A cross-sectoral funding model: Is it fair and feasible?

Background

The National Research and Evaluation Committee (NREC) commissioned the authors of this report to investigate the development of a cross-sectoral funding model for post-compulsory education and training in Australia. The project aimed to identify issues arising from differences in the funding arrangements for the four sectors (i.e. senior secondary schooling, vocational education and training [VET], higher education and adult community education [ACE]) and to discuss whether a cross-sectoral funding model would address any of these issues.

The research questions are:

1. What are the arguments for a cross-sectoral funding model in Australian post-compulsory education and training?
2. What are the impediments to implementing a cross-sectoral funding model and how might they be overcome?
3. What is the likely impact on student demand of a cross-sectoral funding model?
4. What impact would a cross-sectoral funding model have on the type and nature of provision (courses and programs of study) of post-compulsory education?
5. What are the costs and benefits of a cross-sectoral funding system for individuals, institutions, industry, government, and society?

To generate debate on this topic and to inform the research process, the research team involved members of the education policy community in each stage of the project. During the first few months of 2001, the researchers interviewed stakeholders from all the sectors about funding issues in their sector and in the area of cross-sectoral provision (a list of interviewees is in appendix E).

In July 2001, the researchers distributed an interim report addressing the first two research questions. We gave presentations on the topic at several research and policy forums as well as convening an invitational seminar to discuss the findings. This report builds on the interim report by including feedback from the people consulted in July and addresses the remaining research questions. In the original project brief, the researchers aimed to evaluate the costs and benefits of several funding models. However, during the research process, we decided that changing the funding model alone would not resolve many of the issues raised by stakeholders in the consultations - in particular, the urgent need for the policies and practices within each sector to be made more consistent. This report therefore identifies the areas in which further work is required to improve cross-sectoral consistency, many of which are related to funding. Within this context, the report discusses the implications of changing various aspects of the current funding arrangements.

Findings

Sector-based funding evolved during the 20th century to meet the financial needs of institutions and the policy priorities of federal and state governments. The traditional distinctions between the sectors are increasingly irrelevant as institutions attempt to meet changing student needs. These changes include:

• increasing movement of students between the sectors and more types of cross-sectoral provision
• differences in the education participation rates between people who are not in the labour market or have lower skills and people with higher level qualifications, such as university degrees
• the emergence of new demands on post-compulsory education, particularly the need for provision to ensure that all adults in society have 'learning to learn' skills as the basis for participation in lifelong learning

These changes have implications for the way in which education and training is funded. First, education and training provision must become more responsive to the demands of learners for flexible pathways and cross-sectoral provision. Second, we need to explore new ways of supporting the education participation of people with lower level skills.

Cross-sectoral provision refers to all forms of education and training that involve duplication, linkages or overlap between the four sectors, such as credit transfer, articulation, bridging courses, dual-sector awards and nested awards. These forms of cross-sectoral provision are generally negotiated between individual institutions across sectoral boundaries. There is very little support for cross-sectoral provision at the system level, which is both a symptom of the difficulties posed by the sectoral divide and a further obstacle to institutions working within the current system.

Sector-based differences in the regulatory, funding and accreditation arrangements impose restraints on educational institutions and are a disincentive to all forms of cross-sectoral provision, particularly to open and transparent credit transfer systems and the development of courses involving more than one sector. All public education and training institutions in Australia are cross-sectoral providers to some extent, but the scope of cross-sectoral activity is limited by the funding arrangements for each sector. In theory there are few impediments to the expansion of cross-sectoral provision. Institutions are free to seek accreditation for their courses from another sector and to develop cross-sectoral programs for their students. In practice, however, these activities are impeded by the structures of sector-based funding. The different funding, reporting and accountability requirements of each sector mean that it is very difficult to construct courses or programs of study that draw from each sector and are offered as a coherent whole. There are an increasing number of dual-sector programs, but they remain underdeveloped because of the structural differences in funding arrangements.

Although equity policies and programs are implemented in each sector, they are not consistent between the sectors. In most sectors, government programs for disadvantaged learners are funded through competitive tendering arrangements that undermine the stability of provision for both clients and providers. In a climate of growing demand for customised courses and flexible pathways through education and training, sector-based funding systems appear increasingly inadequate to support new forms of education and training provision or to meet the needs of disadvantaged learners.

Given the complexity of the current funding arrangements and the fact that each sector is funded to a different degree by each level of government, it is most unlikely that a new funding model could be put in place to encompass all the sectors. Furthermore, it is not clear that changing the funding model alone would be sufficient to address all of the issues raised by stakeholders. For example, the problems arising from differences in curriculum and course accreditation arrangements would not be resolved by the imposition of a cross-sectoral funding model. We therefore propose an incremental approach to developing a cross-sectoral funding model for education and training. This would involve agencies and governments pursuing greater consistency between the sectors in six key areas:

1. Funding levels per student
2. Accreditation frameworks
3. Processes for determining funding priorities
4. Mechanisms for allocating resources to institutions
5. Student contributions
6. Equity strategies

By developing common principles, policies and practices in each of these six areas, we could make Australian education and training more supportive of cross-sectoral provision. Over time, the system for distributing public funding for post-compulsory education and training should be based on principles that are consistently applied, regardless of the sector in which studies are undertaken.