Governance and Financing Reforms: Latest Trends Jamil Salmi WBI Course 27 February 2008

questions for the group exercise are there any relevant lessons from the comparison between soccer and higher education? are there any relevant lessons from the comparison between soccer and higher education? thinking about your own country, what are some of the governance / financing barriers that prevent tertiary education institutions from being responsive? thinking about your own country, what are some of the governance / financing barriers that prevent tertiary education institutions from being responsive? what measures would you recommend to improve the situation? what measures would you recommend to improve the situation?

key governance questions responsibilities of the State responsibilities of the State buffer bodies buffer bodies autonomy / accountability autonomy / accountability university boards university boards appointment of university president/rector/VC appointment of university president/rector/VC

key financing questions resource mobilization resource mobilization resource allocation resource allocation resource utilization resource utilization equity in resource distribution equity in resource distribution

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)

resource allocation how should public resources be allocated?how should public resources be allocated?

resource utilization how efficiently are available resources utilized? how efficiently are available resources utilized?

benefits incidence which group receives what share of public resources? which group receives what share of public resources?

outline of the presentation governance reforms governance reforms financing reforms financing reforms –resource mobilization –resource allocation

outline of the presentation governance reforms governance reforms

autonomy

how to define autonomy? total freedom is not realistic total freedom is not realistic academic freedom is not negotiable academic freedom is not negotiable freedom to deliver whatever programs one wants and research whatever one wants? freedom to deliver whatever programs one wants and research whatever one wants? freedom to spend as one wants within a lump sum? freedom to spend as one wants within a lump sum? autonomy has to operate alongside accountability autonomy has to operate alongside accountability

extent of university autonomy in 12 OECD countries in 12 OECD countries CountryOwnpublicbuildingsBorrowfunds Spend budgets to achieve objectives Set academic structure and courses Employ and dismiss staff dismiss staff Set staff salaries Decide size of studentenrolment MexicoYYYYY NetherlandsYYYYYY PolandYYYYYY AustraliaYYYYY IrelandYYYYY UKYYYYY DenmarkYYYY SwedenYYYY NorwayYYYY FinlandYYY AustriaYYYY RomaniaYYYYYY [

accountability in return for increased autonomy, governments expect accountability in: *adherence to national goals and policies *maintaining academic quality *financial honesty and value for money *good management and governance

international trends general move to granting greater autonomy (Japan, Thailand, Germany) general move to granting greater autonomy (Japan, Thailand, Germany) MOEs are surrendering some functions to buffer bodies or intermediate agencies MOEs are surrendering some functions to buffer bodies or intermediate agencies growth in scale and intrusiveness of monitoring and reporting by governments growth in scale and intrusiveness of monitoring and reporting by governments increase in number of monitoring agencies (eg: quality assurance) increase in number of monitoring agencies (eg: quality assurance)

appointment of leader mode of appointment mode of appointment –democratic election (faculty, administration, students, alumni) –government appointment –competitive appointment (Board, gvt, electorate) duration of appointment duration of appointment –one or more mandate –from 4 years to for ever

governance in the autonomous university (USA and UK) functions of the Board: appoint the President and monitor his/her performance appoint the President and monitor his/her performance approve the mission and strategic plan, budget and performance indicators approve the mission and strategic plan, budget and performance indicators assess performance against the strategy and plan assess performance against the strategy and plan establish and monitor control and risk management systems establish and monitor control and risk management systems

outline of the presentation governance reforms governance reforms financing reforms financing reforms

funding sources (macro) from public funding to cost sharing

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)

fees n one fee or program-linked? n payment upfront or delayed payment? n ceiling / freedom to set

optimal fees policy n universal 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 from untied funding to performance-based funding

innovative allocation mechanisms –funding formula - output measures are used to determine all or a portion of funding formula (Netherlands) –performance contracts - governments enter into agreements with institutions which set mutual performance-based objectives (France) –competitive funds - support peer-reviewed proposals designed to achieve institutional improvement or national policy objectives (Chile) –demand-side vouchers - finance the recurrent expenses of institutions indirectly through vouchers provided to students who enroll in the university of their choice

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)

Holland  problem: weak internal efficiency (7.5 years to graduate vs. 4 in theory  formula based on graduation rates  4,5 x cost of 1 student-year for graduate  1,5 x cost of 1 student-year for dropouts  risk: too lenient on grading  mitigation: rigorous inspection system

Poland  problem: low enrollment and lack of qualified faculty  formula combining enrollment and proportion of full time professors with a Ph.D

competitive funds n earmarked for specific objectives n competition on the basis of projects n transparent rules & criteria n peer review and selection n independent monitoring committee

competitive funds: advantages (II) n better designed projects n transparent process n flexibility to do annual adjustments n project with results n aligned with strategic goals of institution n possibility to channel donor and government resources institutionalization of program

competitive funds: limitations (III)  hardware projects without vision  narrow focus, not institution-wide  difficult to address core management problems LAC: independent faculties  how do you support the weaker ones?

competitive funds: creating a level-playing field (IV) n separate windows (Indonesia) n pre-investment TA funds to help prepare strong proposals (Egypt) n partnership between stronger and weaker universities (China, Egypt) n cap on amount or number of projects (Chile)

competitive funds: lessons learned mainstream the fund in the national budgetary so the fund will not disappear with the project mainstream the fund in the national budgetary so the fund will not disappear with the project independent annual evaluation to propose adjustment independent annual evaluation to propose adjustment competence and transparency in the review process are necessary to ensure legitimacy competence and transparency in the review process are necessary to ensure legitimacy requesting counterpart funding from the institution is not a necessity requesting counterpart funding from the institution is not a necessity link eligibility for second round of funding to implementation performance link eligibility for second round of funding to implementation performance private institutions should be able to compete private institutions should be able to compete technical support and procurement capacity building are essential technical support and procurement capacity building are essential

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

example of contract: McGill n increased number of students (and foreign students) n increased number of faculty n increased graduation rate n with same research productivity n renewal of academic programs n balanced budget

“contrats d’établissement” (France) n stock taking of university situation and preparation of university project n Ministry team visit (government objectives / project objectives) n contract n intermediary role played by “conseiller d’établissement”

“contrats d’établissement”: evaluation n dialogue n Ministry / universities n within institutions n cumbersome procedures and insufficient follow up n mixed results

the case of Chile n competitive fund does not address overall institutional issues independent faculties / rector’s office archaic management methods low internal efficiency n competition to participate in pilots (4 institutions) n contract prepared and agreed with help of “negotiator”

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

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

allocation mechanisms from direct funding to indirect funding

grants and scholarships grants and scholarships student loans student loans vouchers vouchers

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

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

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

Colorado experience: the reality insufficient funding overall insufficient funding overall $2,400 not enough to influence either demand or supply $2,400 not enough to influence either demand or supply complementary financial aid did not materialize complementary financial aid did not materialize lack of political support lack of political support champions “ expiring ” champions “ expiring ”

Kazakhstan experience 20% best qualified secondary school graduates20% best qualified secondary school graduates choose universitychoose university –$1,200 for public university –up to $4,000 for private university must maintain top academic gradesmust maintain top academic grades

Kazakhstan experience (II) increased competition generallyincreased competition generally some private institutions have been able to attract a growing number of voucher beneficiariessome private institutions have been able to attract a growing number of voucher beneficiaries but insufficient resources to finance all studentsbut insufficient resources to finance all students

other performance-based schemes salary of VC/rector/president (rankings) salary of VC/rector/president (rankings) salary of researchers (Mexico) salary of researchers (Mexico) students (scholarships, tuition, loans, vouchers) students (scholarships, tuition, loans, vouchers)

conclusion

which mechanism is more effective?

policy objectives pursued improving access and equityimproving access and equity improving quality and external efficiencyimproving quality and external efficiency improving internal efficiency and sustainabilityimproving internal efficiency and sustainability

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

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

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