Tertiary Education Financing
in Small States:
Does Size Matter?
Jamil Salmi
Tertiary Education Coordinator
Paris, 2 July 2009
the future of tertiary education financing?
2
3
• social and economic progress is
achieved principally through the
advancement and application of
knowledge
4
World Development Report 1998/99
outline
• international trends
• does size matter?
• impact of the crisis
5
funding sources (macro)
from
public funding exclusively
to
cost sharing
6
fees
• for everybody / dual track
• undergraduate / postgraduate
• national policy / individual institutions
• special category students (repeaters,
mature, part-time, continuing ed, foreign,
out of state)
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fees
• one fee or program-linked?
• payment upfront or delayed payment?
• ceiling / freedom to set
8
optimal fees policy
• universal
• associated with student aid (Jamaica)
• adjusted to cost of living index
9
10
political economy
• consultation and consensus building
• decentralization / autonomy
11
12
funding sources
(institutional level)
from
dependence on public funding
to
diversified funding
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main categories of revenues
• budget
• tuition fees
• productive activities
• donations
• loans
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productive activities
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allocation mechanisms
from
untied funding
to
performance-based funding
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innovative allocation
mechanisms
• funding formula - output measures are used to
determine all or a portion of funding formula
• performance contracts - governments enter into
agreements with institutions which set mutual
performance-based objectives
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innovative allocation
mechanisms (II)
• competitive funds - support peer-reviewed
proposals designed to achieve institutional
improvement or national policy objectives
• demand-side vouchers - finance the recurrent
expenses of institutions indirectly through vouchers
provided to students who enroll in the university of
their choice
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allocation mechanisms
from
direct funding
to
indirect funding
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indirect funding
• grants and scholarships
• student loans
• vouchers
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Kazakhstan experience
• 20% best qualified secondary school
graduates
• choose university
– $1,200 for public university
– up to $4,000 for private university
• must maintain top academic grades
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Kazakhstan experience (II)
• increased competition generally
• some private institutions have been able
to attract a growing number of voucher
beneficiaries
• but insufficient resources to finance all
students
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equity / benefits incidence
• who gets what share of public resources?
evolution of tertiary education enrollments rates
80
70
60
50
40
30
20
10
0
1980
1997
2005
High Income Countries
Least Developed Countries
Sub-Saharan Africa
Arab States
Latin America and the Caribbean
East Asia and Oceania
South Asia
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tertiary enrollment per
quintile
Percenatage of 1824 Year Olds
Enrolled
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
Spain
Q1 - Poorest
Peru
Q2
Mexico
Q3
Q4
Brazil
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Q5 - Richest
does size matter?
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small is still beautiful
• many success stories
• mission focus and niche definition
• strategic choice of studies abroad
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small is still beautiful (II)
• regional / international collaboration
– multi-state (UWI, USP)
– regional (I2E)
– hub (Singapore, UAE)
– international recruitment
– Internet-based research and training
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challenges (macro-level)
• limited fiscal resources
• economies of scale (higher investment
and unit costs)
• higher vulnerability to economic
fluctuations
– Jamaica (bauxite, banana, sugar, coffee,
tourism)
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challenges (macro level)
• limited number of institutions reduces
– possibilities for performance-based
allocation
• risk of inefficient use of resources (high
staff/student ratios)
– options for institutional diversification
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challenges (macro level)
• tension between national interests and
regional commitments
• dangers of study abroad strategy
– relevance
– brain drain (donor funding, special visas,
financial incentives)
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challenges
(institutional level)
• vulnerability of regional institutions /
programs dependent on several
countries
– funding
– cashflow
– foreign exchange risk
• islands within islands
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challenges
(institutional level)
• small economic base means less fundraising opportunities
• quality implications
– limited pool of talent
– monopoly situation (as institution or type of
institution)
• resistance to change (political volatility)
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impact of the crisis
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resources flows
• reduced government funding for teaching,
research and student aid
• reduced resources for institutions as
demand falls (new domestic and foreign
students, dropouts)
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resource flows (II)
• fewer resources from private sector
(donations, contracts)
• fall in stock market values reduces value
of endowments and pension funds
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response of tertiary education
institutions
• budget cutting measures
– employment-related
– programs and academic organization
– students (number, teacher/student ratio)
– efficiency measures
• revenue generation
– demand-linked measures
– financial measures
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implications for governments
• increase scholarships and establish /
strengthen student loan programs
• include tertiary education in economic
stimulus plans
– R&D
– entrepreneurship for innovation
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opportunities for small states
• innovations and startups
• attracting foreign students
• philanthropy
• efficiency gains and no-frill options
• implementing structural reforms
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scenarios for
tertiary education in small states
• graduate unemployment & brain drain
• shifting demand (from long to for shorter
duration programs, private to public,
foreign to domestic)
• increased inequality
• deteriorating quality (with fewer resources)
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scenarios for
tertiary education in small states
• continued dependence on public funding
– resources fluctuations and quality
deterioration
• diversified funding
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the two extremes
State controlled
• Autonomous
• Gvt budget
95%
• students’ fees 3%
• other charges 2%
• Gvt budget
40%
• students’ fees 25%
• research and
contract earnings 20%
• other earnings 10%
• donations etc
5%
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financial planning capacity
• information and monitoring
• fund-raising team
• investment strategy
• contingency planning
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conclusion
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Mark Bray
52
• which funding source is better in a small
state?
• which allocation mechanism is more
effective?
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Alice in Wonderland
Lewis Carroll
Alice
Would you please tell me which way I
ought to go from here?
Cheshire Cat
That depends on where you want to get to.
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policy objectives pursued
• improving access and equity
• improving quality and external efficiency
• improving internal efficiency and
sustainability
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principles of an appropriate
allocation instrument
• linked to performance / policy objectives
• transparent (objective criteria, openness)
• significant amounts
• stability in time
• compatibility
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political economy
dimensions
• dealing with the politics (winners and
losers)
• not an excuse to avoid reforms
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