Major Dimensions of Financing Reforms Financing Reforms for Tertiary Education in the Knowledge...

Major Dimensions of Financing Reforms

Financing Reforms for Tertiary Education in the Knowledge EconomySeoul, 6-8 April 2005

outline of the presentation...

key financing questions

new financing challenges

reform and innovation trends

financing questions

resource mobilization

how much should be spent on tertiary

education? (macro-level)

income generation at institutional level

who should pay, and what share?

when and how?

is it affordable? (student aid)

resource utilization

how should public resources be allocated?

how efficient and effective are institutions?

financing challenges for developing countries

long-standing challenges

emerging challenges


financially sustainable

expansion

enrollment rates by income level

(1980-2001)

0

10

20

30

40

50

60

70

1980 1985 1990 1997 1999 2000 2001

%

High Income

Upper Middle Income

World Total

Lower Middle Income

Low Income

enrollment rates by region (1970-2001)

25.2

14.610.7

48.6

3.6Sub-Saharan Africa

22.4Middle East

Latin America/Caribbean

East Asia/Oceania

Southern Asia

Eastern Europe/Central Asia

0

10

20

30

40

50

60

1970 1980 1985 1990 1995 1997 1999 2000 2001

Year

Enro

llmen

t

Expenditure on tertiary education institutions by enrollment, 2001

AUS

AUT

BEL CAN

CZE

DNK

FIN

FRA

DEU

GRC

HUN

ISL

IRLITAJPN

KOR

MEX

NLD

NOR

PRT

SVK

ESP

SWE

TUR

GBR

USA

0

20

40

60

80

100

0.5 1.0 1.5 2.0 2.5 3.0

Total expenditure as a percentage of GDP

Gros

s en

rollm

ent r

ate

1

1Sum of all tertiary level students enrolled at the start of the academic year, expressed as a percentage of the mid-year population in the 5 year age group after the off icial secondary school leaving age.Source: UNESCO Institute for Statistiscs; OECD

proportion of private enrollment

0 10 20 30 40 50 60 70 80 90

Philippines

Korea

J apan

Indonesia

Colombia

India

Brazil

Bangladesh

Nicaragua

Paraguay

J ordan

Peru

Ecuador

Chile

Congo

Nepal

USA

Guatemala

Thailand

El Salvador

Mexico

Venezuela

Argentina

Honduras

Rwanda

Malasia

Bolivia

Papua New Guinea

Kenya

Zimbabwe

Panama



expansion

equity in access

elusive equity

Mexico (2005)

only 1% of 15-24 year old from poorest quintile attend tertiary education

32% from richest quintile

USA: probability to access Ivy

League university is 8.3% for lowest quintile 50% for richest quintile

France: probability to access Grande

Ecole is 6% for lowest quintile 15% for middle quintile

tertiary enrollment per quintile

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

Perce

natag

e of 1

8-24

Year

Olds

Enrol

led

Spain Peru Mexico Brazil

Q1 - Poorest Q2 Q3 Q4 Q5 - Richest

inequalities in access and educational

resources in USA

9423

20568

3368274

0

5000

10000

15000

20000

25000

30000

US$

High IncomeStudent in

Research U

Low IncomeStudent inCommunity

College

Type of Students & Institutions

Institut.Expend.

PrivateCost



expansion

equity in access

internal efficiency

internal efficiency

proportion of enrolled students who never

finish their studies:

75% in Argentina

60% in Morocco

30% in Australia

proportion of students who graduate on

time:

13% in Italy



expansion

equity in access

internal efficiency

quality and relevance

new challenges

shrinking student population

education and training needs

cost of ICT

increased competition

client needs

knowledge-driven economic growth (and aging population) requires higher labor productivity, which means in turn

increased demand for skilled workers

changing education and training needs

(methodological skills and updating of

knowledge)

more diverse clients (lifelong learning

perspective)

Changes in Job Task-Skill Demands

(USA, 1960-1998

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

14

16

1969 1974 1979 1984 1989 1994 1998Perce

ntile

Chan

ge

Expert Thinking

ComplexCommunication

Routine Manual

Routine Cognitive

Non-Routine Manual

Source: Autor, Levy, and Murnane (2003) “The Skill Content of Recent Technological Change: An Empirical Exploration,” Quarterly Journal of Economics.

opportunity to tap potential of ICT

increased competition

public / private

new providers long distance competition franchise universities corporate universities media companies, libraries, museums &

secondary schools education brokers

alliances and partnerships




reform and innovation trends

funding sources (macro)

from

public funding

to

cost sharing

funding sources (institutional level)

from

dependence on public funding

to

diversified funding

allocation mechanisms (public funding)

fromdirect funding

toindirect funding

&from

untied fundingto

performance-based funding

student aid options

from

mortgage loans for students

to

income-contingent loans for graduates

funding sources (macro)

from

public funding

to

cost sharing

Expenditure on tertiary education institutions, 2001

AUS

AUT

BEL

CAN

CZE

DNKFIN

FRADEUGRC HUN

ISL

IRL

ITAJPN

KOR

MEX

NLDNOR

PRT

SVK

ESP

SWE

TUR GBR

USA

0.5

1.0

1.5

2.0

2.5

3.0

0 10 20 30 40 50 60 70 80 90

All private sources as a percentage of total expenditure

Tota

l exp

endit

ure a

s a pe

rcen

tage

of G

DP

Source: OECD

who can pay?

the Statecentral / federal

governmentprovincial / state gvtmunicipal gvt

students / families

firms

society (taxes)

rationale for cost-sharing

private benefits

need for additional revenues

equity concerns

efficiency promotion

cost-sharing

living expenditures dormitories food transportation

tuition fees

fees

for everybody / dual track

undergraduate / postgraduate

national policy / individual institutions

special category students (repeaters, mature, part-time, continuing ed, foreign, out of state)

one fee or program-linked?

ceiling / freedom to set

optimal fees policy

universal

reasonable level (10 to 30%)

associated with student aid

adjusted to cost of living index

political economy

consultation and consensus building

decentralization / autonomy

funding sources (institutional level)

from

dependence on public funding

to

diversified funding

allocation mechanisms (public funding)

fromdirect funding

toindirect funding

&from

untied fundingto

performance-based funding

direct funding to institutions

set guidelines

negotiated budgets

let us make a deal...

direct funding

formula funding input-based output-based

competitive funding

benchmarking funding performance funding

matching fund charge back

indirect funding

vouchers

scholarships

tax credits

matching grants

student loans

human capital contracts

Allocation Mechanism

Teaching

Research Living Expenses

Service and

Cultural Activities

Investment

Direct Funding

Negotiated Budget X X X X X

Formula Funding

Input-based X X X

Performance-based X X

Competitive Funding X X X

Benchmarking Funding X

Performance Funding X X X X

Matching Fund X X

Charge Back X

Indirect Funding

Vouchers X

Scholarships X X

Tax Credits X X

Matching Grants X X

Student Loans X X

Human Capital Contracts X X

Allocation Mechanism

Public Private

Direct Funding

Negotiated Budget X X

Formula Funding

Input-based X

Performance-based X

Competitive Funding X X

Benchmarking Funding

Performance Funding X

Matching Fund X

Charge Back

Indirect Funding

Vouchers

X

Scholarships

X

x

Tax Credits

x

Matching Grants

Student Loans

X

X

X

xX

X X

Human Capital Contracts x x

student aid options

from

mortgage loans for students

to

income-contingent loans for graduates

conclusion

themes of the forum

allocation mechanisms at the national level

income generation at the institutional level

student aid mechanisms

measuring performance

buffer bodies

Major Dimensions of Financing Reforms Financing Reforms for Tertiary Education in the Knowledge...

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