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Who’s not paying for TAFE

Who’s not paying for TAFE. David Hayward Institute for Social Research Presentation to the Victorian TAFE Association Conference, Central Gippsland, 29 May, 2004. Outline: Who’s not paying for TAFE?. Introduction: Who’s not paying for TAFE? The problem: persistent financial stress

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Who’s not paying for TAFE

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  1. Who’s not paying for TAFE David Hayward Institute for Social Research Presentation to the Victorian TAFE Association Conference, Central Gippsland, 29 May, 2004

  2. Outline: Who’s not paying for TAFE? • Introduction: Who’s not paying for TAFE? • The problem: persistent financial stress • Funding trends • Different views • Why they don’t want to spend • What might make a difference

  3. 2. The problem: financial stress • Evidence of significant financial stress over many years • Auditor-General • Operating losses “In summary our analysis revealed that for the year ended 31 December 1999, 6 public TAFE providers (27%) had a negative working capital position, 16 (73%)…incurred a deficit, 4 (18%) had generated negative cash flows from their operations” (Auditor-General 2000: 54) “…the underlying operating deficits of 17 public TAFE providers…are a sign that these providers are experiencing financial difficulties. These results are not sustainable in the medium to longer term” (Auditor-General, 2004: 43)

  4. The problem cont. • Maintenance and equipment standards “The (1996/7) survey identified that building works with a value of $32m were necessary to bring all buildings up to standards required by the appropriate building regulations, and occupational health and safety standards..(It also) identified a deferred maintenance backlog of $99m…(T)here is a need as a matter of priority to focus on this issue…” (Auditor-General, 2000: 61, 63; see also Auditor-General, 2001).

  5. 3. Funding trends • Table 1: VET expense per capita Source: Commonwealth Grants Commission. Note that 1991/2 data are cash based; 2002/3 data are accruals and cannot be compared.

  6. Funding trends cont. • Table 2: TAFE recurrent funding by source, 2002 ($m) Source: ANTA Annual Report, Volume 3

  7. Funding trends cont. • In sum • A recurring funding crisis • Hits some TAFEs more than others • But is bordering on systemic • Cause is primarily inadequate State government funding • Must acknowledge that Bracks government has begun to reverse effects of Kennett • But progress has been painfully slow

  8. Funding trends cont. • Most recent initiative is to allow 25% increase in student fees • Victorian Auditor-General (2004): “On account of the extra fees of 25c per contact hour…OTTE in 2004 reduced the institutes base funding by 3c per student contact hour. This amounts to $1m…A further $7.18m was also removed from the TAFE institutes’ 2004 service delivery funding (the equivalent of the remaining 22c increase in per student contact hour)”.

  9. 3. Two views • ANTA: • Real funding increases mean efficiency falls • “Efficiency performance … declined during 2002” (Annual Report, Vol. 3. p. 87) 2. Victorian Auditor-General • Real funding increases are needed to ensure financial viability: • Victorian TAFE providers receive the lowest profile funding per student contact hour of any jurisdiction in Australia…Victoria is the only state to deliver training at an average student contact hour rate that is below the national average… The current student contact hour funding does not fully cover the costs of delivery ” (Victorian Auditor-General, 2004: 45)

  10. Two views cont. • A wrestling match • Involving TAFE Directors on one hand and Treasury on the other, with OTTE in the middle • No prizes for guessing who’s winning • Have a look at Budget Paper No. 3

  11. Two views cont. Source: Victorian TAFE Association, 2003 Figure 1. Public Expenditure per hour of public training: Two measures in 2001 prices

  12. 4. Why they don’t want to spend • Broader state budgetary context • Labor’s unnecessary fight with the ghost of Cain • In practice, Steve inclined to spend a bit more, Jeff inclined to cut taxes and debt • But not a lot of difference between them in core budget values, and in belief that Treasury must dominate • Note the whopping budget surplus next to low debt • This is a context enabling my friend at the Treasury to be heard

  13. 5. What might make a difference • The battle with Cain is no longer an issue • We need a more relevant budget framework • Do we really need low taxes? • Harvey Review of Business Taxation • Of 26 businesses surveyed, “only one… regarded state taxes and charges as having a significant impact on expansion and relocation decisions. Demand factors such as the size of the market … were seen as more important than government policies (p. 30). Its survey of the international literature found that tax ranked as a matter of “low concern” for multinational companies’ location decisions (p. 32). • Do we really need a surplus always?

  14. What might make a difference cont. Table 3: Surplus targets by state

  15. What might make a difference cont. Figure 2: Public sector debt as a percent of GSP, 1962-2003

  16. What might make a difference cont. • Figure 3: General government debt as % of GDP, 2002 Source: Hayward and Quiggin, 2003

  17. What might make a difference cont. Table 4: Net operating surplus ($m) and as % of GSP, 2002/3 Source: State Government Annual Financial Reports (operating surplus); ABS Cat No. 5501 (GSP)

  18. 5. Making a difference cont. • We also need a stronger voice for social policy, where: • Where the driver is neither outputs nor outcomes, but educational values • Where we first work out what’s best • Then determine funding levels needed to meet that level • And a time frame to get there

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