Treasurer Ferguson at LegCo

On 6 July 2023, the Tasmanian Treasurer, Michael Ferguson, appeared before the Legislative Council Select Committee Inquiry into the Provisions of the University of Tasmania Act 1992 (the LegCo Inquiry) accompanied by Fiona Calvert, the Deputy Secretary of Economic and Policy Division in Treasury.

In their evidence, Treasurer Ferguson and/or Ms Calvert made a number of incorrect or highly questionable statements. The following is an examination of some of the more serious of these statements. All page references are to the LegCo transcript.

State ownership of UTAS and accountability

In his evidence to the LegCo, Treasurer Ferguson struggled on the question of whether UTAS was a state “entity”, confusing UTAS’ status with the (questionable) exclusion of UTAS from the State accounts (eg, transcript, pages 2 and 4).

UTAS is an “entity” (statutory corporation/authority) of the State of Tasmania and accountable to the Government, the Parliament and the people of Tasmania. This was made clear in the second reading speech to the University of Tasmania Act 1992 (the UTAS Act) and, contrary to some of Treasurer Ferguson’s evidence, it has remained clear despite subsequent amendments to the UTAS Act.

I have written at length on this issue, including in my submission to the LegCo Inquiry and my blog posts, How UTAS got out of control, Part 1, Part 2 and Part 3. Rather than restate my arguments, however, I will simply call some interesting witnesses on UTAS’ status and accountability to the State.

Premier Rockliff

During 2022, Premier Rockliff made something of a point of calling UTAS a “private organisation” in correspondence and, indeed, in the House of Assembly – thereby misleading Parliament.

When he was called out on this by Cassy O’Connor in the House of 8 November 2022, the Premier corrected himself by stating UTAS was a “statutory authority”, although he then stated that it was incorrect that the State Government had “a responsibility” for UTAS. He said similar things in a letter to me. Still, it’s better to be half right than totally wrong.

Moody’s rating agency

In its initial rating for UTAS, which among other things underpinned UTAS’ raising $350 million of debt through the Green Bond, Moody’s made the following comments:

“UTAS continues to benefit from a strong level of capital funding support from government, which reflects its very close ties to the Commonwealth and the state.”

and

“The rating outlook is stable, reflecting the strong institutional framework and high levels of oversight by the state and Commonwealth governments.”

and

“UTAS’ governance is considered strong, reflecting the strong institutional framework for the higher education sector in Australia. The Commonwealth and State Governments play important roles in legislating and monitoring governance of the sector.” (my bolding)

In its September 2022 review of UTAS’ rating, Moody’s added:

UTAS has a strong regulatory and funding framework with the Commonwealth and state government. The university requires approval from the Tasmanian Treasurer to raise new debt…’“.

and

“State oversight of UTAS also includes the Tasmanian Auditor-General conducting the annual statutory audit of the university’s financial statements as well as the Tasmanian Minister for Education appointing two of the University Council positions.” (my bolding)

Clearly and understandably, Moody’s believed that UTAS was an entity of the State and that the Government exercised oversight (that is, that there was a strong accountability arrangement in place). Equally clearly, Moody’s believed the State’s appointment of two UTAS Councillors was part of the State’s oversight of UTAS, as indeed it should be.

If Treasurer Ferguson believes Moody’s got it wrong, I look forward to hearing that he has advised Moody’s, and the creditors for UTAS’ $350 million Green Bond debt who relied on Moody’s, of his view.

  • Moody’s made the mistake of describing what the role of the State Government should be, as distinct from what the State Government has actually been doing (or what Treasurer Ferguson thinks it should do).

  • I will consider Moody’s view of the Commonwealth’s role below in the section entitled “Treasurer says Commonwealth would bail out UTAS“.

A surprise witness

But hang on, do I hear a voice – a voice from Michael Fergusons past? What does it say?

This is Michael Ferguson, then Shadow Minister for Education, speaking against the reduction in State Government nominees to the UTAS Council from four to two when the final amendment to the UTAS Act was moved in 2012:

“This move [the decrease in the number of UTAS Councillors appointed by the Minister for Education from four to two] in itself represents a reduction in the real role and relevance of this parliament to guide the future development of the university it creates through this act. Let us not forget that if we are able to make any comparisons to private corporate structures, then this parliament represents the equivalent role of shareholder in trust for Tasmanians. That status ordinarily attracts the responsibility to elect its directors. However partisan the decisions of responsible ministers inevitably appear to the opposition at times or the public, I take this opportunity to make the point that the responsibility of a minister to make decisions such as appointments to university council are made only because of the implicit trust vested in that minister on behalf of the people of this state and this parliament. Despite the fact that I sit in opposition and our political opponents are in government, I nevertheless express a reservation that the bill diminishes the real role and relevance of this House of parliament to guide and support the future development of the university that it creates.” (see How UTAS got out of control – Part 3; my bolding)

UTAS’ accountability to the Government, the Parliament and the people of Tasmania was clear to Mr Ferguson in 2012, as indeed it also was to Mr Rockliff, the Deputy Leader of the Opposition at that time. It was only with the Government’s reassurance that accountability would be preserved that the Opposition, still expressing reluctance, passed the amendment.

The tail should not wag the dog. What is done with UTAS in the state accounts does not change the fact that UTAS is a statutory authority (public entity) and should be fully accountable to Tasmanians. If there seems to be confusion on this point, perhaps UTAS should be included in the State accounts. (See the writings of John Lawrence on UTAS).

It is also time to ensure that State Government nominees to the UTAS Council start playing their role in ensuring that UTAS is accountable. The argument that State nominees cannot provide accountability because of the requirement under section 9(2) of the UTAS Act that “The Council is to act in all matters concerning the University in the way it considers will best advance the interests of the University“, is a total nonsense. It is possible to both act in the interests of UTAS and play an active role in accountability arrangements.

This argument was cited by Education Minister, Roger Jaensch, in his evidence to the LegCo and was implicit in much of Treasurer Ferguson’s evidence (eg, transcript, page 15), especially when he was lauding the abilities of the UTAS Council to make state-changing decisions, which should be the preserve of government.

The Treasurer’s borrowing approval is an integral part of accountability arrangements for UTAS

Section 7(2) of the UTAS Act states:

“…the University is not to exercise its power to borrow money unless it has first obtained the written approval of the Treasurer.“

Treasurer Ferguson was asked a number of times how he saw this provision, which should be a fundamental element in the accountability arrangement between UTAS, the Government, the Parliament and the people of Tasmania.

Because, unlike his 2012 self, Treasurer Ferguson now denies this accountability arrangement, he got himself in a hopeless tangle over the Treasurer’s borrowing approval role, stating for instance:

“I see it as a check and balance role, as much as anything, so that there is an external and trusted authority for the university to be required to seek that ability to borrow and then for that borrowing to be contained within a defined limit.” (transcript, page 2; my bolding)

So, it’s sort of like having a trusted friend setting borrowing a limit for you?

No – it should be about the State having ultimate control, and oversight, of UTAS’ debt to ensure UTAS is acting prudently and sensibly, and with good cause.

Is there a valid approval for the $350 Green Bond borrowing?

At the start of his evidence, the Treasurer made a point of saying that:

“Over the period to March 2021, the former Treasurer [Peter Gutwein] provided a series of approvals in relation to borrowings by the university, supported by robust analysis by the Department of Treasury and Finance. The university currently has an approved borrowing limit of $400 million.” (transcript, page 1).

Subsequently when a specific question was asked about the Green Bond, Ms Calvert spoke of the conditional increase in UTAS’ borrowing limit provided by to UTAS by Mr Gutwein on 3 March 2021, from $200 million to $400 million:

“It was an increase from a $200 million limit to the $400 million limit. It was agnostic as to what form of borrowing that they used. When we were originally assessing that, I think the expectation was that the university would continue to borrow through the Tasmanian Public Finance Corporation [Tascorp] but they subsequently decided to go down the green bond route.“ (transcript, page 9)

As I have previously shown, the language of Mr Gutwein’s conditional approval of 3 March 2021 was clearly predicated on the additional borrowing of $200 million being obtained through Tascorp. This could well emerge as a problem if this matter is tested in court. Putting this issue to one side, however, I maintain my view that UTAS’ borrowing of $350 million through its Green Bond program does not meet the terms of the Treasurer’s borrowing approvals, particularly the second condition in Mr Gutwein’s borrowing approval of 3 March 2021:

“the $200 million borrowing facility limit will reduce over time consistent with the maturity profile detailed in the University’s request.“

Unfortunately Treasurer Ferguson and Ms Calvert were not questioned on whether UTAS had met this condition, although they were requested to provide copies of borrowing approvals issued to UTAS to the LegCo. (transcript, page 16)

Given the importance of – and public interest in – this matter, I believe the Treasurer should immediately release (1) the maturity profile that UTAS provided to the Government in seeking the increase in its borrowing limit from $200 million to $400 million and (2) borrowing approvals from 2019 and 2021 and (3) any other borrowing approvals that may be relevant to UTAS’ current borrowings.

What analysis has the Treasurer or Treasury actually undertaken of UTAS’ borrowings?

When asked about the Treasurer’s role in verifying “the ability of the university to be able to satisfy their loans and so on“, Treasurer Ferguson invited comment from Ms Calvert, who stated:

“When we provided advice to the former treasurer [Premier Gutwein] in relation to this, it was based on the requirements of the legislation, so it was done based on a very narrow financial focus. That does not mean we didn’t provide significant analysis, but it was in relation to the university’s capacity to repay their debt.” (transcript, page 3; my bolding)

Right to Information records suggest that Treasury’s advice to the Treasurer was based on a set of forward cash projections from UTAS, which were likely next to worthless.

Prior to providing advice to the Treasurer, Treasury should have analysed all documents relating to UTAS’ future financial viability as the ultimate determinant of its capacity to service its debt obligations. This was particularly the case as the UTAS’ Council was proposing to undertake the largest and most significant change in UTAS’ history – to relocate its principal campus from the Sandy Bay campus to the Hobart CBD.

  • Such analysis should have included careful and critical scrutiny of the business case for UTAS’ proposed relocation – namely the Southern Future Business Case (SFBC), considered by the UTAS Council on 5 April 2019, and all related documents, including subsequent documents.

  • Of course the SFBC should have been analysed by Government agencies ahead of the UTAS Council’s decision of 5 April 2019 to relocate, but were not. Treasury’s failure to request and analyse the SFBC and related documents, when UTAS was seeking a government borrowing approval, represented a further abrogation of responsibility by the Government and a breach of trust with the Tasmanian public.

  • As I demonstrated in my last blog post, the SFBC was fundamentally unsound. Recent developments are only likely to have increased the level of financial risk involved with relocation and UTAS stands to ‘lose’ $1 billion in the 30-year assessment period of the SFBC, as well as confronting a short-term funding crisis, if it proceeds with relocation.
    • Under pressure from the Ombudsman, UTAS has recently released additional material, which has only strengthened my view (see the Ombudsman’s recent decision in Robert Hogan and UTAS and the released documents under “2019 onwards“). I will be updating my analysis of the SFBC soon.

Treasurer in denial on impending UTAS financial crisis

When invited to comment on who would fund a ‘bail out’ of UTAS, Treasurer Ferguson said:

“I feel uncomfortable, in one sense, answering the question, because I don’t like to create hypothetical scenarios that suggest what would happen if the university were in trouble, when I know that it isn’t in trouble. I do not want to trash-talk it.” (transcript, page 7; my bolding)

The Treasurer is sticking his head in the sand (or is pretending he doesn’t know what is going on).

Both public analyst John Lawrence and I have closely analysed UTAS’ financial situation and had made extensive public comment.

  • I also wrote directly to Treasurer Ferguson on 5 July, providing a link to my most recent blog post; I have not received a response.

If Treasurer Ferguson is not inclined to believe either John Lawrence or me, I suggest he, and Treasury, read this excerpt from UTAS’ Council Minutes for 27 April 2023:

It is clear that the UTAS Council know that UTAS is, at least, facing a short-term funding crisis.

If accountability mechanisms were working as they should, Treasurer Ferguson would not need to read UTAS Council Minutes two months after the meeting they record, in order to know what’s going on – or rather what the UTAS Council thinks is going on – and to be able to respond somewhat accurately, at least, to the LegCo.

  • I do not believe that the UTAS Council yet understand that UTAS faces a financial disaster if it continues with UTAS’ CBD relocation or, indeed, that it appreciates the likely severity of UTAS’ short-term cash crisis.

  • Short-term expedients like renting space in the Hobart CBD, as an alternative to immediately seeking to construct new buildings, will only worsen the situation by adding to bottom line ‘losses’ if UTAS persists with the CBD move.

  • If the UTAS Council thinks all problems will be solved by receiving approval to develop the Sandy Bay campus site, it needs to think again. UTAS’ fundamental financial problem is the CBD move and the only solution is an immediate halt to the move.

Treasurer says Commonwealth would bail out UTAS

When the Treasurer was asked about who would bail out UTAS he said:

“While I don’t think anybody is seriously contemplating that the university is at risk of failure, nor any other university in the country that I’m aware of, in that extraordinary hypothetical there would be a role for the Australian Government to support a university that was struggling, given its predominant role in the funding of universities.” (transcript, page 3; my bolding)

And:

“Mr FERGUSON – ….In the hypothetical you have described, while not wanting to disagree with the vice-chancellor, in the event that a university in Australia was in so much trouble as would require some kind of rescue package, governments would address that in those circumstances. But I would see a far higher role for the Australian Government, given that it is the funder of higher education in Australia, and the state – in those circumstances, in that hypothetical – would no doubt take an interest in it as well.” (transcript, page 7; my bolding)

And, continuing, there was this exchange:

“Mrs CALVERT – As you are aware, the university is a statutory corporation under the legislation. As the Treasurer said, there is no liability to the state from the university. Obviously, the council is the governing body. I think this has been raised previously in the rating that Moody’s did for the university. They implied a level of support from the Commonwealth government for the university. They would provide extraordinary support from the Commonwealth in the event of the situation that you have described. The caution with this is that Moody’s generally adopts that standard view when they are rating both state and public institutions. You only have to look at Tasmania’s rating from Moody’s and you will see a similar clause in there.“

Ms WEBB – They [Moody’s] would expect the federal government to bail the state out, in the same way they would expect the federal government to bail out UTAS if it was required?

Mrs CALVERT – That is correct.

Mr FERGUSON – Chair, if it would be okay, it might be an interesting point for the committee to query with the vice-chancellor whether, in his use of ‘the state’, he means the state of Tasmania, or ‘the state’ in terms of the country. It might be an interesting question to follow up.” (transcript, pages 7-8; my bolding)

  • In his evidence to LegCo on 4 May 2023 (page 27), Vice-Chancellor (VC) Black indicated that he believed the State, clearly meaning, Tasmania, would be responsible for any bail out. Was Treasurer Ferguson trying to avoid a semblance of conflict with VC, indulging in classic ‘duck-shove’ to the Commonwealth, letting his imagination run wild or some combination of these?

  • It is good to know that the State Government would take an interest in UTAS being bailed out.

As Ms Calvert pointed out, Moody’s generally assumes in its ratings that the Commonwealth would step in to support Australian public universities (that is, that there is an implicit Commonwealth guarantee for Australian public universities).

  • See particularly the bolded comments and cited documents in the section “Is there a valid approval for the $350 Green Bond borrowing?” above; also see Moody’s Higher Education Methodology.

I do not know whether Moody’s has ever tested this assumption with the Commonwealth, but I believe it unlikely that the Commonwealth would be comfortable with the notion that it would act as guarantor to university borrowings that are approved by State Governments under State legislation.

  • Or that should have been subject to (a valid) approval in the case of UTAS’ $350 Green Bond.

I certainly do not believe the Commonwealth would bail out UTAS in circumstances where UTAS had brought financial disaster upon itself (by the unnecessary, costly and high-risk CBD move) and the State Government had failed to exercise any meaningful oversight of UTAS. Apart from anything else, this would set a poor policy precedent.

I believe instead that the costs of a bail out would fall on the Tasmanian Government and people, whether that be in the form of the State paying for the bail out and/or permanent damage to UTAS, such as a reduction in UTAS’ regional presence.

  • The UTAS Council failed, and continues to fail to apply proper scrutiny to the business case – the SFBC and related documents – for UTAS’ CBD move. The State Government has never applied scrutiny at all, even when asked to approve borrowings.

  • To this might be added the fact that UTAS effectively borrowed money (over $200 million) through the Spark Living arrangement (a sale of forward student accommodation rents; see next section) without seeking, or being required by the Treasurer to seek, borrowing approval.

Even if UTAS were in good financial health, well managed and effectively oversighted by the State Government, the Commonwealth might well consider the Ferguson/Calvert assumption about its responsibility for any bail out of UTAS presumptuous.

Treasury and Moody’s rating agency

When asked about the Spark Living arrangement, the following comments were made.

“Mr FERGUSON – I will invite Mrs Calvert to comment on whether the ratings agencies would look at total liabilities in considering credit ratings, but it is very squarely my advice that it doesn’t classify as borrowings. Just as, for example, the university took on a property that it didn’t own and leased it on a long-term lease, it would also be a recognised accounting liability rather than borrowing. Fiona, can you add to that and just touch on whether the ratings agency would consider total liabilities in considering a credit rating?


Mrs CALVERT – I think it is a question that you need to ask the university. We do not have any level of visibility of that. I am certainly not aware of how the rating agencies treated them when they did their rating.


Mr FERGUSON – It really is outside our wheelhouse. (transcript, page 9)

Treasurer Ferguson’s insouciance is quite staggering, and these comments raise all sorts of issues. The kindest interpretation is that Treasurer Ferguson and Ms Calvert were poorly briefed.

I would just make two observations:

  • Treasury, under Mr Gutwein, clearly had some issues with the Spark Living arrangement – thus Mr Gutwein sought “full details of existing borrowings and other debt like obligations” prior to issuing his borrowing approval on 3 March 2021. See John Lawrence’s recent writings around this matter and particularly his comments around Mr Gutwein’s request.

  • The Treasury documents provided to me under RTI revealed that Moody’s met with senior Treasury staff on 12 May 2021. While Treasury’s 10-page brief for this meeting is heavily redacted, UTAS was listed as an agenda item as specifically was UTAS’ request for debt funding. Clearly this was a substantive meeting and, if Treasury has not read Moody’s subsequent rating documents for UTAS, it ought to have.

The fact of Treasury’s meeting with Moody’s also raises more general issues:

  • Did Treasury give Moody’s assurance on the State Government’s oversight (accountability) role – a role it has not played for some years and which Treasurer Ferguson now seeks to deny?

  • Did Treasury indicate/confirm that any bail out requirement for UTAS would be for the Commonwealth rather than the State? The Commonwealth might also wonder about this question.

Treasurer Ferguson – clearly needs to get on top of his responsibilities

By : Robert Hogan