Budgets bitten by research funding

PRESSURE to perform well in audits such as Excellence in Research for Australia and in international rankings has left universities juggling their budgets to cover an estimated $2.7 billion research spending shortfall.

And, says Frank Larkins, whose analysis of the situation is published today by the LH Martin Institute, it could get worse.

"There is a clear trend of universities diverting more income to research in terms of their total operating expenditure," Professor Larkins said.

"You cannot continue to [cross-subsidise to that extent] and preserve the quality of your other programs. Australian universities are underfunded for the tasks they have to do."

Professor Larkins found the $2.7bn was 40 per cent of the sum universities spent on research in 2008 - the latest year for which government figures are available - and that it was cross-subsidised from non-research areas, principally the commonwealth grant scheme, intended to fund teaching activities, and fees, largely from overseas students.

"One would have expected that the majority of money from these income streams would be directed towards teaching and general maintenance," he said.

"Universities don't get enough funding for domestic students; international students are underpinning domestic students and also the research efforts."

This accords with a University of Melbourne analysis conducted in the lead-up to the base funding review. Its author, Melbourne's director of finance and planning, Michael Beaton-Wells, found research activity and quality at all our universities were being directly subsidised by overseas students paying full fees for courses.

Universities' research income more than doubled to $2.8bn in the seven years to 2008, but infrastructure and scholarship funding from the government to support research - that is, from block grants income - increased by only 34 per cent, to $1.2bn.

In the same period, the proportion of university research outlays covered by funding and block grants fell from 63 per cent to 60 per cent. And the proportion universities spent on research and development increased from 31 per cent to 36 per cent.

Professor Larkins linked the need to score well in international rankings to the overseas student market. "One of the things you notice at recruitment fairs [in Asia] is that when students approach you about courses, almost invariably they have international rankings in their hands.

"Therefore universities, from a marketing point of view, say: 'How can we maximise international students and be seen to be research active?' So they put money into it."

Other consequences of the squeeze on funding for teaching had been high student-staff ratios and universities opting for the cheapest workforce available, casual teaching staff.

Professor Larkins endorsed calls by the Bradley and Cutler reports for substantial increases in funding to correct "this misalignment between direct and indirect support for research". He said the Sustainable Research Excellence in Universities scheme designed to partially address the shortfall would not be enough.