7 November 2001
Funding Tertiary Education
for a Prosperous Society
The Tertiary Education Advisory Commission today recommended to the Government a new funding framework to support a
fully integrated tertiary education system.
The details are set out in the Commission’s fourth and final report, Shaping the Funding Framework, released this
The Commission says the “world first” system will enable all New Zealanders to develop the knowledge and skills they
need to contribute to the country’s development as a prosperous and inclusive society.
“The tertiary education system consists of a complex web of inter-related components. Viewing it as an integrated whole
and increasing the accountability of providers will make improved learning pathways available to everyone,” said
Commission Chair Russell Marshall.
“By recommending an integrated funding framework, the Commission has ensured that learners remain central to the design
of the tertiary education system. This means the funding of tuition will continue to be primarily demand driven, and
removing the current caps on foundation education and industry training.
“With the exception of the non-formal education provided by the Adult and Community Education sector, all components
will be funded through a Single Funding Formula. This formula will allow funding rates to be varied according to the
type of education or training, the learner characteristics, and the relative priority of the subject area in relation to
achieving Government goals. Funding for Adult and Community Education will be contained in a separate dedicated fund.”
The Commission fully acknowledges the key role that research plays in New Zealand tertiary education. Its
recommendations include uncoupling research funding from tuition funding, so research programmes can be fostered in an
environment that is independent of the number of students who enrol with a particular provider.
Russell Marshall said the Commission wanted to ensure that excellence in research was rewarded.
“It has therefore recommended introduction of a Performance Based Research Fund,” he said. “This will recognise people’s
standing as researchers, and their ability to attract external funding and to encourage students to successfully
complete research degrees such as Masters and Doctorates.”
The Commission recommends that the Government match the amount of funding received from external sources to support
Centres/Networks of Research Excellence developed to achieve national strategic goals such as those recommended in the
Commission’s third report, Shaping the Strategy. The Commission also wants to see continued growth in funding for
untargeted Centres/Networks of Research Excellence.
Russell Marshall said the commission recognised that encouraging innovation, supporting co-operation and collaboration,
achieving equity goals, and enhancing the quality of teaching staff were key to achieving a high performing tertiary
“We have therefore recommended the establishment of a Strategic Development Fund from which the Tertiary Education
Commission will allocate funds on the basis of bids from providers. This fund will be key in mitigating the impacts of
changing to the new funding framework while supporting access to tertiary education in the regions.”
Russell Marshall said a Single Funding Formula and the five dedicated Funds, coupled with the establishment of the
Tertiary Education Commission and the implementation of charters and profiles, would ensure coherence of the funding
framework across the tertiary education system.
Central to the Commission’s recommendations is a review of the costs of the delivery of tertiary education as the basis
of developing a comprehensive set of Cost and Funding Categories to be used in the Single Funding Formula.
“This would include a comprehensive review of academic staff salaries and conditions, as staff salaries are a major cost
for providers,” he said. “In line with the integrated nature of the Single Funding Formula, the Cost and Funding
Category review would include delivering programmes in institutions and PTEs, the costs associated with delivering
foundation education, and the costs of work-based industry training.”
Other key recommendations include a Quality Test as a prerequisite for receiving public funding, standardised
performance measures for tertiary education and the separate sectors within it, improved accountability regimes with
funding being removed from poorly performing providers, amending the current policy of no-interest on student loans
while studying, a review of the financial student support policies and systems, a merit entry standard for
under-graduate degrees, a review of the information available to learners, and a review of institutional governance.
“The Commission’s overall aim is to improve the quality of tuition and research, to see the Government having greater
ability to steer tertiary education to national goals and priorities, to improve the responsiveness and accountability
of providers, and to further the capability and capacity development of Maori and Pacific peoples,” said Mr Marshall.
“We have taken serious steps to address the responsiveness of tertiary education to Maori and Pacific peoples. Maori and
Pacific peoples have traditionally been disadvantaged by the system, and it is vital that the country enables them to
fulfil their aspirations,” said Russell Marshall.
“The Commission urges the Government to continue with implementing its proposals and has recommended that any savings
from the reallocation of government funding be redistributed within the tertiary education system along with the
introduction of a modest amount of new money. Our proposals provide an assurance to the Government that the money
allocated to the tertiary education system can be targeted to areas the Government sees as priorities.
“We have recognised the need for the performance of the system to be measured, so that it is effective, efficient and
accountable. To this end, the Commission proposes a Tertiary Education Scorecard, which can be developed along with the
Tertiary Education Strategy as a useful instrument that the Tertiary Education Commission can use in making funding
decisions. This increased accountability will give the Government confidence that increased investment in tertiary
education will effectively contribute to achieving its goals and priorities.
Mr Marshall concluded by saying “the Commission is conscious that the complex and integrated nature of tertiary
education means that implementing the changes must be undertaken carefully and in a phased manner. Implementing the new
funding framework must be done in a holistic manner, with consideration given to the dynamic flow-on effect of changes
on all parts of the system.
“I wish to take this opportunity to acknowledge the considerable contribution made by providers and their staff,
students, Maori and Pacific people, research, industry, business and community groups to the work of the Commission. Our
particular thanks are also due to everyone who gave their time to prepare submissions and sit on the working groups
established by the Commission to support it in its work.
“And, finally, I wish to thank the Commissioners and the Secretariat for the passion and dedication that they given to
the task they have undertaken since April 2000.”
Further information can be obtained from the Commission website at www.teac.govt.nz