Beiträge zur Hochschulforschung - European University Association

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20 Thomas Estermann, Enora Bennetot Pruvot Figure 1: Income sources and funding modalities Block grant/lineitem budget Research contracts/ consultancy Public authorities Targeted funding Training contracts Project-based funding Philanthropic funding Companies/business sector 3 Drivers to income diversification Contracts Higher Education Institutions Purchase of other services (conferencing, research facilities) Why do universities seek to diversify their funds? Project-based funding Tuition & administrative fees Students European Union/other international funding Tenders Donations, project-based funding, services Foundations/ charities Others (incl. philanthropic funding) Fees, services, philanthropic funding Others (incl. Alumni) Universities face external challenges, such as pressures on public budgets, globalisa- tion and internationalisation of higher education, which increase competition but also provide new opportunities for activity expansion. These evolutions also drive institutions to seek additional funding from other sources. Income diversification may be strategically used to develop activities and respond to new missions, as it may reinforce the position of an institution on the local, national or international stage by supporting its competitiveness. Risk management constitutes one of the major drivers for income diversification for universities in Europe. The perception that it is necessary to spread financial risks is commonly shared among universities, especially in the light of the consequences of the economic crisis 2 and on the basis of pessimistic expectations regarding future trends in funding coming from “traditional” sources. Developing additional funding streams becomes necessary to mitigate negative consequences of a sudden drop in income or to fuel further growth of the institution’s activities. Universities also tend to approach income diversification as a means to gain more flexibility in their internal financial management, as public funding often comes with complex administrative requirements. Different public funders tend to establish various, and at times incompatible, rules and modalities. Income generated through commer- cial or fundraising activities is perceived as being comparatively easier to manage and has the advantage that it can be allocated internally without restrictions. Although 2 See below “the impact of the economic crisis” Beiträge zur Hochschulforschung, 33. Jahrgang, 2/2011
Overview of the study some additional income sources do offer this type of flexibility, it is evident that contracts with private partners can be just as demanding as public funding programmes. Often, the private sector works according to funding modalities that limit the com- pany’s contribution to partial funding of these activities. 4 State of play How are universities funded in Europe? Are universities diversifying their funds? In Europe, direct public funding continues to be the most important income source for universities, representing, on average, close to three quarters of an institution’s budget. Direct public funding mostly comes to the university as a block grant, leaving the leadership with the responsibility of internal allocation of resources. Public authorities tend to resort to funding formulae to determine these grants, increasingly taking performance criteria into account. In parallel, public authorities use more and more competitive and targeted funding, a trend which has been exacerbated by re- duced investment capacities. Student financial contributions or fees have the potential to constitute a large income source, considered by those who can charge them as fairly predictable and giving the university the ability to invest over the long term. Their importance varies greatly however depending on the legal framework in which universities operate. In some countries like England (25 per cent on average) or Spain (13 per cent on average), they represent a significant income source. Although in many European countries universities can charge fees for some groups of students, their level is often regulated by the state and in some cases contributes only a small percentage to a university’s income. Student populations are often segmented according to academic level or different criteria (national origin, on-campus or distance studies, part-time or full-time, language of classes, etc), painting a complex picture across Europe. Although different percep- tions and traditions exist across Europe on the inclusion of fees in the funding model for higher education, the debate is gaining relevance in most countries – especially in view of the economic downturn – and will continue to be at the heart of the discussion around funding models for higher education in the coming years. Additional sources represent almost 20 per cent of the budget of a majority of universities. In some cases, this type of funds amount to between a fourth and a third of the institution’s income structure. Contracts with private partners represent the largest additional source with an average of 6.5 per cent. It varies significantly between institutions though, ranging from 1 per cent to 25 per cent of the income structure. Phil- anthropic funding amounts on average to 4 per cent of the total income of a university, with some universities generating close to 10 per cent of their income from this source. While universities in the United Kingdom are generally more successful in their Beiträge zur Hochschulforschung, 33. Jahrgang, 2/2011 21
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Page 6 and 7: 2 Orientation, themes and target au
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Page 12 and 13: 8 Abstracts Partnerschaften und die
Page 14 and 15: 10 Abstracts Mark Lammerts: Challen
Page 16 and 17: 12 Jean-Marc Rapp An introduction t
Page 18 and 19: 14 Jean-Marc Rapp long-term financi
Page 20 and 21: 16 Jean-Marc Rapp The European Unio
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