National’s move to cut funding for adult and community education (ACE) will reshape, rather than destroy, the ACE market. This post looks at the backstory, the value of ACE and how the market might change. There is a sister post to this one by Matt Nolan at The Visible Hand in Economics blog, who reviews a report on the economic impact of ACE here. Update: Eric Crampton has also covered it.

The Backstory

The Government announced in May 2009 that it would be greatly reducing school ACE funding by 80% in 2010 and tertiary education institution (TEI) ACE funding by 50% in 2011. Hobby and personal interest courses would not be funded, but courses that provide work skills, lead to qualifications or focused on adult literacy and numeracy, ESOL and Te Reo Maori would be funded. The cuts were sold on the basis that tough choices had to be made in prioritising expenditure.

Since then Labour and National have had a good fight over ACE. Anne Tolley has been characterised as stubborn (and lots of worse things), but she and National made a strong stand and kept to it. Labour has made hay out of an issue with meetings around the country and lots of comment (check out a few related posts at Red Alert). They have largely been speaking to their own voters, but they needed to do that last year anyway. Both main parties did well out of the issue.

If you want to read how the school ACE providers have responded to the Budget cuts, check out the latest CLASS newsletter. It describes their campaign, generating over 200 media stories and a 53,000 signature petition to Parliament, as well as some effective web-based work – they ran a good campaign. There are also updates from throughout the country about closures and cutbacks – you get a clear sense of the scale of change in the sector.

TEIs have not yet made any major public comment on this issue – I wonder if they were waiting until investment plan negotiations this year and also seeing how the schools went.

The Economics of ACE

The ACE debate has been clouded by Anne Tolley’s extensive use of Moroccan cooking  as an example of low value spending (accurate, but not the whole story) and the ACE sector’s claim that anything can help improve someone’s literacy, numeracy, education pathways and life in general (anecdote with no substantial backing).

The ACE sector has relied extensively on a report by PricewaterhouseCoopers titled Economic Evaluation of ACE Outcomes, which states that ACE has a net economic benefit of $54-62 for each dollar invested. r0b at The Standard used those numbers just over a week ago, stating that the ”return on investment in ACE is staggering”.

In a sisterpost to this one, Matt Nolan has reviewed the PWC report and found that very few of the stated benefits would actually justify governemtn investment – most are private benefits. I also reviewed the report and found that:

1. Of the seven ACE organisations that had students  surveyed, only 1 was involved in school-based ACE. The 595 survey respondents were apparently selected by the ACE organisations and then weighted by PWC (with no detailed explanation of how ).
2. Over 2/3 of respondents studied for 1-5 hours /week and for 10 weeks or less (p.28). It may be difficult to attribute too much benefit from such a small engagement.
3. About 20% of people experienced improvement in literacy (p.30), but 22% were in Literacy Aotearoa or ESOL programmes!!! No big surprise there.
4. There are weaknesses in the calculation of benefits and costs in the analysis section – even if we put aside the issues raised by Matt Nolan.

Overall, the PWC report is very unconvincing. It has many weaknesses and only 1/7  of the organisations surveyed offers school-based ACE. The last word on the PWC report could be left to Bill English, quoted from Hansard (17/6/09, Oral Question 3).

Hon Maryan Street: How does the Minister compare the return on the investment of $35 million into private schools with the PricewaterhouseCoopers’ calculation of the return on the investment in adult and community education funding in 2008 of between $54 and $72 for each dollar of funding?

Hon BILL ENGLISH: Well, if we believed PricewaterhouseCoopers’ evaluation, we would spend $10 billion on adult and community education and would have an economy that is twice the size it currently is. That is clearly the kind of nonsense that the previous Government relied on.

Reshaping the Sector

The ACE market will be reshaped, rather than destroyed, because there is so much demand for such education. In 2008 there were 140,000 ACE students (EFTS unavailable)  in schools and 78,000 ACE students (4,000 EFTS) in TEIs (MOE). Enrolment numbers have been boosted by significant government subsidies and by the availability at schools of physical and business infrastructure to run community education programmes, but people still want this type of education. The subsidies are now largely gone and many schools have dropped their programmes, but there are new opportunities.

In the absence of nationwide coverage by subsidised school providers, I expect that private ACE co-ordinators will spring up. They won’t get the same administrative  support from schools, but equally they won’t be bound by the collective employment agreement or be treated as an add-on to the school’s main business. There are still plenty of empty school rooms at night to rent at low cost too. Prior to schools getting so involved in community education, there was a thriving private market in ACE-type courses and I would expect many of the previous school-based tutors to explore new models. There are bound to be several viable models out there for ACE delivery.

Some existing school ACE providers will also thrive. There were 212 schools funded in ACE last year and over 100 have pulled out, but only 24 of those remaining will get government funding, reported the Dominion Post recently, so some must see a way to continue. Wellington High School, one of the biggest operators, is still going strong and most courses only went up by $10 (foreign langauges up from $96 to $145). The Manawatu Standard reported recently very low offerings and enrolments in their circulation area, but The Nelson Mail reported a fall in enrolments of only about 20% in their area last week. 

During 2010 there will be an interesting case study of how removing government subsidies will change the ACE market. I suspect that much of the government funds withdrawal will be made up by higher fees in those schools that continue, but the really interesting point is how many new providers spring up and where, and how many enrolments they attract.