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a review of a review of innovative allocation innovative allocation
mechanismsmechanisms
Jamil Salmi and Art HauptmanJamil Salmi and Art Hauptman
international forum on tertiary education international forum on tertiary education financing financing
Barcelona, 30 Nov-2 Dec 2005Barcelona, 30 Nov-2 Dec 2005
key financing questionskey financing questions
• resource mobilizationresource mobilization
– how much money for tertiary education?how much money for tertiary education?
• resource utilizationresource utilization
– are available resources used efficiently and are available resources used efficiently and
effectively?effectively?
• buffer body or not?buffer body or not?
– is it more desirable to rely on an intermediary is it more desirable to rely on an intermediary
body?body?
outline of the presentationoutline of the presentation
• typology of allocation mechanismstypology of allocation mechanisms
• which mechanism is more effective?which mechanism is more effective?
• preliminary lessons from preliminary lessons from international experiencesinternational experiences
outline of the presentationoutline of the presentation
• typology of allocation typology of allocation mechanismsmechanisms
allocation mechanisms
from direct funding toindirect funding
&
from untied fundingto
performance-based funding
direct funding to institutions:traditional approaches
set guidelines
negotiated budgets
line-item allocation
block grant
categorical / earmarked funds
direct funding: innovative approaches
formula funding input-based output-based benchmarking charge back
competitive funding performance contracts
formula funding
formula linking amount of financing and some measures of inputs and/or outputsnumber of teaching staffnumber of studentsnumber of graduates
unit costs per level of studies / discipline (actual, average, normative costs)
competitive funds
set objectives
competition on the basis of projects
transparent rules & criteria
peer review and selection
independent monitoring committee
performance contracts
institutional agreement to achieve certain objectives
additional funding based on meeting agreed objectives
examples: France, Denmark, Austria, Finland, Colorado & Virginia in US
indirect funding of institutions /
direct funding of students
grants and scholarships
student loans
vouchers
tax credits
Colorado funding modelColorado funding modelOld ModelOld Model
Indirect Gov’t Funding via
Stipends
New Model
Tuition
Direct Government
Funding
Tuition & Stipends
Colorado experienceColorado experience
• voucher for an undergraduate education at voucher for an undergraduate education at eligible universities; no cash actually touches eligible universities; no cash actually touches students’ hands.students’ hands.
• $2,400 per year at public institutions$2,400 per year at public institutions
• $1,200 per year for low-income students $1,200 per year for low-income students attending private institutionsattending private institutions
• degree-seeking, non-degree, and teacher degree-seeking, non-degree, and teacher licensure undergraduate students eligiblelicensure undergraduate students eligible
• age, income and financial aid eligibility are age, income and financial aid eligibility are irrelevant to qualifyirrelevant to qualify
outline of the presentationoutline of the presentation
• typology of allocation mechanismstypology of allocation mechanisms
• which mechanism is more which mechanism is more effective?effective?
policy objectives pursuedpolicy objectives pursued
• improving access and equityimproving access and equity
• improving external efficiencyimproving external efficiency
• improving internal efficiency and improving internal efficiency and sustainabilitysustainability
improving access and improving access and equityequity
• traditional age studentstraditional age students– increased cost sharing with more student grants, scholarships and/or increased cost sharing with more student grants, scholarships and/or
loans to offset adverse effects of higher feesloans to offset adverse effects of higher fees– income contingent student loan repaymentsincome contingent student loan repayments– input-based formulainput-based formula
• disadvantaged studentsdisadvantaged students– expanded need-based grants and scholarshipsexpanded need-based grants and scholarships– pay institutions premiums for enrolling and graduating disadvantaged pay institutions premiums for enrolling and graduating disadvantaged
students (contracts)students (contracts)
• lifelong learning opportunitieslifelong learning opportunities– grants and scholarshipsgrants and scholarships– student loansstudent loans– tax benefits for workers enrolled in tertiary programs tax benefits for workers enrolled in tertiary programs – lifelong learning voucherslifelong learning vouchers– savings accountssavings accounts
improving external improving external efficiencyefficiency
• improving qualityimproving quality– competitive fundscompetitive funds– merit-based scholarshipsmerit-based scholarships
• increasing relevanceincreasing relevance– formula with differential weights for high priority formula with differential weights for high priority
fieldsfields– competitive fundscompetitive funds– grants and scholarships in priority fieldsgrants and scholarships in priority fields– student loans in priority fieldsstudent loans in priority fields– loan forgiveness for students in public service jobsloan forgiveness for students in public service jobs
improving internal efficiencyimproving internal efficiency and sustainability and sustainability
• cost containmentcost containment– funding formula based on normative costsfunding formula based on normative costs
• improving throughputimproving throughput– output-based formulaoutput-based formula– pay for resultspay for results– performance contractsperformance contracts
outline of the presentationoutline of the presentation
• typology of allocation mechanismstypology of allocation mechanisms
• which mechanism is more effectivewhich mechanism is more effective
• preliminary lessons from preliminary lessons from international experienceinternational experience
themesthemes
• combination of instrumentscombination of instruments
• adaptation to country circumstancesadaptation to country circumstances
• clear definition of policy objectives clear definition of policy objectives soughtsought
• link to quality assurancelink to quality assurance
• political economy dimensionspolitical economy dimensions
• unanticipated consequencesunanticipated consequences
principles of an appropriate principles of an appropriate allocation instrumentallocation instrument
• linked to performance / policy objectiveslinked to performance / policy objectives
• transparenttransparent
• flexibilityflexibility
• compatibilitycompatibility
which allocation instrument is which allocation instrument is better?better?
• local circumstanceslocal circumstances
• reform for what?reform for what?
• time dimensiontime dimension
link to quality assurancelink to quality assurance
• pro: powerful incentivepro: powerful incentive
• con: punitive, rewards strongercon: punitive, rewards stronger
• link at the margin?link at the margin?
political economy political economy dimensionsdimensions
• controversial topicscontroversial topics– tuition fees instead of “free” educationtuition fees instead of “free” education– targeted scholarships instead of universaltargeted scholarships instead of universal– student loans instead of scholarshipsstudent loans instead of scholarships– private institutions alongside public institutionsprivate institutions alongside public institutions
• dealing with the politicsdealing with the politics
• not an excuse to avoid reformsnot an excuse to avoid reforms