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close this bookPolicy Development and Implementation of Technical and Vocational Education for Economic Development in Asia and the Pacific - Conference Proceedings - UNESCO - UNEVOC Regional Conference (RMIT, 1997, 520 p.)
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Public Expenditure on Education and Training in Australia: Some Basic Data

Gerald Burke

Draft for discussion only: not for citation or quotation

UNESCO UNEVOC Regional Conference
RMIT Melbourne
November 11-14 1996


MONASH UNIVERSITY - ACER
CENTRE FOR THE ECONOMICS OF EDUCATION AND TRAINING
Clayton Victoria 3168 Australia Telephone: (03) 9905 9157 Facsimile: (03) 9905 9184

Introduction

From the late 1980s education and training in Australia have been substantially reformed. The main stimuli to reform were concerns to promote efficiency and to reduce spending in the public sector, to expand and orient education and training to the demands of globalisation, increased technological change and workplace reform, and to address the continuing high levels of unemployment.

This paper addresses changes in expenditure which up to 1996 included the effects of increased fee-for service in TAFE, the reintroduction of student tuition fees, the Higher Education Contribution Scheme (HECS), cuts in some States to expenditure on government schools, and a relative expansion of non-government schooling.

Participation in Education and Training

Education and training in Australia comprises pre schooling, schools, universities, vocational education and training (VET) and adult and community education (ACE), though the boundaries between the sectors are blurring. The number of students or clients in the formal education system are given in Table 1

Pre-schooling is generally available on a sessional basis, two to three hours a day for two or more days a week, but is not compulsory. Many pre-schools are now offering all-day care. ACE has a major concern to help less advantaged adults and is mainly concerned with Recreational, Leisure and Personal Enrichment short courses. ACE and pre-schooling are not considered explicitly in this chapter.

Schooling is compulsory under State or Territory legislation from age 5 or 6 to 15 or 16. Just over 70 per cent of students remain at school to year 12, the final school year.

About 50 per cent of all young people, including some who leave before year 12, continue directly from secondary school to full-time or part-time post-school education in universities or VET institutions leading to a recognised qualification. Other persons enter post-school courses one or more years after leaving school. Some of the part-time VET students are engaged in courses including a contract for work-based training. In 1994-95 about a quarter of young males but less than 10 per young females commenced traineeships or apprenticeships.

Table 1 Students, 000s, Australia, 1988 to 1995


School to year 10

School years 11 & 12

Higher Education

VET

Recreational, Leisure and Personal Enrichment

'Other'

TOTAL

Provider Type

Gov't & Non-gov't

Gov't only

Gov't only

Gov't only

Mainly private


% students full-time in 1995®

100%

100%

59%

13 % in 1993

approx 0%

na


1988

2651

372

421

952

533

110

5038

1990

2665

376

485

967

539

151

5184

1992

2692

407

559

1043

701

163

5565

1994

2716

384

585

1132

472

88

5376

1995

2738

372

604

1273

388

206

5580

1988 to 1995

3%

0%

44%

na

na

na

11%

Source: ABS, Schools Australia, Cat No 4221.0, DEET, Selected Higher Education Student Statistics ABS, Transition from Education to Work, Cat No 6227.0. ACVETS, Selected Vocational Education and Training Statistics.

Changes in collections severely affect comparisons in recent years.

na not applicable; VET data relate to students in such as business colleges, streams 2100 to 4500 enrolled at any time in the year.

'Other' includes private providers

A feature of post-school education and training in Australia is the wide range of the ages of the students and the substantial proportion of students undertaking a second or third or further course of study.

Training provided by employers on and off-the-job is increasingly recognised for credit towards a qualification. Some Commonwealth labour market programs for the unemployed have included training and could be considered as part of VET, though in general they have not led to recognised qualifications.

An annotated organisation chart of Australia's education and training system is given in OECD (1995).

Funding and coordination

Expenditures by the States and Commonwealth governments on the main sectors of education and training are given in Table 2.

States and Territories

State and Territory governments (referred to as States) operate government primary and secondary schools, attended by about 70 per cent of students, alongside nongovernment schools where tuition fees are charged. States make grants to nongovernment (private) schools averaging 18 per cent of their costs. Local governments have no role in formal education.

State governments operate technical and further education (TAFE) institutes. TAFE institutes are the major providers of VET courses alongside a growing diversity of private providers. Provision of an increasing share of VET programs are subject to tender by both public and private providers of VET. 'User choice' is being introduced whereby the users of VET may choose the provider, customise the course and affect the flow of government funds to particular suppliers.

Commonwealth

The Commonwealth government is the major provider of funds for the public universities and of means tested grants for living costs to fall-time students aged 16 or more, under the AUSTUDY scheme. No government grants are made to the two very small private universities that currently operate, though the students are eligible for AUSTUDY.

The Commonwealth provides about a third of the funds for VET to the States. It also makes grants to the States of about 13 per cent of the costs of government schools and makes grants to non-government schools averaging 36 per cent of their expenditures. The Commonwealth has put the provision of training under its labour market programs to tender by public and private providers.

Fees and charges in public institutions

The Commonwealth government from 1989 has funded a share of its outlay on universities though the Higher Education Contribution Scheme (HECS) which is a student tuition fee which can be funded by an income contingent loan. Payment of HECS can be deferred until the student's annual earnings exceeds a specified level.

Universities now raise substantial funds from fees from foreign students and a small but growing amount from fees for postgraduate courses. From 1997 they will be permitted to charge fees for a limited number of undergraduates who fail to gain a government supported places in the courses of their choice.

TAFE institutes raise about 10 per cent of their funds from fee for service activities and from student fees including fees from foreign students. Government schools raise a small part of their revenue from levies and charges which are generally non-compulsory.

Table 2 Commonwealth and States, Public Outlays on Education by Sector 1994-95, $ billion


Final Expenditure

Other

Student Benefits

Intergov transfer

Total $ billion

% share

Total excluding benefits

share excluding benefits

Schools









Commonwealth

0.03

0.02

0.62

3.11

3.78

31%

3.16

27%

States

9.04

2.64

0.05

-3.11

8.62

70%

8.57

73%

Total

9.07

2.66

0.67

0.00

12.39

100%

11.73

100%

TAFE









Commonwealth

0.00

0.00

0.23

0.73

0.97

37%

0.73

31%

States etc

2.33

0.04

0.00

-0.73

1.63

63%

1.63

69%

Total

2.33

0.04

0.24

0.00

2.59

100%

2.36

100%

Higher









Ed Commonwealth

0.30

0.41

0.79

3.52

5.02

93%

4.24

92%

States etc

3.87

0.01

0.00

-3.52

0.36

7%

0.36

8%

Total

4.17

0.43

0.79

0.00

5.38

100%

4.59

100%

TOTAL Govt*









Commonwealth

0.59

0.47

1.67

7.43

10.16

45%

8.49

42%

States etc

16.48

2.84

0.56

-7.43

12.44

55%

11.89

58%

Total

17.07

3.30

2.23

0.00

22.61

100%

20.36

100%

Source: ABS Expenditure on Education, Australia (5510.0)

Notes: Outlay includes student benefits, grants to non-government institutions, net increase in HECS debt, recurrent and capital expenditures

* Total includes outlays on transport, pre-schools and tertiary not elsewhere classified and other outlays not elsewhere classified.

Restriction in public expenditure

This section will firstly document the main changes in government and private outlays on education and training. It will discuss the changes in relation to the aim of reducing the charge on the public sector.

Table 3 shows the total government outlays on education and the percentage of GDP. At first glance it appears that education outlays blew out from 1988-89 hut have been reined in recently. Government outlays as a percentage of GDP rose from 4.6 per cent to 5.3 per cent in 1991-92 and then fell to 5.0 per cent in 1994-95, However the picture is a little more complicated. Changes in the expenditures as a percentage of GDP are due to changes in the resources devoted to education, the relative price changes of those resources and the changes in the GDP. Much of the growth in the percentage of GDP to 1991-92 was due to the relative increase in pay for staff in education, after a decline in the late 1980s, and to the recession which saw the real GDP fall in 1990-91 and 1991-92. Much of the fall in the percentage of GDP since 1992-93 is due to the recent growth in GDP and to the relative decline in teachers' pay (but precise documentation of this is not yet available).

Table 3 Private and Government Outlays on Education as a Percentage of GDP


Private Expenditure $ billion

Private Expenditure not financed by government $ billion

Government Outlay $ billion

Net Total Outlay $ billion

Government Outlay as % of GDP

Net Total Outlay as % of GDP

1988-89

3.62

1.62

15.76

17.38

4.6%

5.1%

1989-90

4.28

1.85

17.23

19.09

4.7%

5.2%

1990-91

4.82

2.13

18.95

21.09

5.0%

5.6%

1991-92

5.38

2.35

20.47

22.83

5.2%

5.8%

1992-93

5.66

2.59

21.52

24.10

5.3%

5.9%

1993-94

5.95

2.68

22.13

24.81

5.2%

5.8%

1994-95

6.15

2.89

22.59

25.48

5.0%

5.6%

Source ABS 5510.0 and 5512.0.
na not available in comparable form

Table 4 gives details of public expenditures for schools, TAFE and higher education in nominal prices. The fastest growth is for higher education.

The growth in funds for higher education in part stems from the decisions taken in 1988 to reform higher education. The expansion for TAFE largely is the result of the recommendations of the Finn Report (1991) to concentrate further expansion of post secondary education on TAFE and other vocational education and training.

Outlays on student benefits, mainly under the AUSTUDY scheme established in 1987, are included in these estimates. With the new scheme, the rapid expansion in educational participation into the early 1990s, and the recession which increased the number of eligible students, payments for student benefits surged from 1988 to 1992. Growth of over 60 per cent in real terms occurred in four years. A number of modifications to AUSTUDY, including an optional loans scheme, and a decline in the growth in eligible student numbers, have held back expenditures in recent years.

The Commonwealth government has shifted a part of the growth in education outlays to the private sector. Table 3 shows that private sector outlays have increased faster than government outlays in recent years, though private outlays not financed by government made up only a little over 10 per cent of total outlays in 1994-95. Much of the private outlay not financed by government represents fees paid to non-government primary and secondary schools, which also receive grants from both State and Commonwealth governments. From 1989 university students under the Higher Education Contribution Scheme (HECS) have been required to pay a 'contribution' (a fee) of about 20 per cent of average government funds per full-time student, with the option of deferring payment until personal earnings reach average earnings. In the first years of operation much of this fee liability was financed by loans from the Commonwealth government. Net additions to HECS loans, which are shown in the other column in Table 4, peaked in 1991-92 at about $700 million. Due to rising up-front payments (which now attract a 25 per cent discount) and increasing repayments, the net addition to loans is now falling. Part of the burden of higher education expenditures is thus shifting to individuals and their families.

A further saving to government may occur through cuts in the resources per student. Table 1 indicates that total numbers of students rose by about 10 per cent in the years from 1988 to 1995. Outlays, shown in Table 3, when adjusted for the general level of prices, rose by about 20 per cent. However this is in large part due to the relative expansion of higher education where funding per student is higher than in other sectors.

Table 4 Government Outlays on Schools, TAFE and Universities, $ 000 million, 1987-88 to 1994-95

Government Outlay on:


Schools

TAFE

Universities



Cons.

Capital

Benefits

Other

Total

Cons.

Capital

Benefits*

Other

Total

Cons.

Capital

Benefits*

Other

Total

Total

1987-88

6.1

0.5

0.4

1.5

8.4

1.2

0.2

0.1

0.0

1.5

2.4

0.3

0.4

0.0

3.00

14.43

1988-89

6.7

0.5

0.5

1.6

9.3

1.3

0.2

0.1

0.0

1.6

2.3

0.3

0.4

0.2

3.22

15.76

1989-90

7.01

0.62

0.51

1.81

9.96

1.44

0.32

0.09

0.02

1.93

2.46

0.30

0.49

0,40

3.64

17.23

1990-91

7.67

0.64

0.55

1.92

10.78

1.55

0.33

0.09

0.03

1.98

2.71

0.34

0.63

0.54

4.26

1895

1991-92

8.19

0.59

0.64

2.16

11.59

1.71

0.28

0.10

0.05

2.11

2.99

0.33

0.79

0.70

4.81

20.47

1992-93

8.31

0.56

0.68

2.30

11.87

1.82

0.34

0.11

0.05

2.30

3.19

0.43

0.87

0.61

5.14

21.52

1993-94

8.41

0.55

0.70

2.43

12.08

1.95

0.26

0.24

0.04

2.51

3.63

0.32

0.74

0.61

5.36

22.13

1994-95

8.50

0.57

0.67

2.64

12.39

1.99

0.33

0.24

0.03

2.59

3.91

0.27

0.79

0.42

5.38

22.59

Source: ABS 5510.0

Employer expenditure on training

This paper is concerned with public expenditure but it has given some indication of the recent growth in private expenditures. One major area of both private and public expenditure not covered in the previous discussion is employer expenditure on training which was surveyed by ABS in 1989, 1990 and in 1993, followed by a survey of Employer Training Practices in 1994. Total expenditure for the July to September quarter in 1993 was $1.1 billion or 2.9 per cent of gross wages and salaries compared with 2.6 per cent in 1990 (shown in Table 5). The employer expenditure equals about 1 per cent of the GDP. Of this expenditure on training nearly half (46 per cent) represents expenditure on the wages and salaries of those undertaking training and just over half the cost of trainers and other expenditure. Employer expenditure on trainers and other training expenditure (excluding wages and salaries of the trainees) is nearly as large as government grants for VET.

Table 5 Employer Expenditure on Formal Training, Australia,
July - September 1993

Total Training Expenditure $ million

1109

% of Gross Wages

2.9%

in-house training

2.0%

external training

0.9%

% of Employers Reporting Training Expenditure

25%

Training Expenditure per Employee $

192

Private

163

Public

263

Number of employees - million

5.77

Private

4.13

Public

1.64

Hours per Employee

5.6

ABS Employer Training Expenditures

The employer expenditures represent $192 per employee for the three months July to September 1993 or over $750 per year per employee. Expenditure per-employee-who-received-training is much higher. The ABS expenditure survey did not provide an estimate of the numbers being trained but the ABS survey of training and education discussed earlier showed about 31 per cent of wage and salary earners had received in-house training. In-house training absorbed nearly 70 per cent of all training expenditure in 1993 so a rough estimate of expenditure per employee receiving in-house training would be $1500.

These aggregate estimates of employer expenditure at best provide an indication of the dimension of training. They are useful in indicating the level and broad types of training undertaken by firms of different size in various industries. Even in this regard they provide only partial estimates for the whole labour force as eg they do not include expenditure on me self employed.

A very important source of learning was explicitly not considered in the Training Expenditure Survey:

Informal training is excluded from the scope of this survey. That is, any unstructured on-the-job training, being shown how to do things as the need arises, learning by doing a job. (ABS Cat No 6353.0 p. 34)

Over 82 per cent of wage and salary earners indicated that they received on-the-job training. The fact that we can measure expenditure on education and on structured training should not lead to the neglect of the importance of on-the-job training and the means of fostering it.

The Commonwealth 1996 Budget

The Commonwealth Budget delivered on 20 August reined in expenditures on education. It is important to establish what the cuts are, and the changes in the compositions of expenditures, so that the consequences for equity and quality can be investigated. There is a great deal of information available on the budget and much of it is on the web HTTP://www.deetya.gov.au/budget96/ but, as those who remember Jim Hacker and the red boxes in Yes Minister will know, finding what you need to know is not always easy. This section gives an overview of funding for schools, universities and vocational education and training.

Vocational Education and Training

The changes in HECS may encourage a shift in enrolments among courses in universities and a shift to TAFE - though fees may increase in TAFE. The Commonwealth has recently provided about a third of public funds for TAFE and the States two thirds.

Commonwealth growth funding of $70 million is to be maintained but there are some offsetting cuts. The general tightening of finances will affect States' own funding.

TAFE colleges and private VET providers have delivered training programs under Commonwealth Labour Market Programs Most training programs will be abolished. Expenditure on assistance to jobseekers will fall by nearly 50 per cent over the next three years. The consequences for the unemployed are the main ones to be considered but TAFE and private providers and their staff will also be affected.

Schools

To provide a context some background data on funding is needed. Commonwealth grants have provided about 13 per cent of government school spending and 38 per cent of non-government school spending. State governments have provided 87 per cent of government school funding (not counting any private contributions) and about 18 per cent of non-government spending. So together, the Commonwealth and the States provide about 56 per cent of non-government school funding.

The remaining 44 per cent of non-government school funds come from private sources, largely school fees. The figures are averages with, eg 28 per cent of spending of Catholic schools is financed from private sources and 64 per cent of Other nongovernment schools.

The Budget shows that Commonwealth school funding totalled $3,344 million in 1995-96 including $1,124 million for government schools, $1,767 million for nongovernment schools and the remainder for Targeted Programmes, Aboriginal Education Strategic Initiatives and Other Assistance.

The total is projected to grow by a total 17 per cent in the next four years, most of it for non-government schools. Capital grants for non-government schools are increased. Much of the apparent increase in total funds is for projected wage increases, implying a decline in real funds for government schools.

Labor's New Schools Policy which limited the growth of non-government schools, and the levels of assistance available to them, has been abolished. The Budget projects the non-government share of enrolments to continue to rise from 29.4 per cent in 1996 to 31.1 per cent in 2000. For this reason alone we could expect Commonwealth funds for government schools to fall relative to those for non-government schools.

But there is another reason why the real funds for government schools fall. The Commonwealth notes that any movement from government to non-government schools saves the States an average of $3425 per student. It proposes to share in this saving. It will reduce its general recurrent grant to the States for government schools by $1712 per student associated with a rise in the share of enrolments in nongovernment schools. In effect, the States will bear the Commonwealth's costs of the increase in the share of enrolments in non-government schools.

There is not enough information yet on Targeted Programmes, shared across the school systems but largely in government schools. These are to be arranged in five broad bands. There are new initiatives for vocational education and training (VET) in schools, associated with the Modern Australian Apprenticeship and Traineeship System (MAATS) and for a new Literacy and Numeracy Strategy.

Cuts elsewhere in the Budget to Commonwealth general revenue grants to the States will put pressure on States' own funding of government and non-government schools. This will only be clear when State Budgets are released.

Universities

The Commonwealth provides nearly all the public funds to universities. Cuts are reported in operating grants for universities, compared to the previously announced levels - the forward estimates - which were based on the costs of existing policies. Operating funds for universities are in fact projected to increase by 0.6 per cent in 1997 and to be only 1.3 per cent below 1996 levels in 1999. However, no allowance is made for any increase in wages and salaries. The underlying assumption of the Budget is that wages in the community win rise by 4 per cent or more per annum, and universities were expecting a 5.6 per cent rise late last year. So if university salaries and wages move up in step with the rest of the community this will mean the Commonwealth's funding is being reduced in real terms. This could mean a cut from 1995 levels of roughly 10 per cent by 1997 and another 8 per cent by 1999.

Universities may be able to raise more funds from fees. They are now permitted to enrol some Australian undergraduate students for full fees once they have filled their government funded HECS related places. They may continue to seek more overseas student and more fee paying postgraduate coursework students. It is unlikely that this will offset the cuts in real government funding.

The consequence is that staff and programs are likely to be reduced. The Commonwealth has indicated that cuts in DEETYA funding are to be concentrated on postgraduate coursework programs, where fees may be charged. Nearly a quarter of postgraduate coursework students are in education courses. The students in these courses are mainly intending or practicing teachers who are unlikely to be able to pay full fees for their course. A large decline in enrolments in postgraduate courses in education is likely to occur.

The Commonwealth is also shifting a bigger share of its costs on to students through the HECS scheme. HECS will be increased by a minimum of 35 per cent and a maximum of 125 per cent for new students, with a three tier system of charges. As a small offset, some HECS scholarships will be provided to be awarded by universities on merit among equity target groups.

Repayment of HECS will now be required at a much lower level of income than in the past. This will speed the recovery rate and also tap groups who might not have repaid their debt under existing rules. DEET had estimated under the old rules that about 10 per cent of males and 20 per cent of females were unlikely to repay their HECS debt.

There is a lot more to consider. A comprehensive discussion of education and training requires a close consideration of the massive reduction in Labour Market Programs, the funding of MAATS and training wages, changes in AUSTUDY, and the proposed Youth Allowance which would merge unemployment benefits (Newstart Allowance) with AUSTUDY.