Performance-based funding of higher education

1. Performance-based funding of higher education Dead Sea, 11 February 2007

3. key financing questions • resource mobilization • how much should be spent on tertiary education? (macro-level) • income generation at institutional level • who should pay, and what share? • when and how? • is it affordable? (student aid)

4. key financing questions • resource utilization • how should public resources be allocated? • how efficient and effective are institutions?

5. outline of the presentation • typology of performance-based allocation mechanisms • which mechanism is more effective? • preliminary lessons from international experiences

6. outline of the presentation • typology of performance-based allocation mechanisms

7. allocation mechanisms from untied funding to performance-based funding

8. performance-based funding • output-based formula funding • competitive funds • performance contracts

9. formula funding • formula linking amount of financing and some measures of outputs • number of graduates • research productivity (publications, patents, licences, spinoffs) • unit costs per level of studies / discipline (actual, average, normative costs)

10. competitive funds • set objectives • competition on the basis of projects • transparent rules & criteria • peer review and selection • independent monitoring committee

11. performance contracts • institutional agreement to achieve certain objectives • additional funding based on meeting agreed objectives • examples: France, Denmark, Austria, Finland, Colorado & Virginia in US

12. allocation of research funding • targeting additional resourcesto programs/institutions with potential of achieving world-class status • preferably on competitive basis • project-funding • demonstrated institutional capacity (RAE) • centers of excellence

13. allocation mechanisms from direct funding to indirect funding

14. indirect funding • grants and scholarships • student loans • vouchers

15. Colorado funding model Old Model Direct Government Funding Tuition New Model Indirect Gov’t Funding via Stipends Tuition & Stipends

16. Colorado experience • voucher for an undergraduate education at eligible universities; no cash in students’ hands • $2,400 per year at public institutions • $1,200 per year for low-income students attending private institutions • degree-seeking, non-degree, and teacher licensure undergraduate students eligible • age, income and financial aid eligibility are irrelevant to qualify

17. Kazakhstan experience • 20% best qualified secondary school graduates • choose university • $1,200 for public university • up to $4,000 for private university • must maintain top academic grades

18. Brazil ProUni • State purchases seats in private universities • offered to top students from low-income families who don’t get a seat in a public university • no actual payment to the university, but tax exemption

19. Colombia (Antioquia)“access with equity” • partnership among local government, private firms and private universities • low-income students who don’t get a seat in a public university get financial aid to enter a private university • 75% scholarship and 25% subsidized loan

20. outline of the presentation • typology of allocation mechanisms • which mechanism is more effective?

21. Alice in Wonderland Lewis Carroll Alice Would you please tell me which way I ought to go from here? Cheshire Cat That depends on where you want to get to.

22. policy objectives pursued • improving access and equity • improving quality and external efficiency • improving internal efficiency and sustainability

23. improving external efficiency • improving quality • competitive funds • merit-based scholarships • increasing relevance • formula with differential weights for high priority fields • competitive funds • grants and scholarships in priority fields • student loans in priority fields • loan forgiveness for students in public service jobs

24. outline of the presentation • typology of allocation mechanisms • which mechanism is more effective • preliminary lessons from international experience

25. principles of an appropriate allocation instrument • linked to performance / policy objectives • transparent (objective criteria, openness) • compatibility

26. country context • local circumstances (culture, history) • reform for what? • dilemma: rewarding the strong or equalizing the field? • time dimension (flexibility)

27. link to quality assurance • pro: powerful incentive • con: punitive, rewards stronger institutions • link at the margin?

28. political economy dimensions • move to performance-based can be controversial • dealing with the politics (winners and losers) • not an excuse to avoid reforms

29. remember Hemingway…