funding of tertiary education: issues, challenges, strategies and methods bahram bekhradnia director...
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Funding of Tertiary Education: Issues, Challenges, Strategies and Methods
Bahram BekhradniaDirectorHigher Education Policy Institute, Oxford, UK
Almaty 18 April 2006
Society has changed its perception of universities
o Universities centre stageo Increasing focus of political
attentiono No longer separate from the
world
Increasing demands on higher education
o Create knowledge- Research
o Transmit knowledge- Teaching
o Engine for economic growth- Prepare workforce for a “knowledge economy”- Knowledge transfer
o Regional developmento Community Serviceo Social mobilityo Social Cohesion/Moral Authority
The economic role of universities
o Instrumentalist (utilitarian) view unsurprising, but regrettable- Cost to taxpayers is high- Cost to individuals is increasing
Non-economic benefits of higher education
o Are realo Are substantialo Have both financial and social valueo Wider Benefits of Learning Group (
http://www.learningbenefits.net/Publications/ResearchReports.htm)
Better health Better parents Better social integration
The case of England: Sources of University Income 2001-02
41%
17%
6%
17%
17%
2%
Total Funding Council Grants
Total Academic Fees andSupport Grants
Overseas Student Fees
Total Research Grants andcontracts
Total Other Operating Income
Total Endowment Income
Source: HESA finance record 2001-02, HEFCE-funded HEIs
Some universities are much more self sufficient than others
Chart 40: % income from Funding Councils, 1998/ 99
0
10
20
30
40
50
60
70
80
Lower decile = 30%Median = 44%
Upper decile = 59%
Who should pay for higher education?
o The state benefits- So the state should pay
o For individuals HE is a privilege, not a right - personal benefit - So individuals should share some of the cost- But don't make it impossible for poor
students - EG loans with easy repayments
o Universities should be entrepreneurial & seek multiple sources of funds
The approach to Government funding varies
o Degree of autonomy (and maturity)- Formula- Negotiated
Relationship between autonomy and funding
Formulaic grantPerformance-based
Negotiated grantEven-handed
State-regulated AutonomousCentrally-controlled Market-based
The Autonomy of Universities
o Managerial Autonomy- Vice-Chancellor/Rector/President is appointed by University Council- Councils are self appointed & supreme
o Academic autonomy- Students- Staff- Programmes & Curriculum
o Financial autonomy- Block Grant- Balances
Borrowing Overdrafts
The approach to Government funding varies
o Degree of autonomy (and maturity)- Formula- Negotiated
o Capacity and infrastructureo Accountability requirementso Extent & significance of Government fundingo Extent of competition between universitieso Are supply & demand in balance?o How much differentiation between
universities is ok?o Policies the Government wishes to effect
through HE
Approaches to funding
o Deficit funding (the traditional approach)o Negotiatedo How to handle private income when inputs are
funded?o Formula-based
- Cost based- Price-based
o Contract fundingo Competitive funding
- Needs competition!o Performance-basedo Specific funding (to advance specific policies)
Drivers o Relations between Government and sectoro Stage of development
- Specific vs block grant- Market vs planning
o The size of the systemo Policy concerns – for example
- Promote efficiency- Encourage growth- Promote quality- Reduce drop-out- Promote employability- Widen participation
o The national infrastructure available
Performance-Based Funding: What is it?
o Differential funding based on some measure(s) of performance
Why PBF?
o Encourage certain behaviourso Encourage efficiencyo Create competition o Improve qualityo Create differentiation between
universities
o Avoid corruptiono Simplify allocation mechanisms
Alternative forms of PBF
o Pure market forceso Government intervention
Could be based ono Qualityo Priceo Outputs (though this has an element of price)o Simply to drive Government policy (e.g.
proportion of poor or minority students admitted)
Alternative forms of PBF
o Pure market forceso Government intervention
Could be based ono Qualityo Priceo Outputs (though this has an element of price)o Simply to drive Government policy (e.g.
proportion of poor or minority students admitted)
What types of behaviours are you trying to encourage?
PBF in UK
o Teaching- Number of students recruited – of different types
(academic/social)- Penalty for dropout- Cost
o Research- Very selectively funded - Dependent on quality, assessed in Research Assessment Exercise
(overhead of the RAE only appropriate in a large system)- Dependent also on
Number of staff Number of PhD students External income from Charities
Attempts at cost-based Performance Based Funding in England
Polytechnics Funding Council- Each Year guaranteed only 95%
(or 90%) of last year’s grant- Polytechnics had to bid each
year for the balance + new money - price based bidding
- Discounts for high quality bidsCrude system –encouraged
cheapness
Actual and Planned Reduction in HE Unit of Funding in Real Terms
60.0
65.0
70.0
75.0
80.0
85.0
90.0
95.0
100.0
DfEE Year on Year Planned
Actual
One Consequence of PBF in England – selective research funding
HEFCE Research funds (£) by institution
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
90,000,000
1 13 25 37 49 61 73 85 97 109 121
Institution
QR
Fu
nd
s (£
)
2003-04 QR Funds
Another consequence: similar sized institutions receive very different grant
Total funds agains t FTEs 2000-01
0
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
140,000,000
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000
FTEs
To
tal
recu
rren
t fu
nd
s
Advantages of PBF
o Promote policies through fundingo Encourages entrepreneurshipo Can encourage qualityo Can encourage efficiencyo Can provide funding differentiallyo Can encourage pretty well any behaviour
you wisho Can leverage behavioural improvement well
beyond those benefiting from the funding
Disadvantages of PBF
o Conflicting policieso Risk of destabilising institutionso Risk to subject/regional provisiono Sacrifices collegiality for competitiono Can give rise to conforming behaviour
- e.g. chasing publications- e.g. avoiding interdisciplinary research
o Can give rise to undesirable behaviour- e.g. funding the number of graduates produced
Caveats & conditions for successful PBF
o Datao Audito Culture (how much
differentiation and hierarchy is acceptable?)
Examples of PBF
o South Africa – a mixture of inputs and outputs (not all universities can respond, so also a top-sliced development fund)
o Indonesia research quality as a basis for differential funding
o Norway & Denmark – funding based on the numbers graduating
o England – students present at year end, and research quality
Funding of Tertiary Education: Issues, Challenges, Strategies and Methods
Bahram BekhradniaDirectorHigher Education Policy Institute, Oxford, UK
Almaty 18 April 2006