Major Dimensions of Financing Reforms

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Major Dimensions of Financing Reforms

• Financing Reforms for Tertiary Education in the
  Knowledge Economy
• Seoul, 6-8 April 2005

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outline of the presentation...

• key financing questions
• new financing challenges
• reform and innovation trends

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outline of the presentation...

• key financing questions

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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?

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outline of the presentation...

• key financing questions
• new financing challenges

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financing challenges for developing countries

• long-standing challenges
• emerging challenges

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long-standing challenges

• financially sustainable expansion

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enrollment rates by income level (1980-2001)
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enrollment rates by region (1970-2001)
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proportion of private enrollment
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long-standing challenges

• financially sustainable expansion
• equity in access

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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

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tertiary enrollment per quintile
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inequalities in access and educational resources
in USA
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long-standing challenges

• financially sustainable expansion
• equity in access
• internal efficiency

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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

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long-standing challenges

• financially sustainable expansion
• equity in access
• internal efficiency
• quality and relevance

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new challenges

• shrinking student population
• education and training needs
• cost of ICT
• increased competition

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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)

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Changes in Job Task-Skill Demands(USA, 1960-1998
Source Autor, Levy, and Murnane (2003) The
Skill Content of Recent Technological Change An
Empirical Exploration, Quarterly Journal of
Economics.
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opportunity to tap potential of ICT
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increased competition

• public / private
• new providers
• long distance competition
• franchise universities
• corporate universities
• media companies, libraries, museums secondary
  schools
• education brokers
• alliances and partnerships

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outline of the presentation...

• key financing questions
• new financing challenges
• reform and innovation trends

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funding sources (macro)

• from
• public funding
• to
• cost sharing

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funding sources (institutional level)

• from
• dependence on public funding
• to
• diversified funding

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allocation mechanisms (public funding)

• from
• direct funding
• to
• indirect funding
• from
• untied funding
• to
• performance-based funding

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student aid options

• from
• mortgage loans for students
• to
• income-contingent loans for graduates

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funding sources (macro)

• from
• public funding
• to
• cost sharing

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who can pay?

• the State
• central / federal government
• provincial / state gvt
• municipal gvt
• students / families
• firms
• society (taxes)

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rationale for cost-sharing

• private benefits
• need for additional revenues
• equity concerns
• efficiency promotion

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cost-sharing

• living expenditures
• dormitories
• food
• transportation
• tuition fees

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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

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optimal fees policy

• universal
• reasonable level (10 to 30)
• associated with student aid
• adjusted to cost of living index

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political economy

• consultation and consensus building
• decentralization / autonomy

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funding sources (institutional level)

• from
• dependence on public funding
• to
• diversified funding

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allocation mechanisms (public funding)

• from
• direct funding
• to
• indirect funding
• from
• untied funding
• to
• performance-based funding

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direct funding to institutions

• set guidelines
• negotiated budgets

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let us make a deal...
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direct funding

• formula funding
• input-based
• output-based
• competitive funding
• benchmarking funding
• performance funding
• matching fund
• charge back

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indirect funding

• vouchers
• scholarships
• tax credits
• matching grants
• student loans
• human capital contracts

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Service and Cultural Activities
  Allocation Mechanism
  Teaching
  Research
Living Expenses
  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
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  Allocation Mechanism
 
  Public

 
Private
Direct Funding
 
 
 
 
 
Negotiated Budget

X
X

Formula Funding
 
 
 
 
 
Input-based

X

 
 
Performance-based

X
 
   
 
Competitive Funding

X
 
X 

X
Benchmarking Funding
 
 
 
 
Performance Funding

X
 


Matching Fund
 
X
 
 

Charge Back

 
 
 
 
X
Indirect Funding
 
 
 
 
 
  X
X
Vouchers

 
 
 
  X
  x
Scholarships


 
x
Tax Credits


 
 
X
  x
Matching Grants

 

 
 
Student Loans

 

 
 
X
X
Human Capital Contracts
x
x
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student aid options

• from
• mortgage loans for students
• to
• income-contingent loans for graduates

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conclusion
the end
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themes of the forum

• allocation mechanisms at the national level
• income generation at the institutional level
• student aid mechanisms
• measuring performance
• buffer bodies