expenditure to 20% of GDP or below. In this context of continuing fiscal restraint, the Government intends to meet the costs of the reform through a mix of additional Government funding and tuition fee contribution.
Financial implications
6.4 The financial implications of the “3+3+4” reforms are very sensitive to the size of the secondary student population, which is projected to decline after the 2006/07 school year. The following financial implications are based on current population projections, and assuming that floating classes in secondary schools will remain for some time.
Capital and other non-recurrent costs
6.5 The “3+3+4” reform entails substantive capital investment. It is estimated that about $3.4 billion will be required for the construction of additional university complexes and facilities to cater for students having an extra year of first-degree programmes. In addition, a one-off expenditure of about
$3.3 billion will be required for developing a new senior secondary curriculum and a four-year undergraduate curriculum, professional development of teachers, and operating additional classes during the transitional peak years.
Recurrent cost in the secondary school sector
6.6 At present, only about one-third of them could proceed from S5 to S6.
Under the new academic system, basically all students will progress to SS3.
Therefore, the school sector as a whole would need to accommodate more senior secondary students.
6.7 However, the overall secondary student population decline would become obvious from the 2008/09 school year and onwards. Current projection is that except for the transitional peak years, the school places freed up by the declining student population should be sufficient to accommodate the additional intake of SS3 students. Consequently, there may not be any need to provide additional school places, on a recurrent basis, on top of those already available or planned. That said, the larger proportion of senior secondary students in the secondary population would mean a net increase in demand for student financial assistance, at an estimated cost of $20 million per annum.
6.8 For 2004-05, the estimated annual recurrent costs for a S4 or S5 place and a S6 or S7 place are $33,540 and $58,650 respectively. Existing policy is to recover 18% of cost from tuition fees. As tuition fees have been frozen since 1998, at $5,050 per annum for S4 or S5 and $8,750 for S6 or S7, or about $6,000 on a weighted average basis, they now account for only about 15% of cost.
6.9 The Government will continue to heavily subsidise the new senior secondary school places but it remains the Government’s policy to gradually bring the tuition fee back to the target recovery level independent of the “3+3+4”
reform. The tuition fee is about $7,200 per annum on a weighted average basis, at current prices. If the increase were to be phased over four years to minimise the financial impact on parents, tuition fees would increase by 5%
each year. As at present, Government will continue to provide financial assistance to needy students.
Recurrent cost in the tertiary sector
6.10 Moving from a three-year to four-year undergraduate programme, the tertiary sector as a whole will have to provide a net increase of 14,500 places based on the current average student intake. Taking into account the economy of scale as well as the different learning approaches for an integrated four-year programme to be worked out by the tertiary institutions, it is estimated that the tertiary sector would require about $1.8 billion per annum to fund and sustain the reform on full implementation of the new
undergraduate programme. This amount has to be funded by the community and the Government. Currently, the undergraduate programme is heavily subsidised with the existing tuition fee of $42,100 per annum.
The Government cannot afford the same level of subsidy under a four-year undergraduate programme given the huge financial implications.
A shared funding model
6.11 The total capital and non-recurrent costs of the reform are in the region of
$6.7 billion and would be spent over ten years spanning the preparatory stage through full implementation of the new academic system. The amount involved is one-off in nature and spreads over a relatively long period of time. The Government is prepared to set aside public funding for the purposes.
6.12 We believe that the benefits to the Hong Kong community and our next generation of students are considerable and propose that a shared funding model be adopted to meet the recurrent costs of the reform, mainly for operating the additional year of undergraduate university programme. The tertiary institutions are expected to achieve maximum cost efficiency in providing the additional year taking into account economy of scale and the new learning approaches of an integrated four-year program. Even so, the reform would entail substantial recurrent cost. If the Government were to shoulder the entire cost, this would have to be at the expense of other education services. This is undesirable. Since the benefits of the reform will accrue to both students and the community, we propose that the cost should also be shared between parents by paying higher tuition fees, and the community through the general revenue of the Government.
6.13 It must be stressed that even under a shared funding model, the Government undertakes to ensure that no student would be denied the opportunity to study due to lack of means. We will also explore new arrangements in the student financial assistance schemes to facilitate students’ continuing study, for example extending the repayment period of student loans.
6.14 In the light of the Government’s financial position and parents’ affordability, our proposal is to increase university tuition fee from $42,100 to $50,000 per annum at current prices, to be effective from the first year of implementation of four-year undergraduate programme6. At this tuition fee level, and taking into account also the additional tuition income for an additional year of study at undergraduate level and for a greater number of places at SS3, in overall terms the parents will be contributing about $750 million of the additional recurrent cost on full implementation of the new academic systems, and the Government the balance of about $1.1 billion, on top of all capital and other non-recurrent costs.
6.15 The “3+3+4” reform is a worthy investment that will bring lasting benefits directly to future generations and assure the social and economic well-being of Hong Kong. We need the concerted commitment and contribution from all parties in order to realise the significant benefits of the reform.
6 Assuming that the first year of implementation of SS1 is September 2008, then the tuition fee for four-year university education will commence in the 2011/12 academic year. In other words, students who are now in P6 will be the first cohort under the new “3+3+4” academic system.