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Performance-based funding of higher education

This presentation delves into critical queries on higher education financing, focusing on resource mobilization, income generation, and allocation efficiency. It discusses various performance-based funding mechanisms such as output-based formula funding, competitive funds, and performance contracts. Lessons from international experiences are shared, including models from France, Denmark, and the U.S. Emphasizing the shift towards indirect funding methods like grants, scholarships, and student loans, examples from Colorado and Kazakhstan are explored. Other innovative approaches such as Brazil's ProUni and Colombia's "access with equity" program are also highlighted. The presentation concludes with insights on policy objectives, quality improvement, and the importance of transparent and adaptable allocation instruments in higher education funding reform.

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Performance-based funding of higher education

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  1. Performance-based funding of higher education Dead Sea, 11 February 2007

  2. key 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)

  3. key financing questions • resource utilization • how should public resources be allocated? • how efficient and effective are institutions?

  4. outline of the presentation • typology of performance-based allocation mechanisms • which mechanism is more effective? • preliminary lessons from international experiences

  5. outline of the presentation • typology of performance-based allocation mechanisms

  6. allocation mechanisms from untied funding to performance-based funding

  7. performance-based funding • output-based formula funding • competitive funds • performance contracts

  8. formula funding • formula linking amount of financing and some measures of outputs • number of graduates • research productivity (publications, patents, licences, spinoffs) • unit costs per level of studies / discipline (actual, average, normative costs)

  9. competitive funds • set objectives • competition on the basis of projects • transparent rules & criteria • peer review and selection • independent monitoring committee

  10. performance contracts • institutional agreement to achieve certain objectives • additional funding based on meeting agreed objectives • examples: France, Denmark, Austria, Finland, Colorado & Virginia in US

  11. allocation of research funding • targeting additional resourcesto programs/institutions with potential of achieving world-class status • preferably on competitive basis • project-funding • demonstrated institutional capacity (RAE) • centers of excellence

  12. allocation mechanisms from direct funding to indirect funding

  13. indirect funding • grants and scholarships • student loans • vouchers

  14. Colorado funding model Old Model Direct Government Funding Tuition New Model Indirect Gov’t Funding via Stipends Tuition & Stipends

  15. Colorado experience • voucher for an undergraduate education at eligible universities; no cash in students’ hands • $2,400 per year at public institutions • $1,200 per year for low-income students attending private institutions • degree-seeking, non-degree, and teacher licensure undergraduate students eligible • age, income and financial aid eligibility are irrelevant to qualify

  16. Kazakhstan experience • 20% best qualified secondary school graduates • choose university • $1,200 for public university • up to $4,000 for private university • must maintain top academic grades

  17. Brazil ProUni • State purchases seats in private universities • offered to top students from low-income families who don’t get a seat in a public university • no actual payment to the university, but tax exemption

  18. Colombia (Antioquia)“access with equity” • partnership among local government, private firms and private universities • low-income students who don’t get a seat in a public university get financial aid to enter a private university • 75% scholarship and 25% subsidized loan

  19. outline of the presentation • typology of allocation mechanisms • which mechanism is more effective?

  20. Alice in Wonderland Lewis Carroll Alice Would you please tell me which way I ought to go from here? Cheshire Cat That depends on where you want to get to.

  21. policy objectives pursued • improving access and equity • improving quality and external efficiency • improving internal efficiency and sustainability

  22. improving external efficiency • improving quality • competitive funds • merit-based scholarships • increasing relevance • formula with differential weights for high priority fields • competitive funds • grants and scholarships in priority fields • student loans in priority fields • loan forgiveness for students in public service jobs

  23. outline of the presentation • typology of allocation mechanisms • which mechanism is more effective • preliminary lessons from international experience

  24. principles of an appropriate allocation instrument • linked to performance / policy objectives • transparent (objective criteria, openness) • compatibility

  25. country context • local circumstances (culture, history) • reform for what? • dilemma: rewarding the strong or equalizing the field? • time dimension (flexibility)

  26. link to quality assurance • pro: powerful incentive • con: punitive, rewards stronger institutions • link at the margin?

  27. political economy dimensions • move to performance-based can be controversial • dealing with the politics (winners and losers) • not an excuse to avoid reforms

  28. remember Hemingway…

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