New performance-based funding system for universities

Australia’s federal government has promised to allocate an additional AU80 million (US$54 million) to universities next year – but only on a ‘performance-based’ set of criteria.
 
Adoption of the so-called ‘performance-based funding’ scheme was the main recommendation in a report to the government by an independent panel of senior academic leaders.
 
Subsequently, the government announced that funding for bachelor level courses would be capped at 2017 levels for 2019. Federal Education Minister Dan Tehan said that from 2020, funding for student places would increase according to population growth in the 18- to 64-year-old age bracket.
 
He added, however, that universities would only be able to access additional grants if they met specified performance requirements.
 
Perverse consequences
 
Academic critics described the new scheme as an effective slashing of government spending on universities by tens of millions of dollars a year.
 
The National Tertiary Education Union or NTEU warned that the measures for distributing AU$80 million via a performance-based funding system would have “many foreseeable, albeit presumably unintended, perverse consequences”.
 
For instance, graduate employment outcomes were beyond the control of universities; and the way the scheme was designed would discourage universities from enrolling students in courses essential to the community that had higher drop-out rates or lower market demand.
 
But Tehan argued that a performance-based funding system would “incentivise universities to focus on their core business: producing job-ready graduates with the skills to succeed in the modern economy”. 
 
“The university sector can lead the way in driving productivity growth across the nation over the next decade,” he said. 
 
“The focus of performance-based funding on producing job-ready graduates will be a key driver.”
 
Assessing performance
 
Tehan established an expert panel, chaired by Professor Paul Wellings, vice-chancellor of the University of Wollongong, to recommend ways of assessing university performance.
 
The panel identified graduate employment outcomes, student success, student experience on campus and the participation of indigenous, low socio-economic status, and regional and remote students as key performance factors.
 
Accepting the panel’s report, Tehan said it showed that while Australia had a world-class higher education system, it also needed to be “stronger, more sustainable and fit for purpose”.
 
“Performance-based funding amounts will grow in line with the population growth of 18- to 64-year-olds and will begin with an increase of around AU$80 million next year,” he said. 
 
“The performance-based funding scheme, starting from 2020, will ensure there are incentives for improved performance and transparency. The government will work closely with the sector to deliver performance-based funding using the panel’s framework.”
 
According to the government, Australia’s new funding scheme would aim to:
 
• Create more accountability for the spending of public money on specific national higher education priorities.
 
• Promote and develop sound performance assessment of teaching and learning at universities.
 
• Create financial incentives to improve specific areas of university performance.
 
Four principles
 
The government set out four principles it said offered “a meaningful conceptual framework against which the assessment of potential options of the design, measures and thresholds was made”. These were:
 
• Fit for purpose – To promote a high quality education system, to provide effective and reasonable incentive to improve universities’ performance and student outcomes.
 
• Fair – To reflect a university’s overall performance, to recognise a university’s distinct mission, student characteristics and geographical locations.
 
• Robust – To be reliable with evidence based on accurate and trusted data, to be valid using a transparent, clearly defined and rigorous methodology. 
 
• Feasible – To allow for accurate performance measurement in a cost-effective and timely manner (for both universities and government) for implementation from 2020, and to be simple to implement and administer.
 
Simple and robust model
 
In its report, the panel advising the government noted that there was wide support within the higher education sector for a simple and robust model for allocating additional funds.
 
This should include the option for universities to submit “a qualitative narrative to help contextualise their performance against the core measures”, the report said.
 
The panel also proposed four measures for assessing universities based on the following considerations:
 
• Student success: Widely supported by the sector, adjusted attrition rates are a contemporaneous measure. The first-year attrition rates are a very good proxy for long-term failure to complete courses, based on nine-year non-completion rates. 
 
• Equity group participation: Boosting enrolments by indigenous, low socio-economic status, and regional and remote students has also been a focus of recent government equity policy. 
 
• Graduate outcomes: An overall employment rate among graduates is a relevant measure “to capture the complexity of employment in terms of the changing nature of professions and varied job seeking patterns”, despite the limitation of this short-term measure in reflecting a contemporary view of graduate outcomes. 
 
• Student experience: A large proportion of stakeholders were in favour of this measure. It is also the only student-centric measure currently under consideration.
 
Government attacked
 
The union, however, attacked the government over each of the factors to be used in allocating the AU$80 million, saying the creation of jobs was beyond the control of universities and was more a function of business and government. 
 
“Including graduate employment rates gives universities an incentive not to enrol students in fundamental courses essential to the community that have either traditionally higher drop-out rates or low labour market demand,” said NTEU President Alison Barnes.
 
“If the job outcome is not linked to the learning, we may see the perverse outcome of many more lawyers being qualified but working in fast food outlets.”
 
Barnes said including measures such as first-year student drop-out rates and student satisfaction scores would result in academics facing greater pressure to improve pass rates and consequently reduce quality and would threaten the reputation of the Australian university sector.
 
“Research has shown that student satisfaction surveys do not reflect teaching quality and are known to contain inherent bias,” she said. 
 
“The linking of outcomes in these discredited surveys to funding will increase pressure on academics to lower pass marks and include fashionable and popular content regardless of its academic merit.”
 
The union believes that performance-based funding should be tied to “real measures of input and output within the control of the university that genuinely reflect the quality of the performance”.
 
Barnes said such measures might include the level of insecure employment among the academics who taught students, the depth and range of student, academic and welfare support services provided, and student progression rates.