20 years in the life of a small tertiary education system
17 September 2012
Attaining and sustaining mass tertiary education - Lessons from the New Zealand experience
Roger Smyth
This talkNew Zealand spent a decade focused on attaining mass higher education
And then took stock
So spent the following decade working on the sustainability of the system
Making sure that the system delivers good value for New Zealand and for those who participate
New Zealand may be small …
But our journey may have lessons for others
This talkIn this presentation, I describe the policy context – the issues facing the NZ tertiary system at the end of the 1980s
And how the system was reformed to lift participation
How that worked in practice
And why – after a decade of a system focused on participation – we moved to shore up the gains and ensure sustainability
My roles …
1987-2002, a university manager, responsible for academic management
2002-now, a Ministry of Education manager, with responsibility for research on and analysis of tertiary education
Part 1Attaining mass higher
education
The context – the 1980s
The reform of the NZ economy – changed skill needs
And an economic downturn led to greater school retention and greater demand for tertiary education
While the tertiary education system was characterised by low participation
High levels of regulation and rigidity, especially in the polytechnics and colleges
We saw rationing of places – especially in universities – as demand grew
A true supplier’s market
A need for reform
The first phase of reformsA uniform, volume-driven funding system, across all sub-sectors
Removal of restraints on institutional competition
A moving cap on funded places
An expansion of places
Funded by progressive funding rate reductions
Removal of fee controls
Major reductions in student allowances/grants via targeting
An income-contingent loan scheme
Mitigates risks to participation by removing the liquidity constraint
In effect, loans channeled government funding of institutions via students, to mitigate the imbalance in market power
Increased incentives for responsiveness
Fees went up
Average fees for a BA at a university
$0
$1,000
$2,000
$3,000
$4,000
1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
Tu
tiio
n fe
e N
Z$
Student Loan Scheme introduced
Financed by loans
The expansion of the loan scheme
0
50
100
150
200
250
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Bor
row
ers
(00
0)
NZ
$ b
illio
ns
Loan borrowings Borrowers
Phasing in of the loan
scheme
Reduced course costs entitlement
Interest f ree loans
RecessionFee stabilisation
So did participationParticipation doubled 1985-1993
Average annual growth > 10%
And the cost to government
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
$2.0
0
50
100
150
200
250
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009
Fu
nd
ing
-NZ
$ b
illio
ns
EF
TS
(00
0)
Funded EFTS Unfunded EFTS Government funding
What happened
Growth among groups who have traditionally had low participation
Including Māori and older age groups
The planning system was light-handed
Performance measures largely focused on volume
No sense of a ‘network’ view
Supported the competitive settings
Preference in the allocation of new places to ‘pipeline’ growth
A powerful incentive on providers to enrol over their funded levels
Over-enrolmentOver-enrolment ….
Most demand in the core age group was being met
The wānanga were helping address low participation among Māori
A new packageThe changes had dealt with the issue of participation, but ...
Concerns about accountability, governance, quality
Intense public anxiety about fees and loans
A new green paper package in 1998 including ….
Governance changes
Capital charge
Quality assurance
Restructuring of the tuition subsidy structure
Separation of research and teaching funding
Removal of differentials between fields
A greater role for the private sector
Demand-driven funding
A new packageAn election was coming up
Most green paper/white paper proposals were shelved
Including changes to governance, accountability, and quality assurance, capital charging, most of the tuition subsidy changes …
(But this set a policy menu for more than 10 years)
What remained …
Funding was opened up to private providers on the same basis as public, at levels 3+
Demand-driven funding …. But ….
Quality, governance and other interventions were put aside
Demand-driven applied across the system
Demand driven funding…Further unforecast cost increases
Private providers refocused on level 3+ and new providers entered the market in large numbers
The wānanga were new and in a growth phase – they grew fast
One wānanga grew from 1,000 to 36,000 EFTS in 4 years
Funding up from $5m to $177m
Polytechnics sought to grow via community/continuing education
Where there was a ready market, able to be driven by advertising
Universities ... Less change, but …
High dead-weight expense
Volume prioritised over quality
What happened …More supply-induced demand
45% of the growth was among older students
NZ had the second oldest student profile in the OECD
Meaning lower human capital gain
So a lower value spend
Much growth in lower level qualifications
Low labour market returns
Quality concerns
Changed the dynamics of decision-making in all parts of the system
Destabilised government’s fiscal planning
And IFRS costing for loans was looming with large, hard to control costs
Part 2Sustaining mass higher
education
A new reform agenda
A new government meant a new agenda
Managing affordability for students – a new consensus on sharing costs
Loan interest concessions
Fee setting controls
A strategic approach to setting goals for the system
The tertiary education strategy (TES) – articulating national goals for the system
New planning mechanisms for institutions
Steering the system to align with national priories
While retaining institutional autonomy
Separation of research funding from teaching funding
Research performance
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
19
81-1
98
5
19
82-1
98
6
19
83-1
98
7
19
84-1
98
8
19
85-1
98
9
19
86-1
99
0
19
87-1
99
1
19
88-1
99
2
19
89-1
99
3
19
90-1
99
4
19
91-1
99
5
19
92-1
99
6
19
93-1
99
7
19
94-1
99
8
19
95-1
99
9
19
96-2
00
0
19
97-2
00
1
19
98-2
00
2
19
99-2
00
3
20
00-2
00
4
20
01-2
00
5
20
02-2
00
6
20
03-2
00
7
20
04-2
00
8
20
05-2
00
9
20
06-2
01
0
20
07-2
011
Publications Citations
PBRF and CoREs decided on….And implemented
Source: Thomson Reuters
Share of world indexed publications and citations by New Zealand tertiary education institutions
The new reform agenda
BUT … the quality assurance system remained
And representative governance was retained
Moves to chip away at demand driven funding
Mainly focused on the private sector
BUT … costs were still high and unpredictable
The TES was too loose
And the planning and funding systems were too complex
Accountability was loose
Fine tuning for sustainability …
And in 2006, the government announced the abandonment of demand-driven funding
As part of a wider package
Simplification of the planning and accountability arrangements
An overhaul of quality assurance
Rationalisation of the qualifications system
Leading to performance-linked funding
A new TES, prioritising human capital growth
And interest-free loans
This and the new accounting standard saw the cost of lending move from 13 c/$ to 41 c/$
Meaning the cost of over-enrolment was very high
Now …The government didn’t want to stifle demand
Rather, the intention is to move funded levels in line with shifts in demand
But to manage the fiscal implications for government carefully
Institutions have to manage to between 97% and 103% of their funded levels
Avoiding high flow-ons to loans costs
And quality risks
And managing according to the priorities of the government tertiary education strategy
Reverses the dynamics of institutional decision-making
We have seen …The new caps came into effect in in 2008
And in 2009, youth unemployment went up, leading to greater demand for tertiary education
Just as the birth bubble was hitting the tertiary age group
And improved school achievement put pressure on higher level enrolments
So what happened?
By and large, institutions managed to the tolerance bands
And have become better at it
Except the private sector where caps were applied earlier
And where over-enrolment is being managed down slowly
We have seen …
The new system has changed institutional decision-making
Prioritisation of students who are younger, more likely to be full-time and in higher level qualifications
Greater human capital development
Greater value for money
We have seen …Participation rates by age group
Attaining and sustaining?
Under 25 25 and over
0%
3%
6%
9%
12%
15%
2005 2006 2007 2008 2009 2010 2011
Per
cen
t
Certificates 1-3 Level 4-7 non degree
Bachelors degrees Graduate/Postgraduate
0%
1%
2%
3%
4%
5%
6%
2005 2006 2007 2008 2009 2010 2011
Perc
ent
Certificates 1-3 Level 4-7 non degree
Bachelors degrees Graduate/Postgraduate
The new priorities…
Fine-tuning within these settings ….
Youth transitions
Vocational/on job training
Reviewing research funding mechanisms
Questions
For more information, research and statistics
Visit www.educationcounts.govt.nz