Major Dimensions of Financing Reforms Financing Reforms for Tertiary Education in the Knowledge Economy Seoul, 6-8 April 2005 n

outline of the presentation...  key financing questions  new financing challenges  reform and innovation trends

outline of the presentation...  key financing questions

financing questions n resource mobilization u how much should be spent on tertiary education? (macro-level) u income generation at institutional level u who should pay, and what share? u when and how? u is it affordable? (student aid) n resource utilization u how should public resources be allocated? u how efficient and effective are institutions?

outline of the presentation...  key financing questions  new financing challenges

financing challenges for developing countries n long-standing challenges n emerging challenges

long-standing challenges n financially sustainable expansion

enrollment rates by income level ( )

enrollment rates by region ( )

proportion of private enrollment

long-standing challenges n financially sustainable expansion n equity in access

elusive equity Mexico (2005) u only 1% of year old from poorest quintile attend tertiary education u 32% from richest quintile n USA: probability to access Ivy League university is u 8.3% for lowest quintile u 50% for richest quintile n France: probability to access Grande Ecole is u 6% for lowest quintile u 15% for middle quintile

tertiary enrollment per quintile

inequalities in access and educational resources in USA

long-standing challenges n financially sustainable expansion n equity in access n internal efficiency

internal efficiency n proportion of enrolled students who never finish their studies: u 75% in Argentina u 60% in Morocco u 30% in Australia n proportion of students who graduate on time: u 13% in Italy

long-standing challenges n financially sustainable expansion n equity in access n internal efficiency n quality and relevance

new challenges n shrinking student population n education and training needs n cost of ICT n increased competition

client needs n knowledge-driven economic growth (and aging population) requires higher labor productivity, which means in turn u increased demand for skilled workers u changing education and training needs (methodological skills and updating of knowledge) u more diverse clients (lifelong learning perspective)

Changes in Job Task-Skill Demands (USA, Source: Autor, Levy, and Murnane (2003) “The Skill Content of Recent Technological Change: An Empirical Exploration,” Quarterly Journal of Economics.

opportunity to tap potential of ICT

increased competition n public / private n new providers u long distance competition u franchise universities u corporate universities u media companies, libraries, museums & secondary schools u education brokers n alliances and partnerships

outline of the presentation...  key financing questions  new financing challenges  reform and innovation trends

funding sources (macro) from public funding to cost sharing

funding sources (institutional level) from dependence on public funding to diversified funding

allocation mechanisms (public funding) from direct funding to indirect funding & from untied funding to performance-based funding

student aid options from mortgage loans for students to income-contingent loans for graduates

funding sources (macro) from public funding to cost sharing

who can pay? n the State  central / federal government  provincial / state gvt  municipal gvt n students / families n firms n society (taxes)

rationale for cost-sharing n private benefits n need for additional revenues n equity concerns n efficiency promotion

cost-sharing n living expenditures  dormitories  food  transportation n tuition fees

fees n for everybody / dual track n undergraduate / postgraduate n national policy / individual institutions n special category students (repeaters, mature, part-time, continuing ed, foreign, out of state) n one fee or program-linked? n ceiling / freedom to set

optimal fees policy n universal n reasonable level (10 to 30%) n associated with student aid n adjusted to cost of living index

political economy n consultation and consensus building n decentralization / autonomy

funding sources (institutional level) from dependence on public funding to diversified funding

allocation mechanisms (public funding) from direct funding to indirect funding & from untied funding to performance-based funding

direct funding to institutions n set guidelines n negotiated budgets

let us make a deal...

direct funding  formula funding  input-based  output-based  competitive funding  benchmarking funding  performance funding  matching fund  charge back

indirect funding  vouchers  scholarships  tax credits  matching grants  student loans  human capital contracts

Allocation Mechanism Teaching Research Living Expenses Service and Cultural Activities Investment Direct Funding Negotiated Budget XXXXX Formula Funding Input-based XXX Performance-based XX Competitive Funding XX X Benchmarking Funding X Performance Funding XX XX Matching Fund X X Charge Back X Indirect Funding Vouchers X Scholarship s X X Tax Credits X X Matching Grants X X Student Loans X X Human Capital Contracts XX

Allocation Mechanism Public Private Direct Funding Negotiated Budget XX Formula Funding Input-based X Performance-based X Competitive Funding X X Benchmarking Funding Performance Funding X Matching Fund X Charge Back Indirect Funding Vouchers X Scholarship s X x Tax Credits x Matching Grants Student Loans X X X x X XX Human Capital Contracts x x

student aid options from mortgage loans for students to income-contingent loans for graduates

conclusion

themes of the forum n allocation mechanisms at the national level n income generation at the institutional level n student aid mechanisms n measuring performance n buffer bodies