Senate

Higher Education Funding Bill 1988

Explanatory Memorandum

(circulated by authority of the Minister for Employment, Education and Training, the Hon. J S Dawkins MP)
THIS MEMORANDUM TAKES ACCOUNT OF AMENDMENTS MADE BY THE HOUSE OF REPRESENTATIVES TO THE BILL AS INTRODUCED

DETAILED DESCRIPTION OF THE BILL

Chapter 1 - Introductory

Chapter 1 is an introductory Chapter, which contains the interpretative provisions that are applicable to all the provisions of the Bill. Some provisions of the Bill, in particular Chapter 4, have special additional interpretative provisions.

This Chapter provides a Table listing the institutions which are eligible to receive funding under Chapters 2, 3 and 5. Also included is a provision enabling funds provided for equipment or minor building projects to be accumulated for expenditure by institutions in later years. This will be made conditional on the funds being put aside on a non-reversionary basis so that they can only be applied for the purposes for which they were accumulated.

Provision is also made to require States to enter into agreements with non-government institutions which are to receive funds under Chapters 2, 3 or 5 such that the institutions agree to be bound by conditions comparable to institutions established under or subject to State legislation.

Chapter 2 - States Grants for Higher Education Assistance

This Chapter contains provisions similar to those in previous States Grants (Tertiary Education Assistance) Acts. It is designed to provide financial assistance to higher education institutions in accordance with announced Government decisions for 1989-91, but excluding

funding provided for initiatives funded by Chapter 3,
the funds to be provided through the Trust Fund to be established by Chapter 4, and
the estimated amount to be paid by students who elect to pay their Higher Education Contribution Scheme (HECS) liability "up-front" rather than via the taxation system once their personal income reaches the prescribed level.

The funds to be appropriated by this Chapter will be provided to institutions irrespective of the funding option (see Financial Impact Statement).

This Chapter will also provide for institutions to provide an educational profile to the Minister which will be the basis for determining the level of funds to be provided. Provision is made for the Minister to determine the level of funds to be provided to institutions under the category of "operating purposes" or "limited operating purposes".

It has not been possible to include Schedules of institutional grants as in previous legislation, due to time constraints involving the necessary consultative process with the institutions over the distribution of the increased resources for the triennium. However, consistent with previous legislative provisions, the power of disallowance by the Parliament of certain determinations made under this legislation is provided for in the general financial provisions included in Chapter 6.

The following table provides a breakdown of the funds being provided for all higher education institutions by this Chapter.

STATES GRANTS FOR HIGHER EDUCATION ASSISTANCE
(Recurrent in estimated December 1988 and Capital in preliminary June 1988 prices)
    1989 1990 1991     $m $m $m
RECURRENT GRANTS
- Operating Grants 2,195.0 2,229.0 2,288.3
- Projects of National Priority 26.2 26.8 27.5
- Teaching Hospitals 3.8 3.8 3.8
- Drug and Alcohol 0.6 0.6 -
- Special Research Assistance 15.6 36.5 62.6
- Specified Grants
. Equality of Opportunity 1.3 1.3 1.3
. Greater Participation by Aboriginals 11.5 12.8 13.3
. Superannuation 108.1 116.7 125.6
Total Recurrent 2,362.1 2,427.3 2,522.5
CAPITAL GRANTS 81.7 81.7 81.7
TOTAL HIGHER EDUCATION 2,443.7 2,509.0 2,604.2

Chapter 3 - Additional States Grants for Higher Education Assistance

This Chapter provides for additional funding (to that provided in Chapter 2) which is conditional on the introduction of the Higher Education Contribution Scheme (HECS). The appropriation of these additional funds is provided via the Higher Education Funding Amendment Bill 1988 to be introduced concurrently with this Bill.

Included is a new program in 1989 to assist institutions to meet their most urgent needs for the refurbishment of buildings and facilities. Details of the level of funds to be provided by this Chapter are detailed below:

ADDITIONAL STATES GRANTS FOR HIGHER EDUCATION ASSISTANCE
(Recurrent in estimated December 1988 and Capital in preliminary June 1988 prices)
    1989 1990 1991     $m $m $m
RECURRENT GRANTS
- Specified Grants
. Equality of Opportunity 2.1 2.1 2.1
. Greater Participation by Aboriginals 1.7 4.6 8.4
Total Recurrent 3.8 6.7 10.5
CAPITAL GRANTS
- New Works 30.3 69.5 102.6
- Renovations 19.8 - -
Total Capital 50.1 69.5 102.6
TOTAL HIGHER EDUCATION 53.8 76.2 113.1

Chapter 4 - Higher Education Contribution Scheme

The Chapter proposes a new system to supplement funding of the Australian higher education system by requiring contributions to be made by students towards the cost of their higher education when they are in a position, financially to do so. The Scheme is being established under the Commonwealth's benefits to students power in the Constitution and not as a grant to a State.

An annual course contribution of $1800 (in 1989 prices) will apply for each year of equivalent full time study undertaken at higher education institutions from 1 January 1989, with students making a pro rata contribution according to the actual amount of study being undertaken.

In order to become enrolled each semester, students who are liable to make contributions to the cost of their education will be required to either:

pay the institution at least 85% of their estimated liability for the semester, based on the student load being enrolled for (the Commonwealth will discharge the balance of the liability by payments from the Trust Fund established under this Chapter); or
pay no contribution or less than 85%, ask the Commonwealth to pay the remainder of their contribution to the institution and agree to repay the Commonwealth through the taxation system. Students who thereby incur higher education debts to the Commonwealth will also be required to notify the institution of their current tax file number or where they do not have one, make written application for a tax file number.

Liability under the Scheme each semester will be based on the student load being undertaken by the student as at the census date for the semester.

At the census date higher education institutions will calculate each student's semester liability and notify the student in writing. For a student who has decided not to repay through the taxation system, if the final liability is greater than 85% of estimated liability paid on enrolment the student will be liable to pay the difference to the institution. If the final liability is less than the amount estimated on enrolment, the institution will refund the excess, on request.

Students who opt to make their higher education contribution for a semester through the taxation system will not be required to make any payments until their personal taxable income reaches a specified level. For the year ending 30 June 1989, payments will commence when taxable income reaches $22,000, and the amount payable will be -

0.5% of taxable incomes between $22,000 and $24,999;
1% of taxable incomes between $25,000 and $34,999; and
1.5% of taxable incomes of $35,000 and above.

In future years, those rates will be 1%, 2% and 3% respectively of equivalent taxable income bands which will be adjusted in line with movements in the Consumer Price Index.

Higher education contributions payable on assessment of taxable income will be deducted from a student's accumulated higher education debt. The unpaid balance will be adjusted annually to reflect movements in the Consumer Price Index.

Higher education contributions payable on assessment will be treated in the same way as income tax, and normal taxation collection and recovery mechanisms will apply. To facilitate collection, taxpayers who have incurred higher education debts which remain unpaid at the time of lodgement of their annual income tax returns will be required to state on their returns the total amount unpaid. In assessing the amount payable in the year - measured as a percentage of taxable income - the Commissioner of Taxation will be authorised to apply available P.A.Y.E. instalments, provisional tax and prescribed payments credits against that amount first, in preference to application against the person's income tax liability.

Taxpayers will have the same rights of objection and review against higher education assessments as they have for income tax assessments.

In addition to provision for amendments to various taxation legislation to take account of HECS there is also provision in this Chapter for the abolition of the Higher Education Administration Charge including repeal of the relevant provisions in the various pieces of enabling legislation of Commonwealth institutions.

The following table provides a breakup of the financial implications of this Chapter.

HIGHER EDUCATION CONTRIBUTION SCHEME
(estimated December 1988 prices)
  1989 1990 1991   $m $m $m
- Trust Fund - payments to institutions 465.8 490.0 514.6
- "Up Front" payments by students to institutions 52.6 55.4 57.8
Total 518.4 545.4 572.4

Chapter 5 - Contingent Provisions

The purpose of the Chapter, which would only be proclaimed should Chapter 4 not be passed, is to appropriate additional recurrent grants which may be added to those already provided under Chapter 2 sufficient only to bring grants to a level comparable to 1988 grants in real terms including pipeline effects for funded intakes prior to 1989 and a reduction for an amount equivalent to 90% of the expected revenue from the Higher Education Administration Charge (HEAC).

Provision is also made for the continuation of HEAC at an indexed rate as provided for under previous States Grants legislation.

Also included is provision for the continuation of the special assistance for students program which has enabled institutions to make loans or grants to students who would otherwise have had their studies interrupted.

CONTINGENT PROVISIONS
(estimated December 1988 prices)
    1989 1990 1991     $m $m $m
RECURRENT GRANTS
- Operating Grants 353.7 293.0 216.2
- Specified Grants
. Special Assistance for Students 4.3 4.3 4.3
Total Recurrent Grants 358.0 297.3 220.5
Funds to be obtained by institutions - 90% of HEAC revenue 101.7 103.3 104.0

Chapter 6 - Miscellaneous

This Chapter makes provision for imposing additional conditions on grants and other miscellaneous matters. These include requirements for equality for female and male students in the application of funds provided by this legislation; additional conditions and limitations pertaining to determinations and instruments made by the Minister including the requirement for tabling in the Parliament for possible disallowance; payment arrangements; delegation of powers by the Minister, Commissioner of Taxation and Secretary of the Department of Employment, Education and Training; and reporting requirements.

Chapter 7 - Amendments of States Grants (Tertiary Education Assistance) Act 1987

The purpose of this Chapter is to provide adjustments to grants paid under the States Grants (Tertiary Education Assistance) Act 1987 in line with agreed Government procedures, and to make provision for institutes of tertiary education and non-government teachers' colleges to receive funds connected with the 3% Superannuation Productivity Benefit with effect from 1 July 1988. The additional funds relate to the funding of the recent National Wage Case.

AMENDMENTS OF STATES GRANTS (TERTIARY EDUCATION ASSISTANCE) ACT 1987
(estimated December 1988 prices)
The amounts substituted by these amendments represent additional appropriations as follows:     1988     $'000
RECURRENT GRANTS
- University Purposes 3,654.0
- College Purposes 3,424.4
- Special Research Grants 54.0
- Teaching Hospitals 9.0
- Institutes of Tertiary Education 95.5
- Advanced Education in TAFE Institutions 31.0
- Non-Government Teachers Colleges 14.0
- Specified Grants
. Promotion of Equality of Opportunity 4.0
. Greater participation of Aboriginals in higher education 1.0
. Special Assistance for Students 12.0
. Special Research Assistance 487.0
TOTAL HIGHER EDUCATION 7,785.9

Capital and Equipment programs were fully supplemented in the previous amendment to the 1987 Act.


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