The University of Newcastle, Australia

May 2013

Wednesday, 13 March 2013

After sampling the zeitgeist of the Australian higher education sector at a conference in Sydney in March, a UK Vice-Chancellor wrote in a piece in the Times Higher Ed titled 'Winter is Coming' that 'Lucky Australia is feeling a rather British chill in the air'.

As is often the way, these reflections turned out to be prescient of upcoming storms with the Government announcement on 13 April of:

  • An efficiency dividend of 2% in 2014 and a further 1.25% in 2015, which will cut university funding by an estimated $900 million;
  • Conversion of student start-up scholarships to a loan which will save the Government an estimated $1.2 billion; and
  • Removal of the 10% discount for up-front HECS/HELP payments and the removal of the 5% bonus for voluntary repayment of HELP debts to save the Government $228.5 million.

These announcements followed an earlier announcement that the tax incentive for self-education expenses would be capped at $2,000 per annum.

While the political debate around the impact of these cuts on a sector that has responded so effectively to the mandate of access and participation gains momentum – as it should and must ahead of the imminent Federal Budget – many staff will be asking: is winter coming to our University?

Quick answers or glib reassurances are never helpful when answering intelligent questions about complex issues. What we can say at this point is that based on early calculations, the funding cuts will result in a loss of revenue for our University in the order of $5 million in 2014 and $9 million in 2015, and that they will result in a new 'lower funding baseline' from 2015 and beyond.

While, in contrast to 2005-2006, a time that is etched into our University's memory, we are not about to go into the red, this cut will certainly bring to bear pressure on already limited resources.

So, what is our current financial position?

Our current financial results will be available in our 2012 Annual Report, which will be tabled in the NSW Parliament by the NSW Minister for Education in the coming weeks. As is always the case, because of the technical way we are required to report the figure – the headline 'surplus' (the amount of money not spent at the end of the year) sounds large – at around $59 million – but when you drill down below the headline – it becomes clear that this figure includes either funding that is tied to specific projects such as buildings or research or other one-off income received in 2012 including:

  • $14.1 million grant from the Commonwealth Education Investment Fund for NIER
  • $8.1 million in external research grant funding
  • $6 million from Commonwealth and State schemes for capital projects, scholarships and other grants
  • $4.2 million Commonwealth grant for the Tamworth Education Centre
  • a one-off sum of $15.8 million from the wind-up of the University's online provider Gradschool.com when operations were brought back into the University.

When you do the calculations, the actual or underlying financial result for the University in 2012 was $11.6 million – approximately 2.5% of our operating revenue. This is the very tight financial margin that lies behind those headline figures – and clearly provides a challenge in dealing with any additional 'efficiency dividends'.

In the next two months the Executive Committee will work to address how to accommodate the impact of the cuts on our budget in 2014 and beyond using the following guidelines:

  • We will not lose sight of our 2025 Vision and we will continue to define and invest in strategic priorities as articulated in our NeW Directions Strategic Plan – we will also identify what we no longer need to do.
  • Providing first rate education and experience for our students and building our world-class research is our top priority.
  • We will ensure existing and new physical and virtual learning, teaching and research environments for our students and staff deliver the best outcomes for every dollar invested.
  • We will benchmark the quantum of our investment and the service delivery in our service and resource areas with other institutions in the sector and we will understand the financial sustainability, quality and markets for our education programs.
  • We will continue to benchmark where our research sits on the world stage and the investment required to build excellence and scale.
  • Every position counts - every one of our academic and professional staff contribute to the success of the University. We will ensure the right people are appointed to deliver our aspirations, that performance expectations required to build great careers are well defined and that we will invest in an overhaul of our performance development and management processes.

To many of us it can sometimes appear in the cyclical world of higher education that – to paraphrase another quote from the series of the moment, Game of Thrones – 'A long summer always means a long winter to come'. But let's be reassured our sector has proven itself to be one of the most resilient, efficient and innovative across three decades of often sudden policy shifts.

I have confidence that with strategic focus and individual and collective leadership we will prevail and over the next two months, I will be visiting faculties, divisions and campuses and holding open 'Town Hall' meetings to discuss how we will chart our course in these most interesting of times.

Best wishes

Caroline


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