Reducing the funding gap of universities in EU and financial management of universities

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20th CESAER General assembly and seminar - Aalborg - 29-31 October 2009

Reducing the funding gap of universities in EU and financial management of universities

A Norwegian Case

byProfessor Torbjørn Digernes

Rector – Norwegian University of Science and Technology

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Expenditure level on research and higher education

• EU-statistics from 2002 shows that EU spent 1.1 % of GDP on higher education, compared to 2.6% in the US

• The OECD of spending 3 % of GNP on research is met by some countires, but many countries are lagging behind

• We see an enormous growth rate in the BRIC economies, particularly China and India.

• Measured in this way, there is a considerable gap that needs closing

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Situation in Norway• Norway seems to be in line with the EU-level on

educational spending• The recently proposed budget places us at about 1 %

of GDP, and if we include the second money stream through the Norwegian research council, we are at about 1.1 %.

• We are far behind on research, where the figure is below 2 % - mainly because the private sector is lagging behind

• When university and research people meet we tend to preach the gospel to the congregation, but it is difficult the get the politicians into the congregation

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The situation in Norway – funding system (I)• Components in the governments’s funding

model (first funding channel)• Basic funding

– given independently of production indicators– makes out about 60% of the budget

• Production in education– 40 % of the education funding is calculated based on the

student credits produced by the institution– There is a differentiation of rates between different studies, with

medicine at the high end and bachelor level theoretical disciplines in humanities and social sciences at the low end

– It is an open model, so that increase in production results in a proportional increase in budgets

– The government controls the total number of students that can be enrolled at a university

– But money follows the student when education capacity is increased

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The situation in Norway – funding system (II)• Research Production

– A result based redistribution of a budget allocation for the entire sector has been implemented

– The redistribution is based on four weighted indicators• Scientific publications – points calculated based differentiation of

journals on two impact levels• Number of doctorate candidates graduated• Amount of funding from EU-framework programs and ERC• Amount of funding from the Norwegian research council and public

research funds (private funding not included)– A significant growth in the production indicators have taken place

over the last years– The budget allocation has not been increased beyond index

adjustment since it was introduced– Zero-sum game which does not give significant growth impulses to

those who succeed in research production

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The situation in Norway – funding system (III)• Earmarked funding from government

– Strategic tasks• Doctorate scholarships• Other special tasks

– Funding for new facilities• Second funding channel

– Norwegian Research Council– Regional research funds

• Third funding channel– Private sources – industry– NGOs – private research foundations

• The importance of the second and third channel varies between the institutions

• NTNU fetches about 25 % of our total budget through these channels, more than 80% of that is research funding

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Funding from the Government, inflation adjusted

-

500 000

1 000 000

1 500 000

2 000 000

2 500 000

3 000 000

3 500 000

2002 2003 2004 2005 2006 2007 2008 2009 2010

NO

K, t

hous

ands

Strategic based funding -researchResult based redistribution -researchFunding based on educationproductionBasic funding - research andotherBasic funding - education

NTNU data

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Funding from the Government

0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

80 %

90 %

100 %

2002 2003 2004 2005 2006 2007 2008 2009 2010

Strategic based funding -research

Result based redistribution -research

Funding based on educationproduction

Basic funding - research andother

Basic funding - education

Government funding

NTNU data

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External funding in total

0

200000

400000

600000

800000

1000000

1200000

2003 2004 2005 2006 2007 2008

1000

NO

K Others

Research Council

EU

NTNU data

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Positions for PhD-education directly from government funding

0

100

200

300

400

500

600

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

År

PhD

NTNU data

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Number of PhD graduatet

0

50

100

150

200

250

300

350

2004 2005 2006 2007 2008

PhD

NTNU data

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Increased publication of scientific results (given as publication points)

0

500

1000

1500

2000

2500

2005 2006 2007 2008

NTNU data

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Floor space - development 2002-2013

Increase about 57.000 m2 since 2002.

400 000

420 000

440 000

460 000

480 000

500 000

520 000

540 000

2002 2003 2004 2005 2006 2007 2008 2009 2013

År

m2

NTNU data

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Situation assessment• How is it, that we even though we have increased our

budgets like this, many faculties and departments have problems to maintain staff and quality levels?

• Answer: The basic funding is under pressure through several mechanisms

• The basic funding funds the bulk of– The permanent scientific staff– Building operation and maintenance– Technical and administrative support staff– Renewal of scientific equipment– Operation of laboratories

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Mechanisms eroding the basic funding• New facilities added without adding the funds to operate and

maintain them – amounts to about 40 MNOK for NTNU

• The new positions for doctorate educations both from the ministry and the reseach council are underfunded – particularly for support of experimental research

– amounts to 300-400 MNOK for NTNU

• Less than full compensation for price- and wage increase– about 60 MNOK for NTNU 2008-2010

• Large long term research contracts from the research council requires contribution from the host institution – particularly for research equipment and technical support personnel

– About 60 MNOK for NTNU (net effect is less, maybe 20 MNOK)

• Other externally funded research is only partly funded and requires contribution from the host institution

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What is the effect of this development?• General squeeze on the permanent scientific staff, both in terms of

number and work load• A research infrastructure which is not well maintained and renewed to

be up to date• Less than required access to hands-on experimental work by

students at all levels• Weakening of the long term basic research that should be the

hallmark of universities• General threat to keeping up quality standards in research and

education, but research is often hardest hit• Strategic power to develop strength is weakened

• Particularly hard hit are the areas where student recruitment has been weakened over later years

• Science and technology are among these – development of student numbers has in some areas been negative

• Since money follows the student in the funding model, we have several cases where the permanent scientific staff has been going down, amidst a significant growth of overall budgets for the university

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What can we do ourselves?• First we need to ”sweep in front of our own door”• We have to show that we manage our finances in a responsible way,

and take measures to improve our efficiency• Do not accept external funding when internal matching resources are

not present – and argue for full funding• Contribute to realignment in the internal budget structure with other

means under the university’s control• Do not accept external funding when internal matching resources are

not present• Reduce the resources spent in teaching • We can do that keeping up quality in a more narrow program of

specialization• And we should discontinue study programs that are undercritical

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What can we expect others to do?

• Government must give us the freedom to manage our own budget structure so that there is a balance between the different needs

• This means reducing earmarking and expectations of own funding contribution

• Establish a policy to fully fund projects through the second and third money channels for the universities

• This requires acceptance from public and private external funding sources

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But above all!• Never tire of telling the politicians that the our future

prosperity depends upon our competitiveness• In the knowledge society, the primary source of

competiviteness is a strong education and research sector

• Challenge the sector to deliver in response to society’s needs

• Measure its success to do so• And reward success – give growth impulses to those

who deliver

Reducing the funding gap of universities in EU and financial management of universities

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