funding of tertiary education in Aotearoa. MIT supports the need for a comprehensive overhaul of how institutions are funded, and how the government's investment in tertiary education is determined and allocated. Investment in public institutions to deliver the best possible outcomes for students is imperative, both in terms of free access, but also in terms of sufficient investment in institutions so they can continue to improve the quality of the tertiary education delivered." Gilmore is among a range of people - including Green Party MP and tertiary education spokesperson Chloe Swarbrick, Victoria University Vice-Chancellor Grant Guilford, other ITP Chief Executives, unions and students - that have today come out in support of reforming the funding model. Some TEU members have also shared their thoughts on some of the key reforms that need to be made. How much, then, should the tertiary education sector be funded? We know there are multiple public good benefits to a quality tertiary education sector (5), so it should be funded to the degree necessary to provide an accessible, equitable, and inclusive tertiary education system that contributes to the social and economic well-being of New Zealand.

“While further work needs to be done to cost fees-free tertiary education for all, adequate staffing, and the maintenance of buildings, we estimate that filling the $3.7 billion hole will require restoring funding to at least 2.7% of GDP by 2021 (4),” Grey added.

The TEU report suggests where savings can be made (6). These savings are significant, but will not be enough to fully meet the cost of running an inclusive tertiary education system. We cannot meet our goals for a high-quality publicly-accessible tertiary education system that meets the needs of all New Zealanders without spending money. Such a system that meets the needs of our communities is an investment that we must be willing to make through a more progressive tax system.

Grey continued: “Additional funding should not come from cutting other important social services, but rather through progressive taxation. New Zealand has to rebuild its tertiary education system by making its tax policy more progressive and lifting the top tax rate on the highest income earners.” The fiscal and budget responsibility rules of New Zealand governments will need to be adjusted if we are to meet social, economic, and environmental wellbeing goals. The question is, when austere fiscal responsibility is ranked above social responsibility, have we got the balance right? When children are living in poverty, polytechnic courses are being closed, there are not enough teachers, university classes are overcrowded, and tertiary students are living in cars, have we really got the balance of expenditure right?

A new funding system for the tertiary sector is both necessary and affordable. The TEU looks forward to working with the government in creating a new system, building from a recognition of tertiary education as an important public good and a commitment to collaborative decision-making for tertiary education funding.

Government funding of tertiary education was $4.5 billion in 2009. It is $4.3 billion in 2018.

As a percentage of GDP, total government tertiary education expenditure (including student loans and allowances) rose slightly from 2.2 per cent in 2001/2002 to a high of 2.3 per cent in the year ended June 2010, before falling to 1.6 per cent in the year ending June 2016. It is still about 1.6 per cent.

While just over half of tertiary education funding comes from public sources in New Zealand, the OECD average is close to 70 per cent. OECD data shows New Zealand expenditure per student in tertiary education is US$15,088, which is below the OECD average of US$16,143, and markedly less than Australia (US$18,038), the UK (US$24,542), and the US (US$29,328). The student:staff ratio in New Zealand is 17 students per staff member, higher than the OECD average of 16.

Currently with both public and private investment in tertiary education taken into account, New Zealand spends an average of about 2.0% of GDP on tertiary education, markedly lower than other OECD nations such as Canada (2.4%) and the US (2.8%).

The OECD has calculated that each NZ tertiary graduate generates an average of more than US$40,000 of net public benefits as compared with attaining upper secondary education ($42,800 for women and $65,500 for men, with the gender difference resulting from labour market outcomes).

Savings can be made by reducing time-intensive metrics measuring processes, removing the need for marketing to prospective students, and removing time-consuming tendering processes. Various auditing and compliance approaches are also cumbersome, costly and damaging to the core functions of the sector. Other cost savings can be made within institutions. TEU members highlighted the unsustainability of the “continually expanding layers of university management” – something which institutions also bear responsibility for, but which is shaped by the context provided by government policy. Government could set a requirement for the highest salary at an institution to be no more than five times that of the lowest salary, and use this as a pre-requisite for receiving public funding.

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