Department of State Development, $683,049,000

Administered Items for the Department of State Development, $13,911,000

Minister:

Hon. S.E. Close, Minister for Education and Child Development, Minister for Higher Education and Skills.

Departmental Advisers:

Mr M. Duffy, Chief Executive, Department of State Development.

Ms A. Reid, Deputy Chief Executive, Department of State Development.

Mr J. King, Executive Director, Skills and Employment, Department of State Development.

Ms P. Chau, Director, Performance and Governance, Department of State Development.

Mr R. Murt, Chief Executive, TAFE SA.

Mr J. Eastwood, Director, Finance, Centre of Excellence, TAFE SA.

The CHAIR: Welcome to committee A, as we gather on Kaurna land for the estimates committees, which are relatively informal and, as such, there is no need to stand to ask or answer questions. I understand that the minister and the lead speaker for the opposition have agreed to an approximate time for the consideration of proposed payments, which will facilitate a change of departmental advisers. Can the minister and lead speaker for the opposition confirm that the timetable for today's proceedings as previously distributed is accurate?

The Hon. S.E. CLOSE: Yes, I agree.

Mr GARDNER: Yes.

The CHAIR: Changes to committee membership will be notified as they occur. Members should ensure the Chair is provided with a completed request to be discharged form. If the minister undertakes to supply information at a later date, it must be submitted to the committee secretary by no later than Friday 27 October 2017. This year, estimate committee responses will be published during the 14 November sitting week in corrected Daily Hansard over a three-day period.

I propose to allow both the minister and the lead speaker for the opposition to make opening statements of about 10 minutes each, should they wish. There will be a flexible approach to giving the call for asking questions, based on about three questions per member, alternating each side. Supplementary questions will be the exception rather than the rule.

A member who is not part of the committee may ask a question at the discretion of the Chair. Questions must be based on lines of expenditure in the budget papers and must be identifiable or referenced at the beginning of the question. Members unable to complete their questions during the proceedings may submit them as questions on notice for inclusion in the assembly Notice Paper.

There is no formal facility for the tabling of documents before the committee; however, documents can be supplied to the Chair for distribution to the committee. Incorporation of material in Hansard is permitted on the same basis as applies in the house, that is, that it is purely statistical and limited to one page in length. All questions are to be directed to the minister, not the minister's advisers. The minister may refer questions to advisers for a response.

During the committee's examinations, television cameras will be permitted to film from both the northern and southern galleries. If there is anyone in those galleries, I ask that they turn their phones to silent. On that procedure, I open the following lines of examination: the portfolio is State Development and the minister appearing is the Minister for Higher Education and Skills.

I have some changes to the committee. I advise that the following members have requested to be discharged: the members for Goyder, Wright, Elder and Unley, and they have been replaced by the members for Morialta, Fisher, Napier and Chaffey.

I declare the proposed payments open for examination and refer members to the Agency Statements, Volume 4. I call on the minister to make a statement, if she wishes, and to introduce her advisers. You may make a statement if you wish, minister, and introduce your advisers.

The Hon. S.E. CLOSE: I would like to introduce my advisers and then give a brief opening statement. On my right I have Robin Murt, who is the Chief Executive of TAFE SA. On my left is Alex Reid, the Deputy Chief Executive of the Department of State Development, and on her left is John King, Executive Director, Skills and Employment. Behind me is Mark Duffy, the Chief Executive of the department; Phuong Chau, who is the Director of Performance and Governance; and Jason Eastwood, who is the Director of Finance in the Centre of Excellence in TAFE SA.

I will make a brief opening statement, and thank you, Chair, for acknowledging country. South Australia is transitioning to a new economy based on innovation technology and knowledge-based services. Industry structures, job requirements and skills needs are changing rapidly, and our forecasts suggest that this will continue. Skills and qualifications will provide the backbone to support the state government's $200 million Future Jobs Fund, announced in the recent state budget, and to supply skilled workers for our $9.5 billion investment in infrastructure over the next four years.

It is important that our investment in training is sustainable. We prioritise areas where we will get the best results and the most value by understanding the varied and changing needs of people: groups such as small businesses, projects—like those in defence—places and regions, and sectors, for example, disability.

The Training and Skills Commission provides us with world-class economic modelling and advice on industry priorities for qualifications. In May this year, the commission released its Skills for Future Jobs 2020 Series, which explores critical issues affecting the South Australian VET sector and provides a platform for industry to address our economy's skills and workforce development needs. The state government's WorkReady policy targets public investment in the VET system's skills and employment activity.

Earlier this year, I launched the first annual Skills Investment Plan for 2017-18. The plan outlines the directions for the state government's $290 million investment in training and skills initiatives for the next financial year and makes our decision-making process transparent. It will support industry and training providers to plan their involvement in a more sustainable, open and contestable market where people and businesses have a greater choice of training and support services.

The plan emphasises sustainability, market stability, simpler processes, faster responses and making funds available to the market sooner. Under this plan, we will focus on the state's key industry sectors, including traditional trade areas of automotive services, building and construction and electrotechnology, health and community services, in particular the National Disability Insurance Scheme, primary industries and defence. This year, through adjustments that refined WorkReady, we have made initiatives more flexible and cut red tape. In 2017-18, more courses will be available through the subsidised training list, more places and courses will be available via submission, the funding processes will be made simpler and faster and providers will receive funding sooner.

The bulk of our investment—around $260 million—will support approximately 70,000 students to study around 350 vocational qualifications on the state's subsidised training list. Importantly, both students and industry will have more choice. For example, in 2017-18 there are an additional 20 courses open to private sector registered training organisations on the STL (subsidised training list). There are now around 160 courses where students have a choice of training provider for subsidised training, which is a 40 per cent increase since 2015. Private sector registered training organisations can now apply to subsidise any qualification or national skill set where there is a tight link to specific jobs. The course does not need to be on the STL.

The South Australian government remains committed to the public provider and the role it plays in providing services to the training communities statewide, including our very important regional areas. As the state's largest operating provider, TAFE SA continues to be an important and strategic presence. It is integral to a stable, reliable and innovative training sector. Through the WorkReady implementation process, the state government is supporting TAFE SA under the stewardship of its independent board in its transformation to operate in a more competitive environment.

TAFE SA will continue to strengthen its role in delivering the skills needed for our transforming state economy, supporting the government's economic priorities and looking at innovative ways to provide training that drives growth, sustainability and diversification for South Australia's businesses and broader community. In South Australia, we also need to make more room for private and not-for-profit providers.

Our investment in training and skills for South Australians seeks to ensure the state has the workforce capabilities to underpin the development of a high-skill economy. It also supports our participation objectives by helping South Australians equip themselves for jobs in a modern labour market. The more people participating in education, training, and ultimately employment, the stronger and more resilient our economy and our community will be.

A key element of our Skills Investment Plan is to ensure that people who need additional assistance, who are vulnerable and who have complex needs, are supported and not left behind by economic transition. The plan supports apprentices, trainees and school-enrolled students seeking entry level qualifications, as well as people out of work or facing unemployment, including workers connected to the automotive industry, to gain skills, retrain and find jobs.

WorkReady investment offers access for people who need to build their foundation skills before embarking on vocational training or reconnecting with work. We are working closely with industry, the training sector, local communities and people accessing services to ensure that training expenditure is targeted at areas of greatest need and supports our economic transition.

The changes we are making to provide greater choice for students increase transparency of decision-making and deliver funds to providers sooner, and they have been extremely well received by stakeholders—both employers and training providers, who have commended the department for its approach to listening to the needs of stakeholders and then streamlining initiatives and procedures to respond. They are improving our ability to help South Australians develop the skills they need for the jobs we need. I now welcome questions.

Mr GARDNER: I refer to Budget Paper 4, Volume 4, page 105, the TAFE SA Strategic Plan. Can the minister update the committee on how TAFE is progressing towards the full contestability we are expecting to see in 2019? What will TAFE's key roles be in 2019?

The Hon. S.E. CLOSE: TAFE SA is required to operate in a competitive market environment in accordance with the government's approach to the publicly funded VET system, as set out in the WorkReady policy. However, in doing so, TAFE SA is required to address both commercial and non-commercial objectives. In accordance with the TAFE SA charter, as the minister, I can require the corporation to contribute to government policy objectives by undertaking non-commercial operations.

To support the government's policy objectives, all WorkReady subsidised training activity undertaken by TAFE SA in 2015-16 and 2016-17 has been on a non-commercial basis. This arrangement acknowledges the importance of the sustainability of TAFE SA services in priority areas of training across the state to the stability of the VET system.

The arrangement also provides TAFE SA with time to implement changes that are required to both improve competitiveness and prepare for commercial exposure in those areas identified by the government as being suited to commercial funding arrangements. In line with the phased implementation of WorkReady, TAFE SA will be exposed to an increasing number of subsidised courses that are identified as commercial.

In relation to commercial activity, TAFE SA is obliged to operate in accordance with the Public Corporations Act, which requires that commercial operations must be performed in accordance with prudent commercial principles. The 2016-19 TAFE SA Strategic Plan clarifies that the mission of the corporation includes the delivery of sustainable training and education in a competitive environment. In supporting this mission, TAFE SA is implementing a range of initiatives aimed at becoming more customer-oriented, implementing innovations in the way training is accessed and delivered, and reducing costs.

In order to give you a more specific answer to your question, in 2016-17, following discussion with the Department of State Development, TAFE SA identified courses that could be delivered under commercial terms and conditions, that is, at the same rate of subsidy being paid to TAFE and non-TAFE providers. The identification of courses has been supported by the training review reform undertaken by TAFE SA.

In 2017-18, the Certificate II in Horticulture is available on commercial terms and conditions, and approximately 300 places are available to eligible students in 2017-18. In line with its charter, TAFE SA is required to ensure a separation between its commercial activities and its non-commercial activities, and the department is in the process of identifying milestones for 2018-19, which will be informed by the lessons from 2017-18 and TAFE's ongoing transition.

Mr GARDNER: The minister just identified that the department is in the process of identifying milestones for 2017-18. Perhaps she can clarify which financial year she is talking about and when that work will be complete.

The Hon. S.E. CLOSE: We anticipate releasing the STL in May of next year and we will be ready before then to identify the milestones for the following financial year for TAFE SA.

Mr GARDNER: At the moment, is the minister satisfied that TAFE SA is on track to be in a position to implement those changes she described previously to enable TAFE SA to engage in that competitive environment? Is the minister satisfied that TAFE is on track?

The Hon. S.E. CLOSE: TAFE has undertaken an extraordinary effort in modernising its service operations. It has made significant savings in the process and is operating extremely professionally, so I have no reason not to believe that they are well on their way to the contestability anticipated by the end of 2018-19.

Mr GARDNER: While on TAFE, can you advise what the most current board fees are for TAFE SA board members, including the chair?

The Hon. S.E. CLOSE: The total remuneration for board membership for 2016-17 was $518,000.

Mr GARDNER: How much of that was for the chair and how much for the board members?

The Hon. S.E. CLOSE: Remuneration for the chair was just under $100,000 and the remainder was divided amongst the board members.

Mr GARDNER: Going to page 99, the financial commentary says that at this stage the government has not reached an agreement with the states on the proposed replacement Skilling Australians Fund. Can the minister advise where the state government is up to in talks with the commonwealth about this fund and what contribution the state government might make to that program?

The Hon. S.E. CLOSE: A ministerial council meeting in Brisbane in early September has been pencilled in and it is our expectation that it will be much further advanced by then. Officials have been working on the terms of the Skilling Australians Fund. However, I note that the legislation has not yet been presented to federal parliament in order to create that fund. The fund has been established through a levy on 457 visa workers. Employers are having to pay a levy if they employ 457 visa workers. To do that requires legislation. We do not yet know how that legislation will emerge from federal parliament. While we will be significantly advanced in our agreed views on how the fund might be constructed and what it can be spent on, I do not see how that can be a final view until the legislation is through.

I take this opportunity to note that I find it concerning that the federal government has decided to so tightly link the revenue and the expenditure. Governments have a right to raise revenue, but to put in peril funds for training Australians by how many 457 visas there are in any given year at a time when our economy is going through such dramatic transition, when we most need to ensure that there are sufficient training dollars and that they are spent sensibly, to me is highly problematic, but that is a decision that the federal government has made. I look forward to the papers being presented to us for the September meeting in order to understand how far along we are in agreeing on how those funds ought to be spent.

We have had one ministerial council meeting. The fund itself essentially came out of the blue. We had been given to understand that there would be no further national partnership on training. Then through the budget process, assistant minister Karen Andrews rang me the night before to tell me that there would be a fund, and I appreciate that she did that. In policy terms, it came out of the blue that we were informed that there would be this fund and what its construction would be. We have had one meeting since then, which was a useful meeting in terms of trying to define the most useful way to spend those funds, and I look forward to the next one.

Mr BELL: I might just go back to salary and board payments. Last year, the chair was paid $37,000 plus a retainer of $48,000, giving a total of $85,000. You have now indicated that payment has gone up to close to $100,000. Can you break down the actual payment for the chair plus the retainer to get to that $100,000, plus the annual fee per board member, plus retainer per board member?

The Hon. S.E. CLOSE: Certainly, and you are right about the two elements of the payment for the chair, but you are missing a third element. This remuneration is constructed in three elements. There is a base remuneration, which is $37,000 for the chair and $24,000 for each of the board members. In addition, there is an attraction and retention allowance. The chair receives $48,000 and board members receive $23,000. Then, for participating on board committees, the chair receives $10,000 a year and board members receive $5,000 a year.

Mr BELL: Can you inform me how many times the board has met in the last six months?

The Hon. S.E. CLOSE: We will take that on notice and inform you.

Mr BELL: Any idea? Three times, five times?

The Hon. S.E. CLOSE: In no way do I want to be unhelpful, but I do not really like guessing and being vague in estimates, so I would rather take that on notice. They have certainly met frequently, but I would like to give you a precise number, and we will be able to do that reasonably quickly.

Mr BELL: Thank you, minister. While we are on salaries, can you indicate to the committee the salary of Robin Murt, the CEO?

The Hon. S.E. CLOSE: The CE's package is $325,000 and there is an additional $50,000 that is tagged as a performance bonus that requires the CE to meet certain performance targets to the satisfaction of the board.

Mr BELL: In the last financial year, was that $50,000 at-risk salary component paid and, if so, how much?

The Hon. S.E. CLOSE: Some of the performance was paid and some was not. I believe that TAFE SA is already on notice with the Budget and Finance Committee to give the precise figure, and I am happy to supply that also through this process.

Mr BELL: This might be through Budget and Finance as well: are there other executives on an at-risk component? If so, how many and to what value?

The Hon. S.E. CLOSE: For 2015-16, six TAFE SA executives participated in the performance allowance process. I will have to return with the answers to the other questions you asked about the figures.

Mr BELL: On page 104, $3.7 million was tagged as once-off costs associated with the TAFE enterprise agreement. Can the minister explain what that $3.7 million was for? I am particularly interested in whether these were lawyer fees associated with the negotiation.

The Hon. S.E. CLOSE: I am informed that the vast majority of that figure was back pay because the negotiations went past the termination of the previous agreement.

Mr BELL: It was not for lawyers or those acting on the department's behalf?

The Hon. S.E. CLOSE: I am informed that there were not any lawyer fees included in that and, as I say, the vast majority was back pay. We can get some details about the bit that is not back pay.

Mr BELL: That would be great, thank you. I want to turn the minister's attention to page 99 and lease arrangements. In the budget paper, there is a $73.9 million increase in income, primarily due to a net loss on disposal of TAFE SA campus assets to Renewal SA of $113 million and a net loss on disposal of the Millicent campus of $2.2 million. Can the minister explain this process and how there is an increase in income due to a net loss on disposal of key assets?

The Hon. S.E. CLOSE: The answer comes from the Department of State Development, as opposed to TAFE SA, because TAFE is a lessor of the properties rather than the holder of the properties. Every five years, the department's land and buildings are re-evaluated by an independent certified practising valuer. Given this periodic review of asset valuations, it is possible that asset values are not reflective of the current market conditions. A net loss of disposal and assets occurs where the sales proceeds received are less than the current value reported in the balance sheet of the asset. This loss is disclosed in DSD's Agency Statement of comprehensive income as negative income.

You asked a specific question about the Millicent campus. A net loss on the sale of approximately $2.2 million was recorded for the sale of the Millicent campus to the Department for Education and Child Development. The net loss is likewise due to the sales proceeds received being less than the value reported in DSD's asset register.

Mr BELL: Could you indicate how much DSD was receiving in rental income before the assets were sold? How much was TAFE paying DSD to lease those buildings?

The Hon. S.E. CLOSE: For all campuses or for Millicent?

Mr BELL: For all campuses. My calculation was about $41.2 million, but I just want to check whether that is close to the mark.

The Hon. S.E. CLOSE: Given that we do not have terribly long, I will take that on notice so that we give you an accurate answer and you can keep asking questions.

Mr BELL: Can the minister indicate how much it now costs to rent all the facilities back from Renewal SA?

The Hon. S.E. CLOSE: Equally, I will take that on notice. We will be able to provide that reasonably quickly.

Mr BELL: Whilst on notice, this one may be able to be determined quickly. I believe DSD now pay TAFE a subsidy or a payment to then pay Renewal SA for the lease of those buildings. Can you indicate to the committee how much this top-up payment, for want of a better word, actually is?

The Hon. S.E. CLOSE: I am taking time not to take time reading a really long answer; I may have miscalculated. The brief answer is that DSD will charge TAFE SA $54 million for the use of VET infrastructure in 2017-18—so, forward casting—including $53.8 million to align with DSD's leaseback arrangement with Renewal SA. That is an increase from $20.7 million in 2015-16 and $31.9 million in 2016-17. I think that answers the questions I just took on notice, but we will confirm that and if anything is missing we will provide it.

Mr BELL: With these lease arrangements, basically DSD is subsidising rent to Renewal SA; that is fine. However, I would like to know what the terms of the lease are in terms of renew dates because in 2019, if it is going to be an equal playing field, you have a $33 million subsidy kicking in there. I am wondering how that is actually going to go forward in 2019.

The Hon. S.E. CLOSE: DSD will be taking that into account as part of its calculation of the commercial viability of courses.

Mr BELL: I want to go to aggregate savings targets. In 2016-17, can you indicate what the aggregate savings task was and whether your department achieved that task?

The Hon. S.E. CLOSE: Do you mean all of DSD?

Mr BELL: For TAFE.

The Hon. S.E. CLOSE: Those figures sit within DSD, so it is not a simple matter. The 2016-17 aggregate savings task for TAFE SA was $18.5 million. We are still in the process of confirming the final figure of achievement.

Mr BELL: Any idea whether you are going to make that savings aggregate?

The Hon. S.E. CLOSE: At present, it looks like that will be underachieved, as has been reported to the Budget and Finance Committee, but there are a number of factors yet to be taken into account, so that is not yet a final figure.

Mr BELL: I just want your thoughts on this. On page 103, the decrease in expenses in the forward estimates due to operational efficiencies is a reduction of only $3 million. I believe it was reported in a Budget and Finance Committee that the savings would be $15 million; however, from my reading of this, the savings achieved will be only $3 million. I am getting that figure by $309 million take the 2016-17 estimated result of $303 million, which to me is $3 million.

The Hon. S.E. CLOSE: Those figures are not the full picture of all the factors that are taken into account to determine whether the savings target has been reached. As you rightly say, at Budget and Finance it was estimated that about $15 million has been achieved but, as I say, although we anticipate that there could be a shortfall of $3.5 million, that is not yet a certainty. Those figures do not fully capture the detail of the TAFE SA finances.

Mr BELL: Can you explain that? If they do not capture the figure there, where does it capture the $15 million savings? You have put the savings that will be realised and identified in the forward estimates. I totally understand that you have unders and overs and, with some savings, there may be overs, but I find it hard to believe that you could have a $15 million saving, yet say that it only reports a $3 million saving in the paper and that that is attributed to something else.

The Hon. S.E. CLOSE: We will take it on notice so that we can give you a comprehensive answer, but part of the issue is accounting for revenue, so there are savings achieved by not spending so much and savings achieved by overachieving with revenue. Between those two, we probably get to $15 million. It could be a bit more, but we need to be clear about that.

Mr BELL: My last question on this theme is: does DSD require TAFE to accumulate any shortfalls or failures to make their savings in the next financial year? Next year's aggregate saving is meant to be $19.5 million. Does DSD require TAFE SA to add the $3.5 million shortfall to the $19.5 million in next year's budget?

The Hon. S.E. CLOSE: Currently, that is not a requirement, but DSD is constantly managing the budget impact of TAFE SA. In previous years, TAFE SA has produced surpluses, for example. This year, it looks like there may be a shortfall. So in preparing the amount of money that is being transferred to TAFE SA over the next few years, all those factors will be taken into account.

Mr BELL: Page 99 states 'cessation of allocation of resources for a Ministerial Office, ($1.5 million)'. Was that your current office, minister, and what was the headcount for this?

The Hon. S.E. CLOSE: That was the transfer, I believe, of minister Gago's responsibilities to me. I already had an established ministerial office, so I presume that is the way that ministerial offices are established. There had been an establishment that was attached to DSD. My establishment is with the Department for Education and Child Development. I am sure that the people in Treasury make all that end up so that there is no extra money sitting around anywhere, but it would give the appearance of a reduction.

Mr BELL: This is my last question before I hand over to the member for Chaffey. In the Public Works Committee, it was indicated that the Tonsley site was aiming for 12,000 student enrolments and, as of last year, I believe it is a bit over 4,000. Do you have concerns about this, minister, and how is TAFE going to achieve an uplift of 7,000 students, which is over double?

The Hon. S.E. CLOSE: The advice I am given is that the 12,000 referred to the number of students, including Flinders students, and the TAFE element is 4,000. That is the advice I have been given here today. I will confirm that in order to ensure accuracy.

Mr BELL: I thought it was excluding, but I will refer to it; that is fine.

Mr WHETSTONE: TAFE International.

The CHAIR: What page are you on? Is it the same page?

Mr WHETSTONE: Page 97. How many staff members are allocated to international education activities through TAFE SA?

The Hon. S.E. CLOSE: We will get you the precise FTE count. I understand there are two managers and support staff around them.

Mr WHETSTONE: Are you able to tell me if that number has decreased over the last two financial years?

The Hon. S.E. CLOSE: I will bring that back as well.

Mr WHETSTONE: I have a regional question about Berri TAFE, if I may. How many staff currently operate at the Berri TAFE on a full-time basis and has this changed over the past financial year?

The Hon. S.E. CLOSE: Because TAFE does not manage by campus, it manages by area, and the people who may be training in that region are not necessarily attached to the Berri campus, we will have to take that on notice and see if we can identify the staff who are associated with the campus and also the staff who are training in the area. And you are asking over previous years, I understand.

Mr WHETSTONE: Would it be correct that the Berri campus of TAFE does not have tutors or lecturers for particular courses only provided through the WorkReady scheme?

The Hon. S.E. CLOSE: It is unclear from the advice here, so we will bring that back as well.

Mr BELL: NCVER data that was released about a week ago indicated that South Australia had the largest percentage decline in student numbers, with a decline of 17.9 per cent. On page 101, the budget paper indicates that the target is to increase people participating in VET from 70,900 to 72,500. With such a drop, and a drop in over 4,000 completions of qualifications over the last two years, how is TAFE aiming to—

The Hon. S.E. CLOSE: More than TAFE.

Mr BELL: Yes, that is right—achieve this target?

The Hon. S.E. CLOSE: To be clear, while my advisers are getting some of the details, of course the training effort is not simply confined to TAFE, nor is the subsidised training by government confined to TAFE.

The CHAIR: While you are looking for that information, it is 9.45, so it will be the last question shortly. I am into one more these days.

The Hon. S.E. CLOSE: We are forecasting an increase from the estimated result of 70,900 to 72,500 based on the stabilising of our funding for training and our close work with industry on making sure that we are offering the courses that are desired by both industry and people who are wishing to study, and the greater proportion of non-government providers that we are subsidising.

Mr BELL: This is my last question, on page 103. Does TAFE currently still have 32 positions excess to requirements and are they still 19 in education, 12 in salaried and one as a weekly paid admin position?

The Hon. S.E. CLOSE: We will confirm that by coming back.

The CHAIR: The time having expired for examination of these lines, the Department of State Development and the administered items for the Department of State Development, I declare the examination of the proposed payments referred to committee B.