Funding of Higher Education Institutions

The European University Association's work on the financial sustainability of universities has previously focused on the opportunities and challenges associated to the attraction of diverse income sources (Thomas and Pruvot 2011) and the development of adequate financial management tools such as full costing (Thomas et al. 2008, 2013). EUA has also set up a Public Funding Observatory to monitor the development of trends in public funding for universities throughout Europe on an annual basis since 2008.

This paper primarily addresses evolutions in the ways public funding is delivered to universities, and how public authorities seek to calibrate these modalities to improve funding efficiency in the system. Early observations show that, while some funding tools are widely used in the countries considered in the analysis, they tend to cover different realities, thus making comparisons challenging. To understand these different realities one first needs to look at the overall funding context in each system.

Income Structures

Where system averages are available, public funding represents between 50 and 90 % of the universities' income structures. There have often been significant changes in the modalities through which public funding is delivered. In addition, one should bear in mind the important cuts made in the budgets for universities in a number of countries since 2008, which are described in EUA's Public Funding Observatory. In 2014, 15 systems had lower public funding available to higher education institutions than in 2008 (taking inflation into account).[1] Given the importance of this funding source for universities, changes in both the nature and overall amount potentially have the greatest effect on universities' long-term financial sustainability.

In 2013 tuition and administrative fees represented typically around 5 % or less of the universities' income in the Nordic countries (Denmark, Finland, Iceland, Norway, Sweden), as well as in Austria, Belgium (both systems), the Czech Republic, Estonia, France and Germany.[2]

In nine countries tuition fees represented 10 % or more of the universities' average income, and, as such, constitute the most important income source after public funding. Those include Hungary, Ireland, Italy, the Netherlands, Latvia, Poland, Slovakia and Spain, as well as the United Kingdom. However, as public authorities in many cases can decide about the introduction, abolishment or level of tuition fees, this income source can fluctuate considerably.

Generating additional income from other sources is therefore perceived as more and more necessary for the long-term financial sustainability of universities, and expectations of public authorities around this are rising. Here, we consider income generated by research contracts and provision of services (such as renting of facilities, catering services, consultancy, etc.), philanthropic funding, and, when possible, European funding.[3] Overall, these types of additional income sources exceed 10 % of the average universities' income in most systems (Thomas and Pruvot 2011, p. 27). A worrying trend though is that in some countries, national authorities tend to perceive European funds as a mechanism to compensate decreases in national public funding for the sector. This is problematic, not only because of the significant amount of co-funding required, but also because European funds are allocated on a competitive basis—success in the competition requires institutional capacities and resources that in turn depend on financial means.

  • [1]
  • [2] Estonia and Germany have recently abolished tuition fees for students completing their studies within the regular timeframe/obtaining a certain number of ECTS per year
  • [3] It should be noted that European funds are not always identifiable in the universities' income structure; this may be for instance the case of structural funds, which are delivered by the national or regional authorities, and may be thus labelled as national/regional funds
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