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Funding of Tertiary Education: Issues, Challenges, Strategies and Methods. Bahram Bekhradnia Director Higher Education Policy Institute, Oxford, UK Almaty 18 April 2006. Society has changed its perception of universities. Universities centre stage Increasing focus of political attention

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funding of tertiary education issues challenges strategies and methods

Funding of Tertiary Education: Issues, Challenges, Strategies and Methods

Bahram Bekhradnia

Director

Higher Education Policy Institute, Oxford, UK

Almaty 18 April 2006

society has changed its perception of universities
Society has changed its perception of universities
  • Universities centre stage
  • Increasing focus of political attention
  • No longer separate from the world
increasing demands on higher education
Increasing demands on higher education
  • Create knowledge
    • Research
  • Transmit knowledge
    • Teaching
  • Engine for economic growth
    • Prepare workforce for a “knowledge economy”
    • Knowledge transfer
  • Regional development
  • Community Service
  • Social mobility
  • Social Cohesion/Moral Authority
the economic role of universities
The economic role of universities
  • Instrumentalist (utilitarian) view unsurprising, but regrettable
    • Cost to taxpayers is high
    • Cost to individuals is increasing
non economic benefits of higher education
Non-economic benefits of higher education
  • Are real
  • Are substantial
  • Have both financial and social value
  • 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
The case of England: Sources of University Income 2001-02

Source: HESA finance record 2001-02, HEFCE-funded HEIs

who should pay for higher education
Who should pay for higher education?
  • The state benefits
    • So the state should pay
  • 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
  • Universities should be entrepreneurial & seek multiple sources of funds
the approach to government funding varies
The approach to Government funding varies
  • Degree of autonomy (and maturity)
    • Formula
    • Negotiated
the autonomy of universities
The Autonomy of Universities
  • Managerial Autonomy
    • Vice-Chancellor/Rector/President is appointed by University Council
    • Councils are self appointed & supreme
  • Academic autonomy
    • Students
    • Staff
    • Programmes & Curriculum
  • Financial autonomy
    • Block Grant
    • Balances
      • Borrowing
      • Overdrafts
the approach to government funding varies12
The approach to Government funding varies
  • Degree of autonomy (and maturity)
    • Formula
    • Negotiated
  • Capacity and infrastructure
  • Accountability requirements
  • Extent & significance of Government funding
  • Extent of competition between universities
  • Are supply & demand in balance?
  • How much differentiation between universities is ok?
  • Policies the Government wishes to effect through HE
approaches to funding
Approaches to funding
  • Deficit funding (the traditional approach)
  • Negotiated
  • How to handle private income when inputs are funded?
  • Formula-based
    • Cost based
    • Price-based
  • Contract funding
  • Competitive funding
    • Needs competition!
  • Performance-based
  • Specific funding (to advance specific policies)
drivers
Drivers
  • Relations between Government and sector
  • Stage of development
    • Specific vs block grant
    • Market vs planning
  • The size of the system
  • Policy concerns – for example
    • Promote efficiency
    • Encourage growth
    • Promote quality
    • Reduce drop-out
    • Promote employability
    • Widen participation
  • The national infrastructure available
performance based funding what is it
Performance-Based Funding: What is it?
  • Differential funding based on some measure(s) of performance
why pbf
Why PBF?
  • Encourage certain behaviours
  • Encourage efficiency
  • Create competition
  • Improve quality
  • Create differentiation between universities
  • Avoid corruption
  • Simplify allocation mechanisms
alternative forms of pbf
Alternative forms of PBF
  • Pure market forces
  • Government intervention

Could be based on

  • Quality
  • Price
  • Outputs (though this has an element of price)
  • Simply to drive Government policy (e.g. proportion of poor or minority students admitted)
alternative forms of pbf18
Alternative forms of PBF
  • Pure market forces
  • Government intervention

Could be based on

  • Quality
  • Price
  • Outputs (though this has an element of price)
  • 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
PBF in UK
  • Teaching
    • Number of students recruited – of different types (academic/social)
    • Penalty for dropout
    • Cost
  • 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
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 bids

Crude system –encouraged cheapness

advantages of pbf
Advantages of PBF
  • Promote policies through funding
  • Encourages entrepreneurship
  • Can encourage quality
  • Can encourage efficiency
  • Can provide funding differentially
  • Can encourage pretty well any behaviour you wish
  • Can leverage behavioural improvement well beyond those benefiting from the funding
disadvantages of pbf
Disadvantages of PBF
  • Conflicting policies
  • Risk of destabilising institutions
  • Risk to subject/regional provision
  • Sacrifices collegiality for competition
  • Can give rise to conforming behaviour
    • e.g. chasing publications
    • e.g. avoiding interdisciplinary research
  • Can give rise to undesirable behaviour
    • e.g. funding the number of graduates produced
caveats conditions for successful pbf
Caveats & conditions for successful PBF
  • Data
  • Audit
  • Culture (how much differentiation and hierarchy is acceptable?)
examples of pbf
Examples of PBF
  • South Africa – a mixture of inputs and outputs (not all universities can respond, so also a top-sliced development fund)
  • Indonesia research quality as a basis for differential funding
  • Norway & Denmark – funding based on the numbers graduating
  • England – students present at year end, and research quality
funding of tertiary education issues challenges strategies and methods28

Funding of Tertiary Education: Issues, Challenges, Strategies and Methods

Bahram Bekhradnia

Director

Higher Education Policy Institute, Oxford, UK

Almaty 18 April 2006