2 nd EUA Funding Forum: Strategies for efficient funding of universities

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1 2 nd EUA Funding Forum: Strategies for efficient funding of universities Bergamo, 9-10 October 2014 Forum report Liviu Matei, General rapporteur

2 Table of contents I. Executive Summary 3 II. What is the EUA Funding Forum? Progress since the first edition 4 III. Main findings and conclusions 6 IV. Recommendations 9 2

3 I. Executive summary The present report provides an account of the 2 nd EUA Funding Forum, its main findings, conclusions, and recommendations. For a sense of perspective, the report includes short comparative references to the first edition of the Forum. The main points of the report were presented in the last plenary session of the Forum and they were met with approval by the participants. The report, however, is not an official document of the Forum or of EUA. Rather, it is as a summary put together by the General Rapporteur and represents a collegial endeavor aimed at supporting the dissemination of the results of the Forum, information sharing, and eventual follow-up. The EUA Funding Forum is an initiative launched in It represents a unique, inclusive platform aimed at all higher education funding stakeholders. The 2nd EUA Funding Forum was hosted by the University of Bergamo on 9-10 October participants from 35 countries attended. They included university leaders, administrators, higher education researchers, representatives of student organisations, public authorities (from the local, national, and European levels), funding agencies and organizations, and privatesector partners. The central topic of this edition of the Forum was strategies for efficient funding of universities. This topic was chosen considering the current context of enhanced competition for public resources and changing funding modalities. A key characteristic of this context is the rising pressure on universities to work more efficiently, as public authorities increasingly demand value for money for their investment in the university sector. More specifically, the presentations and discussions focused on: - the analysis of the financial status of Europe s university sector; - an overview of the latest trends with regard to funding models in Europe; - the exploration of the interaction between funding models and the re-structuring of the higher education landscape in different European countries; - the examination of the consequences of integrating performance-related criteria in funding models; - sharing experiences in managing institutional mergers; - learning about how European-level policy objectives are embedded in the different streams of European funding available to universities. The main conclusions and recommendations of the 2 nd EUA Funding Forum summarised in this report refer to (1) characteristics of the current period in Europe with regard to funding of higher education, and (2) how to elaborate efficient strategies for funding. 3

4 II. What is the EUA Funding Forum? Progress since the first edition The EUA Funding Forum was launched in 2012 as a surprising initiative. It was surprising because no major initiative with regard to funding existed before in the context of the pan- European developments in higher education policy and there were no obvious signs that this situation would change. With the emergence of the European Higher Education Area including nearly all European countries, a new and unique space for dialogue in higher education and higher education policy has been created. Important aspects for the reform and transformation of higher education in Europe have been addressed within this new space for dialogue. They included for sure all dimensions or action lines of the Bologna process, from degree structures to student mobility, from the social dimension to quality assurance, and from equity to global openness and attractiveness. More than just dialogue, the emergence of the European Higher Education Area made possible joint learning, new decision-making, and the launch and implementation (with varying degrees of success) of sometimes large and ambitious new initiatives. Logically, funding should have been important, crucial in fact, for all these initiatives and reforms. It remained however systematically outside the official pan-european dialogue. While the reasons (legal, political, financial, etc.) for this situation can be identified and accepted, the exclusion of funding did represent a significant policy gap in this context. The EUA initiative to launch and sustain a European university funding forum was meant as a rare effort to fill this gap. It was a successful effort. In retrospect, the EUA Funding Forum proves to be a valuable and feasible initiative. It shows that a European dialogue with regard to funding is necessary and possible, and that it can have a real impact, as will be detailed below. It could also be said that, nearly three years after its first edition, the Funding Forum is one of the best illustrations of how EUA serves its member institutions, and the university sector in Europe in general. What is the EUA Funding Forum? It represents an inclusive platform open to all higher education funding stakeholders from Europe and beyond. The Forum promotes focused analyses and exchange of information regarding key developments, current and emerging trends, challenges and solutions in the area of funding of higher education in Europe. It serves as a platform to inform the reflection about funding at the institutional, national, and European level, as well as to stimulate new practical initiatives. At the same time, it enables the sharing views of the sector with national and European-decision makers in this area. What are some of the developments or progress elements to date made possible by the EUA Funding Forum, which could serve as evidence for its particular character and relevance? 4

5 One such development is the EUA Public Funding Observatory. The Observatory existed prior to the Funding Forum but its development and relevance got a boost in the wake of the first Funding Forum. The Public Funding Observatory became a unique source of information, and also a key reference for stakeholders in the area of funding in Europe, and increasingly outside Europe as well. The Funding Forum provides a unique opportunity for stakeholders to get acquainted with the latest developments in public funding of universities in Europe via EUA s Public Funding Observatory, released on the occasion of the Forum. Another important development is the DEFINE project, led by the EUA. DEFINE was also conceived and carried out in relation to the Funding Forum initiative. The project results were presented in Bergamo and represented the main contribution informing the discussion at this edition. The DEFINE project focuses specifically on policy and funding mechanisms set by public authorities with the aim of delivering funding more efficiently to the university sector. More than that, however, the DEFINE reports provide probably the best mapping, and also analysis (what works and what does not) of public funding mechanisms in Europe altogether. As such, the DEFINE reports are becoming another privileged source informing policy assessment, development, and implementation in this area. They undertake a mapping of the funding reality in Europe, provide data and knowledge, and put forward key questions with regard to funding to be considered by institutions, authorities, and other stakeholders. Although the most recent DEFINE report was published only in late 2014, it has already attracted a lot of attention within and also beyond Europe. The stakeholder interest in the Funding Forum is growing. This is reflected, for example, in the number of participants and countries represented. 200 participants from 29 countries attended the first Forum in 2012 in Salzburg. 250 participants from 35 countries attended this 2014 edition. In short, the relevance of the EUA Funding Forum consists in allowing learning about challenges, continuing and emerging trends, developments, problems and approaches to addressing them, and instruments; it helps to confirm or adjust individual and institutional standpoints with regard to funding; it facilitates discussions about what works and what does not, about gaps; and it helps to inform thinking about funding (particularly emphasised at this edition) and new practical initiatives. 5

6 III. Findings and conclusions from the 2 nd EUA Funding Forum Beyond the rich diversity of individual contributions and discussions, at a more general level the main observations shared by participants at the Forum could be grouped in two categories. They concern respectively (1) characteristics of the current period in Europe with regard to funding higher education, and (2) what are efficient strategies for funding, how to elaborate or develop such strategies, and in particular, how to think about and conceive them, before even talking about how to implement them. (1) Characteristics of the current period in Europe with regard to funding higher education. In 2012, one of the main conclusions of the 1 st EUA Funding Forum was that the economic crisis impacted universities negatively (through budget cuts, largely) and to such an extent that times will never be the same. A particularly important characteristic with regard to funding at that time was the uncertainty about the future and the absence of a defined path with regard to funding and funding policies. There was also discussion about using the crisis to promote positive transformations in higher education, in particular by adopting and promoting new approaches to institutional efficiency. In 2014, at the 2 nd Forum, it was concluded that this time a key factor influencing the situation with regard to university funding in Europe is slow growth or persisting recession (depending on the country or region). While universities and policy makers are searching for solutions, it is not to be expected that funding will go back where it was cut. Accordingly, a very important characteristic of the current situation is the entrenchment of temporary austerity policies. Another important new factor affecting significantly the work of universities, including in the area of funding, is demography. This is already true for the current demographic situation in certain countries, but even more worrying are anticipated demographic trends. Demography was already discussed at the first Funding Forum in 2012, but it appears now that its impact is significantly more serious than was thought in Salzburg. While at that time it was concluded that we have probably just passed the higher education peak (no major increase in enrollments was expected), at present some countries (although not all by any means), are facing major demographic challenges reflected in abruptly and continuously decreasing enrollment. It is important to note, however, when talking about the main characteristics of the situation in Europe with regard to funding, that the data made available by the Public Funding Observatory, by the DEFINE project, as well as data from other sources presented by the participants, indicate a large diversity across regions, countries and institutions. Also, one could talk of one or several lines of divide with regard to university funding in Europe, which could also be characterized as different trajectories with regard to investment in the university sector. While in certain countries university funding has been cut significantly, this is not the case in all 6

7 European countries, some of which have retained pre-crisis levels of funding or even increased them. At the same time, demography is a significant factor in some countries, but not or not yet in others. The EUA Public Funding Observatory provides a precise map of these trends and particular situations. (2) What are the efficient strategies for funding and how to elaborate or choose efficient strategies? While there is serious variety with regard to levels of funding or funding situations in Europe, the DEFINE project indicates that the variety of funding tools that are currently available or put to use is limited (certain funding tools are more commonly used than other). In other words, the variety of situations is not mirrored by a variety of funding tools in Europe. The exact selection of particular tools even from this limited portfolio, however, combined with the level of funding, contributes to increasing diversity. One question that was asked in this context was whether there is a need to consider new funding tools, to expand the portfolio of tools, as a way to acknowledge and address better (i.e. in a more differentiated manner) the existing situation with significant differences and even major divides in Europe. There was no conclusive answer to this question, but it was mentioned that one could consider EU funding, which, through programmes such as Horizon 2020, Erasmus+, or cohesion funds, addresses a wide diversity of situations, when looking for an answer. Also, new experiences and initiatives in other parts of the world are to be considered. One particular element that was taken up in the discussions in this context is the extent to which the different funders need to consider the wider funding environment to enhance synergies and avoid counterproductive inconsistencies (both at national and EU level). Beyond a mere inventory of funding tools and mechanisms, what are the good ones, and also what are efficient strategies and strategic approaches? A number of recent positive experiences from several countries were presented at the Forum, regarding how universities adapt to and exploit funding policies and tools. This included for example the role of university leadership in the case of mergers and alliances, or in the framework of so-called excellence schemes, which both result in some degree of funding concentration. In fact, a more general trend towards concentrating funding and rewarding performance was recognized in the interventions of participants from countries that have adopted mechanisms providing funding for excellence. Particular attention was given to the matter of implementation of excellence schemes. This discussion was stimulated and informed by the findings of the DEFINE project, as well as by particular national and institutional experiences presented by participants to the Forum. Issues raised as part of this discussion included the need to ensure that excellence initiatives are implemented in stable economic and regulatory environment and (so that excellence funding does not become a replacement for regular public funding); the need to make the rules of the scheme known in advance and keep them consistent throughout the process; the need to provide flexibility in order to ensure fair treatment of the different academic disciplines; the need for public authorities to establish clear objectives and 7

8 corresponding criteria for selection; and the need to ensure constant monitoring to help evaluate the attainment of the scheme s goals and assess the costs incurred. A surprising finding of the DEFINE project was that evaluation is an exception rather than the rule in the field of excellence schemes. Participants also mostly shared the view that it is likely that performance-based funding is here to stay. In fact, it could be expected that public authorities will increasingly look to performance-based funding mechanisms when reforming funding allocation to universities. While the experiences with these policies and tools coming from outside higher education institutions themselves appear to be predominantly positive, it was also observed that there is a need, however, for universities to develop internal institutional strategies to work effectively with such funding policies/mechanisms. Good lessons and recommendations in this regard are put forward in the DEFINE report. Cost-sharing as a funding mechanism was given a particular attention at the Forum. Costsharing refers broadly to the participation of parents and students to covering the cost of higher education, in particular, but not exclusively through tuition fees. Cost-sharing implies a shift of the cost burden away from a primary or exclusive reliance on public funding. It was agreed that when discussing the effectiveness of cost-sharing, one-off lessons need to be considered with care before generalisations are made. Another important shared observation was that costsharing measures should not result in leaving out completely the government (public funding must be present in the form of loans or grants, for example). Inclusion is a particular matter of concern in systems using this funding instrument. A comparative study presented at the Forum notably showed that cost-sharing does not have the same impact on inclusion everywhere, because it interacts with other factors that are at play as well. Another conclusion was that we have as yet insufficient data to assess the effectiveness of cost-sharing. It would be important in this context to clarify what data to collect and how to interpret them. For example, one could look at indicators about how cost-sharing works (does revenue increase or not? How do costsharing aspects interact with the socio-economic background of students? What is the impact of cost sharing on quality?). A particularly important conclusion concerning the institutional strategic thinking with regard to funding was that we are witnessing a major shift in recent years in Europe: universities have become funding-conscious (it is a question whether this applies or applies equally to all universities). At present, most universities are not simply and passively on the receiving side of governmental funding and funding policies; they are consciously and actively involved in defining and implementing funding strategies internally, in their own institutional context, and also externally in interaction with other stakeholders. Moreover, the funding environment has evolved and is getting increasingly complex, as relevant stakeholders are more numerous, beyond the traditional university-government relationship. 8

9 IV. Recommendations The main recommendation in 2012 in Salzburg was somewhat self-reflective, regarding the Funding Forum itself: continue and institutionalize the Funding Forum. This recommendation has been realized. The Funding Forum and related initiatives represent already a very useful platform in the area of university funding. The main recommendations from the 2 nd Funding Forum address separately higher education institutions and policy makers, Recommendations for higher education institutions: 1. Develop institutional strategies to promote efficient funding in interaction with external funding policies and mechanisms. 2. Institutional strategies must be technically and professionally strong, but they must be also informed by broader considerations and thinking, such as the institutional mission and values; national/regional characteristics, challenges, and aspirations; larger social and economic realities and processes (such as poverty, unemployment, social stratification, etc.). Recommendations for policy makers: 1. Policy makers need to privilege long-term perspectives when designing funding reforms and carry out rigorous ex-post evaluation. 2. They should seek to simplify funding allocation in order to avoid unintended and potentially harmful side-effects of overly complicated mechanisms. More specific recommendations were put forward as well: - Universities should engage actively with politicians and policy makers. It is important to build a relationship of trust with politicians. - University leaders should engage with policy makers in defining funding policies and mechanisms. Universities should aim at proposing funding mechanisms and tools, not just reacting to the initiatives coming from politicians and policy makers. University leaders should bring into this dialogue information that shows the real cost (e.g. including indirect cost), measures for efficiency that are promoted by their own institutions, as well as their own data and indicators more generally. - Universities should engage with relevant policy makers outside the higher education sector as well. For example, an important question is how to involve treasuries or ministries of finance in the dialogue (this could be a topic for the 3 rd Funding Forum). - It is important to develop explicit and effective strategies for how to react in times of hardship. The accumulated experience in Europe shows that successful strategies may involve tough measures at the very beginning, or restructuring and strategic re-profiling. 9

10 While cutting on the margin (e.g. reducing capital expenditure) might be an easier strategy in such situations, it usually backfires after a while. - Elaborating and implementing effective institutional strategies for funding must consider issues of governance. In fact, it can be stated that good governance is good funding. - Efficient funding strategies must be about cost control as well, not only about increasing revenues. - There is a great need for reliable and usable data/evidence with regard to funding. The Public Funding Observatory is an example of how sophisticated, reliable, and very informative data on public funding can be collected and then used by various stakeholders, including universities themselves. - Mergers should not be encouraged or undertaken under the sole objective of achieving efficiencies and economies of scale, but have to pursue primarily academic purposes. - Funders should promote a holistic view when developing funding reforms, being mindful of the interactions with other funders and of the possible impact on the different stakeholders concerned. - Public authorities and universities should work towards the assessment of the impact of funding reforms for the sector in a systematic, regular way. - Funding policies and tools should always be designed considering the principle of institutional autonomy for universities. - Funding policies and tools should build in incentives for efficiency in a way that corresponds to the specificities of the university sector. - Processes leading to the development, implementation and review of funding mechanisms should be as transparent and inclusive towards the sector as possible. About the General Rapporteur Liviu Matei is the Provost and Academic Pro-Rector of Central European University Budapest and a professor of higher education policy. He has taught at universities in Romania, Hungary and the United States, consulted for UNESCO, OSCE, the Council of Europe, and the European Commission, as well as for other international intergovernmental and non-governmental organisations with programmes in higher education. He is a member of the Board of Trustees of the American University of Central Asia and serves on the editorial board of the Journal of the European Higher Education Area. 10

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