House of Representatives

Explanatory Memorandum

(circulated by authority of the Minister for Employment, Education and Training, the Hon J S Dawkins MP)

FINANCIAL IMPACT

The Government's Budget decisions announced in "A New Commitment to Higher Education in Australia" mean that higher education institutions will have available an additional $843 million (in December 1987 prices) over 1988 levels for the 1989-91 triennium. The Higher Education Contribution Scheme (HECS) is expected to raise some $307 million of this increase; $83 million in 1989, $98 million in 1990 and $126 million in 1991. This compares with an estimated $107.4 million revenue from the Higher Education Administration Charge (HEAC) in 1988.

These decisions, when converted to estimated December 1988 prices which are the price levels of the grants being legislated in this Bill, will provide higher education institutions with resources in the triennium as follows:

Provided there is no impediment to the introduction of HECS as detailed in Chapter 4, this Bill will appropriate some $7,557 million for the three years of the triennium via Chapter 2 plus estimated expenditure of $1,470 million from the Higher Education Trust Fund (Chapter 4). In addition, the $243 million provided for in Chapter 3 of this Bill will be appropriated by the Higher Education Funding Amendment Bill 1988 which is being introduced concurrently. Because detailed allocations to individual institutions have not yet been possible, the amounts included in this Bill cover total resources to be made available to all higher education institutions (both State/Territory and Commonwealth). Chapter 7 will appropriate $7.8 million to meet the costs of supplementation of 1988 grants in line with Government procedures.

In addition to the estimated expenditure of $1,470 million from the Trust Fund to be established by Chapter 4, institutions are estimated to receive $166 million from students who elect to pay their liability under HECS on enrolment rather than through the taxation system.

If Chapter 5 is required to be proclaimed $876 million will be appropriated with institutions obtaining an additional estimated amount of $309 million from students which represents 90% of the estimated revenue from the continuation of HEAC during the triennium.

The Bill is structured to provide two options for funding higher education for the 1989-91 triennium. Under the Government's preferred option, decisions announced in the 1988/89 Budget relating to the provision of additional resources over the triennium will be provided together with the introduction of HECS. Under this option the level of resources available to institutions for each year of the triennium will be as follows:

Should the Government's estimate of expenditure from the Trust Fund as provided by Chapter 4 and payments by students who elect to pay their HECS liability "up-front" vary, then in subsequent legislation the level of funds for operating grants under Chapter 2 will be varied so that institutions receive, in real terms, the total level of funds as indicated for each year of the triennium.

The second option for funding would be activated if Chapter 4 introducing HECS were not passed. Under this option institutions will receive, in total, the same real level of funds provided to institutions in 1988 together with funds for the pipeline for funded intake increases prior to 1989. In addition HEAC would be retained for each year of the triennium. The level of resources to be provided to institutions under this option would be as follows:

Should the Government's estimate of the HEAC revenue, which is based on estimated relevant enrolments for each year of the triennium vary, then in subsequent legislation operating grants provided by Chapter 5 would be varied to ensure institutions receive, in real terms, the total level of resources as indicated for each year.

In accordance with Government policies the total resources to be provided under either option will be supplemented to take account of cost increases.