Financial Issues

“If we are going to talk about the importance of the arts, as we do from time to time in this house when we say how proud we are of the arts in Melbourne, then I think it behoves the government of the day to follow that up with some funding. It was not a huge amount of money that would have been required to fill the gap to allow the Victorian College of the Arts to continue as it was, as essentially a separate entity down in Southbank.” (Mr MAUGHAN, Rodney)[i]

In 2003, under the Higher Education Support Act 2003[ii], the Federal Government’s reforms to higher education introduced a new model of ‘consistent’ funding for academic clusters. This reform was inclusive only of institutions of a certain number of students and above, excluding many quality, specialised colleges such as the VCA who did not qualify due to their relatively small intake. Financially vulnerable, the VCA aligned itself with the larger University of Melbourne.

Following a reduction in Federal Government funding in 2004, The University of Melbourne was instructed by Federal Government to provide a $5m subsidy per year from 2007 to 2012. On 1st January 2007 the VCA became a Faculty of The University of Melbourne through the passing of the Victorian Melbourne University (Victorian College of the Arts) Act 2006 .

IS THE UNIVERSITY CHARGING EXCESSIVE OVERHEADS AND THEREBY INFLATING SUBSIDIES?

VCA (as distinct from the former Music Faculty which has maintained separate accounts) is ‘contributing’ to University Overheads at a rate of 83.3% of earned income while the average for other Faculties is 46.2% [iii]. Why such a high charge for VCA?

In 2006, VCA administration charges were $11.694m or 47% of Faculty Revenue. On integration in 2007, many functions moved to the University and VCA costs were reduced to $6.274m.[iv]

However, the University levied an additional $9.231m for overheads, so VCA administration costs rose to a total of $15.505m. The additional $3.818m of costs provided no benefits to students or staff. But it did increase the VCA budget.

University overheads for 2009 are listed as $14.426m or 83% of VCA income[v]. This represents a 55% increase within two years of integration.

This explains why the University subsidy appears to be ever-increasing. But how can the University expect the VCA to stay within budget with this level of overheads?

WHY ARE RENTAL COSTS SO HIGH?

On integration, the University acquired VCA assets valued at $103m[vi]. The land and buildings are owned by either the University or the Crown and, prior to integration, no rent was charged[vii].

Now the University is charging VCA $250 per square metre or $6m per year or over $6,000 per student in rent[viii].

VCA needs space. Teaching practical arts requires studios for dancing, rehearsing, filming or assembling an orchestra, and spaces where artists and sculptors can work and production designers assemble theatre sets.

Provost Professor Peter McPhee has told University Council that “In the past, any depreciation and maintenance expenses were hidden in operating costs. These expenses need to be transparent and the much discussed $11m in ‘rent’ from the VCAM from 2011 is simply a way of ensuring transparency”[ix]. Does this mean VCA rental costs will rise to $11m after 2011?

The fact is that VCA used to survive on a budget of an average of $28m and managed to teach to the highest international level within that budget, recording a surplus 4 out of 5 years[x]. Charging this rent is an additional fee that the University is levying on a small Faculty – much of it on land and buildings the VCA brought with it to the integration. Why is it being charged?

  1. HANSARD Assembly 22 August 2006, p2667-2900
  2. Higher Education Support Act 2003
  3. The University of Melbourne Annual Budget 2008, p36
  4. The University of Melbourne, Faculty of the Victorian College of the Arts, Business Plan 2008-2012, Section 6.1
  5. University of Melbourne Annual Budget 2008, p36
  6. The University of Melbourne Annual report 2008, p131
  7. $2m rental entered as both income and expense- with net result no cost to the VCA
  8. Pretty well rehearsed in reshaping the arts, Interview with the Dean, The Age, 13 April 2009
  9. University provides strong support to VCAM, MUSSE (Melbourne University Staff Student E-Newsletter), 27 May 2009
  10. 2002 surplus of $9.434m, 2003 surplus of 2.
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