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Proposed “threepillar” funding model

The World Bank therefore proposed a “three-pillar” funding model designed to provide a balance between stability, performance and innovation. In this model, stable funding is combined with a performance-oriented component based on performance indicators, and an innovation-oriented component allocated via performance agreements.

  • • For continuity, the first pillar would mainly consist of a modified version of the study-place model, as its input-oriented approach remains an important element of the state-funding system. it would also include a per capita funding component based on the number of professors or academic staff, to enhance the funding available for basic research and to further align teaching and research funding.
  • • The performance-oriented pillar would be based on a small number of indicators derived from national strategies and of general relevance for all tertiary education institutions. Part of the allocation would be based on institution-specific indicators related to their profile and strategic development and reflected in the performance agreement.
  • • The innovation-oriented pillar would provide funding for activities that contribute to targets set in a university target or performance agreement. This pillar also contains funding for research centres of excellence, accounting for research evaluation outcomes and a national strategy for research priorities. The targets incorporate national priorities, and operationalise university profiles and strategies.

While the performance-oriented (Pillar 2) component of the performance agreement is focused on selecting a few relevant indicators specific to the institution’s mission, the third pillar should assess more broadly how the institution will contribute strategically to Latvia’s tertiary education vision, mission and objectives. As well as teaching and research, these should also extend to all kinds of “third mission” activities like technology transfer and innovation, continuing education, and social engagement (European Commission, 2008).

The second pillar partly rewards and sanctions past performance, whereas the innovation-oriented component provides financial support for future objectives negotiated between individual universities and the ministry (taking into account state goals and institutional profiles). To complement the three-pillar model, the report also addresses the issue of cost-sharing and emphasises that means-tested or need-based financial support can widen access and address equity concerns. Table 5.3 illustrates the main features of the three-pillar model recommended by the World Bank.

Through the World Bank study, Latvia has recently completed a thorough review of the tertiary education financing with extensive engagement of stakeholders from throughout the tertiary education system and civil society. The study is an excellent example of Latvia’s use of the independent assessments by international organisations and experts to help frame policy issues and leverage essential reforms. The recommendations from this process are fully consistent within international best practices and it is very positive that the Cabinet of Ministers has recently endorsed the new funding model. The challenge for latvia now is to fully design and implement it.

Table 5.3. Three-pillar model for new financing system

Pillar 1: Basic funding

Pillar 2:

Performance-oriented funding

Pillar 3:

Innovation-oriented funding

Teaching

  • • Number of study places per field
  • • Cost-oriented weight
  • • Number of graduates
  • • Number of incoming and outgoing students

Institutional indicators

Profile-oriented target agreements teaching +

research + third mission

Research

  • • Number of professors/ academic staff
  • • Cost-oriented weight
  • • Bibliometric indicator
  • • Third-party funds
  • • Number of PhDs

Institutional indicators

Funding of centres of excellence

Source: World Bank (2014c), Higher Education Financing in Latvia: Final Report, World Bank Reimbursable Advisory Service on Higher Education Financing in latvia, World Bank, http://viaa.gov. lv/files/news/24134/lv_hef_r3vsub_190922014_c_final.pdf.

in June 2015 the Cabinet of Ministers endorsed the proposal of MoES to implement the three-pillar funding model. With the support of the tertiary education institutions the second pillar financing was launched in July 2015.

The Cabinet passed the regulation by which additional performance-based indicators were introduced in the tertiary education funding system. These indicators will reflect the performance of tertiary education institutions in the area of research and innovation. The funding allocated specifically for the second pillar constitutes EuR 5 million for 2015, EuR 6.5 million in 2016 and EuR 6.5 million in 2017.

 
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