Why gaining State and Territory agreement to more funding for VET may be proving challenging
Ordinarily when the Commonwealth government offers States and Territories additional funding for new training places with few strings attached, there is a ready acceptance of the extra funding.
This begs the question as to why, six months after the Federal election, the only jurisdictions to sign up to new funding for fee-free TAFE are currently the Northern Territory and South Australia?
Labor’s fee-free TAFE funding was an election commitment which was clearly more attractive to States and Territories at the time it was announced than the former Coalition government’s funding proposal for a multi-year National Skills Agreement. The latter included a raft of additional reforms (extra strings attached) including Commonwealth involvement in setting ‘efficient’ pricing for VET courses and hence funding, and much greater transparency on TAFE funding. Unsurprisingly jurisdictions consistently rejected the Commonwealth’s offers and waited until after the election to recommence negotiations.
It has been a number of years since I was involved in these discussions at Ministerial level but I have been reflecting on those experiences to try and determine why the Commonwealth appears to be finding it hard to get the remaining jurisdictions to agree to more funding for fee-free TAFE?
It seems to me that there are a few inter-related issues which are creating real dilemmas for at least the three largest jurisdictions – New South Wales, Victoria and Queensland.
Financial viability of community and non-profit providers
The joint media release issued by TAFE Directors Australia (TDA) and Adult Learning Australia (ALA), as well as statements by Community Colleges Australia (CCA) made a strong case for the role of adult and community education providers in VET and, by implication, served to remind policymakers of the damage that might be done if efforts to inject additional funding into TAFE came at the expense of community providers.
Independent Tertiary Education Council Australia (ITECA) has also been prominent in the debate – explaining how much VET activity occurs in private providers and raising concerns about the impact of fee-free TAFE on private providers which receive government funding. Amongst the private providers being funded by States and Territories are a sizeable number of non-profit providers (separate from ACE providers) which I suspect States and Territories will also not want to see become financially unviable.
It was only six weeks after the TDA-ALA media release that the Commonwealth Budget papers made reference to funding for “fee-free TAFE and community-based vocational education places.” I took that as a clear sign that the Commonwealth, probably at the request of at least some States and Territories combined with the efforts of ALA and CCA, was thinking about allocating some of their “fee free TAFE” funds to some community-based non-TAFE providers.
A key issue from the States’ perspective, particularly Victoria and New South Wales where specific funding is available to adult and community education providers, is the financial viability of their Learn Locals/ACE providers if a large share of the 120,000 existing subsidised VET places next year switch to TAFE. If students who would have studied with an ACE provider instead choose TAFE, this will have a direct financial impact on these ACE providers.
Unlike previous state government ‘free-TAFE’ initiatives ,which have been about allocating only new, additional, money to TAFE (and therefore not reducing funding for other providers), in this case the aim of the policy appeared to be to support TAFE by incentivising students to switch to TAFE (and away from other providers).
Redirecting funding for existing VET places
With the bulk (two-thirds) of the 180,000 fee-free TAFE places the Commonwealth has allocated funding for next year being places which are already in the system, if the Commonwealth government listens to the concerns of States and Territories and the ACE sector and allows community-based providers to also have a share of the fee-free existing places – how will they incentivise students to choose TAFE?
I have written previously about why a shift in student enrolments from non-TAFE providers to TAFEs might not happen quite that smoothly in reality. This is because in most jurisdictions providers have some discretion about the student fees they charge, and hence they can reduce their fees and would then be able to retain most/all of their students but this would come at a reduce level of profit/surplus and this might have flow-on financial implications for ACE providers which typically are more reliant on government funding and operate on lower margins. An added complication with this policy is that some of the students who will choose a fee-free TAFE place next year may well have chosen to study at TAFE anyway – so while the students will welcome not having to pay a student fee – they will not be an extra place in TAFE.
Therefore while it will be easy to count the 60,000 new fee-free places the Commonwealth is providing funding for, irrespective of whether or not they are delivered in TAFE or non-profit providers, the problem is where to allocate and then how to ‘count’ the 120,000 existing places if they are not all additional students in TAFE but some existing places stay with the providers they are currently allocated to? That is, if non-profit and ACE providers continue to deliver more or less the same number of places they did last year (which would be likely to be reassuring to at least some States), and a good portion of TAFE’s share of the existing fee-free places are students who otherwise would have studied at TAFE and paid fees, will there be enough additional TAFE students to achieve the government’s purpose in shoring up TAFE funding?
Levels of funding for VET
There is another reason why some jurisdictions may not want all of the Commonwealth’s fee-free funding to go to TAFE. That is in those jurisdictions where there is currently a heavy reliance on non-TAFE providers delivering government-funded VET – in part to keep funding costs down. Again I have written about this previously and there are a range of reasons why TAFE Institutes have a higher cost base than other providers.
In jurisdictions which do not have a strong ACE sector, their reticence to reach agreement with the Commonwealth may be that they think (unlike some of my analysis above) that enough students will switch to TAFE from other providers and that in doing so this could require an additional funding injection from the relevant State or Territory. That is because, if the Commonwealth’s contribution to converting existing funded places to fee-free in TAFE, is only about providing funds to meet the cost of the foregone student contribution (and some additional student support costs) then there may be a gap in the funding rate needed to deliver these places in TAFE compared to the costs of delivering them through other providers (if there is a high cost differential between TAFE and other providers in that jurisdiction).
If that is the case and the jurisdiction would need to fund the gap between the cost of delivery in TAFE and the cost of delivery in a non-TAFE provider, that might also explain why some jurisdictions are still trying to negotiate a better deal.