Funding higher education: time for a more transparent system?

With a new minister for higher education comes a reset of the debate over how to fund higher education.

In recent weeks there have been calls to discuss how we make more transparent what the government and public are paying for in higher education.

But what activity do we need to make more visible? This is where it gets tricky, especially when we look at funding for teaching.

A recent report highlighted the amount universities spend on research, and how some of this money comes from students' tuition fees.

How is teaching paid for?

Following changes made by the Whitlam government, public universities in Australia received almost all their income from the federal government.

This changed during the late 1980s and today the government contributes only around half the investment in teaching and research across the sector.

Universities receive money from government for each student they enrol, as well as funding from the student through the HECS-HELP loan scheme. Of this combined per place funding, students contribute between 29% and 84% of the total.

Who pays for what, and why, has as much to do with decisions made during the 1980s as it does with the cost of education.

When government near-wholly funded universities there was a clear expectation that the block funding was for both teaching and research. It was up to universities to work out how best to resource all their activities.

As the Australian system changed and students made ever-larger contributions, this link has become less clear for many people.

There are often calls that research must go alongside teaching, not least as it forms part of the legal definition of a university in Australia. So it is a reasonable argument to make that state money should be for research.

There is nothing inherently wrong with cross-subsidising different activities, most businesses do, so why are there concerns about doing this in universities?

It is fair to say we just don’t know how meaningful the relationship is between what is spent on higher education teaching and the cost of delivering it.

But Australian universities don’t just rely on government support for teaching, they rely on a combination of government funding, student fees, commercial activity and philanthropy to run their operations.

Creating a more transparent system

So how much is a fair amount to charge for a student place, and how much should be allocated for teaching and for research?

One popular suggestion is through activity-based costing models. These look at the different activities people undertake to deliver a service, in this case teaching, and assign the cost to each. Similar models are used in many other areas, such as health, that the government provides funding for.

Working out how much each course costs to teach is no straightforward task but universities around the world are seeking a more detailed level of understanding of what it costs to teach a course, and hence can be more transparent about how much they directly spend on students.

But this is not simple. There are significant risks in being too prescriptive. It could stifle innovation in university teaching and make the system unable to cope with changes to teaching.

When looking at online banking or streaming music services, it doesn’t take much imagination to think how dramatic the change to university teaching might be with new technologies.

What should students pay for?

A first step towards greater transparency is a conversation about the activities we think it is important all public universities undertake - teaching, research and everything in between.

It is good for Australian higher education when universities defend how they allocate funds, both between courses and between teaching and research.

It is also very hard to decide what a fair split between public and state contributions should be until we know what they are paying for.

In recent speeches, Education Minister Simon Birmingham has suggested a 50-50 split could be a good way forward. This might be so, but without being up front with what public investment goes towards, it is difficult to know.

Gwilym Croucher works at the University of Melbourne