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Challenges of the tertiary education funding system

Among the problems identified by the World Bank study was the significant underfunding of the tertiary education system in comparison to most other EU countries. In addition, neither the system of funding through free study places, nor the research funding model create meaningful or appropriate incentives for tertiary education institutions to improve teaching, productivity or internationalisation. They are static and “one-dimensional”, merely input-based, lacking two important pillars of funding: performance-oriented funding and innovation-oriented funding.

The model also hinders institutions’ efforts to align teaching and research. This finding resonates with one of the key messages the review team heard during meetings with academic staff. They repeatedly shared their concerns about low salaries and high workloads that limit time for research. In response, the new funding model aims to support the alignment of teaching and research.

On academic salaries, the senates of tertiary education institutions determine the principles and rates of pay for their institution, although they may not be less than the minima determined by Cabinet of Ministers’ regulation. The government has recognised the need to address low salaries by increasing the minimum wage rate of academic personnel and making other reforms to the wage system. The minimum wage for academic staff is planned to rise from 1.5 times the average wage in the country in the base year of 2012 to 2.5 times the average wage in 2017 and 2.8 times in 2020 (MoES, 2014a, 2014c).

On workloads, both workloads and salaries for academic staff are based on teaching loads. A full-time teaching load is 1 000 hours per year. It is assumed that staff will pursue research within the teaching workload but this is considered a challenge by many academic staff. If an academic staff member is undertaking externally funded research such as an EU project, tertiary education institutions have the flexibility to reduce teaching loads to allow time for research. However, they cannot do this for academic staff members without externally funded research projects. As a result, these staff may simply not have the time and/or financial means to conduct research.

in addition, the current funding model is administratively burdensome and lacks incentives for institutions to diversify, consolidate or collaborate. These incentives are particularly relevant considering the relatively large and unsustainable network of tertiary education institutions and research institutions.

As mentioned earlier, there are great variations in the pattern of funding between institutions. Private colleges and universities are highly dependent on revenue from tuition fees. The funding patterns for public universities vary according to mission (whether they are research-intensive institutions or primarily teaching institutions), the alignment of their study programmes with national priorities, their ability to compete for international funding, and the extent to which they are able to generate revenue from alternative sources.

Revenue diversification can have a great impact on institutional sustainability. institutions that depend highly on tuition fee revenue are more at risk from changes in student enrolment. Those that depend primarily on state funding are more at risk from cuts in state funding in periods of economic crisis. The data suggest that some institutions with limited diversity in funding sources are indeed more vulnerable than others to these risks (World Bank, 2014a).

Moreover Latvian tertiary education institutions do not seem to fully use the financial autonomy they have, and their autonomy is not accompanied by sufficient accountability towards external stakeholders (both public and private). Tertiary education institutions are currently not required to publicly account for their balance sheets. Although useful information about general trends in revenue for the tertiary education sector is available in the annual MoES statistical report (MoES 2014a) “the availability of more detailed data on the tertiary education institutions’ revenue streams both in private and public sector is limited” (World Bank, 2014a). Information about public institutions’ funding is more readily available but the World Bank cites a report that when the consolidated budget reports of public tertiary education institutions are examined, there are concerns about the accuracy of the data, for instance due to under-reported transfers between institutions of tertiary education (Civitta, 2014).

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