Are universities taxpayer funded monopolies?

We live in the age of education democratisation. With the advent of online education providers, people can study the degree and the skills they like without having to go to campus.

We all love the idea. My issue is with how universities are funded and whether they have an unconscionable advantage over private sector training organisations – particularly here in Australia.

Australian tertiary institutions are largely funded by the Australian Government based on the number of students they have enrolled. They also receive grants from the State governments to set up new schools (which usually gets spent on new buildings, rather than academic and support staff, but that’s an issue for another time).

So, basically we have institutions where the physical buildings, the salaries and all other costs are funded by the taxpayer.

Let me give an example. Here in Queensland the State Government set up a training provider panel a couple of years ago to provide training to public employees.  The State Government has a budget attached to each employee of $5000 per year. The training panel criteria was that training could be provided at approximately $250 per person per day, and that all training would count as credit towards a university degree.

Even though the most effective forms of training for the public sector are likely to be vocational courses (i.e. applied skills) this move has provided two outcomes.

1)      The private sector can’t compete because universities are indirectly and/or directly subsidising courses through taxpayer funds, and

2)      Universities have expanded their role into vocational education, taking away a chunk of the market for private sector providers.

Yes, the State Government has saved costs, but it has also locked in a monopoly arrangement for universities – which in the current phase of democratisation of education seems quite short-sighted.

On top of this, we are seeing those same taxpayer funded resources used to set up online training.

In case you think I am blowing steam about a non-issue, let’s look at how government owned power generation companies are treated.

Government owned power generation companies have access to a lower cost of capital than their private sector competitors due to an implicit government backing. They also have access to large amounts of legacy assets which provide both the cash flows and the people to work on new power projects.

In recognition of the unfair advantage that government owned power generators have, they are now forced to use private sector equivalent pricing for their services and on new projects. They are legislated in black and white on these matters, and in some instances face a competitive neutrality fee to help enforce this.

Ports, rail and other government owned businesses face similar regulations.

To quote the Queensland Treasury - “Competitive neutrality means that government businesses should not enjoy any net competitive advantage over their competitors simply as a result of their public sector ownership.”

While we don’t call them government owned, given the funding model for them, aren’t universities really the same thing.

Could it be time to do something about this? Time to inject some competition I think.