Posted tagged ‘university funding’

Public funding of autonomous universities: living with the complexities

January 15, 2018

Some years ago, when I was still President of Dublin City University, I attended a meeting between Irish government officials and university heads to discuss national higher education strategy. At one point the conversation focused on university autonomy. Everyone agreed that such autonomy is vital for an internationally successful higher education system; but what exactly did ‘autonomy’ mean?

It quickly became clear that each of the the two groups had a very different understanding of the term. The university Presidents saw it as the right and ability of an institution to set its own strategic direction; the government officials  believed it meant the right of the institution to decide the methods by which it would implement government priorities.

The gap between the two was maybe not quite as big as the above description implies, because even university heads accepted that if the state gave them public money, it had a right to insist that this helped to deliver key government objectives; but governments should not have the right to determine a university’s overall strategic direction.

These tricky issues are now again being thrown into relief in Ireland with the publication this week of a government-commissioned report of an independent expert panel, Review of the Allocation Model for Funding Higher Education Institutions. The recommendations contained in the report suggest that funding contingent on the achievement of government objectives can be compatible with the preservation of ‘institutional budgetary autonomy’. The latter however is defined as being about the ‘internal allocation of funds’, not about the harnessing of funds to develop an institutional strategic direction.

The report sets out a number of hard-to-argue-with objectives of a new model, such as widening access and support for research and innovation. However, it proposes complex allocation criteria and formulae that would, inevitably, erode the capacity for flexible use of funding within institutions as these learn to play the system and therefore chase particular performance indicators on a mathematical basis to maximise income.

For me, the Scottish system of ‘outcome agreements‘ is easier to apply and more flexible. It generates agreed targets (which do also in part reflect government priorities) which are set within a wider strategic framework that universities can develop for themselves, and doesn’t align the funding criteria too closely to these in any detail. These leaves much greater operational and strategic flexibility, while still giving the government a degree of assurance that institutions are working with public policy objectives.

Irish universities already suffer significant disadvantages in terms of autonomy, such as the controls exercised by the state in staffing and remuneration. Adding to these disadvantages, even in an understandable cause, carries major risks. The recommendations of the expert panel should be considered with some care.

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Negative educational equity?

October 5, 2015

The funding of higher education is something currently under review in a number of countries, including Ireland and Wales; but any debate around it raises issues not just of how an ambitious university system can be resourced, but also of the impact of a fees régime in a country that chooses to let the the students pay for some or all of the costs of their education.

It has now been estimated that in England the average student can expect to pay £63,000 for their university education – a sum consisting of tuition fees and living costs, and amounting to much more than the deposit for a mortgage to buy a house. While it is also clearly the case that a university degree will significantly enhance a graduate’s career prospects and salary expectations, there may come a point at which the cost is greater than the expected return; a condition sometimes described as negative educational equity.

One of the possible consequences of this state is that some may choose to look to higher education outside of England; and recent reports have highlighted the much lower cost of degree courses in some European countries, many of which are now being offered in English. There are apparently signs that some English students are availing of this opportunity, while international students are being put off from coming to England by the cost.

Therefore, while there is a strong argument for saying that free university tuition is something the taxpayer cannot afford, it can also be argued that a funding régime that imposes tuition fees on all students while the state detaches itself from the resourcing of higher education is equally unsustainable and may produce unintended consequences. University funding needs to reflect the value of higher education to graduates, but also the value to society. It is an area in which an ideological approach to what is right and what is wrong is very unlikely to be satisfactory. The reality is that, in order to have a successful system, the state must carry some of the cost, as must those taking the courses – where they can afford to.

Irish higher education and the quest for something better

September 29, 2014

During my ten years as an Irish university President, one of my recurring and deeply frustrating experiences was encountering politicians who had persuaded themselves that the university sector received too much funding, wasted resources and needed more control to resolve this problem. Two of the four Ministers for Education who held office during my tenure came into the job proclaiming that something was wrong with the universities. One of them decided to test his suspicions by introducing funding cuts in the middle of an economic boom, while the other declared he was establishing a ‘forensic audit’ to find out where all the money was being stashed away by the institutions. Both of them hinted they had postbags full of complaints from citizens about wasteful expenditure in the sector.

Throughout the decade the university Presidents robustly defended the universities, pointing out that they delivered excellent results on the back of per capita funding far below that available to institutions in other developed countries. Then came the recession, and in 2008 we were advised that cuts would come soon, and would be brutal. Salaries were cut and employment was controlled, student contributions went up and government funding was reduced significantly. Now, six or so years on, the chief executive of the Irish Universities Association, writing in the Irish Times, has said that government funding has over this period been reduced by ‘almost a third’, seriously affecting the student experience and university rankings. Perhaps a little confusingly, he also suggests that ‘through the dedication and hard work of both front and backline staff in the universities, quality, although at risk, has been maintained.’

It is very difficult for universities to make a case that a crisis threatens to engulf the system when they also suggest that cuts of 30 per cent have not compromised quality. Indeed that suggestion might convince long retired education ministers that they were right all along. Global rankings tend to attract media comment, but how much they really affect university fortunes could be debated. Even student/staff ratios generate much more excitement amongst lecturers than they aggravate students.

One of the problems is that few of those engaged in the higher education conversation have made a clear case as to what constitutes quality, and therefore what could be put at risk by inadequate resources.  The quality assurance industry built up over the past decade or so has focused on process rather than substance, and reports emerging from that system give few clues as to how close we may be to compromised educational standards. Saying that quality has been maintained gives little insight into what might happen if ‘quality’ were damaged or lost. Nor does it tell us much about what investment could do to raise standards and assure global competitiveness. Saying something like ‘if you give us more money we’ll ensure that what we’ve always done is performed to the highest level of quality’ won’t be persuasive if you’ve just said that without this money you’ve actually managed to achieve the same thing.

Irish higher education clearly does need more money, but it also needs new ideas and new models of delivering learning and research. It needs a narrative, a ‘story’. The IUA is an excellent and well-led organisation, and there is imaginative leadership in the universities. Generating this story is not a task that cannot be performed effectively.

Calls for more funding, or for other resourcing mechanisms including tuition fees, will make little headway as long as those who will take the decisions don’t really see what the new money will buy and why that should be bought. It is time to generate a narrative that says something about what higher education should be doing that would have the potential to transform the lives of those experiencing it and the fortunes of the country, beyond what has been delivered in the past. It would perhaps be better to stop talking about percentages, or resources, or processes, and to focus instead on what a new and maybe somewhat different framework of higher education can do for society. People need to be convinced that there is something better out there that deserves some money. Right now, I suspect most politicians and officials are persuaded that cuts have gone some way to reducing excess fat without seriously compromising quality, and that the impact of these cuts can and should be contained by a bigger dose of centralised controls: the worst of all possible worlds.

Money matters

October 13, 2011

Here’s an interesting statistic: Harvard University, with an enormous endowment of over $30 billion, hands out more annually in student scholarships than my university gets in income from all sources. Its overall annual income is over 20 times that of Robert Gordon University. In fact, its endowment could pay the full running costs of the entire British higher education sector for a full year; and its annual income is nearly twice that of the entire Irish university sector.

This tells us a number of things. First, however fast other university systems are developing, they won’t catch up with the US any time soon. Secondly, Harvard’s wealth is largely a product of the generosity of its graduates, and on this side of the Atlantic universities must also engage much more closely with the alumni community. Thirdly, financial support for those from a disadvantaged background is a vital part of a successful university system, and I suspect we’ll find that Harvard is paying out more for this than is made available in all of Britain and Ireland put together.

Of course Harvard is not typical in every respect of the US university sector. But even if it were a complete outlier (which it is not) its financial strength should give us pause for thought. There is a real risk that the relatively modestly resourced universities in Europe will lose out to the powerful US ones and the emerging institutions in Asia.

The funding of higher education is, at some level, a social contract. It is an expression of how society wants its universities to develop, and what role it wants them to play. It is unlikely that many universities over here will rival Harvard for money any time soon, but we must start to plan for the longer game. Set against the fees-and-funding chaos in England and the great funding uncertainties in Ireland, Scotland is having a much more stable experience as the government keeps to its promise to close the funding gap between England and Scotland. But at some time here too there will need to be a larger debate about the future: about what we expect of universities, how they will be paid for it, and what contribution they can make to society beyond education.

Assessing the value of education

July 27, 2011

Recently I had an interesting conversation with a young student currently studying at an English university. Two years away from completing his undergraduate studies, he told me that he intended to travel the world and then settle down to a job that would have to pay less than £21,000 – permanently. He did not wish ever to cross the salary threshold at which he would have to repay his student loans. And why? Because once he allowed himself to be sucked into the game ‘in which my salary would have to chase my debts’ he would be in ‘negative educational equity’. He had no intention of going there.

While there may not be too many people planning their careers quite like this, the student’s assessment is not wholly out of line with what some commentators are saying, particularly in the United States. In a recent blog post Professor Mark J. Perry of the University of Michigan looked at the relative rates of inflation of property prices, consumer prices and higher education tuition fees in the United States. He found that since 1980 tuition fees had risen more than twice as fast as house prices. And yet, the inflation in real estate, as we know, created the property bubble and its horrendous economic effects. The question  he asks is whether the ‘education bubble’ is also about to hurst, creating a fresh set of very serious problems. This could happen where those in the education system are no longer convinced that the debts they take on in order to acquire a degree are greater than the financial benefits of being a graduate.

There are of course differences between the funding and costs of a university education in America and one on this side of the Atlantic; indeed in these islands the position varies between different countries. But as the costs rise – whether these are borne by the taxpayer or by the student or in some other way – some may ask whether there is an adequate repayment for the investment. Where this is asked more generally by society it can be answered in terms of the capacity of higher education to provide relevant skills and a civilising influence; where it is asked by individual fee-payers the answer sought is about the return on investment in terms of career development and salary.

If we slip into a situation where students walk away from higher education opportunities because they are not convinced they will provide an adequate return, then as a society we will be in trouble. If there is even a hint of a risk of this we need to look closely at our higher education strategy. The time to do that is now.

Managing university budgets: thinking strategically

July 21, 2011

Although it is not absolutely a true picture, I have a feeling that in my entire academic career one constant feature has been ‘the cuts’. I started as a lecturer in Trinity College Dublin in 1980, and for those old and decrepit enough to remember that period in Ireland, it was a time of non-stop economic woes and recurring public spending reductions. By 1982 the situation had got so bad that the then short-lived government led by Charles Haughey had to break its own agreement with the public service unions and abandon pay increases, and there were more budget cuts. By around 1986 the situation had become so dire that the College actually set up something it called the ‘Cuts Committee’, whose task it was to find more savings.

In 1991 I joined the University of Hull in England as Professor of Law, and shortly afterwards as a Dean. For those who can remember that particular period, it was the time of annual 1 per cent British government ‘efficiency gains’, this being an automatic mechanism for reducing higher education funding. Every so often there were larger cuts, and I remember receiving a circular from the Vice-Chancellor just before Christmas one year trying to get us to address the question how we could manage the budget reductions without redundancies.

Just as things began to look up a little towards the end of the 1990s, I moved to Dublin, Dublin City University and the high-octane exuberance of the ‘Celtic Tiger’. Or so I thought. In 2002 the then Minister for Education decided that higher education was over-funded, and from then on we had real-term budget reductions, pretty much year-on-year, until in 2008 the roof fell in and we were faced with a dramatic change in our circumstances.

Now I am in Scotland, where actually things are probably better than anywhere else in the near neighbourhood, but we are still looking at a likelihood of at least some further cuts.

Other academics may of course remember the years differently, and in fairness I moved around in such a way that I often arrived in a system just as it was going from good times to bad (or at least not so good) times – though in other ways I have over recent years been lucky to be in universities that were and are smart in difficult economic circumstances. But for those who also think that ‘the cuts’ have followed them around, it is a terrible de-motivating experience, producing a degree of lethargy and fatalism and eroding a capacity for innovation. Furthermore, on the whole universities don’t cut strategically; they cut opportunistically (i.e. exploiting staff departures and the like), and where they cannot do that they simply apply cuts across the board. Doing so is, however, inherently anti-strategic, depending as it does on a mixture of chance and common misery.

It becomes particularly counter-productive when it involves exhortations to re-use paper clips and print on both sides of paper. In fact, and demonstrating that this is an international phenomenon, the newspaper USA Today recently ran an article on ‘cutbacks outside the box’, describing steps such as smaller food portions in canteens, removing phone lines and abandoning printing.

Of course, university expenditure has to be properly controlled, and appropriate efficiencies are quite proper. But that in itself is not a budget strategy. Neither are cuts, by themselves. A budget strategy needs to connect with an overall strategic purpose, which includes a decision on what to prioritise and resource, and including decisions on growth for those priorities. It should also include plans for the diversification of revenues. Budget strategies should not react to decreases in public expenditure but should anticipate them and prepare for them.

It is unlikely that universities will ever again be able to expect public expenditure largesse. That era, if it existed, has probably passed. Even if the resources were once again available, they would probably be much more directed to government priorities rather than to general increases in funds. This means that higher education must lose the ‘cuts mentality’, and become financially strategic. And that requires a change in mindset. It won’t be all easy.

Resourcing excellence

February 26, 2011

Today we shall probably get a better idea of who will form the next government in Ireland. Once the new administration takes office it will have a number of priority issues on its agenda. It may be tempted to think that higher education is not one of them, or worse still, that any issues regarding it can be addressed by stepping up regulatory restrictions and bureaucratic controls. None of that will improve the standing of Irish universities, or help them to attract knowledge intensive investment to Ireland.

The new ministers will need to bear in mind that companies with an innovation agenda will choose a location in which they can most easily tap into a labour force with specialist skills and a research community with high value specialist expertise. If they cannot find that here, they will go elsewhere. And having that here is, more than anything else, a question of resources.

Right now in the United States some well known universities are facing significant financial pressures also. But even allowing for these, here is what they can avail of. The University of California at Berkeley is very worried about the loss of state funding. In fact it has 35,000 students, and after funding reductions have taken effect it will receive $300 million, or €218 million, in state funding (which works out at €6,228 per student). UCD, Ireland’s largest university, has 24,000 students and receives approximately €125 million in the recurrent grant (or €5,208 per student). However, when you add other sources of income and look at the overall budget, the picture gets more extreme. Overall, UCD’s annual budget is in the region of €350 million. The annual budget for Berkeley is around $1.8 billion, or €1.3 billion. So even with new financial pressures, UC Berkeley has more than twice the resources available to it on a pro rata basis than those available to UCD (and other Irish universities).

Mergers and other similar measures will not help in this in any way – on the whole they cost money and dilute excellence. As I have said in this blog before, there is no substitute for proper resourcing, and there is no framework for higher education excellence provided on the cheap. If we really mean to have a knowledge economy and society, then the government’s approach needs to change fundamentally. Also, those who believe that it will be possible to fund higher education satisfactorily solely from public money may need to think again; we need to be internationally competitive.