Australian Financial Review, 1 May 2017
By Tim Dodd
Federal Education Minister Simon Birmingham is gearing up for an unprecedented propaganda war on universities, targeting their healthy surpluses, lavish new buildings and university vice-chancellors’ million dollar salaries in an effort to swing public support behind the higher education budget cuts he will announce Monday evening.
Sources signal that in a campaign against university spending he will highlight vice-chancellors’ annual salaries, which averaged $873,600 in 2015, with nine of the 38 university leaders earning over $1 million, led by the University of Sydney vice-chancellor Michael Spence on $1,385,000.
One of Senator Birmingham’s talking points is expected to be that vice-chancellors earn more than the prime minister and most senior public servants. Another is that some elite overseas universities pay their leaders less, for example Oxford, which pays its chief £442,000 ($763,000), less than Australian vice chancellors’ average salary.
He also believes there is little correlation between vice-chancellors’ salaries and the financial performance of their institutions.
Cover for cuts
Senator Birmingham’s preparation for a swingeing attack on universities looks like cover for the higher education cuts he will announce in a speech Monday evening, which will result in students paying more for degrees.
He is expected to focus on the “social licence” under which universities operate, implying that they have not behaved responsibly in spending taxpayers’ money.
“Universities have a vital role to play in Australia but many mums and dads are feeling the pinch of tighter budgets at home and want to know their tax dollars are being used effectively and efficiently,” Senator Birmingham said in a statement on Monday.
Vicki Thomson, CEO of the Group of Eight which represents the research intensive universities, said it would be a “cheap and simplistic shot to use surpluses, salaries and infrastructure to suggest universities and students can continue to wear cuts”.
“This idea we are bloated universities is concerning and a little surprising from government,” she said.
Ms Thomson said universities were “part of a growing revenue stream for government, not part of an expenditure problem”.
She cited the growing level of education exports, led by universities, which now bring in $22 billion a year in export earnings to make it Australia’s third largest export.
“Every person in this economy benefits from our international student success,” she said.
High operating margins
The minister will also attack the statement last week from peak body Universities Australia that the public higher education sector is not able to withstand further cuts. He has prepared figures showing that universities had an overall operating margin of 6.1 per cent in 2015 (although this has been steadily declining from 9 per cent in 2010).
He is prepared to argue that this contradicts the universities’ claim that they have already contributed $3.9 billion to budget repair in the last five years and “did have capacity to absorb further cuts”.
Included in his package of university funding changes Senator Birmingham will release a Deloitte Access Economics report, Cost of delivery of higher education, which analyses 17 universities that agreed to participate in the study.
“This independent analysis speaks for itself: Funding for our universities is at record levels, but it has grown above and beyond the costs of their operations,” he said in his statement.
“Universities need to invest taxpayer money judiciously and with appropriate public scrutiny and accountability.”
However Universities Australia CEO Belinda Robinson defended university surpluses.
“Universities are not-for-profit – but they shouldn’t for loss either,” she said.
“Universities have regulatory requirements to maintain surpluses as a buffer against external shocks and to ensure they can maintain their facilities and assets. Published surpluses also include funds that are tied to multi-year research and building projects.”
The government’s higher education package is also set to dash universities’ hopes that the $3.7 billion fund for university infrastructure will be restored after being earmarked for abolition in 2014.
Senator Birmingham has prepared a list of major new building projects that he will claim shows that universities have no trouble financing major projects from their surpluses and the increasing book value of their infrastructure.
He is likely to tell universities that they have the capacity to borrow to fund new projects and should turn to the debt markets for money.