HUMANE
SEMINAR
(19 - 20 May
2000)
Budapest
University of Economic Sciences and Public Administration (BUESPA)
ABSTRACTS AND SUMMARY OF DISCUSSION
Decentralization
and Internationalization: The Effects of Financial Systems on Academic Activity
Csaba Forgacs:
Vice-Rector, BUESPA
Csaba Forgacs gave an overview of the Hungarian system, explaining that
as a result of a new law, the number of Higher Education Institutions (HEIs)
had been reduced from about 90 to 25, with effect from 1 January 2000. Parallel
with these mergers, and in addition to academic freedom, the government wanted
to give more freedom for faculties to finance their activities. For this
transitional year 90% of the budget provided by government was to be allocated
among the Faculties within the institution. Only 10% of the budget could be
used by the central units (Rector’s office, Secretariat of Vice-Rectors,
Finance Department, International Relations, Central Administrative Office for
students).
Different universities were trying to find their own way in the new
financial system. There was some variation between institutions as to what
counted as the “Centre” (for example, the Finance Department might be included
or not). It was a major challenge for
HEIs to know how to work under the new budget allocation system, and how the
element of centrally-managed international cooperation (student exchanges)
should be decentralised. His presentation focused on how the new system affects
academic/student exchanges.
Csaba explained that since government money was about 65% of the total
income, the remaining 35% could be applied in any way. He also explained how financial devolution
was now operating, with a 50% reduction in central costs for membership fees
and total devolution of the travel budget.
The biggest changes were that government formula funding for students
now went 90% to Faculties instead of just 2%, while funds from the leasing of
rooms and equipment went 100% to the Centre, rather than the previous 30%. Other shifts were much more marginal. Such changes could have a massive impact on
the activity levels of individual departments, with Faculties suddenly more
empowered.
There were several channels through which internationalization of
academic activity could be supported – not least, grants under the ERASMUS
scheme. However, increasingly students themselves had to contribute to the
costs of their study abroad. In the
light of such changes Csaba raised the question of a need for a new strategic
direction and plan, to establish a proper position for international
activity. For example, what system for financing
internationalization will be preferred by the Faculties? To what extent should
the jobs of the International Relations Office be decentralized? Which activities still have to be managed
centrally? What strategies would the Faculties find appropriate to support international academic activities, notably
the inter-university “Masters” agreements?
Finally he pointed out that in order to finance “central” activity, new
forms of financial support were needed.
Despite rigorous selection process the recent increase of student
numbers (by 60% or 70%) meant that universities had had to use money intended
for maintenance on teaching and research.
This had led to an expenditure freeze in some areas of routine
maintenance.
György Bazsa: Pro-Rector, University of Debrecen
This presentation outlined the various ways in which
different models of financing can be used to bring changes to a national
system. It dealt with the main tasks
for the Hungarian HE system, and the main ways in which funding is
assured.
Professor Basza noted that the income for universities in Hungary (171
million HUF) led to matching expenditure of 171 million, with 86m on staff and
63m on running costs. There was
discussion of the fact that this ratio of about 50% on staff was considerably
lower than in a typical West European university, and an explanation was given
that staff had two or three jobs, supplementing low university incomes by
teaching elsewhere (sometimes in private institutions). This partly explained the SSRs of 12:1,
which by Western standards seemed quite favourable. He noted that the number of students had increased three-fold in
the last ten years. His own view was
that common sense would indicate that quality must deline with greater numbers
if there were no increase in funding.
Professor Basza set the context whereby the number of universities had
been reduced by means of mergers. He gave his view of HE as producing a skilled
labour force, integrating teaching and research and helping to develop the
region. Higher education thus played a
vital role in the transition to the market economy, and developing research
(two thirds of which, in Hungary, took place in the HE system). There was a vital need to develop private
funding. The State (central) input
to funding represented about 70% of total HE income, and he illustrated the
several levels of formula funding for different types of student (eg,
postgraduate or undergraduate). Self-generated funding was described as
comprising (limited) student fees, money charged for teaching services or
research contracts, small private donations, and possible some development of
alumni activities.
There was a notable tension between strengthening academic leadership
and the creation or strengthening of the role of the “secretary-general”. Professor Basza insisted that academics have
to decide on academic matters, and that senior academics must decide on direction
while administrators merely carry out the necessary steps. HUMANE members were slightly startled by
this rigid distinction, and wished to amend the view to say that such a split
was acceptable as long as any decisions were made in full awareness of the
consequences – and that such awareness depended on skilled administrative
staff.
Good Money
and Bad Money (or: Always Look a Gift-horse in the Mouth)
Roddy Begg, Director of Alumnus Relations, University
of Aberdeen
Roddy Begg changed the Latin proverb which advises that one should
“never look a gift horse in the mouth” to produce a fundraiser’s maxim whereby
one should always inspect every tooth!
In response to questions about individual profit Roddy make clear that
in the UK it was strictly forbidden to make personal profit from any university
income – the nearest case (where there was still a clear distinction) would be
that of researchers who persuaded the public to donate funds to help their own
research, thus making their working lives easier.
Roddy’s main thesis was that fundraising has a number of associated
risks. Among these is that of failing
to ask for enough money to fund a particular project. It is always essential to take accounts of all overheads,
in particular on-costs and infrastructural costs. He illustrated these terms, with examples of
some failures to secure funding for essential overheads of a project for which
fundraising had been undertaken. This
led to discussion of the circumstances under which it is reasonable not
to insist on full costs, although it was acknowledged that universities are
sometimes too ready to accept less than full funding in the competition
to raise funds.
Roddy warned that a particular risk is to accept a benefaction (such as
a building, art collection or library) without considering the financial
implications of the gift in terms of its maintenance/running costs. Sometimes these implications do not come to
light for many years - however, once you have accepted a gift it is difficult
to avoid all the implications of its ownership. One should be particularly wary of accepting
funding to undertake an activity that is not clearly within the university's
academic plan or mission. Roddy similarly warned colleagues against accepting
too many conditions attached to any donation - in particular, any excessive
influence by the donor on how his/her funding is used. It was important to try always to retain
flexibility in the terms of the gift, to allow scope to change direction if the
"academic scene" changes.
The issues surrounding the thanking of donors were discussed, in
particular the naming of buildings, Chairs or academic departments. Examples
were given of the risks of being thus publicly associated with prominent
individuals. However, the importance of
adequately thanking all donors was emphasised.
The essential message of the presentation was that it is essential to
fundraise, particularly as governments withdraw their support for universities,
but that fundraising has many associated risks and
pitfalls. One should always think long
and hard, and consider all possible scenarios, before accepting
donations.
The presentation produced interesting discussion of how much the
results of sponsorship should be allowed to interfere with academic activity –
one example involved the use of a building for open-air concerts, with
significant disruption over several days for preparation, rehearsals, etc. This illustrated the point about looking
ahead. Another aspect of looking ahead
concerned the possibility of using a benefactor’s name for only a limited
period (as happens in the USA). This
might be wise either in case a better offer appeared in the futre or (as had
happened) in case some negative feature of the donor made continued association
embarrassing! Similar considerations
were felt to apply to honorary degrees, with an example quoted of a university
which had (fortunately!) used its rules to reject the suggestion of an honorary
degree for the wife of a later-disgraced Head of State.
The talk also illustrated some of the varying traditions of
Europe. As one Italian colleague said,
“Good money and bad money is all very well – but what about when there is no
money?”! A partial answer was later
provided in a remark by Esa Ahonen (see summary below), to the effect that some
the alternative methods mentioned in his talk were quite recent and had been
seen as rather radical.
Mass Education: who pays the
cost? And when?
Dugald Mackie briefly illustrated the many different national systems
for funding higher education, but reminded participants that – basically – it
was always the State which paid. Demand
throughout Europe was rising faster than willingness to pay, and government
resources generally were shrinking.
Universities were thus constrained – yet at the same time quality costs
money. Moreover, argued Dugald, “free”
education should be interpreted as meaning “at no cost”, since someone
has to pay – and in the UK free higher education had ultimately become
incompatible with the combination of rapid expansion and lower taxation.
He pointed out that the transformation of HE from being an experience
enjoyed by a privileged elite to something which is almost seen as being as much
of a right as school education is increasingly a global phenomenon. With
participation rates in developed countries reaching 80% (South Korea), 78%
(Finland) and - for such a large country - a surprisingly high 65% for the USA,
there had been concerns on the part of some governments about the costs
involved in such expansion, and on the part of universities about maintaining
quality and sustaining investment in the face of a continuous decline in
resources from the State.
Dugald went on to
examine the ways in which different European countries deal with the issue of
expanding participation in HE while seeking to maintain quality and standards
among the universities. The issues included payment for the cost of tuition,
widening access, expectations of support from families, private universities,
differentiated fees and the maintenance (or not) of quality. He then focused more particularly on the
recent evolution in the UK towards student contributions (justified on the
grounds that graduates should pay for their enhanced career prospects and
earning power). In particular this
involved the variation of fee payment within Scotland, and the way in which an
argument over tuition fees had become a key political issue in the very first
months of the new, devolved government, even threatening to cause the end of
the coalition Executive.
While the changes seen in Scotland should benefit students, their
beneficial impact on universities was much more doubtful, particularly given inflationary
pressures on costs which are not being matched by increases in State funding.
Universities must therefore look to other avenues for additional funds to
supplement declining state resources. Such avenues include increased
commercialisation of research (and investments in spin-off companies), joint
educational ventures with commercial partners to provide long-term income
streams, and creating savings through the re-engineering of processes to make
them more efficient.
There was some lively discussion as to whether graduates truly did earn
more, on average – not for the only time statistics were doubted – but at least
for UK members the national statistics were incontrovertible. The idea was raised that it is the national
economy which pays the price if mass education leads to diminished quality; and
a further point about the national economy was that tin a society where the
number of retired people will soon largely exceed the number of taxpayers,
there simply have to be other sources of income to fund higher education and
public services in general.
Dugald drew on his experience as a member appointed by the Scottish
Parliament to the Independent Committee of Inquiry on Student Finance (known
from the name of its chairman as the Cubie Committee). Several members expressed support for the
Cubie view that tuition should be free at point of entry, with repayment (a
contribution) being made later, based on ability to pay. Other members stressed that it was not so
much tuition fees as the loss of maintenance grants which had been the real
problem. There was concern that
differential fees within Europe might reduce the level of student mobility –
and that such a result would run counter to the general trend of globalisation.
“Diversified
Funding at the Helsinki School of Economics and Business Administration”
Esa Ahonen,
Administrative Director, HSEBA
Esa continued the arguments of
previous speakers that all universities are now facing challenges of declining public
funding and, at the same time, the need for higher quality due to national and
international demands and increased competition. In Finland no tuition fees are
allowed in degree programmes in universities. This means that even if all
expenditure is market-based, income for degree programmes is not at all tied to
the market, but rather to one sole purchaser, the State, that has decided to
pay less for the product. However, at the same time private companies want
higher quality. The equation was difficult to solve!
Universities can choose between
different strategies based either on a philosophy of maximum savings, or for
example on a philosophy of high quality, leading to higher cost levels. HSEBA
had deliberately chosen the "high quality-high cost" strategy. This
meant setting out to attract the best staff, the best students and the best
companies to work with. He illustrated
the many ways in which HSEBA had turned to external sources of funding in order
to boost and diversify funding.
In contrasting this dynamic approach to the traditional university
cultures of balanced budgets and minimal risk/initiative, he also warned
against the danger of “running after every rabbit” – a point which strongly
echoed Roddy Begg’s earlier remarks about sticking to mission. Esa illustrated both why diversification is
necessary and why it is difficult. .
Esa also developed his ideas on the problems of rigid organisational
forms, and the vague legal status which is held by different kinds of
university business initiatives. The HSEBA solution had been to create two
modes of operation: the traditional State university structure (including also
private funding in different forms), and a separate private limited company
structure. He outlined the duality inherenet in the busienss mode and academic
mode of activity, and argued for a productive synergy between the two modes
(this thesis was also developed at the Helsinki seminar in June 1999). Finally two pie charts for income in 1996
and 1999 respectively showed the clear reduction in government budget from 68%
to 56% and the growth of income from university companies (0% to 19%).
In the State university
structure HSEBA organised contract research, donations, sponsored Chairs and
sponsored classrooms in addition to the normal State funding for degrees. Its
recruitment services, student business projects and thesis projects were well
developed. The Library had a long tradition of selling databases and
information services on CD-ROMs and in other forms. Now the University was more
and more creating "packages" and speaking in terms of partnership
programmes. These were organised professionally, with support from a foreign
consultant. Internal solutions had stressed financial autonomy and (crucially)
the idea of investment rather than subsidy. HSEBA had developed new products
for sale and had invested heavily in its own brand name (PR, alumnus activity,
and sponsorship). This more
business-like approach had been seen also in relations with other universities
( for example, business courses specially designed for students at the
University of Helsinki) and in the creation of a consulting company.
The HSEBA holding company now
owned two companies, concentrating on Executive Education and Applied research.
Our next move will probably be to turn our new business incubator to a private
limited company. Due to our high quality and rapid action companies are getting
more interested and we are now also starting to receive remarkable funds for
high quality international research, for example in the field of knowledge
management.
Discussion immediately centred on the nature of rewards and incentives
offered to staff in order to persuade them to change attitudes. Esa noted that in Finland there was not a
massive difference between salaries in higher education and in proviate
companies, so that the incentives were not so necessary. In his experience Departments did not make a
loss. With regard to risk, all
proposals were checked centrally.
Alternative income was well illustrated by the University of Mannheim
(also originally a Business School), which had now developed a database of
students which it sold to selected companies for recruitment purposes. The companies benefited by reduced costs,
better recruitment opportunities, and were willing to pay a premium. The original idea had been to help the
Alumnus Association, but profits soon went far beyond this. An expansion of the scheme – truly a win-win
option – was under consideration.
Some Remarks from the German Point of View
Christoph Ehrenberg: Kanzler, University of Osnabrück
(The observations and background
notes given here were designed as a brief introduction to the final session on
the agenda. They were not intended as a
full abstract.)
Christoph noted that around 10 % of HEIs in Germany are run
privately, for the most part closely linked to industry. But only around
1 % of the approximately 1.8 million students in Germany opt to study
there. Many of these private HEIs also profit considerably from State funding. He pointed out that State-run HEIs receive
more than 90% of their funding from the State. Although the share of
third-party funding (research funds) comprised as much as a third of the total
budget at some universities specialising in engineering, the greater part of
this third-party financing also originates from state or publicly-funded grant
bodies and foundations.
It was also true that public
spending on HE in Germany amounts to less than 2%, which is comparatively low.
The present state of the public purse means that a change could not be expected
in the foreseeable future. The cost of German unity had exacerbated public debt
to such an extent that debt reduction had become German politics most serious
problem alongside the fight against unemployment. State debt is currently 750
billion euros, i.e. between three and four annual federal budgets. Against this
background, an increase in financing for HE was not in sight. As a result,
alternative sources of funding are gaining in significance. There are two main
suggestions:
-
Tuition fees, which are however politically extremely controversial: a
solution is not on the horizon.
- Mobilising private capital e.g.
in the form of foundations; the new law governing foundations is to improve the
situation by means of tax relief.
Christoph’s presentation was followed by further commentary on the part
of the three German colleagues, to illustrate the various situations in
different Länder. The
(theoretical) possibility of differential tuition fees within the Länder
was discussed, in the context of the Anglo-Scottish split in the UK, but it was
agreed that such a move was unlikely.