Gonski schools model will boost uni funding, skills

If there is one thing the Federal Education Minister has made clear in 2023, it’s that skills growth will only be achieved through greater equity.

To achieve this, our universities will need to educate and train more students than ever before, especially from underrepresented equity groups, such as First Nations people, lower socio-economic groups, people with disability and those from rural, remote and outer suburban communities.

The question then becomes, how do we pay for this?

Victoria University’s Mitchell Institute has modelled what a new funding approach would like to reflect this reality, using the schooling resourcing standard as a guide. In the school sector, funding is provided at a base level with loadings applied to students from equity groups.

The more students from an equity group, the greater the loading.

We found that including an equity-based component would mean that more resources go to the universities – and the populations they serve – who need it most.

Our modelling showed an 11 per cent increase in average per student funding. The final cost would depend a lot on the design of the system.

When it comes to education funding, resources matter. But some universities have much greater resources than others. For instance, in 2022, the University of Sydney reported $1.4 billion of revenue from 30,000 international students.

In 2022, Victoria University enrolled a similar number of local and international students and received about $260 million. That’s more than $1 billion less for teaching the same number of students.

This disparity has a massive impact on a university’s ability to provide any extra support needed for domestic students – let alone for research. More prestigious institutions have historically enrolled fewer students from an equity background and can generate much greater revenue from international students.

This is part of the reason why there have been calls for an international student levy, so that resources could theoretically be shared more evenly across the sector. But the operative word is ‘theoretically’. Any reallocation mechanism would be bitterly contested.

It is just one of the reasons why we do not support a levy. Putting the burden on international students is not the answer.

Instead, research by the Mitchell Institute shows that a ‘capacity to contribute’ concept could help meet the aims of an international student levy without taxing international students.

In the school sector, a ‘capacity to contribute’ is a measure based on a non-government school community’s ability to handle ongoing operational costs. The result is that non-government schools with students from more advantaged backgrounds receive less funding from the Australian government. These schools usually charge higher fees to families.

Applying the same model to higher education would see universities with higher international student revenue – relative to domestic student revenue – receive less government funding. The money saved would then be used to support a needs-based funding system.

As the Gonski reviews showed very powerfully, there is significant evidence that funding based on the composition of student cohorts can improve educational outcomes. In the school sector, it is estimated that a targeted 25 per cent increase in school funding would close the average attainment gaps between secondary school students from low-income families, and students from more affluent families.

That is what a needs-based funding system can achieve. We argue that Australia’s universities will need support of this exact type to really meet the equity challenge. And it must be met if the disadvantage is to be tackled head-on.  

Disadvantage does not stop when students leave high school. Now is the perfect opportunity to re-think how the funding of our universities can change this reality.

Written by Mitchell Institute Director Associate Professor Peter Hurley and Vice-Chancellor Professor Adam Shoemaker, this opinion piece originally appeared in the Australian Financial Review.