SUMMARY OF KEY FINDINGS
Background
• It should be recognised that the re-evaluation of all aspects of financing of Post Secondary Tertiary institutions is an international phenomenon, and is not one that is specific to just Malta. It is a serious long term issue that warrants mature debate. It would be a pity if this debate were to become unnecessarily politicised.
• Malta has made significant progress over recent years in stepping up participation rates in Post Secondary and Tertiary (PS+T) education.
• However, continuing investment is required if we are to aspire to OECD standards and the Lisbon criteria.
The present situation
• All PS+T institutions are under severe financial pressure. This pressure manifests itself variously in inadequate infrastructure, overcrowding, under-investment and insufficient funds being available for basic necessities. In such circumstances, there is an inevitable effect on morale.
• In part, the pressures being faced by the institutions are the result not of policy failure, but of policy success. However, this success now demands the adoption of new policies.
The way forward
• The current systems and methodology of funding PS+T institutions have passed their sell-by date and require radical revision. The stark logic of a broad linkage between numbers attending institutions and funding requirements leads inexorably to a model of formula funding.
• Proper and effective accountability is an absolute pre-requisite for publicly funded PS+T education. The current systems in place are wholly inadequate.
• The revision of financing PS+T institutions should necessarily include consideration of all components of funding PS+T education, including the current Student Maintenance Grant (SMG) and tuition fee regimes. Current trends point towards a greater degree of private contribution to the cost of higher education, while at the same time protecting the socially desirable principle of “equal access”.
• Great caution should be exercised in any move to “tilt’ the PS+T education platform.
• There is a need for greater strategic co-ordination and co-operation between the various institutions in the PS+T sector. Examination of the current structure of the PS+T institutions should accompany this strategic review.
• There are a number of material finance related considerations resulting from Malta’s accession to the EU.
• A sequence of steps is recommended as a proposed way forward to address the key issues identified above. The reshaping of the PS+T educational landscape will take some time. In the meantime, interim relief will be needed.
The components of financing Post Secondary and Tertiary Education
A) Other sources of Revenue
The PS+T institutions are highly dependent on government funding. The degree of reliance is much higher than equivalent institutions in other countries. (for instance, in 2002 across the UK as a whole, Higher Education institutions rely on public finance for 62 per cent of their total income). In fairness, this level of dependence is, in part, because of the restrictions imposed by the Education Act. It is also true that there is little tradition in Malta of educational endowment or of business support for PS+T institutions. Finally, there has, in the past, been little incentive for the institutions themselves to look elsewhere for their funding.
The WG recognises the limitations of Malta’s modest economic base and the profile of the majority of business establishments here. These will inevitably impact on fund raising opportunities, as both factors will have a restrictive effect on the ability of institutions to raise other sources of income in material sums.
Notwithstanding the difficulties attendant on developing other sources of revenue, it is clear that the institutions - particularly the University, would do well to attempt to develop initiatives in this area, so as to gradually reduce the level of dependency on Government funding. However, we expect that this is likely to be a slow and gradual process. The question of tuition fees for national students, the main source of alternative income to many universities overseas, is addressed separately below. Tuition fees to (non EU) foreign students is a direct source of income. However, the further development and protection of this source of income (for which there may be considerable potential) will first require that many of the infrastructural and organisational issues at the university referred to in this report be addressed.
B) Financing PS+T education – who pays?
The continuing and sustained financing of PS+T education in Malta was the core theme of our consultative process. Nowhere did we find anybody who questioned the desirability of continuing encouragement for higher levels of participation in the PS+T sectors. There is widespread recognition of the benefits of higher education to society, the economy, and the nation as a whole. Like those we consulted, the WG is wholly supportive of the proposition that higher education will produce social, economic and civilising benefits. The question to be asked however, and one that stimulated a great deal of discussion, is, of course, who pays?
The “who pays” question can be sub-divided into four distinct sub-sets of questions as follows:-
(a) Firstly, the government will need to determine whether it believes that it can continue in its role as the (almost) sole provider of finance to the PS+T sector, or whether it feels that the needs of the sector are, or will become, such that other sources of funds need to be located.
Having done this, it will be necessary to address items (b) to (d) hereunder.
(b) Should the current SMG system continue undisturbed, or should it be amended; in particular, should it continue to have universal application?
(c) Should tuition or registration fees be introduced?
(d) Should the PS+T platform be “tilted” in any way?
The questions of SMG and Fees are not, in the opinion of the WG, ones on which there is a “right” or a “wrong” answer, but rather one of a series on which the government needs to make choices as to how the limited fund of national resources should be deployed. Clearly, if unlimited financial resources were available, it would be nice to sustain a tuitionfree, SMG supported regime or environment.
However, it is equally clear that unlimited financial resources are not available, and that the government has to make some difficult choices in their allocation. What is also clear is that starving the institutions of required funding is emphatically not the answer.
Before dealing with the matter of SMGs and tuition fees, and in order to set the discussion in context, it is appropriate by way of introduction to outline in the briefest terms the systems currently in force – and to compare these systems with those in other countries.
C) The current system
The current system is one whereby well over 95 per cent of Sixth Form or equivalent places in Malta are free of any tuition charges (“tuition free”), as are all qualifying full time post secondary vocational and tertiary courses.
Furthermore, all eligible students attending Sixth Form, and full time post secondary and tertiary courses are entitled to receive the Student Maintenance Grant or stipend. The current entitlements (excluding supplementary entitlements and payments under the TAS and ESTS schemes) are as follows:
In summary, the vast majority of students in Malta are able to attend Sixth Form, and vocational or university courses tuition free, and also receive a maintenance grant for the duration of their (full time) courses.
D) International comparators
A high level summary of the position that pertains in OECD countries on tuition fees and student support also shows the level of participation in Higher Education. For the purposes of this summary, “Higher Education” represents students continuing in education at tertiary (university or equivalent) level. It will be seen that the no-fee plus student support regime that is extant in Malta is generous by comparison. On the other hand, it could be argued that the relatively lower participation rate in higher education points to the need for continued encouragement. No data is readily available on the extent to which other countries provide SMGs for Sixth Form attendance.
Increasingly, attendance at Sixth Form is being seen as a natural extension of secondary school education, and the inclination of the WG is to question the continuing universal application of the SMG to this category, other than under specified socio-economic criteria.
E) Student Maintenance Grants
During our consultative process we encountered differing views on the question of the SMG system. Essentially, in an economic environment where there are (and will continue to be) strongly competing demands on government funds, most parties we consulted regarded the continuing universal application of the SMG as being open to question. Most parties favoured a system where the SMG would be made available, where needed, on a means tested basis.
Nobody questioned the principle of support where it could be demonstrated that this support was required, although some parties did question how well means testing would work in a Maltese environment.
The KSU on the other hand took a strongly opposing view to any changes being made to the SMG system, regarding the grant as providing students with independence, and enabling them to elect to continue to pursue higher education irrespective of parental views. The KSU pointed out to the WG that participation in PS+T education was not just a question of parental means, but also of parental attitudes.
There was much discussion as to the extent to which the SMG was in fact being directed to educational needs, with many anecdotes about the difficulties students have parking their cars at university, or about the funds being used for clothing and so on. However, the WG regards this area as being something of a smokescreen or distraction from the main debate, which is to address the question as to whether Malta can and should continue with the current SMG system.
F) Tuition fees
It is apposite to address the matter of tuition fees at this stage. Perhaps understandably, some of those we consulted saw an inextricable linkage between the two. However, in contrast to a readiness from most constituencies to revisit the current SMG system, there appeared to be a lesser willingness to opening the doors to tuition fees. Once again, the exception was the KSU.
Whereas the KSU made it absolutely clear that its preference was for a “no change” policy, it did indicate that if any change at all was essential, its (reluctant) preference would be for the introduction of modest tuition fees as opposed to any radical changes to the SMG system. A survey carried out by the KSU seemed to indicate the student members making a lesser differentiation than their executive between the two categories.
An interpretation would be that the introduction of a tuition fee of around Lm500 pa (or an equivalent SMG adjustment) would cause approximately 18 per cent of students not to attend University – unless, of course, alternative
support was to be available.
G) SMG’s and Tuition fees – options available
As noted above, the questions of SMG and Tuition fees are not, in the opinion of the WG, ones on which there is a “right” or a “wrong” answer, but rather one of a series on which the government needs to make choices as to how the limited fund of national resources should be deployed. However, it is also clear from a study of recent international trends that, whereas by no means universal, there appears to have been a growing move towards the introduction or increase of tuition fees, and to student support being made available on a means tested basis – with student loan support being available where appropriate.
The reasons for this trend of seeking to widen the base of funding for higher education institutions are manifold; in part it has been driven by the need to get badly needed additional funding to the institutions as they face rapidly growing participation rates; in part they have been justified by the fact that OECD studies have consistently demonstrated that graduates are maintaining their ability to earn significantly more than non-graduates, in spite of rising participation rates, a finding largely supported by local tracer studies In this scenario, tuition fees can be regarded as an investment in the individual’s future earning power. As already noted, student loan schemes, where available, are generally designed to defer or bridge the costs involved. Some have also argued that the payment of tuition fees will result in a higher degree of application on the part of students – an argument that is rejected by the KSU.
In those jurisdictions where change has been implemented, the aim has, in all cases, been to increase the personal contribution to the cost of studies, due to the personal benefit or gain that it is deemed will accrue; at the same time steps were taken to respect the socially desirable principle of equal access through the provision of support where needed, by reference to the economic circumstances of the student and their families. This “part contribution” approach recognises that higher education is not just a collective (i.e. public), but also a private, investment.
Student support costs represent a very significant proportion of the Revenue vote in each and every sector.
We also set out a hypothetical model which shows the impact (at various levels) on the Higher Educational institutional revenue budgets if tuition fees were to be introduced. It can be seen that whereas the likely impact of introducing fees at MCAST would be modest, the introduction of reasonable fee levels at the university and the post secondary (general) institutions would have a more significant impact on their revenue-raising ability.
All PS+T institutions are under severe financial pressure
All PS+T institutions are under severe financial pressure. This pressure manifests itself variously in inadequate infrastructure, overcrowding, underinvestment and insufficient funds being available for basic necessities. A small number of examples will suffice to make the point:
• The Junior College is expected to have over 3,000 students this year.
The WG was told that the facility was built to house a significantly smaller population of students. The Giovanni Curmi Higher Secondary School has similar overcrowding concerns, albeit not on the same scale. These will give rise to health and safety related issues;
• The budget allocation to the Junior College barely covers its payroll cost;
• In the summer of this year, the university was having to impose constraints on funds for basic necessities such as photocopying paper, printer cartridges, etc. Important posts (academic and non-academic) remain unfilled;
• The spend on books for the university and Junior College libraries is now almost zero – and subscriptions to publications are being cut back on a regular basis;
• A number of courses being run by the university are seriously overcrowded;
• Church school Sixth Forms resort to “special appeals” as the government contribution to costs is not keeping up with recurrent costs, never mind allowing for ongoing capital infrastructure and maintenance requirements;
• MCAST’s infrastructure expansion plans are threatened with delay because of short notice budget cuts;
• Strategic Plans lie fallow because of inadequate funding to secure their proper implementation;
• The total annual budget allocation for maintenance for the Giovanni Curmi HSS (housing 1,500 students) is just Lm4,000 whilse that of the Sir M. Refalo Post Secondary complex in Gozo (560 students) is Lm700.
Capital allocations for improvements are likewise minimal in nature.
In the circumstances outlined above, the existence of staff morale problems is inevitable.
The financial allocations extended to the PS+T institutions have not kept up with the growing student populations they are being asked to handle. Spend per student has dropped significantly since 2001. The exception has been the spend on post secondary vocational institutions, where a significant investment has been made in building up MCAST since 2001. Elsewhere, spend is running at around 1999 levels, notwithstanding the cost increases that have been experienced since that time.
It is relevant to point out that the increase in the University Revenue vote for 2001 included the impact of new collective agreements (academic and non-academic) implemented during that year. These agreements had the effect of adding approximately Lm2 million on an annualised basis to the university payroll costs, and Lm0.5 million to that of the Junior College. If this incremental cost is backed out of the Revenue votes for 2001 to 2004, it will serve to show a more realistic picture of the severity of the real decline in spend. For illustrative purposes, this impact is also shown on the table.