What’s in the 2025 funding agreements? – ‘Higher education courses’ block grants
In February I reported on preliminary university-level 2025 allocations under the Commonwealth Grant Scheme and estimates of student contributions.* These have since been updated to add money for FEE-FREE Uni Ready places and regional university study hubs. The revised funding summary is here.
This post looks at the underlying funding agreements for more detail on the 'higher education courses' part of CGS funding. As usual in funding agreements since 2021, the detail reveals a range of legal and policy problems.
A spreadsheet summary of higher education courses funding for 2025 is here.
The role of higher education courses funding
Higher education courses funding is intended, by the Higher Education Support Act 2003, to be a flexible block grant. Within their total funding envelope, expressed as the 'maximum basic grant amount' (MBGA), universities can move resources across coursework AQF levels and between fields of education, other than medicine.
Although higher education courses funding is supposed to be flexible, both Coalition and Labor governments have used ad hoc funding agreement conditions to restrict use of higher education courses money to purposes chosen by the government.
This has in turn led to the unlegislated concepts of 'base MBGA' and 'total MBGA'. Total MBGA is actual MBGA under HESA 2003. Base MBGA excludes most ad hoc programs. Its purpose is to reduce expenditure on the higher education continuity guarantee and the current equity plan funding. If universities don't meet the ad hoc criteria they get $0 for those non-delivered places.
Overall trend in higher education courses funding
To the surprise of universities the first-term Albanese government often treated them harshly. But Labor kept the former government's promise to index higher education courses funding to CPI. That was 4.1% for 2025. They also kept the Coalition's region-based funding increases. While there are complex financial flows in and out of higher education courses funding - discussed further in this post - it is up 6.1% between 2024 and 2025 to a total of $7,687,211,975.
Ad hoc place programs winding down
Most ad hoc place programs are winding down - a positive development in my view as higher education courses funding should be flexible.
National Priority Places and Innovative places were Coalition-era programs, both designed to be relevant to the labour market and support courses with industry linkages. The 12,000 NPP places were short-term while the 300 Innovative places were intended to be long-term. In the language of the funding agreements, the Innovative places were to be in 'base' MBGA and the NPP places in 'total' MBGA. But looking back at the 2021 agreements this never happened. They were both in total, but not base, MBGA.
The NPP funding ended in 2024 at $12.25 million while Innovavtive places funding dropped by 50% between 2024 and 2025, to $4.2 million.
Funding for Labor's 20,000 additional equity/skills shortage places program funding has dropped from $202 million in 2024 to $145.6 million in 2025. The level of under-enrolment against this program in the public universities has not been reported. As overall CSP EFSTL delivered and equity enrolments were soft between 2022 and 2023 I suspect that there is significant under-enrolment for this program. For NUHEPs the funding agreements let them rollover unused 2024 funding into 2025. I am not sure whether equivalent arrangements are buried in the totals for public universities.
The main exception to the ad hoc places phasing out is the nuclear-powered submarine places program.
Nuclear-powered submarine places
2025 is year 2 of the nuclear submarine places program. I was critical of this program when the places were announced in 2023. For funding purposes it assumed higher-than-usual attrition of 25% of EFTSL annually, despite evidence-based programs for ensuring student success being a selection criterion. The whole program finishes before any nuclear-powered submarines will arrive.
In the short-term, however the number of student places and associated dollars are increasing, as seen in the table below (the detail can be downloaded here).
An issue with nuclear submarine program administration is that the Department requires universities to identify specific students holding these places. This links students to a controversial program without telling them about it. Possibly some linked students oppose nuclear-powered submarines in general or AUKUS in particular. Few courses listed in the funding agreements are labelled 'nuclear'. Most are more general engineering or science degrees.
If the Department requires specific students to be identified as funded under the program how do they justify assuming 25% attrition each year? (I checked the maths behind the funding agreement numbers - the Department assumes that 504.4, or 75% of the 673 commencing places in 2024, are continuing students in 2025).
The more logical policy would be to fund actual linked enrolments. This, however, is not straightforward. Apart from Indigenous students in bachelor-degree places, there is no express legal authorisation to pay Commonwealth contributions on actual enrolments. Payments must fit within a maximum basic grant amount that can only be changed with a new funding agreement.
Regional university study hubs money
The regional university study hubs program has untidy funding arrangements. Some study hub money is allocated via under HESA 2003's section 41-10 'other grants'. In my view this is the legally correct and proper way to do it. However 17 universities also share in just over $11 million from the CGS allocated via funding agreements.
The text below is from USQ's funding agreement and provided as an example of CGS-financed study hubs funding. It needs to be read jointly with the funding agreement 'summary of indicative maximum funding amounts', which tells us that USQ's 2025 study hub places are worth $1,077,925.
While this ensured money went to study hubs in the case of specific hub-university relationships it is very unsatisfactory. It blatantly ignores section 30-10 of HESA 2003 (below), allocating higher education courses places to a Table A provider when this should not happen. Having gone ahead and allocated places anyway it then also takes no notice of the requirement to allocate them to funding clusters.
The regional university study hubs CGS sub-allocation also sets a bad precedent in requiring a university to transfer CGS money to third parties.
These payments should be pulled out of the funding agreements. Any prior agreements between the universities and the study hubs could be managed via the 'other grants' provisions.
Funding for equity plans
In previous funding agreement posts, I criticised the policy of using unspent Commonwealth Grant Scheme funds on 'equity plans'. The criticisms were both substantive, as universities in financial trouble should not commit to new expenditure, and procedural, as the funding agreements cannot legally authorise payments under these programs.
In December 2024 the government put legal authority in place to authorise its outlays on equity plans under the 'other grants' provisions of the Higher Education Support Act 2003.
Universities will, however, be disappointed with the equity plan legislative instrument. It does not guarantee the 'amounts equivalent to the funds estimated to be unspent from their eligible MBGA allocation in 2024 and 2025' mentioned in the funding agreements.
The legislative instrument merely says that 'the Minister will determine the grant amount for a higher education provider in writing under paragraph 41-30(b) of the Act.' This section of HESA 2003 gives the minister discretion to choose any figure, including $0.
By contrast, section 41-30(a) refers to funding based on a formula in the other grants guidelines. The original continuity guarantee on which this policy is loosely based had such a formula in the guidelines.
I don't think the funding agreement equity plan commitment is binding on the government. Under section 30-25(2) of HESA 2003 the government can, arguably, require the equity plans as a condition of CGS funding. But that section only supports conditions on universities, not on the Commonwealth.
The equity plan policy is a bad idea exacerbated by poor implementation.
FEE-FREE Uni Ready
The good news here is that the FEE-FREE Uni Ready places are not mentioned in the funding agreements. I am unclear whether there are less formal side-agreements on use of this funding.
According to Senate estimates hearings on 27 February 2025 universities have received the FEE-FREE Uni Ready Commonwealth contribution rate ($18,278 per EFTSL) for 8,211 places, based on enabling places delivered in 2022.
On top of this 454 new FEE-FREE Uni Ready were allocated based on a tender process. I don't know which universities received the new places, but the 2022 enabling load is here (although my count is 8,182 places, slightly below the Senate estimates figure). Many universities were 'under-enrolled' on enabling places in 2022, so they have forgone some of their historical potential funding for FEE-FREE Uni Ready places.
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Th 13 February 2025 post had an error in the spreadsheet, with UWA appearing twice, once with WSU's funding. The corrected file is here.