, Norman LaRocque September 2002

1. Investing in Private Tertiary Education in New Zealand: Why Bother?Presentation, New Zealand Association of Private Education Providers Annual Conference 2002 , Norman LaRocqueSeptember 2002

2. Outline • Evolution of PTE Policy: • Why Bother? • The Changing Education Landscape • Challenges for PTEs • Conclusion

3. Evolution of PTE policy: Late 1980s/1990s • Many policy developments over the late 1980s/1990s led to evolution of PTEs: • ACCESS/TOP funding • Subsidies to PTEs - from puddle to pool • Tuition fees at TEIs introduced • Reduced per-student subsidies to TEIs • Introduction of SLS and subsequent lifting of PTE student borrowing limits • NQF • Industry training and ITOs • Opening up of degree-granting powers • Introduction of demand-driven funding system in 2000 - integrated funding.

4. Evolution of PTE policy: Year 2000+ • Current policy reversals: • some student support limited to public sector students • capital charge abandoned • ITOs asked to use polys • International student levy • Other education levels: • private school subsidies capped • private ECE provision out of favour, especially for-profits. • By end of 1990s, policies neutral between public and private sector: • funding • student support • capital charge agreed • Big policy changes with respect to private sector role and in other areas of policy. • Current policy reversals: • Public > private under TEC • PTE subsidy reduced and capped/moratorium

5. Some don’t think we have gone far enough… “The government should stop funding PTEs in the upcoming budget and redirect the funds into universities, polytechnics, wananga and colleges of education.” - Andrew Campbell, NZUSA

6. Others are merely gravely concerned about you… “The Association is gravely concerned at the general move to government policies that support private provision of tertiary education, including: increased government support for private training establishments [PTEs].”].” - AUS Policy Statement

7. So why bother investing in tertiary education in New Zealand?

8. So why bother? • Given the unreceptive attitude of the government and some other stakeholders to private investment in tertiary education, you must sometimes ask “why bother”? • My point to you today is that a wide range of indicators suggests that a lot of students, families and organisations are glad ‘you bother’. • While some do not or cannot say so in words, they show it in a much more meaningful way - through their actions. • Some examples follow.

9. Domestic students must think PTEs are OK I… • Domestic students are voting with their feet. • The number of funded EFTS places in PTEs grew from 363 in 1992 to 22,666 in 2001. • The amount of EFTS funding going to PTEs increased from less than $2 million in 1992 to more than $135 million in 2001. • Source: TEAC Fourth Report, November 2001.

10. Domestic students must think PTEs are OK II… • In 1992, the number of funded EFTS in PTEs was less than 1% of the number of funded EFTS in polytechnics. • By 2001, the number of funded EFTS in PTEs was more than 40% of the number of funded EFTS in polytechnics. • Source: TEAC Fourth Report, November 2001.

11. Skill New Zealand must think PTEs are OK… • In 2000, PTEs claimed $129.4 million in Skill New Zealand funding. • This represented 85% of all Skill New Zealand funding. • Polytechnics and Wananga were next in line, with $9.8 million in funding (6.4%). • Source: A Statistical Profile of the PTE Sector, Education Directions, September 2001.

12. Skill New Zealand trainees must think PTEs are OK… • In 2000, PTEs enrolled 86% of Skill New Zealand trainees. • Not a one night stand - as far back as 1990, PTEs were enrolling 76% of ACCESS trainees. In 1993, PTEs enrolled 89.5% of TOP trainees. • Source: A Statistical Profile of the PTE Sector, Education Directions, September 2001.

13. International students must think PTEs are OK… • PTEs play a major role in the export education sector - greatest proportion of international students of any sector. • In the year to 30/6/2000, PTEs had international student fee income of $76.2 million (31.5% of total). • Of this, $27.2 million was from private tertiary education providers, while $49 million was from private english language schools. • Source: A Statistical Profile of the PTE Sector, Education Directions, September 2001.

14. ITOs must think PTEs are OK… • In 2000, ITOs purchased $17.8 million (61%) in off-job training from PTEs, compared to $11.3 million (39%) from polytechnics. • PTEs enrolled about 60% of off-job training students as at 31 July 2000. • Source: A Statistical Profile of the PTE Sector, Education Directions, September 2001.

15. WINZ must think PTEs are OK… • In July 2000, nearly half of first year students at PTEs used to be on a benefit. This compares to 17% at state institutions. • Unemployment rate among 25-34 year olds with a non-degree tertiary qualification was less than half the level of those without a qualification. • Source: Ministry of Education data.

16. Students from low-decile schools must think PTEs are OK… • PTE students tend to be from low-decile schools. • In July 2000, 29% of students at PTEs were from low-decile schools. This compares to 23% of polytechnic students and 13% of university students. • Only the proportion of low-decile students at Wananga was higher (52%). • Source: A Statistical Profile of the PTE Sector, Education Directions, September 2001.

17. Maori and Pacific students must think PTEs are OK… “Pasikale and Yaw (1998) point out the value of [PTEs] in offering a culturally welcoming environment for learners, many of whom had predominantly negative experiences in schools.” - Cited in Literature Review on Pacific Education Issues: Final Report, Ministry of Education January 2002. • Maori and Pacific students are disproportionately represented among PTE student populations. In July 2000: • 27% of PTE students were Maori - versus 13% in TEIs; and • 8% of PTE students were Pacific - versus 4% in TEIs. • Source: A Statistical Profile of the PTE Sector, Education Directions, September 2001.

18. Pacific students must think PTEs are OK… “Universities often have a very staid and formal image to young people, whereas PTEs have the scope to be more flexible and creative and capture the imagination of our kids.” -- Dr Melani Anae

19. Looking Forward • Many reasons to be optimistic regarding the role of the private sector over the longer-term: • Role of government - no need for government delivery, only government funding • Private higher education significant and/or growing elsewhere - USA/Canada, Asia, Middle East/GCC, South America, Australia looking at more favourable treatment of private sector • No policy basis for recent reforms - ‘unsustainable developments’ • Overseas students provide lots of potential - public sector filling up • Economic, social and technological forces are driving change in tertiary sector - cannot ignore. • What is public education anyway? • Positive strategy - nothing against polytechnics and universities. Indeed, quite the opposite - there are many good management teams in state institutions. But we need a market test, not a screwed scrum.

20. The Changing Education Landscape • Government budgetary constraints • Growing diversity of student base: • Maori and Pacific Peoples • older • international students • Labour market changes: • service sector growth • labour market churn • Technology: • demand and supply impacts • Broader economic and policy changes: • premium on skills

21. The Changing Education Landscape (Cont’d) • New forms of tertiary provision: • for-profit universities • corporate universities • virtual universities • “clicks and mortar” hybrids • foreign institutions • USA: • for-profit market = $US105 B • 67 publicly traded education companies • 366,000 higher ed students in 1998 • University of Phoenix = 100,000 students in 2001

22. Private Tertiary Education: You Are Not Alone… Private Enrolments as a Percentage of Total Enrolments © The Treasury Source: World Bank, 2000

23. Recent Anti PTE Policy Changes are Based Entirely on the Fact They are Private: Two Legs Too Few • “Four legs good, two legs bad.” • -- Animal Farm

24. Some Challenges for PTEs • Some legitimate challenges for PTEs remain. Three are addressed below. Quality Assurance Perceptions • Whether valid or not, many people believe that the PTE sector is synonymous with low quality. A few points on this: • Perceptions matter. These perceptions of low quality can be used to justify the government-led rationalisation of the sector. • The PTE sector is young and is susceptible to ‘contagion’ - the actions of one or a small number of PTEs can affect the entire sector (and make great political cannon fodder). • The same is not true in other sectors - have the financial problems of so many polytechnics been used as a weapon against the polytechnic sector? The closure of CIT? Wanganui? Wairarapa? Yeah right. • The perception is there. Do something about it.

25. Some Challenges for PTEs (Cont’d) • PTEs can’t just be good enough on QA. You need to be better than that. And you need to be proactive - as a sector, as NZAPEP, whatever - and take steps to address the perceptions about quality. • I hear various things about the existing accreditation system and don’t know enough to comment on it. But you can explore other means of regulating quality - on top of existing ones or instead of existing ones - including private regulation of quality, associations with other institutions, industry certifications, etc. • And whatever is put in place needs to stick. • QA, accreditation and credentialing learning are key issues in the new tertiary environment.

26. Some Challenges for PTEs (Cont’d) Innovative Delivery • Look at innovative organisational forms as means of delivering education. One possibility is partnerships between the public and private sectors (PPPs): • PPPs could come in many forms - contracting education delivery of specific courses to public institutions, contracting other services to public institutions, wholesale management of public institutions under contract, etc. • PPPs can benefit the sector in a number of ways - PTEs can bring their innovation, management capability, lower cost structures and greater flexibility. They can marry this with the ‘positional’ advantages that state institutions might have. • PPPs can fit in well with the Minister’s objectives of rationalising the tertiary sector, while ensuring that institutions remain publicly owned and private sector disciplines continue to apply in the sector. • The government has already agreed to PFI-type PPPs (Partnerships for Excellence).

27. Some Challenges for PTEs (Cont’d) Innovative Delivery • Other possibilities include: • developing partnerships with overseas and domestic providers who can bring access to capital, expertise and R&D capability - Campus Group Holdings, University of Phoenix, etc. • associations with large corporates - Corporate Universities - Bank of Montreal, Motorola, etc. • Associations with other PTEs • Some of that is happening now. But can we see more of it? Marketing and Lobbying • Need to keep focus on this - defend, but also provide positive options for change. Need to change nature of debate (eg affordability debate in public vs private tertiary education sector).

28. Conclusion • Policy analysis ‘lite’. • The PTE sector has made many gains - can build upon these despite the current environment. • Need to be proactive in addressing these.

29. Education Forum P.O. Box 24-310, Manners Street, Wellington, New Zealand. Telephone: +64 4 499-0790 Fax: +64 4 471-1304 Email: nlarocque@educationforum.org.nz Web: www.educationforum.org.nz