hefin

Financing Higher Education: 

Financing Higher Education Today and Tomorrow

Slide2: 

“A dominant theme of higher education in the 1990s has been financial distress.” D. Bruce Johnston former Chancellor State University of New York

The financial crisis in higher education of the 1990s:: 

The financial crisis in higher education of the 1990s: Intensified demand for higher education Rising tertiary enrollments Reduced government capacity to finance higher education expansion: increased competition for public funds residential campus is expensive

ENROLLMENT AND PUBLIC EXPENDITURE TRENDS IN HIGHER EDUCATION: 1980-90: 

ENROLLMENT AND PUBLIC EXPENDITURE TRENDS IN HIGHER EDUCATION: 1980-90

Decline in per student expenditures1980-1990: 

Decline in per student expenditures 1980-1990 Sub-Saharan Africa: $6,300 to $1,500 Middle East: $3,200 to $1,900

Overview: 

Overview What does it cost? How big a sacrifice? Where does it come from? Can we get more for less? What’s coming?

Expenditure per student: 

Expenditure per student

Slide8: 

Expenditure per student

Effort: 

Effort What share does the country devote to higher education of: national income per capita income

Share of GDP to higher education: 

Share of GDP to higher education

Expenditure per tertiary student as % of GDP per capita: 

Expenditure per tertiary student as % of GDP per capita

Sources of financing:: 

Sources of financing: Public Sector direct funding indirect funding Private Sector households organizations businesses

Tertiary expenditure as % of GDP: 

Tertiary expenditure as % of GDP

Era of Reform: 1980 - 2000: 

Era of Reform: 1980 - 2000 United Kingdom The Netherlands Australia South Africa Chile

Reform objectives:: 

Reform objectives: Institutional differentiation and/or specialization Financial diversification Efficiency

1. Differentiation / Specialization: 

1. Differentiation / Specialization PUBLIC INSTITUTIONS research universities teaching universities polytechnics professional / technical institutes community colleges distance education / open learning

Differentiation (cont.): 

Differentiation (cont.) PRIVATE INSTITUTIONS universities polytechnics technical institutes distance education

Share of enrollment in private higher education: 

Share of enrollment in private higher education

Private institutions are growing rapidly...: 

Private institutions are growing rapidly... Sub-Saharan Africa: from 30 in 1990 to more than 60 in 1999. Indonesia: from 344 in 1980 to 1,035 in 1994.

2. Financial diversification (business-like approaches): 

2. Financial diversification (business-like approaches) facilities rental short courses contracted training on-campus advertising corporate sponsorships distance education full tuition for foreign students

Financial diversification (cont.): 

Financial diversification (cont.) partial tuition fees for local students research; technology transfer business incubation sale of goods and services consultancies investment of reserves; endowments conference management

To charge or not to charge...: 

To charge or not to charge... No fees charged Norway Germany Mexico Ghana Brazil Argentina Hungary Tuition fees charged Japan Australia China Chile Vietnam South Africa Portugal (modest)

Tuition fee income as % of recurrent tertiary expenses: 

Tuition fee income as % of recurrent tertiary expenses

Our students are too poor to pay fees….: 

Our students are too poor to pay fees…. VIETNAM: With per capita income of just $250, its higher education system charges tuition fees of $40 to $50 and recovers 19% of its costs from these contributions. CHINA: Several leading universities generate 40% of their income from fees.

Policy on fees is determined more by geography than by wealth:: 

Policy on fees is determined more by geography than by wealth: Countries with significant (10%+) cost recovery are almost equally divided among low income (13%), middle income (17%), and high income (15%). There is generally little cost recovery in Africa, Middle East and Eastern Europe, but extensive cost recovery in Asia and Latin America.

“Success stories”: 

“Success stories” UNITED KINGDOM University of Warwick: earned income of £ 91.3 million in 1998 which represented 61% of its total income. Cranfield University: generated 83% of its recurrent budget from income generating activities.

“Success stories”: 

“Success stories” AUSTRALIA University of Southern Australia: “Business managers in each faculty play a key role in establishing customer networks, industry links, and generating revenue from private sources.”

“Success stories”: 

“Success stories” UGANDA Makerere University: “Between 1995 and 1999 the share of total resources contributed by income generating activities increased from 17% to 31%.”

“The state cannot hope to be the sole or even the main source of financing for the higher education sector as a whole.” UNESCO, 1998: 

“The state cannot hope to be the sole or even the main source of financing for the higher education sector as a whole.” UNESCO, 1998 “An indicative target could be for public institutions to generate income covering 30 percent of recurrent expenditures from non-governmental sources.” World Bank, 1994

Slide30: 

“…higher education institutions are expected to obtain 10 percent of their resources from income generation activities.” Government of Norway

Slide31: 

“There is evidence that higher education institutions in developed and developing countries are taking steps to transform the whole institutional culture so as to make income generation central to their mission.” Association of Commonwealth Universities, 1999

Slide32: 

Is this revolutionary or what?

3. Efficiency: 

3. Efficiency Increasing available resources by reducing unit costs. How ?

How ?: 

How ? Increase effectiveness drop-out rates repetition rates completion rates

 Computerized management  information systems (MIS): 

 Computerized management information systems (MIS) financial administration personnel management student records libraries purchasing printing / publications

 Resource management: 

 Resource management water electricity utilization of space

 Funding formulae /  allocation criteria: 

 Funding formulae / allocation criteria The use of explicit incentives to encourage institutions to use funds more efficiently.

Types of allocation systems: 

Types of allocation systems Negotiated budgets Input-based budgets Output-based budgets Quality-based budgets

Budgeting systems: selected countries: 

Budgeting systems: selected countries

Input budgeting is financially risky: 

Input budgeting is financially risky SOLUTION: Define unit cost level for minimum acceptable standard and fix the number of students at what the budget will bear. Others pay fees. EXAMPLES: China, Eastern Europe, Uganda, Kenya,Tanzania, Vietnam

Block grant allocations: 

Block grant allocations Encourage initiative, innovation, responsiveness, accountability. EXAMPLES: Australia, Belgium, Denmark, Sweden, China, Thailand, Netherlands, Spain, United Kingdom

Other efficiency-enhancing mechanisms:: 

Other efficiency-enhancing mechanisms: Mergers (Australia, China, Netherlands, Vietnam) Advanced placement from secondary schools, community colleges, etc. Student counseling (market information)

Tomorrow...: 

Tomorrow...

Corporate observation:“You’re in an industry which is worth hundreds of billions of dollars, and you have a reputation for low productivity, high cost, bad management and no use of technology. You’re going to be the next health care: a poorly managed non-profit industry taken over by the profit-making sector.”: 

Corporate observation: “You’re in an industry which is worth hundreds of billions of dollars, and you have a reputation for low productivity, high cost, bad management and no use of technology. You’re going to be the next health care: a poorly managed non-profit industry taken over by the profit-making sector.”

What’s coming?: 

What’s coming? For-profit higher education corporate universities virtual universities lifelong learning services

What’s coming?: 

What’s coming? International trade in higher education. Franchises Global distance education Human development contracts Educational software

What’s coming?: 

What’s coming? Managed educational investments. Pre-paid tuition fees Pension use for education Education tax credits Educational employment benefits

What’s coming?: 

What’s coming? Edu-business partnerships Edu-tainment Info-cation Telematics Desktop classrooms

Slide49: 

CONTENT DESIGN DELIVERY SUPPORT SUPPORT

What’s coming?: 

What’s coming? Trend of convergence in knowledge-producing organizations publishers television networks universities libraries and museums consumer survey firms

What’s coming?: 

What’s coming? Public funds increasingly used to ensure access by poor students. Credit / debit cards Lines of consumer credit

Points to ponder:: 

Points to ponder: The problem of financing higher education has no single solution; it has many solutions. Policymaking in the realm of higher education finance is as much political as it is technical. In the future, for-profit higher education will be the main new factor.

The End: 

The End Thank you!