A new funding model for Latvian HE: Criteria, current challenges, proposals and scenarios

1. A new funding model for Latvian HE: Criteria, current challenges, proposals and scenarios World Bank Team Stakeholder workshop July 8, 2014 Riga, Latvia

2. Contents of the presentation • The process • Criteria for assessing funding models • Main challenges of current financing model and requirements for new model • Proposals for a new funding model • Scenarios for implementation

3. The process so far criteriaforgoodfundingmodels analysis of strengthsandweaknesses of existing model strategic fit analysis of existing model proposalsfor a new model

4. Contents of the presentation • The process • Criteria for assessing funding models • Main challenges of current financing model and requirements for new model • Proposals for a new funding model • Scenarios for implementation

5. Criteria for assessing funding models • Teams’ work in developing financing model builds on confirmed criteria for “good” funding models mainly derived from European trends and international practice • Criteria were applied to Latvia’s current higher education funding model to determine its strengths and weaknesses • Criteria will be applied to the overall assessment of the proposed funding model

6. Higher Education Funding Assessment - Stakeholder Feedback on Initial Findings | March 12, 2014

7. Contents of the presentation • The process • Criteria for assessing funding models • Main challenges of current financing model and requirements for new model • Proposals for a new funding model • Scenarios for implementation

8. Main challenges of current financing model and requirements for new model • The Team has identified 8main challenges associated with Latvia’s current approach to financing higher education and research according to • Analysis of strengths and weaknesses of higher education financing in Latvia: (Report 1) • Assessment of current funding model’s ‘Strategic Fit’ with Latvian higher education policy objectives (Report 2) • Identified challenges were reinterpreted as 8requirements for the new funding model • Consistent with the organizing structure of the prior reports, identified challenges and requirements were organized by the four topics: • State funding • Diversification of financial sources • Financial autonomy • Student funding and support

9. Challenges and Requirements: State funding

10. Challenges and Requirements: State funding

11. Challenges and Requirements:Diversification of financial resources

12. Challenges and Requirements:Financial autonomy

13. Challenges and Requirements: Student financing

14. Contents of the presentation • The process • Criteria for assessing funding models • Main challenges of current financing model and requirements for new model • Proposals for a new funding model • Scenarios for implementation

15. Again: the 4 topics • State funding • Diversification of financial sources • Financial autonomy • Student funding and support

16. But before: two basic ideas thereformshouldbe a package of morepublicfunding + strategy/ performance-orientation + public/private cost-sharing + accesspromotion • no additional public funds without changing the system – changes as good reason for more investment (additional funds make changes possible) • orientation for change: strategic fit, performance-orientation • mixed funding of the mixed good higher education • turn down major access obstacles

17. But before: two basic ideas an importantfeature of thefunding model is „balance“. One-sidedmodelsaredangerous, the model hasto deal withtrade-offs. The current model is not sufficientlybalanced. stability, input-orientation incentives, output-orientation ex antefunding ex post rewards national objectives institutionalprofiles teachingcriteria researchcriteria broadresearchfunding focusedresearchfunding publicsources private sources needs-basedstudentfunding merit-basedstudentfunding autonomy accountability

18. State funding: 3-pillar-model instead of 1 pillar

19. What does this mean for the study place model? • still in place, but not to cover all cost, stable basic funding (in the end funding per student will vary according to performance) • continue field-specific cost factors (check, update), but now with the character of relative prices • continue planning process, demand-orientation (but without performance criteria, they are now directly relevant through other pillars)

20. The process of planning study places should be gradually changed • stakeholder consultations (labor market needs, development of demand), interministerial committee (if not integration) • MoES/line ministries: overall target numbers for fields (incremental with planned +/-), target numbers for innovative programs • universities: proposals how to contribute to +/- and for innovative programs (the latter: open for private universities) • panel to review proposals, MoES to decide (last period’s demand relevant if more than e.g. 5% deviation from plans) • part-time study places allowed • deeper field evaluations from time to time intentions: planningelement, highstability, but reallocationspossible (questions: Further ideas? Timelines, still everyyear?)

21. Aspects of the 2nd pillar • calculation: X € of total budget for indicator, university with Y% od indicator value gets Y% of the indicator budget • final decision about indicators and weights: political, strategic fit • up to 3 institution-specific indicators (calculation options: premium for targets reached, reward according to rate of increase of indicators)

22. Aspects of the 3rd pillar • clarify priorities for next 3 years in promoting institutional profile (within framework of national goals) • define institution-specific performance indicators • ex-ante funding of innovative activities (e.g. establish joint Dr. schools with non-university research, post doc programs, international accreditation...) • funding of research centers of excellence

23. Diversification: requirements for the EU structural funds • parallel process going on, we recommend to include goals that are not covered by 3-pillar-model (and which have short-term character) • incentives to generate other income streams (e.g. knowledge vouchers for SME) • sector consolidation incentive program (reference to Denmark)

24. Autonomy: a strength of the Latvian system • formal rules of autonomy are a European best practice • but the other side of the coin is transparency/accountability (financial statement, report on target agreement) • plus financial management training, make more use of the financial autonomy

25. Student funding: cost-sharing + access • enlarge number of state-subsidized study places (full need of the country) • private cost-share from all students • differentiated system (cost, labor-market perspectives, political preferences such as STEM) – or advantages of flat fee? • needs-based scholarship to refinance private cost-share (continuation based on merit) • student loans with state guarantee (and merit-based debt remission)

26. Funding model is not isolated, needs favorable framework conditions • strategic planning on both sides • informed study choices • quality assurance • inter-ministerial coordination (MoES, line ministries, MoF) • alignment of mechanisms for universities, colleges, research institutions

27. Contents of the presentation • The process • Criteria for assessing funding models • Main challenges of current financing model and requirements for new model • Proposals for a new funding model • Scenarios for implementation

28. The realization of the model depends on the funding level – 3 scenarios DEVELOP THE KNOWLEDGE SOCIETY: fullimplementation of the model post-pone-ment of ele-ments in-crea-sing LIMITED EXPANSION: partial implementation of the model OPTIMIZING SCARCITY: somebasicimprovements

29. achievements in ”optimizing scarcity” model are very limited • basic revision of study place allocation system, more inter-ministerial coordination • target agreements to make profiles more transparent without financial support and incentives • small no. of graduates-allocation OR small innovation pool (generated by lowering price per student below current level) • self-initiated peer learning/benchmarking on financial management • turn merit-based scholarship into needs-based one (small volume) • financially neutral cost-sharing instead of dual track, high cost-shares to create some funds for needs-based fee waivers none of thechallengesmentionedaboveaddressed on thefullscale, most verypartially

30. much more could only be done with additional funding • funding of research (broad) • funding of research (focused, centers of excellence) • performance-oriented formula, incentive system • institution-specific indicator component • better access to loans (solve guarantor problem) • target agreements incl. financial incentives • financial support of institutional profiles • promotion of third mission activities • promotion of innovative developments • set free potentials for new programs with EU funds (e.g. sector consolidation incentives) only additional fundingisabletoinduce significantchanges

31. Implementation could of course be done in steps with adequate packages (some thoughts) Roadmap for models with budget increases • Consider requirements for EU funds in current parallel process • Quick and transparent wins: formula, basic research funding and loan guarantee first (pragmatic start, direct effects, no negotiations, state and student funding immediately addressed, teaching and research)? Iincrease formula volume step by step (multi-year plan)? • Second step optimization of study place system and implementation of target agreement with all its implications? • Third step full implementation of cost-sharing + needs-based elements? Other suggestionshowtomoveforward?

32. To be discussed • Questions • comments on conceptual level • Further suggestions • Questions of feasibility, how realistic are components, operative issues • Suggestions for implementation process