Why 70% – TAFE and government funding

First things first.  I am a supporter of a properly funded, efficient and effective public provider system (TAFE) in Vocational Education and Training.  I have always said, as those of you who read my blog regularly will know that TAFE can and does do fantastic things and should be supported to do those things. So that being said let me move on to what I want to talk about today.

For about a week a now I have been trying to get an answer to what I thought would be a fairly simple question.  In fact when I first asked it on social media early last week, I expected to be inundated with responses telling me what the answer was and where to find the information that I sought.  Instead no one said anything, there was no response at all, which I found to be a little surprising.  So I took my question and I asked around a little more privately in case there was something I was missing, what I got was some vague references to the education unions and the AEU. So I thought I will ask the AEU then and I got no response.  So then yesterday, I thought surely someone on LinkedIn will know the answer so again I asked and again the best answer I got seemed to references to the AEU and there stop TAFE cuts campaign, but no actual answer to my question.

So what you may well ask was my question?  Is was simply;

 

Where did this figure of 70% of Government funding come from?  

 

To explain what I mean.  There has been quite a lot of publicity lately from the Education unions, some politicians and from people with the TAFE system about TAFE getting 70% of all government funding.  Now depending on the post or the article or speech you listen to the words around the 70% change, need, require, should get, even deserves have been words I have seen associated with it.  The guts of the argument appears to be that TAFE should get 70% of all government funding because it needs to have that much in order to provide the service it needs to provide.  Now if TAFE needs that sum of money, whatever that actual figure is (and I might touch on that later), to operate effectively and efficiently and provide Australians with a good return on money we put into it, then I am not averse to that.  So what may you ask is my problem?

My problem is I want to see the figures.  I simply want to know who came up with it and using what data.  Where are the figures, or the report or the research that sits behind this idea that TAFE should get 70% of government funding.  Now remember I am not saying it shouldn’t.  I am simply saying show me the figures.  I want to see the research.  Why do I want to know this?  Well a couple of reasons really, firstly I (as some of you might have noticed) like to troll through data and see what pops up.  Secondly given the amount of money (across all states and commonwealth) that we are talking about here, I want to know its right.  I want to know if someone figured out how much it cost to run all of the TAFEs in all of the states (I would love to know what that figure was too) and found out it was around 70% of the total VET budget for that year and went well that’s how much they need, or if they looked at unit costs and enrollments and additional services and infrastructure and maintenance costs and ran it through a formula and came up with a figure which turns out to be about 70% of government funding.

The other problem is this.  Surely any kind of formula or calculation would have come up with a dollar figure rather than a percentage figure.  So if it turns out that TAFE requires 70% of the current budget of government funding and a government then decides that it is going to add say $100 million to the amount of funding what should happen to that additional money.  Food for thought I think.

Here is the thing I want to know where this figure came from, so I am formally issuing a challenge to anyone one in any of the Unions, or Sharon Bird MP or Bill Shorten himself, The Greens, or who ever,  to tell me where this figure comes from.  Here is the deal as well, if this is just an ideological position, or a ‘well we can actually say we think we should have all of it because no one will wear that position,’ I don’t actually care.  I really just want someone to tell me what this figure is and what it actually means and I will take an answer from anyone about where this figure comes from.  However,  I am pretty sure that if none responds, and no one can show me where this 70% came from then that is an answer in and of itself.

Anyway that’s just my opinion.

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Hatchet Job or uncomfortable truth – The TAFE NSW report.

A report compiled by Boston Consulting on the operations of TAFE NSW was released recently.  You can find a copy of the report here.  Given the fairly scathing nature of the report some parties and in particular the NSW Teachers Federation, other education unions and number of others have called it a hatchet job, noting the fact that Australian Careers Network was mentioned in the report as a competitor which some of the data seems to have been based on.  Given this I thought it was both topical and worthwhile to have a look through the report.  The first point I feel has to be made it that ACN is only mentioned twice in the report itself and Navitas is mentioned three times.  Now while I acknowledge that there may be some issues with data arising from ACN, I think it would be a brave person who was overly critical of on organisation like NAVITAS who has a very strong reputation and is not some new to the market player.  With that said lets look at the report.

The first part of the report talks about the VET market in NSW and TAFEs place in that market.  A lot of the information contained in this section is fairly straightforward such as;

  • NSW is the second largest VET market in the country behind VIC,
  • TAFE NSW provides the majority of training in the state, around 76%,
  • NSW and VIC have much higher figures of government expenditure on Training than any of the other states.
  • TAFE delivers over 80% of Smart and Skill funding and Government funded programs account for about 63% of all of TAFEs revenue
  • 20% of revenue comes from Fee for service including VFH and the rest of the income comes from a variety of sources (International etc)

When we look more closely at how TAFEs market share is broken down there are some really interesting things that pop out.  While TAFE enrolments count for 95% of all enrolments at a Certificate I level, this drops dramatically to 54% at a Certificate II level, before rising to 75% at Certificate III, 85% at Certificate IV and 95% again at Diploma level and above.  The other interesting thing of note here is that 42% of all of TAFEs enrolments were in Management type qualifications, with society and culture qualifications (Aged care etc) being the next largest segment at 14%.  Engineering and building when taken together (10% and 5% respectively) account for 15% of enrollments.  I find this interesting because one of the criticisms of the non-public sector is that concentrate of the low hanging fruit of Management qualifications, when it seems at least from these figures the vast majority of TAFEs work is the low hanging fruit area as well.

 

Lets move on the next section which compares student offerings and outcomes.  So while TAFE has a strong reputation for quality it seems that it lags behind in terms of cost, flexibility and convenience.  What is of note here is that TAFE NSW is only marginally ahead of the non-public sector in terms of satisfaction with the overall quality of training (about 3%) and the margins are even less when specific things like teaching, assessment and generic skills are considered.  Where it seems that TAFE does fall behind and in some areas significantly is in student outcomes.  While about 80% of students in non-public providers achieved their training outcomes the figure was only around 72% for the public provider.  The difference however is far more significant when we drill down and look at the results for people who were unemployed upon entering training.  For non-public providers 62% of students went on to either be employed or to undertake private study, whereas the number for TAFE NSW is 31%.  Now while as the report states TAFE does work with people with genuine disadvantage and with very low skills, given that there are a range of non-public providers particularly in the not for profit space that also work in this space, it seems unlikely to me that it could account for half the outcome rate of non-public providers.  The other area in which TAFE NSW seems to be well behind the market, in the opinion of employers (from NCVER data), is flexibility at about 8% lower than other providers, in addition there is also an issue with the conditions of the equipment and facilities.  On the positive there is a view that their teachers skills and assessments are slightly better than those at non-public providers.

TAFE also lags behind significantly in terms of utilising blended learning (classroom + online) for their students, with 66% of all TAFE programs being classroom based.  I think we need not to read too much into this as a significant number of TAFE courses (Trades for example) require significant classroom/face to face time.  It does however point to the fact that blended learning solutions (rather than full classroom or full online) are becoming the preferred option for employers and students as they offer additional flexibility.  TAFE NSW is also behind the other state TAFEs in every area of enrollment except for interstate online and significantly behind QLD and WA in terms of VET in schools enrolments although the VET is schools issue may be the result of structural program differences between the states.

Now here comes the controversial stuff, comparisons between TAFE NSW and competitors.  I will to be fair and where they are mentioned, restrict my comments to data relating to TAFE and NAVITAS and not ACN and comparisons between TAFE NSW and other TAFEs.  One of the problems it seems for TAFE NSW (if we ignore the private sector data) is that its unit enrollment costs as some 40% higher than interstate profitable TAFEs and is higher than even unprofitable interstate TAFEs.  Now even without a comparison with the private sector where costs may be as much as 60% lower, the fact that TAFE NSW is more expensive than TAFEs in other states is a substantial problem, which needs explanation.

Now the cynical part of me would suggest that one of the reasons that the NSW teachers federation and other like bodies have been so critical of this report is that they have recently suggested that the offer relating to a new agreement for TAFE teachers which the NSW government has put on the table will  result in onerous working conditions. (The union response to the offer is here) Now if TAFE is as it seems more expensive on a per enrollment basis than even other TAFEs, it has to make it difficult for the union to advance claims that the removal of the additional 5 weeks leave (NAT) that TAFE teachers get in addition to their 4 weeks annual leave and expecting TAFE teachers to turn up at their institute 5 days per week when working are onerous ones.  That however is as I said, just the cynic in me talking.

It also appears that when compared to other TAFEs (not private providers remember other TAFEs) that TAFE NSW teachers are less productive.  They deliver less teaching hours per year than TAFE teachers in any other state and almost 35% less than those in QLD and are paid substantially more, up to 13% more than TAFE teachers in QLD.  Now I don’t know about you but that to me suggests there is a problem and that increasing the number of teaching hours for TAFE NSW teachers, by say curtailing NAT leave or having teachers at the institute 5 days per week, would have an effect on the per unit cost of delivery, which to restate is more expensive than in any other state (about 40% more expensive than in QLD).  Now I might be wrong, but somehow I don’t think I am.

Now if we remember that this is data which compares TAFE NSW with other TAFEs this is a staggering indictment of the system in NSW, which I think puts the education unions and others who are saying TAFE NSW just needs more money and funding to be successful in a pretty tough spot.  Even in terms of their admin staff, the costs at TAFE NSW are out of alignment with those in other state TAFEs resulting in the admin costs per hour taught being up to 50% more than in other State TAFEs.  Again remember this is not a comparison between TAFE NSW and private providers, this is a comparison between TAFE NSW and other TAFEs.  Yet again when we look at ‘educational managers’ we see the same scenario where the unit costs per hours taught are up to 50% more than that of others TAFEs.

Again if we ignore the non-public comparisons the unit costs of assets at TAFE NSW are 2.5 times that of TAFE VIC.  There also seems to be a problem around the utilisation of these assets, now while some of this is the result of the need for specialist facilities for certain programs, issues such as;

  • Classes not typically run on Fridays
  • Classes are not typically offered after hours (e.g.,evenings, weekends)
  • Facilities are lightly used outside of ‘term’ and
  • Term structured learning

cannot I think be ignored.

If we add to this is the sheer size of the asset pool, some 1900 buildings over 168 sites with a replacement value somewhere in the vicinity of $4.7 billion we can start to appreciate the scale of the problem.  One of the issues with this is that there are therefore a substantial number of campuses which are within a 5 km radius of at least one other campus.  The structure of TAFE NSW as ten different institutes also creates problems in this area with significant duplication of courses, administrative and teaching roles and the need to duplicate assets across multiple locations.  With the majority of Institutes offering training in more than 6 fields of education, many campuses turn out to be to small to cost effectively deliver this range of programs.

 

So what does all of this mean for TAFE NSW?  It means I think that certain stakeholders in the TAFE NSW and VET in general need to take a good, hard, long look at what they saying, their positions and their agendas.  It is cleat that the concept that all TAFE needs is better funding and more money and everything will be alright is a deeply flawed notion.  There is a significant need to look at the costs associated with delivery as it seems from the data that compared to other TAFEs the awards conditions and arrangements in NSW are driving the costs of delivery up by between 35 to 50%.  Now as I have always said I firmly believe we need an effective, well-funded TAFE system in this country, however, it also has to be one in which we get a return for the money we invest in it and with TAFE NSW staff costs where they are alone it seems difficult to justify that they are getting a good return for the dollars spent, particularly when we compare them to other TAFEs.

So what needs to happen.  I think we need to see what we have seen in other states, that is amalgamation at the very least at an administrative level and possibly even at a campus and teaching level.  There needs to be work done on the award conditions, in particular the number of hours teachers actually deliver and there needs to be work done on developing blended learning solutions where they are appropriate.  In addition even though it might be uncomfortable TAFE NSW and its supporters and stakeholders need to stop blaming there issues on everybody else, including the non-public sector and the government and really look at themselves.

To answer the question in the title, hatchet job or uncomfortable truth? I have to say I going to come down on the side of uncomfortable truth.

Anyway that’s just my opinion.

State of VET survey results – Some interesting perspectives!

As some of you know a few weeks ago I asked people who were interested to fill out a quick survey I had created about their perception of the how the VET sector was travelling at the moment and their confidence in the sector moving forward.  Now it has taken me a little while to get back to the survey because, frankly, I was overwhelmed by the number of responses that I got and it has taken some time to troll through the data and to think about what that data says.  Firstly then a very, very big thank you to everyone who filled in the survey and now on to the results.

Most of the responses were from those in non-public providers, about 70%, 15% were from TAFEs and the final 15% made up of independent trainers and assessors, consultants and others, with respondents from across a wide range of roles within the sector. Which given the make up of the sector itself is not too bad a mix.  What I found interesting given the respondents was when I looked at the data there was so much cohesion around the answers to the various questions I posed.

The first two pieces of data are about respondents satisfaction with the sector and how they think the sector will travel of the next 12 months.

Sector Satisfaction

 

12 month satisfaction outlook

A huge 80% of respondents were either very dissatisfied or dissatisfied with the current state of the sector and 79% of the sector thinks that the situation is either going to stay the same or get worse over the next 12 months.  Interestingly while as a sector we seem to a little disillusioned shall we say and think things are likely to remain how they are for a while, it seems that we don’t really think it is going to have too much effect on your student numbers.  Sure no one it seems expects that there is going to huge growth in the number of students they enroll over the next 12 months but only a small number feel that there will be a significant decrease in student numbers as well.

Enrollment forcast

 

The other piece of data that I found worrying was perceptions around financial security and profitability.  The majority of respondents felt, not unsurprisingly I think, that their profitability was either going to remain the same of decrease.  With smaller number predicting increases or substantial decreases

profitability

This of course translates into the fact that only 18% of respondents felt that their ongoing financial security was either sound or very sound.

Financial security

 

Which then underlies the fact that in general providers feel the revenue they generate from traditional sources is going to decrease over the next 12 months, but there also seems to be a level of confidence that revenue from other sources will rise.

funding sources

These factors of course will then have an effect on the make up of the VET sector workforce as can be seen below.

Workforce

So what does all of this mean?  Well not unexpectedly I think it points strongly to the fact that we are currently part of a sector which is in a state of flux and which is to some extent attempting to find its feet again and that this general uncertainty will be something we are going to have to live with at least until the end of 2016 and may a little longer after that as well.  There will be and in a lot of cases should be a tightening of belts and more fiscal responsibility from providers.  We will see less sponsorship of football teams and more money being concentrated where it should be, on student outcomes and completions.  We are also going to see the the dollar value per student reduce across the board, be it VFH, State funding or Fee for Service.  Providers will get less overall money per student which will result in lower profitability in most cases.  Are we going to see more providers abandon the market either voluntarily or through administration?  Clearly I think the answer there is a definitive yes.  There are still a couple of the larger (primarily VFH fueled providers) who are close to the bone at the moment, but not being publicly traded makes it difficult to know just how close they are.  I also think that a number of smaller providers will simply walk away, some for profitability reasons, other just because it is becoming to hard to be a small player unless you other systems supporting you.  I know of a number of providers who have walked away from State government contracts to deliver training, because for the small number of students they put through the additional compliance and paperwork made it not cost-effective.  These providers haven’t walked away entirely though, but have simply gone back to doing fee for service business.

So what do other people think of the data, what it means and how you think things are going to pan out over the next 12 months or so.

 

Product or Service – Does viewpoint matter in VET

I had a quite interesting discussion with an L&D friend over the weekend about education in general and the question of whether or not education and in particular vocational education was a product or a service.  This got me thinking.  Now lets for the moment just all agree what education is a Good and that people should be able to access high quality education, what interested me more is what is it that consumers, that is students are buying when they buy a VET education and what is it that we think we are selling.  Now before any of you go off and say things about education not being for sale or not be a business, it is.  If you think for one minute it isn’t then why would universities advertise so heavily to attract the best students and why would there be such bun fights around funding for VET.  It is a business and that is not a good or a bad thing it is just a thing.

So now that I have got that little bit out of the way, here is the central question, What is it that students are buying when they buy an education?  I had someone a number of months ago now suggest to me that the reason that VFH needed to be paid on commencement rather than completion was that students were buying a product, namely all of the great material and content and knowledge that the provider had created and that if we thought about it was like buying a DVD or any other product.  You pay for it upfront, you don’t pay for it after you have listened to it or used it.  Now I think that this is a fundamentally flawed way of considering the interaction between students/funding bodies and providers as well as the kind of thinking that got us into this VFH mess in the first place.

Students and governments aren’t particularly interested in your content or how much time and money you spent on it.  They are not purchasing that, what students and funders are purchasing is an outcome.  The shininess of your content might influence some students in terms of their choice but in the long run what they are purchasing is an outcome, or more realistically they are purchasing a service which will give them the outcome that they desire.

So if we consider what we are selling as a service things become much clearer in terms of how we should think of  what we do and how it should be paid for, by whoever is doing the payer.  Take the example of a electrician; do you pay the electrician upfront?  Generally the answer would be no, you might pay a small percentage of the total fee up front where there were things that were required to be purchased by the electrician in order to do the job, but in general it is payment on completion.  We pay when we get the outcome that we want, we pay when the electrician has successfully installed our oven or whatever service he was delivering for us.

When we view the vocational education sector as providing a service rather than delivering a product, it must therefore alter the way in which we view how payments should be made in.  It produces the idea that there is simply no justification for commencement fees, or at very least no justification for full unit commencement fees, there may be a case as I have outline in other places a case to be made for partial upfront fees as long as those fees come with caveats around completions.

So here is just a little bit of an additional question to think about.  How did we get to the product viewpoint?  Some might suggest that it happened when we moved to a system that included non-public providers, but that would be wrong, simply because there have been non-public providers in the system for a long time and the service viewpoint was still there.  For me when it really shifted was not even at the start of VFH, but rather at the point where brokers became involved.  Why?  Well because brokers are paid on a sale basis which turns the process from one in which the provider is supplying a service to one in which the broker is selling a product.

Anyway that’s just my opinion.

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