Fourth Report of the Tertiary Education Advisory Commission - full report 13/58

Shaping the Funding Framework
Fourth Report
of the Tertiary Education Advisory Commission

Chapter 3: Performance of the Current Funding System
(Cont...)

Table 3.8 Average Salaries for Academic Staff
($US)⁴⁸

Not only is the New Zealand system competing with international tertiary
education systems for staff (and, to a lesser extent, students), but it is also
in competition with other parts of the New Zealand economy. Economic reform and
globalisation have opened a range of new and lucrative opportunities for
talented and highly qualified teaching and research staff. Providers wishing to
attract or retain staff and students are under increasing pressure to match (or
better) the opportunities and conditions offered internationally and in the
private sector:

Academic salaries have fallen dramatically behind both earlier and
current benchmarks and have not kept pace with domestic inflation. Since 1990, a
backbench MP's salary has increased by 37 percent, a secondary teacher's by 28
percent, a university lecturer's by 15 percent. The consumer price index for
that period totalled 25 percent. Staff salary increases in the university sector
last year ranged between 1.5 percent and 1.7 percent, while the CPI increased by
over 3 percent.⁴⁹

The ability of TEPs to offer intrinsic (that is, non-financial) rewards to
staff is also being increasingly limited. Submissions to the Commission from
tertiary staff noted reductions in funding for sabbaticals, conference leave,
and other conditions considered as essential components of academic life.

This is of concern since - arguably more than any other factor - intellectual
capital and high-quality teachers, trainers and researchers are the key to an
effective world-class tertiary education system. Given that New Zealand
currently has a lower level of per-capita GDP than other comparable nations,
achieving this outcome will require more intelligent use and sharing of
resources, enlightened leadership, flexibility, rationalisation, and
concentration.

Representatives of providers offering Training Opportunities and Youth
Training programmes report that funding reductions have led to the exit of good
providers from the programme, quality compromises, insufficient capital
investment, difficulties in funding staff development, and an inability to meet
staff salary expectations - all of which impact negatively on quality
recruitment.

Achieving a world-class tertiary education system will require a fundamental
commitment from the government, industry and the community to the necessary
level of funding, and an exploration of new sources of revenue and assistance.
Public funding needs to be increased and also re-directed to the areas where
maximum impact can be achieved; and providers need to find more efficient ways
of utilising their current level of public funding.

3.6 Summary

While the weaknesses of the current funding arrangements are significant and
need to be addressed, its strengths are substantial and should be built upon
rather than discounted. Such a strategy is consistent with the Commission's
general approach of evolutionary, rather than revolutionary, changes.

The current funding systems have supported significant participation
increases while containing costs for the government, and, with other measures,
have resolved what was the most pressing issue for tertiary education in the
1980s. New Zealand currently ranks relatively well against OECD norms for most
measures of participation and achievement, including graduation rates and
completions.

In terms of total public expenditure on tertiary education, New Zealand ranks
highly (6th of 29) and is significantly above the OECD mean. Public expenditure
on providers alone (that is, excluding direct support to students) is close to
the OECD norms, suggesting that TEIs are relatively efficient. Direct financial
support for students (loans and allowances) is unusually high by OECD standards.

The evidence on quality is equivocal. One point of view is that quality has
been maintained, partly by progressively increasing the proportion of costs
covered by learners. Overall total TEI funding per learner (tuition subsidies
plus fees) has been almost maintained (in CPI-adjusted dollars) over the 1990s.
Another point of view is that quality may have deteriorated. Proponents of this
perspective cite evidence such as the decline in staff:student ratios.

The sustainability of the current TEI funding system is being undermined by
public perceptions (real or otherwise) that student indebtedness has become a
major problem, partially fuelled by the situation of relatively small numbers of
borrowers with large debts. System weaknesses exist in terms of a lack of
coherency and integration. There are also issues in relation to the adequacy of
funding.

The current funding system contains many of the incentives that are desired
in a funding system. Some of these (for example, the imperative for enrolment
growth in order to maintain funding levels) are relatively strong, but are often
blunt. Other incentives (for example, incentives to improve quality of
provision) are indirect and relatively weak.

Concerns do exist, however, in terms of the proportion of TEIs (particularly
small regional polytechnics) in serious financial difficulty and the threats to
staff recruitment and retention in some areas, particularly at universities.
There are also concerns that incentives for excellence and concentration of
research effort are weak. Unless these issues are addressed, they may lead to a
deterioration in quality that could be very hard to reverse.

The current funding system is not delivering the improvements in quality
(especially for learners at the top end of the system) that the Commission
identified as a priority in Shaping the Strategy. This comment applies to
both tuition and research and is of serious concern to the Commission.

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Footnote(s):

48

Provan (2001), p. 9. These figures are based on averages at the bottom of
the relevant salary scales. Fully comparable figures for the United States are
not available. Information from the American Association of University
Professors (2001), however, lists average salaries for lecturers, associate
professors and professors at all ranked universities as $32,295, $57,380 and
$78,912 respectively.

49

Ibid., paragraph 2.5(ii).