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University Bailouts, Funding and Coronavirus

In a set of stable circumstances, funding higher education should be a matter of automatic persuasion. If you want an educated populace, the taxpayer should muck in. In some countries, however, this venture is uneven. In the United Kingdom, the system remains divided, an echo of class stratification. In Australia, which took so many of its behavioural and policy cues from ancestral Britain, investment in public education as a measure of Gross Domestic Product does not stack up well, in real terms, with other countries of the OECD. Its school system is also something of a mild perversion – wealthy private schools receive millions as a windfall; state schools, short of equipment and facilities, starve and moulder.

This state of affairs is highly unsatisfactory, but it is one made worse by the governance of tertiary institutions that remains, at heart, anti-democratic and oligarchical. More to the point, they have lost their way, becoming beasts of private endeavour without enterprise; business driven without being entrepreneurial. Poor, even disastrous investment decisions have been made, most notably the foray into the international student market. This has often been done without a care about financial reserves or insurance that might cushion any precipitous fall in revenue. Notwithstanding this, university politburos are putting out feelers for bailouts and financial assistance. The begging bowl is doing the rounds.

In the United States, colleges have received a small slice – some $14bn of the multitrillion-dollar stimulus measure – to soften the blow caused by COVID-19. And some blow it has been, with LIU Post and Quinnipiac University laying off staff and the distinguished San Francisco Art Institute closing after a stint of 150 years. Of that, $6bn is in the form of student aid; $7.5bn goes to the institutions. The American Council on Education is none too pleased, claiming that the institutional portion is less than $8bn colleges and universities have spent in refunds and board charges. Sector-wide losses are predicted to come in at $50bn.

University of Illinois at Urbana-Champaign is an exception, having taken steps to insure itself against a sharp drop in Chinese student revenue. Moves were made in 2018 by the institution’s colleges of business and engineering to sign a three-year contract with an insurance broker to the value of $424,000, which would cover potential falls of revenue up to $60 million. As Jeff Brown, dean of the Gies College of Business explained at the time, the insurance would be “triggered” by a fall of 20 per cent in Chinese student revenue in a single year. “These triggers could be things like a visa restriction, a pandemic, a trade war – something like that that was outside our control.”

The picture before those seeking relief is not a good one. Combined with the characteristically shabby, ill-informed corporatism of the modern university, students in the higher education sector are receiving the attentions of an overworked and anxious teaching staff, many on sessional contracts, even as student fees feed the burgeoning managerial complex. And international student fees, varying from twice to three times the domestic rate, have proven irresistible, leading to a seemingly endless number of appointments in management, marketing and public relations. A logos-before-learning sentiment prevails.

In the United Kingdom, the question posed by the Financial Times over the weekend was whether universities are “too big to fail”. Student numbers have galloped away, with University College London finding itself with twice as many it had a decade ago (38,000) and Manchester University still mighty with 39,000. But this has not stopped the higher education sector’s call for a £7bn bailout. This has come with the rich assumption that universities, as a matter of course, will receive such assistance, assumed as given by such international ratings agencies as Moody’s. “It is not axiomatic,” retorts Baroness Cavendish, an adviser to the UK Department of Health and Social Care, “that UK taxpayers should now take on the financial risks of bridging what will be a shortlived hit to revenue – or without a quid pro quo.”

In 2018, the seasoned education specialist Sir Michael Barber, as head of the Office for Students, warned universities that they could not assume an automatic line of credit in the case of a financial crisis. “The OfS will not bail out providers in a financial difficulty,” reasoned Barber during the Wonkfest higher education festival in London. “This kind of thinking – not unlike the ‘too big to fail’ idea among the banks – will lead to poor-decision making and a lack of financial discipline, is inconsistent with the principle of university autonomy and is not in the students’ longer term interests.” In two words: too late.

This makes calls for more funding, or a bailout package, as sharp as a double-edged sword. Universities should receive generous funding from the public purse but there is also an expectation that such money be spent to advance the cause of education and the welfare of students, neither of which has featured much in the last decade. The Australian Labor Party, in traditional fashion, has fallen for the magic of higher education in its ideal, rarefied form rather than actual, grounded practice. That practice, which entails giving taxpayer insurance to cover the outcomes of shoddy decision making, is ignored.

For its part, the position of the Morrison government is best put by Senator James Paterson. Admittedly, it supplies an incomplete picture, and a disingenuous one at that. Nonetheless, it carries some weight. Despite being warned about the China risk, universities, claimed Paterson, “rode the cycle up”. It was time for them to ride it down.

Inadvertently, the talk of protecting universities has started to resemble that of holding up financially imprudent banks. Labor frontbencher Tanya Plibersek, for instance, has warned of “serious concerns that without federal government action some leading institutions could collapse.” She proposes “low or no-cost loans to provide stability in coming months.” She misses a beat on the issue of financial folly. “For years, universities have used income from international education to help fund their world-leading research.” Such an equation is, if not false, then only a small part of it, ignoring the multi-million-dollar amounts expended on non-research and teaching related operations, notably the spread-sheet devotees of management.

With such circumstances in mind, it would surely be fitting for the university in general to start a process of considered self-examination or, as novelist Arundhati Roy suggests with sharp clarity, take advantage of the coronavirus to “break with the past and reimagine their world anew.” But what we find in certain marked instances is a hearty cri de coeur, a demand for financial padding that will tie things over. Worst of all, it is a call for generous insurance without a promise of change and without condition. Woe to the students, the sessional staff and the frontline academics.

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  1. Baby Jewels

    The gap in funding receipts between State and Private schools has long been a bugbear of mine. Clearly, this government does NOT want an educated populace. Only those already priviledged, are supported, even to excess, in education in this country.

  2. john tons

    What this article misses is a fundamental contradiction at the heart of our thinking about tertiary education. The basis for tertiary funding in Australia, the UK and the USA is captured in the Independent Panel report to the Review of Post-18 Education and Funding (The Augar report) in the UK. The report stresses the importance of tertiary education to both the prosperity of the nation and as a means of enhancing the life chances of the individual. The argument has become one of claiming that because the student benefits it is only fair that s/he should pay. By treating education as a commodity it has resulted in a system where universities compete for students for students are a source of income. Foreign students are even more attractive because they provide an even greater income. The result of this public policy has been to create a bloated system funded by unsustainable debt. In the USA tertiary students owe $1 trillion most will carry that debt throughout their lives. The Covid 19 crisis is exposing the fundamental weaknesses in a poorly thought out system. So the author is right in being critical about proposed bail outs but we need to question the neo-liberal political ideology which has shaped our education system.

  3. Keitha Granville

    What is happening in those European countries where education, including universities, is totally free? Do we we know how they will fare? Are their economies in any better place than the rest of us to recover from this? Or does it all collapse like a house of cards?

  4. Phil Pryor

    Fund grants to parents on incomes and means. Fund schools on applications of merit and need for capital works. Let all Australian children catch up to unfairly advanced ones in some private schools. Let every child be educated well and fairly, with parents getting fair support. As for the Universities, let there be national support for national needs for tertiary education of the best type for all who qualify and deserve ongoing support, especially for results. Find new ways to directly support students in current needs, to assist those in stress and with shortcomings. Food and shelter and costs are now serious issues more than before. We must see the future clearly in tertiary education needs, to alleviate crisis and setbacks. Never mind dunny paper, minds are the real future. Spend now, wisely. Politicians of the J Patterson type, a pustular political pervert of the I P A area, that den of dills and deviates, are to be ignored as they are ignorant, to be avoided and they are voids, to be shunned as they are frauds and fools.

  5. Matters Not

    Lots of issues here but let’s start with one identified by john tons pointing out that when an individual becomes educated there are personal benefits (broadly defined to include wealth, health, status, prestige, power etc). At the same time there are societal benefits. Sometimes that benefit goes decidedly more to the individual (try the legal profession) and sometimes more to the society (try teaching). And sometimes it’s hard to determine (try certain members of the medical profession with 8% of some specialists responsible for 89% of ‘out-of-pocket’ expenses – while the remaining 92% just feeding on the relative crumbs.)

    Having said that, perhaps might return to john’s explicit point.

    because the student benefits it is only fair that s/he should pay.

    Yep – there should be no freebees. But having established that, two issue are yet to be resolved. First, related to the timing of that payment – before or after the course? Second (and it’s related to the first) the means to collect that payment? Briefly, it’s possible to demand ‘fees’ – payable before or after the event either up-front or via loans). Broadly, the current arrangement(s). Or by a genuine progressive taxation system, where those who earn more – thus pay more tax. So a person who earns, say $100 000 pa will pay far less tax than the surgeon who might earn $5 million a year or the accountants who may make many times that figure.

    For me, it’s a progressive taxation system, properly legislated and enforced (minus loopholes) that’s the desirable way to proceed.

  6. New England Cocky

    The adage remains, “No R&D No Future”.

    UNIVERSITIES: The Dawkins “Reforms” that established the managerial overclass in the formerly collegiate University structure has much to answer for, especially the extravagant corporate-like salary package overpayments of Vice Chancellors and the consequential collection of generally mediocre “academics” bored with their particular field of expertise and wanting all the expense perks & lurks attached to “administering a university” who gravitate into the necessarily redundant upon appointment plethora of high cost Assistant Acting Vice Chancellor for Receiving Perks positions generated to display the status of the once single VC.

    As an undergraduate my University administration had a VC with a Personal Assistant and a University Secretary, responsible to the University Council and several subordinate Committees. Now the University budget spends over 50% of income on bureaucratic “administration” positions.

    SCHOOLS: The continuation of the “Howard vote buying by Funding Private Schools for Aspiring Middle Class Election Wins” STILL does not provide economically effective academic results on any cost-benefit analysis, let alone any social justice responsibility of government. A less obvious strategy of encouraging new school creation for any minute religion based interest group of parents is simply another form of vote buying best described as “metropolitan socialism”.

    @Matters Not: Agreed.

  7. totaram

    NEC: Hear, hear! As someone who once taught at a university, I couldn’t agree more. When I last looked, 50 cents of every dollar from International student fees, went on “Admin”, to the extent that local students were actually subsidising the international ones. How good was that?

  8. wam

    My dad caught fish by using hooks on a cord handline. The bait was collected or caught and used fresh or salted down.
    The catch was kept alive till commercial quantity to be sent to market. The by catch was thrown back or eaten for our dinner.
    The universities were for the rich or for the smart poor with scholarships or cadetships.
    Today the bait has gone having been stripped and eaten and the bycatch is killed and dumped and the fish are netted
    The universities are for the rich or government pay by bums on seats the poor garner debt.
    The result is tens of thousands of poorly schooled youth taking university courses with certainty of debt, no hope of academic success and no hope of paying their debt.
    Time to reset the priorities and evaluate the hecs/vetfee system which vice chancellors and institution CEOss have been rorting and accept universities like year 12 is for the intellectual elite as measured by success at years 9 naplan. A level, at which my casual observation suggests, is beyond a majority of primary teaching and nursing degree student.
    The universities are for the academically elite and should not flourish on the debts of the unschooled..
    ps NEC
    how true but smirko will have all schools with a religious curriculum next term ‘creationism’ will it get a run as an alternative explanation for life???

  9. New England Cocky

    @wam: heheheheh …. the NSW Libs under Premier Nick “Goulash” Greiner tried that back in the 80s. I asked the kids to evaluate the evidence for themselves and present a short class verbal presentation and point form essay establishing their case. We even had a wonderful Jehovah’s witness speaker who put their case objectively and without any religious emotion. (A true teaching talent).

    The kids made up their own minds and were marked on the quality of their presentation, for or against, rather than the content of their work.

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