Formula-based unit cost models for funding teaching: strategies and international experiences
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1 Formula-based unit cost models for funding teaching: strategies and international experiences Dr. Brigitte Ecker, Joanneum Research, Policies EUA Funding Forum Salzburg, June 2012
2 Key issues Recent funding trends in the higher education sector Definition of unit cost models Models and experiences from five European countries (Switzerland, United Kingdom, the Netherlands, Finland and Sweden) Distinction between teaching and research Criteria of formula funding practiced in teaching Unit costs Role of (full) cost accounting National context Impact of formula-based unit cost models Lessons learned 2
3 Recent funding trends in the higher education sector Remarkable change Increasing competitive project funding in the higher education sector, while reducing institutional core funding (block grants) Core funding increasingly allocated by a performance-based approach Combination performance contracts and formulas Independent funding schemes for teaching and research Driven by the new public management approach in order to increase transparency ease communication of financial needs enhance efficiency and effectiveness Several studies on the effectiveness of various types of funding, but rather little evidence on formula-based models practiced in teaching 3
4 Definition of unit cost models Wide range of terms such as funding per student, teaching funding formula, unit cost formula, formula funding based on normative costs etc. All concepts have in common that the fomula-based funding includes input criteria (e.g. number of students) or/ and output criteria (e.g. student success rates) Formulas based on input criteria tend to reduce costs, although providing a considerable share of block grants (keeping up financial sustainability). In times of budget constraints: increasing efficiency by considering performance indicators Unit cost philosophy: the public funds the resources (by defining prices, standard cost or tariffs) to produce a unit of output, i.e. to educate students. Needs of formula funding: definition of a student place; decision which allocation model (price vs. distribution model) is used, which criteria are included and how they 4 are weighted.
5 Formula-based unit cost models practiced Universities core budget (block grants) are based on Switzerland England The Netherlands Finland Sweden performance contracts performance contracts performance contracts performance contracts performance contracts Distinction between teaching component and research component Formula-based unit cost model federal subsidies allocated to Cantonal universities include an education (70%) and a research (30%) component at the inter-cantonal level 63% for teaching 40% for teaching 45% for teaching 62% for education at first and second level, 38% for education at third level and research yes yes yes yes Criteria/ indicators number of students number of students number of students and degrees number of degrees (planned and realised) number of students (full time equivalents) and full-time performance Price model versus distribution model price model at the inter-cantonal level, distribution model at the national level price model distribution model (constant prices) distribution model price model 5
6 Formula-based unit cost models practiced Unit costs per student place a year in 2011 (EUR) Criteria of allocation considering fields of study and success Switzerland England The Netherlands Finland Sweden differ between fields of differ between fields of formula model, no study, base prices = study: 8,600 36,100 prices published 4,700 differ between fields of study: 8,210 39,756; recalculated by the new HE Act differentiation between three groups: I: Humanities and Social Sciences (factor 1) II: Natural and Technical Sciences (factor 2.4) III: Medicine (factor 4.8) no differentiation between BA and MA differentiation between four groups: A: clinical stages of medicine (factor 4) B: laboratory based subjects (science, etc.) (factor 1.7) C: Subjects with a studio, laboratory or fieldwork element (factor 1.3) D: all others (factor 1) differentiation between undergraduate and post graduate students Priority-based funding no London -factor (+8%); FTI-policy (e.g. expansion of MINT) differentiation between three groups: I: Low cost programmes arts, humanities, law, social sciences, and languages (factor 1) II: High cost programmes: sciences, engineering, and agriculture, (factor 1.5) III: Medicine (factor 5) differentiation between bachelor and master students (factor 2) prices are used to set incentives for adjusting the studies offered differentiation between five groups: I: Theology, Human-, social, and Economic sciences, law (1.25) II: Pedagogic, psychology, sport (1.5) III: Technical and natural sciences, agriculture (1.75) IV: Human-, dentistry, veterinary medicine, pharmacy (3.25) V: Arts and Design (3.75), Music (4.5), Theatre and Dance (5.5) differentiation between master and PhD students no differ between fields of study: 4,465 56,545 differentiation between 15 groups: I: Humanities etc. (factor 1) II: Science, Technology (factor 2.3) III: Nursing (factor 2.4) IV: Odontology (factor 2.3) V: Medicine (factor 3.2) VI: Education (factor 1.8) VII: Other (factor 1.8) VIII: Design (factor 5.6) IX: Art (factor 7.0) X: Music (factor 4.9) XI: Opera (factor 11.4) XII: Theatre (factor 10.3) XIII: Media/ film (factor 12.7) XIV: Dance (factor 7.5) XV: Physical ed. & sports (factor 3.7) no 6
7 Formula-based unit cost models practiced Role of (full) cost accounting Capacity planing Admission system Switzerland England The Netherlands Finland Sweden implementation of 1999: implementation 2007 universities 2009 implementation model of full costing standardized full of the TRAC started to develop of full cost accounting developed in 2005; costing systems at (Transparent rules and guidelines for research; supported by the Approach to Costing) universities started in (autonomous) for full Association of model, since 2005 full no harmonised system Swedish Higher 1999 cost accounting, cost accounting, for teaching Education; delivers information for triggered by recommended to be the periodic review of FP 6, for the definition used in 2007 prices of prices (so far) of less importance no planning of student numbers specific admission criteria for medicine, dentistry, and veterinary medicine planning via ASN (Additional Student Numbers) harmonised admission procedure estimations on the developments in the past years in principle open, in some disciplines regulations planning value for each university and fields of study negotiated between each university and ministry admission required for all studies no planning of student numbers simple rules of admission discussion at FIT Tuiton fees per year for students from European countries in 2011 (EUR) 811 6,500 up to 11,200 single rate: 1,565 no no 7
8 Lessons learned Unit cost models targeted towards more transparency and objectivity, increasing the ability to plan and control Necessary and successful strategy of science and higher education policy to finance education per student number Need to define a student place and capacities in advance Price model based on fixed prices requires a stringent admission system and a funding cap as well (long-time experience in England) Distribution model tends to be more variable (in the Netherlands and Finland) (Full) cost accounting gained importance in order to adjust the prices paid by the public Danger: models get too complicated and thus become difficult to govern Trade-off between keeping a system manageable and transparent and to create a fair system which corresponds with real costs (differing between fields of study, level of study and locations) 8
9 Conclusions Specific historical, cultural and national context has to be taken into account Implementation of formula-based unit cost models also requires adequate funding for research (funding agencies and programs, length and size of projects granted, success rate etc.) Just Switzerland finances a part of academic research by the teaching formula (science-driven education) However, all countries have implemented different funding models No best way to define a generally accepted model But all countries developed strategies in order to improve efficiency and quality of the higher education sector, mainly by establishing an evaluation culture 9
10 Contact Dr. Brigitte Ecker, Joanneum Research, Policies Priv.-Doz. Dr. Karl-Heinz Leitner, AIT, Technology & Innovation Policy Dr. Claudia Steindl, AIT, Technology & Innovation Policy Reference Leitner, K.-H., Ecker, B., Steindl, C. (2011): Finanzierungsmodelle universitärer Lehre: Internationale Beispiele, Erfahrungen und mögliche Strategien für Österreich, Projekt im Auftrag des Bundesministeriums für Wissenschaft und Forschung, Endbericht, Wien. vers_lehre_endbericht.pdf 10
International experiences and lessons drawn from a science policy view
Funding formulas for teaching in public universities: International experiences and lessons drawn from a science policy view Presenter: Brigitte Ecker Senior Researcher, Joanneum Research Forschungsgesellschaft
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