When a philanthropic trust was asked to fund free tertiary education at the tip of New Zealand’s South Island, it was incredulous to say the least. John Prendergast tells how a risky funding innovation helped revive a vanishing community.

When a philanthropic trust was asked to fund free tertiary education at the tip of New Zealand’s South Island, it was incredulous to say the least. John Prendergast tells how a risky funding innovation helped revive a vanishing community.
You Must Be Bloody Joking?

That was the initial response, of virtually everybody, when the chief executive officer of the Southern Institute of Technology (SIT), Penny Simmonds, suggested that the Southland philanthropic community should stump up with $7.2 million to underpin a “Zero Fees” scheme at the institute.

Zero fees – yes, that’s right, providing tertiary education for anybody who wanted to enroll at the institute. For nothing. Nix.

The fate of most harebrained ideas is that they are consigned to the rubbish bin. Quick smart. But thankfully, a group of community leaders decided to look into this particular idea a bit more closely.

That was back in 2000, and my own organisation, the Community Trust of Southland, spent three full months undertaking extensive due diligence, poking and prodding the idea to see what was wrong with it.

Somewhat surprisingly, we concluded that, actually, there wasn’t anything wrong with it. And it might just work.

The (Harebrained) Proposal

SIT was a polytechnic with a roll of approximately 1,770 equivalent fulltime students. Just like tertiary students throughout the rest of New Zealand, SIT’s students had part of their fees covered by a government subsidy, and were required to fork out the remainder themselves.

Together, the government subsidy and the student fees provided SIT with the income to cover operating costs.

The opportunity SIT identified was that if, somehow, their student numbers could be increased from 1,770 to around 3,000, then those 3,000 students would generate sufficient dollars from the government subsidies alone to meet SIT’s operating costs; thereby eliminating the need to charge students any fees.

SIT at the time was a middling regional polytechnic, with classrooms built to accommodate 25 to 30 students, but with only 12 to 15 actually in each class. So there was latent capacity for SIT to absorb greatly increased student numbers, without increasing operating costs.

But how could SIT achieve a 70% increase in new enrollments to attain a roll of 3,000 – the magic number needed to break even and make the scheme self-sustaining?

That’s where we came in. The proposal was that the Community Trust of Southland, together with other local funding bodies and local councils, would provide the funding needed to initially subsidise SIT to be able to offer free education to all new students.

The total funding needed was $7.2 million, and it was projected that this amount, spread over three years, would propel SIT to its 3,000 target.

The concept was entirely unheard of. Never before, in New Zealand or abroad, had an educational institution received a philanthropic grant to enable it to provide free education on an ongoing basis.

Were we going to be mad enough to try it?

A Real Need in a Dwindling Community

It is important to understand the context that this idea was hatched in.

Southland is a province that sits at the southernmost tip of New Zealand, and as a region we had suffered through the vicissitudes of a restructuring of the New Zealand economy in the mid to late 1980s, followed by a recession in the early to mid 1990s – events that had decimated the agriculturally dominated local economy.

Three removal trucks per week were leaving Southland, taking with them scores of Southlanders to seek a better life further north. Last one out turn the lights off.

We needed something that was going to arrest Southland’s decline, and give people a reason to flock to the province.

So when the Zero Fees scheme idea got its first public airing at a planning meeting of Southland’s community leaders in May 2000, despite it not seeming plausible at face value, the Community Trust of Southland refrained from canning the concept. Maybe providing free education was the solution.

Testing the Idea

But what if it didn’t work? How embarrassing would it be if, even when offered free tertiary education, people still weren’t prepared to come to Southland?

So independent research was commissioned to survey year 12 and 13 students to find out what the drivers were behind their choice of tertiary institution. And we found that cost was indeed one of their key drivers. We also surveyed the community’s response to the idea and, reassuringly, 73% liked it.

Yet if this was such a good idea, how come no other region had done it? If the idea could work elsewhere, any competitive advantage for Southland would disappear.

So we undertook extensive due diligence and found that there wasn’t anywhere else in New Zealand that enjoyed the particular mix of circumstances that made the scheme viable.

A Robust Partnership Template

Lo and behold, the concept might just fly. But how could $7.2 million be raised?

The Community Trust of Southland’s annual grants budget was in the vicinity of $7 million, meaning that if we were to entirely fund the project there’d be nothing left for other community organisations that year. So we made the conscious decision to only be a partial funder.

It was also decided that the amount we were prepared to fund – $3.5 million – would come from capital reserves, thus preserving the ability to grant our usual $7 million to the rest of the community.

Fortuitously, there was already a history of philanthropic partnership in the region. Southland’s major philanthropic funders, the Community Trust of Southland and the Invercargill Licensing Trust, had worked together with local councils on several major infrastructure projects.

So with the partnership template already well established, all that was needed was for the Zero Fees project to be inserted.

And that is what happened, and out the other end came funding approval from not only the two philanthropic trusts and the local Invercargill City Council, but also contributions from other Southland councils, the Mataura Licensing Trust, and corporate sponsorship support.

Did the Reward Warrant the Risk?

In September 2000, four months after the scheme was first hatched, the full $7.2 million funding for the project was confirmed and the scheme was publicly launched. And we all held our collective breaths to see whether it would work …

And work it did. Phew!

After only 18 months, enrollments passed the 3,000 student threshold required to make the scheme self-funding.

Today, nine years later, it’s still going strong; propelled not by any philanthropic funding, but by its own income that’s generated from government student fee subsidies.

Noted Australian demographer Bernard Salt has observed that, of cities in Australasia experiencing a declining population in recent years, Invercargill (home of SIT) is the only one that has been able to reverse the trend.

And economists have estimated that the local economy has grown, via the influx of money-spending students, to the tune of approximately $25 million a year.

Would we be without our Zero Fees scheme? You must be bloody joking!