Tuesday 21 May 2013

Budget 2013

Last week's budget announcement wasn't all that exciting; I declined to put my hand up with the University's press guy asked who'd be keen to comment.

I strongly approve of that the country's housing supply problems were noted even in the budget. I'm glad that Bill English has been able to get this on the agenda; it's probably the most important thing that National can plausibly fix this term. I hope they're able to open things up both to increased density and to new development.

Having spent the weekend thinking about it, here's what I'd have done differently within the existing set of political constraints.*

I like the budget's focus on getting back to surpluses, but I would have handled this differently. I would have focused less on current debt reduction and more on medium-to-long term restructuring around superannuation. I think we buy more flexibility by fixing looming superannuation problems, implementing what the Productivity Commission already recommended, than by taking a pretty hard line on debt in the current period. I think this is politically feasible, but John Key's the one facing the re-election constraint and seems to disagree.

Fixing superannuation now would give us a bit of breathing room on current debt. 

Debt is the best way to pay for earthquake rebuilds; I'd also expect it could be somewhat useful in recapitalising EQC as part of a rather needed complete overhaul. The EQC model is broken - it simply doesn't work for large-scale disasters like Christchurch. It always feels like they're screwing down on costs because they just don't have enough money to cover the actual costs of fixing everything. There's reasonable risk that we wind up with substantial costs down the line when it turns out that many of the repairs didn't do the job

I also hear rumours that SCIRT's having to define down what's acceptable on engineering standards in order to meet tightened budget constraints; I now try to avoid the Moorhouse overbridge, or at least when there's a traffic queue that would mean sitting on the thing for any substantial period. The infrastructure costs of the quake seem more likely to increase than decrease; Mayor Parker says that central government is leaning on Christchurch Council to put more money into a bigger convention centre than Christchurch needs [ht: NoRightTurn]. It makes sense for Council to sell some of its assets to pay for the infrastructure rebuild; blowing money on stadiums and convention centres is something else entirely. Debt and asset sales to make sure we have quality roads and sewerage may be boring, but it's important. 

Lastly, and discount this one for obvious self-interest as much as you like, but the government has got to make up its mind about whether it wants there to be a University of Canterbury that's worth having. 

It's not unreasonable to argue that a country of 4.4 million people does not need all of the University of Auckland, the Auckland University of Technology, the University of Waikato, Massey University, Victoria University at Wellington, the University of Canterbury, Lincoln University, and the University of Otago [have I missed anybody?], and that we could use to consolidate things by abolishing a couple of them. It's also not unreasonable to argue that the University of Canterbury is an excellent institution, with a fine history, a superb engineering school, and a top-notch international reputation that deserves to continue to exist. I really love this place and think we have the best programme in the country for teaching students how to think like economists. 

Christchurch is currently a less attractive place for students. Housing costs here are high, nightlife is rather worse than it was, and who could fault local high school students for wanting to get away from it all for a little while? The earthquakes are over, sure. But whenever you travel from here to somewhere else, just being in a place that isn't undergoing massive reconstruction is ridiculously uplifting (though, when in Wellington, tinged with the terror of looking up at unreinforced masonry,  seeing the "earthquake prone" warning on the building, and hearing the Alpine Fault countdown timer ticking in your head). 

This is a temporary thing. The west side of town, where the University is located, is so close to over the quakes that you could mistake anything still going on for normal scheduled road maintenance. The downtown demolition job is months from done, downtown will be back in a couple years, and a whole pile of nightlife is coming back in other parts of town. Incoming academic visitors, who travel from the airport on the extreme West side of town to our Ilam campus, express surprise that there's so little evidence of there having been an earthquake - until they tour downtown. The biggest impediments to student life are housing costs**, which could be high for a while, and difficulty in accessing normal nightlife. 

But the effects on the University could easily be permanent. We went from about 15,000 students pre-quake to about 13,000 last year; this year, we're down to 11,000***. At the same time, the University is incurring exceptional infrastructure costs and the same insurance problems as everyone else in the city. The government has helped the University through this over the last two years by maintaining its contribution to the University as though we still had the same number of students that we had in 2010, though our income from student fees remains rather lower than it had been.

The government, not entirely unreasonably, wants some evidence of that the University is trying to reduce costs before it will commit to further support. It feels like Stephen Joyce is squeezing the University to see what it can come up with; that squeeze has pushed down to the Colleges. The process is yielding a fair bit of uncertainty about which programmes will be cut. 

Students and their parents hate that kind of uncertainty. If you have choice among a number of rather good universities in New Zealand, do you choose the one where you think your major might have its honours programme cut (or, worse, the whole major), with consequent turbulence in staff numbers and course offerings, or one somewhere else? Declining first year numbers sparked by worries about programme stability can easily turn into self-fulfilling prophecies. Colleagues attend orientation events at the local high schools. One colleague reports that a local high school career counselor is advising students to go anywhere but Canterbury for Arts because of programme risk. Other colleagues report that the first question high school students ask is which programmes will be cut and why they should come here given programme risk; from those reports, even students considering majors in the bench sciences are pretty worried. It's hard to blame them for those kinds of worries when the modal story about the University in the Christchurch Press focuses on its financial situation.

It is very easy to imagine unravellings such that the University is not able to recover once the city's amenities are back up to scratch. If covering the earthquake-related downturn requires cutting half the honours programmes in Arts and substantial reductions elsewhere, it's hard to build back from it. I know everyone has the impression that all universities have a lot of academic deadwood that can usefully be abolished. But, as best I can tell, and given how performance assessment here has been handled over the last several years, the only way of doing that while remaining compliant with New Zealand labour law is by deeming whole programmes surplus to requirements or by inviting all staff in a department to reapply for a smaller number of positions. The former case throws often the baby out with the bathwater; the latter has staff simultaneously applying for positions elsewhere and Canterbury being left with those who didn't find greener pastures. The deadwood, if there is any, can be the hardest to cull. And while it's easy (and often right) to point to excessive administrative overheads, the quakes rather drastically increased the place's fixed costs while reducing the number of students over which those costs can be spread.

So my alternative budget would either have scheduled a path for the closure of the University of Canterbury, including arrangements for less-than-proportionate expansions to Vic, Otago and Auckland, or provided firm indications of support such that students could be confident in choosing Canterbury. This middle ground has too high a risk of yielding rather poor outcomes.

* My unconstrained recommendation would be rather different, but why waste time wishing for ponies? 

** Again, I'm very glad that the government has been talking about the kinds of restrictions that are keeping housing prices rather higher than they need to be.

*** The same Press piece says that last year's final numbers were 12,000 rather than the 13,000 noted in the annual report; it could be that the 2012 annual report figures were based on projections. 


  1. Just on the number of universities in NZ:

    Virginia has 8m people, although I always remember it as 5m from when I was growing up there. Virginia 'Universities' -- tertiary education organisations in NZ jargon -- are listed in Wikipedia: http://en.wikipedia.org/wiki/List_of_colleges_and_universities_in_Virginia.

    There are 6 research universities (George Washington doesn't count because it's based in D.C.), and a total of 77 institutions listed as 'public or established' -- all the universities and colleges and community colleges with accreditation and some history in the Commonwealth. Thirteen have enrollments over 10,000, and 27 have more than 5,000 (more than Lincoln Uni's).

    So prima facie, I don't think we need to be worried about the number of universities.

    Entirely agree with your comments about uncertainty. A downward spiral has been triggered. Now it's up to the people in charge to decide what to do about it.

  2. I wonder whether NZ mightn't do better by encouraging a fifth or so of those going on to Uni to instead learn a trade. If the last management student enrolled instead became an electrician....

  3. "have I missed anybody?"

    Te Wananga o Aotearoa and all the degree-granting polytechs.