PART 2 PRINCIPLES OF FUNDING Introduction
5.46 As stated earlier, a partnership arrangement has existed since 1974 whereby the States have retained the basic responsibility for the funding of TAFE with the Commonwealth providing supplementary assistance for specific purposes. Under this partnership arrangement, Commonwealth assistance for TAFE has been by way of:
direct capital grants for specific building projects, including initial equipment stocks for new buildings;
direct grants for equipment, initially for new and replacement equipment as part of a combined equipment and minor works program but, since 1982, as a special grant for new equipment to keep pace with
a series of specific purpose recurrent programs; and a general recurrent grant to cover fee reimbursement.
Apart from the above grants, which have been administered by the CTEC (or its predecessor bodies), funds have also been channelled into TAFE under general
assistance programs managed by other Commonwealth agencies.
5.47 The Committee has considered - and rejected - any major change to.this division of responsibility believing that a partnership arrangement remains the preferred option for the long-term development of TAFE. The major
alternatives would be to seek either a total transfer of financial responsibility for TAFE to the Commonwealth
(along the lines adopted for higher education in 1973) or to move to a total system of matched grants for all
categories of expenditure. A further option - described as
"fee-for-service" - has been proposed by the Commonwealth Departments of Employment and Industrial Relations, Finance and Treasury. Each of these options is addressed below.
Future Fundinq Options Considered
5.48 Total Commonwealth Funding. The first of these options represents a radical departure from the existing partnership arrangement and, in the Committee's view, is unnecessary for the achievement of the Commonwealth's objectives for TAFE. Moreover, there are a number of serious practical difficulties which
5.49 A total transfer was possible for higher education because relatively few
institutionswere involved and those institutions were autonomous with their own management structures. TAFE, on the other hand, involves some
institutionswhich are administered principally by State departments and authorities where most of the service
functionsare provided centrally; moreover almost all teaching and support staff are part of a State-wide service rather than in the employ of individual colleges.
fundingof TAFE by the Commonwealth is incompatible with the existing administrative arrangements for TAFE under which colleges fall within the umbrella administration of a State Government department/authority responsiEle to a State Government Minister. It could be expected that total Commonwealth funding would require the granting of autonomy to individual colleges following.the precedent set in 1973 when the Commonwealth assumed
responsibility, under advanced education arrangements, for the former State Government teachers colleges.
5.51 A total transfer arrangement could also be
expected to add substantially to the total administrative costs requiring, as it inevitably would, a duplication of functions and staffing at the Commonwealth level.
5.52 Total Matched Fundinq. As to the second option - that of a matched funding arrangement for all categories of grants - the Committee sees this as impeding rather than assisting the achievement of Commonwealth objectives. In particular, the Committee holds the view that a
formula-driven matching arrangement when applied to recurrent grants would serve to reinforce inter-State differences in growth rates and the quality of TAFE
provision. However, for the reasons set out in Chapter 6, the Committee sees distinct potential for a form of
"matching" arrangement in connection with future capital programs for TAFE.
5.53 Fee-for-service. The Committee has examined the concept of "fee-for-service", an alternative funding arrangement proposed in submissions received from the Commonwealth Departments of Employment and Industrial Relations, Finance, and Treasury.
5.54 The fee-for-service concept envisages the
replacement of all existing CTEC grants by a standardised set of payments for course provision in TAFE undertaken at Commonwealth initiative. Fees would be determined on the basis of operating costs together with a component to
represent the imputed value of capital and equipment inputs. Accordingly, the submissions propose that the existing capital and equipment programs should be
discontinued in favour of additional access for the States to Loan Council funds.
5.55 The choice of funding mechanisms will be
determined ultimately by the outcomes sought under each of the Commonwealth's objectives for TAFE, distinguishing between circumstances where grants of the kind currently administered by the CTEC constitute the appropriate mechanism and circumstances where a fee-for-service approach of the kind proposed might be indicated. The distinctions will not always be clear-cut but it is possible to draw some broad conclusions..
5.56 For this purpose, outcomes may be thought of as falling into one of two categories: the first is typified by outcomes that have a short-term perspective and are -
easily defined in a quite specific way; the second category embraces outcomes that have a longer time-horizon attached to them and are less discrete in nature, often requiring changes to systems and attitudes.
5.57 The first category is seen to include:
(a) job-specific training and re-training and immediate skill requirements;
direct and immediate access to employment, rather than the longer-term employment problems of the
whereas the second category- includes outcomes which imply:
greater emphasis on longer-term needs for adaptive skills and the minimisation of the need for
greater emphasis on all forms of disadvantage, and the longer-term problems of improving the employability of various groups;
greater emphasis on general educational problems and the capacity of TAFE systems to respond. For example, TAFE students can gain from an educational environment which encourages interaction among students and the ability of students to learn from each other. -In this connection the provision of adequate library resource centres and student facilities are important
developments in encouraging the right kind of educational environment; and
recognition of the need to encourage cross-sectoral - developments andthe advancement of able TAFE students to further study in higher education.
5.58 A fee-for-service approach assumes that a
particular service can beidentified and costed. This is clearly more relevant to outcomes of the kind described in
(a) and (b) above. The more job-specific the education process, the more likely it is that the required education service can be defined and an appropriate fee calculated.
5.59 However, where the process of achieving desirable outcomes is more concerned with longer-term problems and more general educationalobjectives, therewill not
necessarily be a direct relationship between the services that can be purchased and the pursuit of outcomes that are consistent with Commonwealth objectives. Moreover, a fee-for-service arrangement which' channelled funds to TAFE through industry or individuals - an approach proposed by the Department of Finance and by DEIR in respect of the latter's labour market programs - would not be workable in achieving outcomes which have longer-term objectives
involving educational and systemic change. The so-called emphasis on "consumer sovereignty" would distort
educational processes away from conferring broad-based adaptive skills towards the job-specific end of the scale.
5.60 Another factor that needs to be kept in mind in considering alternative methods of funding is the
cost-effectiveness of the administrative changes that accompany the various options. Any major shift away from
current arrangements for CTEC programs towards
fee-for-service would lead to a very great increase in the costs and complexity of administration. (The cost of administering the CTEC's programs for TAFE is estimated at
$l.15m in 1984/85, which represents less than 0.4 of one per cent of the value of the program.)
5.61 The Committee would also be concerned about the longer-term implications of diverting existing Commonwealth capital expenditure in TAFE to a public sector borrowing
right for the States through Loan Council arrangements.
5.62 It should also be noted that the substitution of direct funding for TAFE capital and equipment by an
indirect contribution via fee-for-service arrangements has the potential to create a hiatus in TAFE capital
development in a period when sustained enrolment growth is required to meet Commonwealth objectives; States would undoubtedly demand assurances of continued Commonwealth
funding for student places before they would countenance firm capital commitments to new projects. Moreover, a Commonwealth capital program that is tied to enrolment growth provides the flexibility to scale back the program should the rate of growth diminish. On the other hand, access to Loan Council funds is likely to lead to a
permanent increase in public sector borrowing of the order of $150m. In addition, the States would incur a new
recurrent cost, that of meeting the interest payments on borrowings - which would amount to an estimated $l2m in the first year of operation, based on the current long-term bond rate, and the current practice of one-third of the
"borrowing right" being in the form of grants.
5.63 Finally, the most serious shortcoming of the fee-for-service arrangement is in the severe impact it would have on the capacity of TAFE to undertake adequate
forward planning for course provision and therefore for facilities and staffing. The Committee has concluded that the Commonwealth's objectives for TAFE would be placed at unacceptable risk by any large-scale conversion of existing
financial programs to fee-for-service arrangements which, in other than special circumstances, are inimical to
long-term resource planning.
5.64 In summary, it may be observed that there are a number of Commonwealth agencies each administering programs which are aimed at meeting broadly similar Commonwealth
objectives for TAFE, but there are differences in the specific outcomes sought. The objectives of underpinning economic development through TAFE and special assistance for the disadvantaged to help to eliminate the impact of disadvantage on the future employment, living and lifestyle of certain groups are sufficiently wide as to admit a range of outcome goals, all having a legitimate place in the
range of programs, but demanding different programs with different funding mechanisms.
5.65 Where the outcomes are discrete and short-term in nature - such as a short job-specific training program - a fee-for-service arrangement may well be appropriate.
However, long-term education and systemic change cannot be achieved by the purchase of discrete services but require a more holistic approach. It is patently clear to the
Committee that the Commonwealth's objectives for TAFE are much wider and much more complex than those that can be achieved by the Commonwealth simply entering the market as a consumer prepared to pay for discrete parcels of
education/training on a fee-for-service basis.
5.66 While there is a place for the pursuit of both short and long-term outcomes under Commonwealth programs, the balance is both delicate and important. For example, programs which tackle the short-term problems of those currently unemployed are essential. However, it is equally important to work simultaneously towards building a TAFE system which has a capacity to respond to the longer-term problems of improving the employability of various groups and to providing broad adaptive skills as a mainstream activity. The Commonwealth's objectives in this respect require the continuation of direct capital, equipment and recurrent grants of the kind that have been operating since 1974.
Principles of Funding
5.67 Consistent with the conclusions emerging from the preceding discussion of funding options, the Committee has developed a number of principles which it considers should underlie future Commonwealth financial programs for TAFE.
5.68 Accordingly, the Committee proposes as the first funding, principle that:
1. The framework of financial arrangement for TAFE be maintained in terms of the existing Commonwealth/State partnership
the States continuing
to be responsiblefor on-going recurrent and equipment costs;
the Commonwealth continuing to be responsible for supplementary recurrent and equipment programs designed to meet specific Commonwealth objectives;
sharedCommonwealth/State responsibility for capital development.
5.69 With the acknowledgment that, within the same set of Commonwealth objectives, there will be a range of
programs seeking differing outcomes, the second funding principle emerges; namely that:
2. Funding arrangements attaching to individual programs should have regard to the particular outcomes sought under the program.
Block funding will be appropriate in
circumstances where the Commonwealth and the States are able to reach full agreement on
longer-term objectives and reporting procedures, thus niinimising administrative costs.
In other circumstances, even when there is
agreement on objectives and reporting procedures, specific purpose grants may be indicated:
where the Commonwealth has a special responsibility;
or where the Commonwealth seeks to exercise a direct influence on the way a program is developed and delivered; over time some such programs (where their continuation is
justified) may be "main-streamed" and subsumed into block funding arrangements subject to negotiated agreements.
In circumstances where the outcomes sought by the Commonwealth are straightforward, immediate and quantifiable, a fee-for-service arrangement may be appropriate.
5.70 Following on from this principle, certain other principles may be established about the nature of
3. Programs may be long-term - e.g. where the
Commonwealth has special responsibilities as is the case in connection with Aborigines and migrants - or short-term to meet a discrete objective.
4. As far as possible, all programs should be outcome oriented; in particular:
program objectives should be clearly stated;
monitoring and evaluation procedures should be established for all programs as part of negotiated agreements between the Commonwealth and the States;
monitoring and evaluation procedures should include a requirement for State TME authorities to report expenditure from State sources in respect of
activities covered by Commonwealth grants;
all programs should be conditional upon the States ensuring that the benefits of, and opportunities created by, Commonwealth financial assistance be equally available, as far as practicable, to male and female students;
where feasible, performance indicators should be established, but care should be taken to avoid distorting programs by concentrating only on outcomes that are easily measurable;
all programs should be subject to review in terms of performance and in respect of the continued need for a p}ogram;
mechanisms should be established so that
projects/programs producing exemplary results can be incorporated rapidly throughout TAFE systems;
equally, for the efficient use of resources, there should be rapid dissemination of the results of projects/programs that have not met expectations;
there should be flexibility to adjust both the rate of expenditure and the nature of programs according to changes in circumstances.
5.71 Apartfrom some short-lived variations to
arrangements, fixed triennial funding has been a feature of Commonwealth grants for higher education. On the other hand, Commonwealth grants' for TAFE have been determined
traditionally on an annual basis, mainly because the costs of TAFE are shared between the Commonwealth and the States.
5.72 Triennial funding arrangements confer great benef its in terms of forward planning and the Committee
believes there is scope to extend these arrangements to some elements of Commonwealth assistance for TAFE. This opportunity arises where particular programs are of a long-term nature, there is agreement on objectives and outcomes, and partnership agreements include undertakings on State effort. The final funding principle is therefore that:
5. Triennial funding should apply to Commonwealth grants for TAFE in circumstances where the nature of the program and the associated funding mechanism indicate such arrangements to be appropriate.
The Framework for Future Commonwealth Grants:
A Concluding Comment
5.73 In proposing to maintain the framework for
Commonwealth grants for TAFE that has been in place since 1974, it will be obvious that the Committee has no major reservations about the continued appropriateness of the Commonwealth/State partnership arrangement. Indeed, it is essential to build upon the achievements of the programs that have operated over the last 10 years. Where the Committee does find room for some criticism is in relation to inadequate definitions of objectives and desired
outcomes, and unsatisfactory arrangements for program evaluation.
5.74 At the time of the Commonwealth's first
substantial involvement in financial support for TAFE in 1974 the needs were great and they were urgent.
Considerable energy was devoted to getting an array of new programs off the ground and securing the co-operation of State TAFE authorities and, as a consequence, lesser priority was accorded to the setting of precise goals and targets for individual programs and to the establishment of on-going monitoring procedures. The Committee accepts that this approach may well have been necessary at the time but considers that these aspects of program administration should have been rectified as the programs matured.
Accordingly, in the revised arrangements for the
Commonwealth support of TAFE proposed in Chapter 6, greater attention is paid to aspects of accountability and the definition of desired outcomes. In particular, the Committee is recommending considerable restructuring of grants and the arrangements under which they are provided in order to serve more effectively an outcomes-oriented approach with effective accountability.
5.75 Grants for capital purposes are seen to be
associated primarily with the growth objective; that is, to the provision of physical facilities to accommodate continuing strong growth in TAFE enrolments of the order of 7 per cent a year. A carefully managed Commonwealth
capital program will also serve to complement more direct measures to assist disadvantaged students; for example, by providing facilities in outer-metropolitan and rural areas which are currently under-serviced or not serviced at all;
by opening up the use of buildings for multi-sectoral purposes; and by providing space for such student services as child care, food and recreation. TAFE students have a right to expect a standard of facilities which is
comparable to that of higher education and to gain from an educational environment which encourages interaction among students and the opportunity to learn from each other.
5.76 It should be noted that the emphasis on growth implies a substantial reduction in the Commonwealth's capital contribution once growth rates slacken. However, as argued in Chapter 4, reduced rates of growth cannot be expected in the immediate future; any reduced effort on capital would not be consistent with the achievement of the range of Commonwealth Government objectives that has been identified.
5.77 Grants for equipment purposes are also seen to be tied in part to the growth objective where funds are
applied to the initial equipment stock for new buildings constructed under the capital program. The other component of the equipment program is directed to the acquisition of modern technology for teaching purposes.
5.78 Grants for recurrent expenditure purposes are relevant to a number of the Commonwealth Government's objectives for growth, quality improvement, and special measures to assist disadvantaged groups. These grants provide the mechanism whereby the Commonwealth can channel
funds directly to special areas of need and influence immediate outcomes and the direction of the longer-term development of TAFE.
5.79 In Chapter 6 the Committee sets out its detailed proposals for future Commonwealth financial assistance programs for TAFE.