Funding models considered and the proposal for a new model

1. Funding models considered and the proposal for a new model Prof. Dr. Frank Ziegele, World Bank Team September 24, 2014 Riga, Latvia

2. Funding models considered

3. How did we come to the proposed instruments? useexperienceswithexistingmodels developtheexistingsystemfurther suggestnewideas/ components but youcan‘ttransfer a model 1:1 toanothercountry, alwaysspecialcontexts. specificcombinations, Adoptandadaptelements!

4. Models we learned from • Study place allocation models: UK, Estonia, Sweden • formula funding: Finland, Germany, Netherlands, Sweden, Norway • target agreements: Germany, Netherlands, Croatia • cost-sharing approaches: Netherlands, Australia, New Zealand • student grants and loans: Estonia, Germany, Netherlands • excellence-oriented funding: Germany, France, Denmark • sector consolidation program: Denmark, Scotland • innovation vouchers: Netherlands (plus comprehensive overview on trends in European systems)

5. Models we learned from: example Finnish state funding

6. Proposal for a new model

7. The new model also addresses the 4 elements • State funding • Diversification of financial sources • Financial autonomy • Student funding and support

8. The proposal includes two ”packages” to overcome political blockades thereformshouldbe a package of morepublicfunding + strategy/ performance-orientation • 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 (instead of polarized debate) • turn down major access obstacles twopackages! thereformshouldbe a package of public/private cost-sharing + accesspromotion

9. A major principle for the reform is: balance! 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

10. Proposed model for state funding in brief • increase public funding • keep and optimize the study place system • introduce basic funding for research (again) – only universities • introduce rewards for good performance • introduce rewards for good plans to develop HEIs profiles and performance • support (few) centers of excellence in research – only universities

11. State funding: 3-pillar-model instead of 1 pillar implications of the 3-pillar-model

12. Important implication: available funds differ according to performance funding high performance frompillar 2/3 fundinglowperformance funding per studyplace funding per studyplace frompillar 1 available funds per study place

13. The process of planning study places is gradually changed • stakeholder consultations (labor market needs, development of demand), interministerial committee • 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

14. Strengths of current study place system are preserved • planning process according to labour market needs • stability • differentiation according to cost of fields • but now: allowing reallocations (innovative programs), less micro-management

15. Research funding balances 3 elements funding of non-university institutes current model funding of centers of excellence (pillar3) universitypooltosupportindivid. researchers per capita-funding (pillar1) individual researchers funding of institutes (university + non-university) incentives for research performance incentives (pillar 2)

16. The 2nd pillar is a major new element of performance orientation • around 10% of budget would create substantial incentives • calculation: X € of total budget for indicator, university with Y% of 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)

17. The 3rd pillar promotes profile differentiation • clarify priorities for next 3 years in promoting institutional profile (within framework of national goals) • define institution-specific performance indicators for pillar 2 • pre-funding of innovative activities (e.g. establish joint Dr. schools with non-university research, post doc programs, international accreditation...), but also reward goal attainment • funding of research centers of excellence

18. 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 stimulate other income streams (e.g. knowledge vouchers for SME) • sector consolidation incentive program (reference to Denmark, Scotland)

19. 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, peer learning

20. Student funding: based on cost-sharing + promoting access • enlarge number of state-subsidized study places (full need of the country) • private contribution 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)

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

22. Funding models considered and the proposal for a new model Prof. Dr. Frank Ziegele, World Bank Team September 24, 2014 Riga, Latvia