Who Should Pay Tuition Fees and Tertiary Education Financing in New Zealand

1
Who Should Pay? Tuition Fees and Tertiary
Education Financing in New Zealand

• ,
• PresentationAct Conference Workshop
• 15 March 2003

2
Introduction
3
Introduction

• Many changes to tertiary education policy since
  late 1980s/early 1990s
• Presentation examines one of the most
  controversial aspects of those changes tertiary
  education financing
• Tuition fees
• Student loans/allowances policy
• Role of private sector
• Assist party in developing tertiary education
  financing policy

4
Tertiary Education Financing Policy The
Nineties Versus the Noughties
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Tertiary Education Reforms 1990 - 1999

• Market-based tertiary education policies from
  1990-1999
• Focus on lifting tertiary participation
• Institutional self-management
• Increased funding neutrality between public and
  private sectors
• Demand driven funding system
• Tuition fees introduced
• Lower per-student subsidies
• Student loans
• Income targeting of student allowances
• Changes mirrored those in other sectors and in
  wider OECD

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Tertiary Education Reforms 2000 - Present

• Change in policy direction - election pledges
• Broad policy architecture retained in most areas
  student support, tuition fees, etc
• But significant changes to second level policy
  parameters
• Softening of student loan scheme
• Higher per-student subsidies
• Per-student subsidies to private providers cut
• Fee freeze/fee maxima
• Some student support only available to students
  in state institutions
• Eligibility for allowances to be widened

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Weaknesses in Government Strategy

• Governments strategy to address
  under-representation in tertiary education by
  disadvantaged groups fee freezes and
  across-the-board increases in subsidies is
  wrong
• Access issues need to be addressed well before
  tertiary level calls for emphasis on earlier
  levels of education
• Fee limits and increased subsidies will do little
  to increase participation lots of deadweight
  spending
• Inequitable spending favours the rich
• No efficiency justification subsidies already
  too high
• Low quality spending on equity and efficiency
  grounds
• Fee limits could lead to a running down of the
  tertiary education sector by limiting resourcing
  available from private sector

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A Better Way

• Better strategy available to achieve twin
  objectives of broadening access to tertiary
  education and ensuring adequate resourcing
• Three elements to reform
• Reduce share of tertiary education costs borne by
  taxpayers
• Abandon proposed fee maxima
• Introduce targeted measures aimed at broadening
  participation among under-represented groups
• Reforms would increase efficiency, equity and
  quality of government spending

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A Better Way (Contd)

• A series of other reforms should be introduced to
  get better value for money from current spend.
  These include
• Splitting tuition and research funding and
  funding research through a competitive system
• Improving quality assurance
• Abolishing the student loan interest rate holiday
• Reforming tertiary institution governance
• Re-examining government ownership of tertiary
  education institutions
• Improving information available to students
• Some proposals (eg governance, flexible fees)
  recommended by TEAC, others being implemented by
  government

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Tertiary Education Financing in New Zealand
Myths and Realities
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Myth 1 Tuition Fees Will Deter Students from
Pursuing Tertiary Education

• Tertiary participation not simply a function of
  fees. Factors such as attitude, expectations and
  academic preparation just as, or more important
  than, fees
• Not consistent with New Zealand evidence
• Low fees and low participation in 1980s
• Growth in participation since late-1980s 95
  increase
• New Zealand now has highest entry among OECD
  countries into both low level and high level
  tertiary education
• Tertiary participation among low-decile school
  leavers in New Zealand increased between 1997 and
  2000, despite fees
• Cross-country evidence Korea, USA, Canada,
  Australia high fees and high participation

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Myth 2 New Zealand was Alone in Moving Toward
Market-based Tertiary Financing Policies

• Not true
• Increasing private sector share of tertiary
  education financing mirrors international trends
• Increased cost-sharing takes many forms
• Tuition fees
• Increased private tertiary education provision
• Increased use of student loans
• Less use of student grants

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Myth 2 New Zealand was Alone in Moving Toward
Market-based Tertiary Financing Policies
(Contd)

• Private tertiary share up by gt 30 in 10 out 19
  OECD countries from 1995 - 1999
• Increasing private share in developed and
  developing countries
• Canada, US
• Australia
• Austria, Italy, UK
• China, Philippines

• West, Dearing, MCG all proposed higher private
  contribution
• New Zealand not ahead of the game in areas such
  as student loans
• USA, Canada and Sweden had student loan schemes
  in mid-1960s
• Ghana in early 1970s
• Philippines in mid-1970s
• Australia in late 1980s

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Myth 3 It is not Fair to Ask Students to Pay
More

• It is fair, for two reasons
• Students benefit the most from tertiary education
  higher lifetime earnings
• Students come from relatively wealthy families
• Why should tradespeople, young farmers and those
  setting up businesses subsidise people who will
  go on to earn higher incomes?
• Education spending must compete against other
  uses for government funding (health, pensions,
  tax cuts).

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Myth 4 Taxpayers Do Not Spend Enough on
Tertiary Education

• Taxpayers provide a range of assistance
  subsidies, loan, allowances, other spending
• In 2002/03, taxpayer spending of 2.59 billion
  34.6 of education budget
• Taxpayer spending on tuition subsidies, loans and
  allowances 10,637 in 2002/03

• Government pays 70 of direct costs of tertiary
  education
• Tertiary subsidies higher than other levels of
  education (5 X ECE and 2.3 X schools)

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Myth 4 Taxpayers Do Not Spend Enough on
Tertiary Education (Contd)

• Problem is not taxpayer spending no
  justification for more
• Cant expect to spend the same as the USA, UK and
  Canada when they are much wealthier than we are
• NZ does well compared to its ability to pay
  sixth highest in OECD in public spending on
  tertiary education relative to GDP
• Need to grow the economy if we are to afford more
  public and private spending

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Public Spending on Tertiary Education Relative to
GDP, OECD, 1998
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Myth 5 Proposed Policies are Just a Return to
the Failed Policies of the 1990s

• Proposed reforms are mainstream OECD, IMF,
  IPPR, etc
• Other countries moving increasingly to
  market-based policies Canada, Australia, the
  UK
• Post-1999 changes represent the failed policies
  of the past eg Muldoon price controls
• Post-1999 tertiary agenda Jurassic Park
  resurrecting long-dead policy dinosaurs

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Conclusion
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Conclusion

• Tertiary education reform not easy advocates
  are well organised and articulate
• Easy to get it wrong look at Nationals
  dreadful you stay, taxpayers pay policy of 2002
  election
• Small country small margin for error
• Benchmark policy if cant tackle middle class
  welfare, then wider attack on welfare state not
  credible

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Wellington, New Zealand. Telephone 64 4
499-0790 Fax [phone] Email
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