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Financing for quality: A new deal in Spanish higher education
Pergamon S0952-8733(96)00011-6
Higher Education Polio3",Vol. 9, No. 2. pp. 175-188, 1996 Copyright (~, 1996 International Association of Universities Published by Elsevier Science Ltd. Printed in Great Britain 0952-8733/96 S15.00+ 0.00
Financing for quality: a new deal in Spanish higher education Jos6-Gin6s M o r a I and E n r i q u e V i l l a r r e a l 2 ICenterfor the Study of Higher Education, The Pennsylvania State University, University Park, PA 16801-5252, U.S.A. and 2Department of Applied Economics, University of Valencia, Valencia, Spain In recent years, higher education in Spain has undergone major legal and organizational changes. The number of students and the resources committed to higher education has also grown dramatically in the last decade. After this period of rapid changes, the Spanish Public Higher Education System (SPHES) is launching mechanisms to improve overall efficiency and quality. To meet these objectives, three programs are being carried out: first, a new organization of the teaching system, which aims to make the programs more flexible, varied, of shorter duration and more closely related to social needs; second, a program to assess the quality of university institutions; and, third, a new model to finance the system, which provides a more rational framework for financing and should help to achieve the desired aims of quality. This paper outlines the third program, the financial model, and discusses the proposals to finance public universities designed by a Committee of the Council of Universities. Copyright O 1996 International Association of Universities
HIGHER EDUCATION IN SPAIN
Recent evolution Over the last few decades, as in other countries, higher education in Spain has developed dramatically ( M o r a et al., 1993, 1995). However, some remarkable or unique features are pointed out in the following paragraphs. 1. Higher education in Spain is c o m p o s e d mainly o f universities. In academic year 1994-1995, the 49 Spanish universities enrolled more that 1.4 million students, o f which a b o u t 52% were women. O f these universities 43 were public (including the Open University) and six private, although the latter represents only 3.6% o f the student population. The non-university sector o f higher education represents a minimal part o f the system and is c o m p o s e d mainly of special schools (languages, military, music, etc.). 2. There was an uninterrupted growth in the n u m b e r o f students from the beginning o f the 1960s, especially m a r k e d in the 1980s. If in academic year 1994-1995 the students enrolled were 1.4 million, 10 years ago the n u m b e r was a b o u t half that. One reason for this pattern o f development is that the " b a b y b o o m " occurred in Spain a b o u t 10 years after it did in other E u r o p e a n countries. Similarly, the start o f the fall in the birth rate was delayed c o m p a r e d to other countries, although it is currently one o f the lowest in the world. Thus, while in other countries there has 175
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recently been a stabilization in the university population, in Spain an increase is expected in the next few years. As a consequence of the open door admissions policy in the universities and the dispersion of university centers, higher education is currently quite accessible to different social groups. A recent study (Mora, 1995) has shown that, except for the 20% of the population at the lowest economic level, the different socioeconomic levels are fairly well represented in the university population. Though the level of democratization in access to higher education in Spain may be considered reasonable, financial efforts should be made to promote higher education in the lower socioeconomic levels by facilitating grants and loans for students who need aid. There has been an impressive growth in the resources given to higher education in recent years. Owing to the political situation in Spain in the 1960s and 1970s, as well as the lower level of economic development compared to other European countries, the provision to higher education was considerably lower, especially in economic resources. One fact illustrates this point: in 1976, public expenditure on higher education represented 0.23 % of the GDP, while other European countries spent, proportionally, much more (Kaiser et al., 1992). The economic crisis of the 1970s and the tendency to reduce spending on higher education began when, in Spain, the levels of spending necessary to maintain a university system of quality had not been reached. However, in the last few years the effort made to correct this situation has been remarkable: in nine years (1983-1991) university budgets have been multiplied by 2.7 in 1983 constant prices (Mora et al., 1993, 1995). Spanish public expenditure on higher education, though still below the European Union average, shows a notable closing of the gap with other countries. As a consequence of the increasing needs of the system, a substantial part of the new funds was assigned to capital expenditures and salaries, whereas the funds for current expenditures in services and goods have remained low. These funds, in some way more closely related to quality, must be increased in the near future to improve the quality of the services offered by universities. Although similar processes have taken place elsewhere, a peculiar trait of higher education in Spain has been the overarching change created by the University Reform Act (known as LRU) of 1983 as a model of organization for the universities. From the institutional point of view the act transformed institutions that had been clear examples of the "bureaucratic model" into institutions closer to the "collegial model" (Clark, 1983). Today, members of the university community make basic decisions about the working of the institutions. Nevertheless, the staff of the universities is composed mostly of civil servants, subject to the salary and general work regulations of the state. The change has been, without doubt, profound. The reforms have created a break with tradition so that the Spanish universities have very advanced democratic and participatory structures at present. Though this transformation has not been without tensions and difficulties, results have been in general extremely positive. Another significant factor is that direct responsibility for public higher education has recently been passed from the central government to the governments of the Autonomous Regions (process about to be completed at this time). Although many rules are c o m m o n to all the public universities of the state, each Autonomous Region can introduce variations, primarily in the financing aspects. The main traits o f the current financing model are as follows: (1) funds are given to universities by the regional governments; these basic funds are to cover teaching
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costs, "basic" research and other basic services to students; (2) the funds are given as a lump sum, which the universities are free to allocate internally; (3) governments have allocated funds using an incrementalist model that is not closely related to needs and real growth of each university; this mechanism has generated no justifiable differences among universities; and (4) researchers may bid for extra funds (European, national and regional) to carry out specific research; these competitive funds are included in the budget of each university apart from the lump sum they receive. 9. A major problem of the Spanish university system is the low graduation rates. While the number of students that enter the system is high, the dropout rate and the number of students delayed are both very high. The scheduled duration of the studies is also very long. Consequently, the number of students who complete their studies is relatively low. There are various causes of this situation, but they can be reduced, at the danger of over-simplification, to two. The first is the traditional strictness of the system (the lack of adjustment to demand, an excessively regulated staff, little pedagogical innovation, failure to respond quickly to the great increase in the throng of students). The second is the lack of an accountability mechanism for the internal working of the system.
Current programs to improve quality The SPHES has expanded remarkably in students and resources and reached a reasonable level of autonomy. However, the problems described in the previous section have encouraged the idea, in university and governmental circles, that it was necessary to set up mechanisms of improvement in the universities. If during recent years the emphasis focused upon growth and democratization, the challenge in the near future will be quality and diversification. To cope with this challenge, three initiatives were instituted recently: a new teaching organization, an institutional evaluation program for the universities, and a new proposal for financing the SPHES. In this section we will relate briefly the first two. The reform of the teaching organization. At the moment, reform of the teaching organization is taking place. This process, as well as introducing a greater flexibility of the curriculum of the programs, attempts to reduce the formal length of studies. The main features of the reform are as follows: 1. the organization of courses has moved from a year-based to a semester-based structure. The number and variety of courses has been multiplied in an effort to offer a wider perspective for each academic program. This change has been more than a split of the former organization. The total number of teaching hours has increased. New topics have been incorporated into the programs; 2. course choice within the programs has grown dramatically. Formerly, programs were organized in annual courses with very few options. Now a standard credit system has been implemented. Each student may select his/her own curriculum, though some basic courses are compulsory; and 3. traditionally, higher education in Spain has been focused more on theoretical aspects and general knowledge than on practical issues. To correct this situation the new syllabi place greater emphasis on the practical aspects of each course. All universities are currently involved in these structural changes. Though it is expected that reform will improve the quality of the system, some problems have arisen. Besides the troubles of adaptation that such large-scale structural change
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poses, the increase of resources required by the implementation of the new system is a crucial point to be considered. The increase in choice, variety and practicality of the programs obviously requires more resource input. Some of the extra resources could come from an improvement in the efficiency of the system, but new funds of public and private origin are also necessary. The financing program that we present in this paper takes into account this fact. The program of institutional evaluation. Recently, several processes of evaluating higher education have been implemented in Spain. The first was the assessment of tenured university academic staff began by the Ministry o f Education in 1990. This mechanism deals with the evaluation of teaching and research by staff in such a way that, for each period given a positive assessment, they receive a small rise in salary. This process was started by a government order without discussing or testing the criteria for the assessment (De Miguel and Rodriguez, 1990). Because of the lack of reliable standards in the assessment of teaching, all of them are positively assessed, and the system has become a way of rewarding seniority. Thus, the result is a mechanism of assessment which has no effect whatsoever on the improvement of teaching. The assessment of research activity took a different course, as a significant portion of the academic staffwas evaluated negatively. For this assessment a National Committee was established. It brought together experts from different scientific fields. The Committee assesses research by means of criteria that are not available to researchers. The lack of scientific accuracy in the criteria used to assess research, except in those areas (mainly natural sciences) where straightforward mechanisms can be more easily contrasted, created considerable discontent in the academic body, having generated an endless number of legal complaints against the results of the evaluation. It has been suggested that this procedure will not improve the overall quality of the university system, but it will actually have a negative effect, since it considers that the only value of academics is in good research, and even this would be assessed with bias. Independently from these initiatives, the Council of Universities promoted workshops and publications (Mora, 1991; De Miguel et al., 1991) on institutional evaluation that finally ted to an Experimental Program of Evaluation of the Quality of the University System. The pilot project (Garcia et al., 1995) tried to put into practice the usual mechanisms of institutional evaluation adapted to the Spanish universities. This pilot program evaluated teaching, research and management in several establishments. The Council of Universities was responsible for the project through a Technical Committee that organized the program, worked out the protocols for the assessment, prepared the documentation and homogenized the process between the various universities participating. The process finished in 1994, and the final results were evaluated in a meeting of university rectors and experts in evaluation, both national and international. The general feeling was that the program and the methodology used were adequate and the program should be extended to all universities. The implementation of a general assessment process was approved by the Council of Universities in September, 1995. This National Program of Institutional Evaluation will start as a systematic and regular teaching, research and management assessment for the universities. A N E W P R O G R A M : FUNDS FOR QUALITY
As a complementary measure to the two programs just outlined, a new model to finance the universities has been recently proposed. The Report on Financing of the
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University (Consejo de Universidades, 1995) was drafted by a Committee* of the Council of Universities composed of national and regional administrations and experts in this field. It was presented during the final days of 1994 and discussed during 1995 by the university community and government officials. The objective of the Report is twofold. First, to establish a rational frame for financing public universities. Second, and even more important, to establish a financial mechanism to promote quality. The Report envisions a new financial situation for the year 2004 when new mechanisms to allocate funds have been drawn up with the aim of stimulating a climate of effectiveness, efficiency and quality in the SPHES. The financing of specific research (currently granted to research teams through competitive criteria) is not included in this program. The main points of this Report are presented in this paper: general and financial objectives; general frame for resource needs; proposal for a new allocation model; and proposals for student financing. Process background Over the last few years continuous growth of student enrollments produced a rapid increase in funds from public sources in the universities. However, no explicit mechanism to allocate them between universities was defined. The lack of clear criteria has given rise to major disparities in distributing resources among universities. Furthermore, inefficiencies in the use of these funds also appeared as a logical consequence of an extremely rapid increase of funds. Both reasons fuelled the urgent need to improve equity in allocating public funds among public universities and the need to be efficient in their use. Yet, and this is a main difference compared with other countries, increased funding is held to be indispensable. In 1993, the Autonomous Government of the Valencian Region developed a new system to allocate funds among the four Valencian universities. After several studies (Mora et al., 1993) a mixed universities-regional government committeet defined a model that was implemented in 1994 (Mora and Villarreal, 1995a,b). For the first time some Spanish universities have rules and explicit criteria to obtain public funds. Perhaps the criteria are not the best, but as they are clear and explicit, they have a distinct advantage: they can easily be improved. After this regional experience, the Council of Universities formed the Committee mentioned earlier to develop a similar process across the whole Spanish university system.
Program objectives Foreseeing thefuture. In Table 1 data are presented on percentages of the population entering higher education and educational attainment of the population in several European countries. The percentage of first time entrants to Spanish higher education exceeded 40%, a percentage similar to other European countries. Nevertheless, the proportion of graduates in the population is only 10%, amongst the lowest in the European Union. Two reasons explain this: the dramatic growth of higher education is recent; and the proportion of dropouts is very high, the percentage of students that eventually get a degree is low, and the effective duration of studies too long (Mora et al., 1995). Yet, higher education graduates enjoy a very good relative position in the
*This Committee was composed of representatives of the Council of Universities, central and regional governments and experts in higher education financing. People from differentpolitical parties with diverse points of view were on the Committee,of which the authors were members. tThe authors were also members of this Committee.
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Josd-Gin6s Mora and Enrique Villarreal Table 1: Higher education entry ratio and educational attainment of the population (1991)
Germany Denmark Netherlands U.K. Ireland France Spain
Entry ratio*
Pop. attain.t
49.0 52.8 40.1 36.9 39.9 48.0 43.3
22 19 19 17 16 15 10
*Number of first time entrants into full-time higher education per 100 persons in the theoretical starting age. Source: OECD (1995). tPercentage of the population 25-64 years of age that has completed higher education. Source: OECD (1993). Spanish labor market. They have the lowest unemployment rates (Palafox et al., 1995). Their rates of return for educational investment are high and have not decreased during the last decade (Vila and Mora, 1995). Thus, it is likely the current trend will continue and the proportion of people entering higher education will increase. Consequently, the SPHES must be ready to receive a significant p r o p o r t i o n of young people leaving secondary education and an increasing number of adults. The Report plans for an entry rate of about 50% for each cohort in the near future. Nevertheless, increase in demand will be offset by the dramatic decrease in the size of the age cohorts. Hence, the number of higher education students is estimated in 2004 to be about 1.2 million, a figure below current numbers. A peak of 1.6 million is expected in the academic year 1996-1997. Several actions must a c c o m p a n y the financial program to decrease the number of enrolled students. One is the implementation of innovative programs to improve teaching quality. Second, the current teaching reform, if it is properly financed and carried out, should permit more flexibility and the possibility for students to obtain an intermediate degree with which to enter the labor market, should they so choose. Third, the financial p r o g r a m will set aside a significant sum to finance Vocational Higher Education to be developed outside the universities. The development of this sector could handle a part of the current university demand. Finally, if current programs to improve quality take effect, the effective duration of studies will decrease and with it the number of enrolled students. The SPHES has been traditionally rather uniform. It was expected that every university reached a high level both in teaching and research in every field. Clearly, this model does not work properly because it is difficult to adequately finance at this level. Universities must pursue excellence, but for most of them this is possible only in some scientific fields or in some of the services they offer. The universities must diversify, search for the specialities and services they can best carry out and try to adapt to social and economic needs. In a few words, each university should look for its natural niche. Though diversification in Spanish universities has increased since the Reform University Act of 1983, it seems necessary to proceed in this way. The proposed financial p r o g r a m contains an important goal to help universities reach this objective of diversity and adaptation. The increase in the level o f diversification will make it possible for universities to get the best students and financial resources. To stimulate competitiveness an impor-
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rant part of the financial public resources granted to universities will be allocated according to competitive criteria. These competitive funds must also stimulate programs devoted to improving quality of teaching and the services offered to students. Currently, research is financed through competitive criteria. There is a general feeling in the academic world that the level of scientific research in Spanish universities has risen in recent years. The financial p r o g r a m will attempt to extend this improvement to teaching and other services. In this way, programs and groups more involved in quality improvement and effectiveness would have access to additional funds to carry out their goals. The result should be continuous feedback that will gradually improve the system's overall quality. Increases in competitiveness should not cause us to forget that this program is designed for a public university system. Some level of coordination must be maintained. Even so, because it is a system mainly financed through taxes, the p r o g r a m must be extremely careful with the improvement of efficiency and accompanied by strict criteria for accountability, not only for financial resources (which currently work quite effectively), but for the effectiveness and quality of programs and services. The proposed increase in resources must go hand in hand with a continuous assessment of higher education institutions. Financial objectives. The main objective of the new financial program is to improve quality in the SPHES. This is necessary because the quality level of a strategic sector such as higher education is crucial for economic and social development. However, improvement is necessary for very practical reasons as well. Presently we have a massive system that demands resources without control. By increasing those financial resources focused on quality we m a y reduce the size, improve outcomes and bring the system under control. The Report states: "Either the system resources are increased to improve quality and performance or we will face the social and economic consequences of a system growing up out of control" (Consejo de Universidades, 1995, p. 20). In short, either we invest in quality or we will spend resources on poor services in overcrowded universities, which in the long run could turn out to be even more expensive. Comparison between expenditures in higher education in Spain and other developed countries (Table 2) shows that despite dramatic increases in recent years, the Spanish figure remains below international standards. Table 2 illustrates perfectly the feeling in Spanish universities that current financing is not enough for the quality services
Table 2:
Higher education expenditure, 1991 (percentage of the GDP and per student--$PPS)
U.S. Canada Netherlands Sweden Denmark Finland Ireland Germany Spain Source: OECD (1993).
% GDP
$ (PPS) per student
2.4 2.6 1.7 1.2 1.3 1.4 1.4 0.9 1.0
13,639 10,415 9373 8548 7685 7218 7047 6322 3875
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Table 3: Objectives in higher education expenditure (percentages of the GDP)
University sector Non-university sector Total higher education
Public expenditure Private expenditure Tot. expend, univ. sec. Public expenditure Private expenditure Tot. expend, non univ. sec. Public expenditure Private expenditure Tot. expend, higher educ.
1993
2004
Increase
0.72 0.19 0.91 0.09 0.01 0.10 0.81 0,20 1,01
1.02 0.29 1.31 0.18 0.01 0.19 1.20 0.30 1.50
42% 51% 44% 102% 6% 93% 48% 49% 49%
Note: Forecasting made under hypothesis of no changes in GDP. Source: Consejo de Universidades (1995),
the university has to offer at the moment. The financial program states that increasing financial input must be a central objective in the near future. The financial objectives proposed for higher education in the year 2004 are presented in Table 3. A substantial increase of funds (49%) is outlined in the program at a similar pace for public and private funds. The proposed increase for the university sector is 44%, with a more marked rise in private funds, whereas the non-university sector (vocational higher education) would double the funds. This means an annual rise in real terms of some 3,7% across the coming decade.
A newfinancial structure for universities The following general considerations underlie the new financial program for universities (from this point the paper focuses only on the university sector): 1. the major part of the financing of universities should remain public; 2. the self-financing in universities (fees and external contracts) should be increased; 3. part of the funds to universities should be based on competitive criteria to promote quality; 4. capital expenditures will decrease as a logical consequence of the end of the period of expansion; and 5. current expenditures for goods and services should be increased more than for staff. Following these priorities, the new financial structure is defined along three dimensions: (I) the total amount of resources in the universities; (2) the income structure; and (3) the expenditure structure. Table 4 sets out both the resources committed to universities in 1993 as a percentage of the GDP, and the resources proposed for the year 2004. The total increase in public funds reaches 42%. The main increase (340%) is committed to student grants and loans. The objective is to improve direct financing to students in three ways: (1) by increasing the number of beneficiaries; (2) by raising the amount of the grants; and (3) by creating a new program for loans. The proposed increase in private funds is 47%, which includes student fees and additional funds from external contracts. It is assumed that private universities will grow, but their student share will not change greatly. Thus, the structure of university income will also change. The current distribution and the new one are presented in Table 5. The most significant change is the addition
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Table 4: Total resources in universities (percentages of the G D P )
Public funds
To public universities To student grants Total public funds To public universities To private universities Total private funds
Private funds
Total university funds
1993
2004
Increase
0.67 0.05 0.72 0.15 0.04 0.19 0.91
0.80 0.22 1.02 0.22 0.05 0.27 1.31
19% 340% 42% 47% 25% 42% 44%
Note: Forecasting made under hypothesis of no change in GDP. Source: Consejo de Universidades (1995).
Table 5: Income structure of public universities (billions of Spanish pesetas)
Basic financing Competitive funds Students fees Capital transference Other income Total incomes
1992
2004
Increase
267 0 81 84 37 469
314 77 124 42 65 623
18% 53% - 50% 76% 33%
Source: Consejo de Universidades (1995).
of competitive funds as a new and crucial part of the finance model. These funds would represent about 18% of the direct funds allocated to universities from public sources, and universities would have to bid for them. Student fees (53%) and other income (76%), especially from external contracts, should increase markedly. The third point to note is the structure proposed for expenditures. Increases in current expenditure and especially expenditures unrelated to staff salaries should increase substantially. This is reflected in Table 6, which provides for an increase of 162% for current expenditure in goods and services (the part of current expenditure not related to salaries). Increases in staff expenditure (38%), with the hypothesis of a similar number of students, means a significant increase of funds to boost both staff numbers and salaries. A new allocation model.
An important feature of the new financial program is the proposed alteration for model distributing public funds* among the universities. It introduces criteria and variables that ought to lead to a desirable improvement in quality. The model is based on two main types of funds and follows a general trend in other countries (OECD, 1990; Eicher and Chevaillier, 1992). The first is tied to university basic figures (students, graduates, programs, etc.). It supports the regular working of the institutions in teaching and basic research. The second part is made up of funds tied to specific objectives that will be awarded to universities on a competitive basis. The first part is *The allocation model is only for funds for current expenditures. The capital funds would be given to the universities depending of the specific needs of each one after direct discussion between universities and regional administrations.
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Jos~-Gines Mora and Enrique Villarreal Table 6: Expenditure structure of public universities (billions of Spanish pesetas)
Current expenditures Staff Other (goods) Capital expenditures Total expenditures
1992
2004
Increase
356 303 53 113 469
556 417 139 67 623
56% 38% 162% - 41% 33 %
Source: Consejo de Universidades (1995).
distributed to the universities as a lump sum, whereas the second is contingent upon the achievement of the proposed aims. This dual system should stimulate the innovation and quality of the universities. Basic financin 9 should allow each university to reach its goals with at least a standard level of quality. This basic financing may be related to a formula that includes basic costs and additional variables representing factors related to efficiency improvement. The structure of this basic financing is defined by an estimate of the real cost of each university with some incentives to improve efficiency. In estimating basic costs the model contains criteria to determine total cost per given credit. The key component to assess expenditures is the teaching staff. The structure of teaching staff in different types of schools can also be fixed. The next step is to set teachers' expenditures per student in a specific field, since it is possible to set up the number of credits per program through several hypotheses involving the size of student groups and the way lessons are given. Non-academic staff expenditure may be fixed as a proportion between the teachers and this type o f personnel with an increasing trend according to the experimental teaching. Current expenses are fixed through modules per teacher and per student. The basic cost per student is multiplied by the number of students, but to slow down the number of dropouts and repetitions the concept of students to finance has been introduced. The number of students to be financed is the outcome of a formula containing the number of enrolled credits, the number of graduates, and the number of dropouts. No specific formula is proposed in this model, but the one used in the Valencian Region could be an example to follow (Mora and Villarreal, 1995a,b). The results of these calculations may be adjusted by several additional factors to improve efficiency and quality: (1) a factor to reward the balance between supply and demand of places in the programs; (2) a factor to correct scale diseconomies in particular programs with small student numbers; (3) a factor to correct the expenditure increase caused by the bilingual character of many courses or other factors that raise costs; and (4) a factor rewarding efficiency in the use of human resources. To basic financing, the allocation model adds further funds that must be distributed competitively. The objective of these funds is to stimulate quality and diversify the services offered by universities. These funds are requested by universities, university departments and university teams and will be granted in competition with other groups from the same or other universities. Though they are open to other possibilities, three kinds of programs are proposed in the Report:
1. third cycle programs: doctoral programs that offer outstanding quality and demand may seek a special grant; 2. adaptation programs: the aim is to cover the extraordinary cost of implementing
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new academic programs and the special needs they generate, to close or to adapt inefficient programs; and 3. innovation programs: the aim is to promote educational innovation by financing those projects aimed at achieving teaching improvements. The funds for the National Program of Institutional Evaluation recently launched by the Council of Universities would come under this line.
Student grants and a proposal of loans Equal opportunities in access to higher education is a constitutional principle in Spain. The current program to ensure equity is composed exclusively of grants. There are three kinds of grants:
1. compensating grants for people from the lowest economic level, which cover not only the direct cost of studies but also the opportunity cost in the case of the poorest families; 2. direct cost grants to cover extra costs (residence, books, transportation, food, etc.); and 3. fee grants, given directly to the universities to cover student fees. Academic performance and economic level are the relevant factors to get a grant. In 1983, 3.4 billion pesetas were set aside for grants. This figure rose to 41.7 billion in 1993, that is, from 0.012% of the G D P to almost 0.08% (Mora et al., 1995; G r a o and Mora, 1995).* Despite this dramatic increase, total funds devoted to higher education students are still below the level to fulfill the constitutional principle of equality. To increase the total funds for promoting student access to higher education is also an objective of the new financial program. Several additional reasons justify this increase in resources: 1. the level of grants seems insufficient to cover even the total direct cost of the students from the poorest families. In any case, they do not cover the opportunity cost for these students. Therefore, an increase in the basic grant seems necessary; 21 the new financial structure foresees a significant increase in student fees. It seems appropriate to offset the negative effect of this proposal; 3. student mobility is very low in Spain. Only a few students choose universities on grounds other than proximity to family residence. This has negative effects on competitiveness and the drive for improvement in the universities. Lack of mobility also diminishes the possibility for young people to broaden their mental horizons, their experience, and avoid parochialism. Historical and sociological reasons explain this situation, but the lack of programs to enhance mobility could be also an important consideration; and 4. the economic conditions to get a grant are currently very strict. Only 16% of students get some kind of financial help. Since opportunities for part-time jobs are very rare in Spain, there is a high degree of dependence on family resources amongst university students. The lack of direct responsibility of students for the cost of their studies has important sociological consequences and may well influence the low level of performance in the system.
*In Table 4 the figure for "public funds to students grants" is 0.05% of the GDP. In this case the funds given to universities to pay the fees of the granted students are included in the other section ("public funds to public universities").
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The plan proposed for student aid seeks mainly to develop equity in access, but other aims such as mobility or increased responsibility of students should be developed as well. The program proposes to create both specific grants to develop mobility and a new program of loans. The proposed scheme for grants and loans will develop along the following lines:
1. grants for lower income groups: a first level of grants for people of lower economic level will compensate opportunity costs. Only minimum academic requirements would be demanded. About 3% of the university population would fall into this category; 2. grants for mobility: based on academic and economic criteria, some 10 % of students would get a grant of this type. It would allow them to select any university in Spain or even in other European Union countries; 3. grants for fees: about 17% of students would get grants to cover university fees alone; and 4. loans: the Report proposes a system of loans available to 20% of students. The loan system is not completely defined but would be underwritten and partially subsidized by the government. Thus, about 50% of higher education students would have access to some kind of financial aid. To implement this ambitious program will require adjustment to current criteria. Currently, selecting students for a grant works rather unfairly (Mora, 1995). Some from upper income groups manage to get a grant, especially if the parents are self-employed. Yet, a significant portion of students from the lower income groups do not get grants because the academic requirements are too strict (at least stricter than for the average student). New mechanisms to regulate the criteria to avoid abuse and to distribute grants and loans more equitably will be necessary.
SUMMARY Over the last decade Spanish higher education has undergone a profound process of change that has led the system to a promising position. Nevertheless, some improvements must still be carried out to reach the level of quality that the economic and social development of the country needs. One of the most important reforms is finance. How and how much the Spanish universities are financed must be changed to improve both quality and efficiency. The program presented to the Council of Universities by its President (and Minister of Education) has been analyzed. Its main characteristics are: 1. total expenditures in higher education should rise from the current 1.01% of the G D P to 1.50%. The funds to universities would increase by 44%, while those for the non-university sector funds would rise by 93%; 2. the increase in public funds to public universities would be 19% and that of private funds should be 47%; 3. funding of university student aid should be increased by 340% and a new system of loans should be launched; 4. university fees should be increased by 53% and the universities should increase their resources from other private funds by at least 76%; 5. capital expenditures will decrease by 41%, while current expenditures will increase
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by 56%. This last increase would be especially significant in current expenditures on goods and services (162%) and less important in staff salaries; 6. public funding of universities should split into three blocks: capital funds, given to universities depending on specific needs, basic financing, given as a lump sum, and competitive funds (18% of total public funds); and 7. a formula-based model should be used to allocate basic funds among universities. This formula should include incentives to improve quality and efficiency. The implementation of this program at present faces some obstacles. Political, economical and organizational problems could blunt its edge. Amongst the most relevant are: 1. The current need to balance the budget is as much a priority in Spain as in other countries. Consequently, there is a strong drive to cut public expenditure. This program, however, increases public expenditure, though less than private ones, so it may well be that those in charge of finances in regional governments will be reluctant to implement it. It should be brought to their attention that higher education is a strategic sector, will be more important in the future, and will be one of the most profitable investments for the country. 2. The Report f o r Financing the University has been developed for a multi-party group and experts with different points of view. The main lines of the document were explicitly endorsed by the members of the Committee. Nevertheless, political changes at central and/or regional government could alter the willingness to implement this program depending on party programs. Regional governments are sensitive to increasing fees, though the program considerably improves funds for student aid. While this is a framework for the whole country, regional governments will have to implement it following (or not) the guidelines set out by the Report. 3. The University Reform Act of 1983 democratized and modernized the Spanish university but also revealed some shortcomings. One of the most important, from an economic point of view, is that those responsible for finances and human resources management are elected by faculty colleagues. Still, public universities have a Social Council (a body that represents external political and social interests) •that should control the financial and managerial issues in each university. The effectiveness of this body is extremely low. Consequently, universities are not subjected to real external control. The lack of professional management and real external control eases universities into institutions that are inclined to be inefficient. Extra resources are needed to implement this program. Political will to improve the public higher education system and organizational changes in the universities to increase efficiency are also necessary. The future of the system depends now on the policy-makers.
REFERENCES Clark, B. R. (1983) The Higher Education System: Academic Organization in Cross National Perspective, Berkeley:Universityof California Press. Consejo de Universidades (1995) lnforme sobre Financiacion de la Universidad, Universidades, 6 (Dic./Enero), 3-46. De Miguel, M. and Rodriguez, S. (1990) Evaluating the University System: A Spanish Faculty Point of View, Paper presented in the 12th Forum of the EAIR, Lyon, September. De Miguel, M., Mora, J.-G. and Rodriguez, S., (Eds) (1991) La EraIuaci6n de las blstituciones Universitarias, Madrid: Consejo de Universidades.
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Eicher, J.-C. and Chevaillier, T. (1992) Rethinking the finance of post-compulsory education. Higher Education m Europe 17, 1.6-32. Garcia, P., Mora J.-G., Pdrez J.-J. and Rodriguez S. (1995) Experimenting institutional evaluation in Spain. Higher Education Management 7, 1, 111-118. Grao, J. and Mora, J.-G. (1995) An/tlisis y disefio de sistemas de ayudas econdmicas a los estudiantes universitarios, Research memorandum. Kaiser, F., Koelman, J. B. J., Florax, R. J. G. M. and Van Vught, F. (1992) Public Expenditure on Higher Education, London: Kingsley. Mora, J.-G. (1992) Calidad y Rendimiento en las Instituciones Unh,ersitarias, 1991, Madrid: Consejo de Universidades. Mora, J,-G. (1995) Socio-economic Equity in Access to Higher Education in Spain, lnvited paper in the Conference Addressing Under-Representation in European Higher Education, Council of Europe, University of Cambridge, U.K.. Mora, J.-G. and Villarreal, E. (1995a) Un Modelo para la Financiacion de las Universidades Pfiblicas, in E. Oroval, Ed., Plan!ficacidn. Evaluacidn y Financiacirn de Sistemas Educativos, pp. 175-199, Madrid: Civitas. Mora, J.-G. and Villarreal, E. (1995b) New Financial Relationships Between the Administration and Universities: The Valencian Case, Higher Education Management 7, 297-307. Mora, J.-G., Palafox, J. and Prrez, F. (1993) La Financiacidn de las Universidades Valencianas, Valencia: Alfons el Magnanim. Mora, J.-G., Palafox, J. and Prrez, F. (1995) The Financing of Spanish Public Universities, Higher Education 30, 389-406. OECD (1990) Financing Higher Education, 1990, Current Patterns, Paris: OECD. OECD (1993) Education at a Glance. OECD Indicators, Paris: OECD. OECD (1995) Education at a Glance. OECD Indicators, Paris: OECD. Palafox, J., Mora, J.-G. and Prrez, F. (1995) Capital Humano: Educacidn y Empleo, Valencia: Fundaci6 BANCAIXA. Vila, L. and Mora, J.-G. (1995) Earnings and Workers' Education: Evolution in the 80s, Paper presented in the I Conference of the European Association of Educational Research, Bath, U.K.
Higher Education Polio3",Vol. 9, No. 2. pp. 175-188, 1996 Copyright (~, 1996 International Association of Universities Published by Elsevier Science Ltd. Printed in Great Britain 0952-8733/96 S15.00+ 0.00
Financing for quality: a new deal in Spanish higher education Jos6-Gin6s M o r a I and E n r i q u e V i l l a r r e a l 2 ICenterfor the Study of Higher Education, The Pennsylvania State University, University Park, PA 16801-5252, U.S.A. and 2Department of Applied Economics, University of Valencia, Valencia, Spain In recent years, higher education in Spain has undergone major legal and organizational changes. The number of students and the resources committed to higher education has also grown dramatically in the last decade. After this period of rapid changes, the Spanish Public Higher Education System (SPHES) is launching mechanisms to improve overall efficiency and quality. To meet these objectives, three programs are being carried out: first, a new organization of the teaching system, which aims to make the programs more flexible, varied, of shorter duration and more closely related to social needs; second, a program to assess the quality of university institutions; and, third, a new model to finance the system, which provides a more rational framework for financing and should help to achieve the desired aims of quality. This paper outlines the third program, the financial model, and discusses the proposals to finance public universities designed by a Committee of the Council of Universities. Copyright O 1996 International Association of Universities
HIGHER EDUCATION IN SPAIN
Recent evolution Over the last few decades, as in other countries, higher education in Spain has developed dramatically ( M o r a et al., 1993, 1995). However, some remarkable or unique features are pointed out in the following paragraphs. 1. Higher education in Spain is c o m p o s e d mainly o f universities. In academic year 1994-1995, the 49 Spanish universities enrolled more that 1.4 million students, o f which a b o u t 52% were women. O f these universities 43 were public (including the Open University) and six private, although the latter represents only 3.6% o f the student population. The non-university sector o f higher education represents a minimal part o f the system and is c o m p o s e d mainly of special schools (languages, military, music, etc.). 2. There was an uninterrupted growth in the n u m b e r o f students from the beginning o f the 1960s, especially m a r k e d in the 1980s. If in academic year 1994-1995 the students enrolled were 1.4 million, 10 years ago the n u m b e r was a b o u t half that. One reason for this pattern o f development is that the " b a b y b o o m " occurred in Spain a b o u t 10 years after it did in other E u r o p e a n countries. Similarly, the start o f the fall in the birth rate was delayed c o m p a r e d to other countries, although it is currently one o f the lowest in the world. Thus, while in other countries there has 175
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recently been a stabilization in the university population, in Spain an increase is expected in the next few years. As a consequence of the open door admissions policy in the universities and the dispersion of university centers, higher education is currently quite accessible to different social groups. A recent study (Mora, 1995) has shown that, except for the 20% of the population at the lowest economic level, the different socioeconomic levels are fairly well represented in the university population. Though the level of democratization in access to higher education in Spain may be considered reasonable, financial efforts should be made to promote higher education in the lower socioeconomic levels by facilitating grants and loans for students who need aid. There has been an impressive growth in the resources given to higher education in recent years. Owing to the political situation in Spain in the 1960s and 1970s, as well as the lower level of economic development compared to other European countries, the provision to higher education was considerably lower, especially in economic resources. One fact illustrates this point: in 1976, public expenditure on higher education represented 0.23 % of the GDP, while other European countries spent, proportionally, much more (Kaiser et al., 1992). The economic crisis of the 1970s and the tendency to reduce spending on higher education began when, in Spain, the levels of spending necessary to maintain a university system of quality had not been reached. However, in the last few years the effort made to correct this situation has been remarkable: in nine years (1983-1991) university budgets have been multiplied by 2.7 in 1983 constant prices (Mora et al., 1993, 1995). Spanish public expenditure on higher education, though still below the European Union average, shows a notable closing of the gap with other countries. As a consequence of the increasing needs of the system, a substantial part of the new funds was assigned to capital expenditures and salaries, whereas the funds for current expenditures in services and goods have remained low. These funds, in some way more closely related to quality, must be increased in the near future to improve the quality of the services offered by universities. Although similar processes have taken place elsewhere, a peculiar trait of higher education in Spain has been the overarching change created by the University Reform Act (known as LRU) of 1983 as a model of organization for the universities. From the institutional point of view the act transformed institutions that had been clear examples of the "bureaucratic model" into institutions closer to the "collegial model" (Clark, 1983). Today, members of the university community make basic decisions about the working of the institutions. Nevertheless, the staff of the universities is composed mostly of civil servants, subject to the salary and general work regulations of the state. The change has been, without doubt, profound. The reforms have created a break with tradition so that the Spanish universities have very advanced democratic and participatory structures at present. Though this transformation has not been without tensions and difficulties, results have been in general extremely positive. Another significant factor is that direct responsibility for public higher education has recently been passed from the central government to the governments of the Autonomous Regions (process about to be completed at this time). Although many rules are c o m m o n to all the public universities of the state, each Autonomous Region can introduce variations, primarily in the financing aspects. The main traits o f the current financing model are as follows: (1) funds are given to universities by the regional governments; these basic funds are to cover teaching
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costs, "basic" research and other basic services to students; (2) the funds are given as a lump sum, which the universities are free to allocate internally; (3) governments have allocated funds using an incrementalist model that is not closely related to needs and real growth of each university; this mechanism has generated no justifiable differences among universities; and (4) researchers may bid for extra funds (European, national and regional) to carry out specific research; these competitive funds are included in the budget of each university apart from the lump sum they receive. 9. A major problem of the Spanish university system is the low graduation rates. While the number of students that enter the system is high, the dropout rate and the number of students delayed are both very high. The scheduled duration of the studies is also very long. Consequently, the number of students who complete their studies is relatively low. There are various causes of this situation, but they can be reduced, at the danger of over-simplification, to two. The first is the traditional strictness of the system (the lack of adjustment to demand, an excessively regulated staff, little pedagogical innovation, failure to respond quickly to the great increase in the throng of students). The second is the lack of an accountability mechanism for the internal working of the system.
Current programs to improve quality The SPHES has expanded remarkably in students and resources and reached a reasonable level of autonomy. However, the problems described in the previous section have encouraged the idea, in university and governmental circles, that it was necessary to set up mechanisms of improvement in the universities. If during recent years the emphasis focused upon growth and democratization, the challenge in the near future will be quality and diversification. To cope with this challenge, three initiatives were instituted recently: a new teaching organization, an institutional evaluation program for the universities, and a new proposal for financing the SPHES. In this section we will relate briefly the first two. The reform of the teaching organization. At the moment, reform of the teaching organization is taking place. This process, as well as introducing a greater flexibility of the curriculum of the programs, attempts to reduce the formal length of studies. The main features of the reform are as follows: 1. the organization of courses has moved from a year-based to a semester-based structure. The number and variety of courses has been multiplied in an effort to offer a wider perspective for each academic program. This change has been more than a split of the former organization. The total number of teaching hours has increased. New topics have been incorporated into the programs; 2. course choice within the programs has grown dramatically. Formerly, programs were organized in annual courses with very few options. Now a standard credit system has been implemented. Each student may select his/her own curriculum, though some basic courses are compulsory; and 3. traditionally, higher education in Spain has been focused more on theoretical aspects and general knowledge than on practical issues. To correct this situation the new syllabi place greater emphasis on the practical aspects of each course. All universities are currently involved in these structural changes. Though it is expected that reform will improve the quality of the system, some problems have arisen. Besides the troubles of adaptation that such large-scale structural change
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poses, the increase of resources required by the implementation of the new system is a crucial point to be considered. The increase in choice, variety and practicality of the programs obviously requires more resource input. Some of the extra resources could come from an improvement in the efficiency of the system, but new funds of public and private origin are also necessary. The financing program that we present in this paper takes into account this fact. The program of institutional evaluation. Recently, several processes of evaluating higher education have been implemented in Spain. The first was the assessment of tenured university academic staff began by the Ministry o f Education in 1990. This mechanism deals with the evaluation of teaching and research by staff in such a way that, for each period given a positive assessment, they receive a small rise in salary. This process was started by a government order without discussing or testing the criteria for the assessment (De Miguel and Rodriguez, 1990). Because of the lack of reliable standards in the assessment of teaching, all of them are positively assessed, and the system has become a way of rewarding seniority. Thus, the result is a mechanism of assessment which has no effect whatsoever on the improvement of teaching. The assessment of research activity took a different course, as a significant portion of the academic staffwas evaluated negatively. For this assessment a National Committee was established. It brought together experts from different scientific fields. The Committee assesses research by means of criteria that are not available to researchers. The lack of scientific accuracy in the criteria used to assess research, except in those areas (mainly natural sciences) where straightforward mechanisms can be more easily contrasted, created considerable discontent in the academic body, having generated an endless number of legal complaints against the results of the evaluation. It has been suggested that this procedure will not improve the overall quality of the university system, but it will actually have a negative effect, since it considers that the only value of academics is in good research, and even this would be assessed with bias. Independently from these initiatives, the Council of Universities promoted workshops and publications (Mora, 1991; De Miguel et al., 1991) on institutional evaluation that finally ted to an Experimental Program of Evaluation of the Quality of the University System. The pilot project (Garcia et al., 1995) tried to put into practice the usual mechanisms of institutional evaluation adapted to the Spanish universities. This pilot program evaluated teaching, research and management in several establishments. The Council of Universities was responsible for the project through a Technical Committee that organized the program, worked out the protocols for the assessment, prepared the documentation and homogenized the process between the various universities participating. The process finished in 1994, and the final results were evaluated in a meeting of university rectors and experts in evaluation, both national and international. The general feeling was that the program and the methodology used were adequate and the program should be extended to all universities. The implementation of a general assessment process was approved by the Council of Universities in September, 1995. This National Program of Institutional Evaluation will start as a systematic and regular teaching, research and management assessment for the universities. A N E W P R O G R A M : FUNDS FOR QUALITY
As a complementary measure to the two programs just outlined, a new model to finance the universities has been recently proposed. The Report on Financing of the
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University (Consejo de Universidades, 1995) was drafted by a Committee* of the Council of Universities composed of national and regional administrations and experts in this field. It was presented during the final days of 1994 and discussed during 1995 by the university community and government officials. The objective of the Report is twofold. First, to establish a rational frame for financing public universities. Second, and even more important, to establish a financial mechanism to promote quality. The Report envisions a new financial situation for the year 2004 when new mechanisms to allocate funds have been drawn up with the aim of stimulating a climate of effectiveness, efficiency and quality in the SPHES. The financing of specific research (currently granted to research teams through competitive criteria) is not included in this program. The main points of this Report are presented in this paper: general and financial objectives; general frame for resource needs; proposal for a new allocation model; and proposals for student financing. Process background Over the last few years continuous growth of student enrollments produced a rapid increase in funds from public sources in the universities. However, no explicit mechanism to allocate them between universities was defined. The lack of clear criteria has given rise to major disparities in distributing resources among universities. Furthermore, inefficiencies in the use of these funds also appeared as a logical consequence of an extremely rapid increase of funds. Both reasons fuelled the urgent need to improve equity in allocating public funds among public universities and the need to be efficient in their use. Yet, and this is a main difference compared with other countries, increased funding is held to be indispensable. In 1993, the Autonomous Government of the Valencian Region developed a new system to allocate funds among the four Valencian universities. After several studies (Mora et al., 1993) a mixed universities-regional government committeet defined a model that was implemented in 1994 (Mora and Villarreal, 1995a,b). For the first time some Spanish universities have rules and explicit criteria to obtain public funds. Perhaps the criteria are not the best, but as they are clear and explicit, they have a distinct advantage: they can easily be improved. After this regional experience, the Council of Universities formed the Committee mentioned earlier to develop a similar process across the whole Spanish university system.
Program objectives Foreseeing thefuture. In Table 1 data are presented on percentages of the population entering higher education and educational attainment of the population in several European countries. The percentage of first time entrants to Spanish higher education exceeded 40%, a percentage similar to other European countries. Nevertheless, the proportion of graduates in the population is only 10%, amongst the lowest in the European Union. Two reasons explain this: the dramatic growth of higher education is recent; and the proportion of dropouts is very high, the percentage of students that eventually get a degree is low, and the effective duration of studies too long (Mora et al., 1995). Yet, higher education graduates enjoy a very good relative position in the
*This Committee was composed of representatives of the Council of Universities, central and regional governments and experts in higher education financing. People from differentpolitical parties with diverse points of view were on the Committee,of which the authors were members. tThe authors were also members of this Committee.
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Josd-Gin6s Mora and Enrique Villarreal Table 1: Higher education entry ratio and educational attainment of the population (1991)
Germany Denmark Netherlands U.K. Ireland France Spain
Entry ratio*
Pop. attain.t
49.0 52.8 40.1 36.9 39.9 48.0 43.3
22 19 19 17 16 15 10
*Number of first time entrants into full-time higher education per 100 persons in the theoretical starting age. Source: OECD (1995). tPercentage of the population 25-64 years of age that has completed higher education. Source: OECD (1993). Spanish labor market. They have the lowest unemployment rates (Palafox et al., 1995). Their rates of return for educational investment are high and have not decreased during the last decade (Vila and Mora, 1995). Thus, it is likely the current trend will continue and the proportion of people entering higher education will increase. Consequently, the SPHES must be ready to receive a significant p r o p o r t i o n of young people leaving secondary education and an increasing number of adults. The Report plans for an entry rate of about 50% for each cohort in the near future. Nevertheless, increase in demand will be offset by the dramatic decrease in the size of the age cohorts. Hence, the number of higher education students is estimated in 2004 to be about 1.2 million, a figure below current numbers. A peak of 1.6 million is expected in the academic year 1996-1997. Several actions must a c c o m p a n y the financial program to decrease the number of enrolled students. One is the implementation of innovative programs to improve teaching quality. Second, the current teaching reform, if it is properly financed and carried out, should permit more flexibility and the possibility for students to obtain an intermediate degree with which to enter the labor market, should they so choose. Third, the financial p r o g r a m will set aside a significant sum to finance Vocational Higher Education to be developed outside the universities. The development of this sector could handle a part of the current university demand. Finally, if current programs to improve quality take effect, the effective duration of studies will decrease and with it the number of enrolled students. The SPHES has been traditionally rather uniform. It was expected that every university reached a high level both in teaching and research in every field. Clearly, this model does not work properly because it is difficult to adequately finance at this level. Universities must pursue excellence, but for most of them this is possible only in some scientific fields or in some of the services they offer. The universities must diversify, search for the specialities and services they can best carry out and try to adapt to social and economic needs. In a few words, each university should look for its natural niche. Though diversification in Spanish universities has increased since the Reform University Act of 1983, it seems necessary to proceed in this way. The proposed financial p r o g r a m contains an important goal to help universities reach this objective of diversity and adaptation. The increase in the level o f diversification will make it possible for universities to get the best students and financial resources. To stimulate competitiveness an impor-
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rant part of the financial public resources granted to universities will be allocated according to competitive criteria. These competitive funds must also stimulate programs devoted to improving quality of teaching and the services offered to students. Currently, research is financed through competitive criteria. There is a general feeling in the academic world that the level of scientific research in Spanish universities has risen in recent years. The financial p r o g r a m will attempt to extend this improvement to teaching and other services. In this way, programs and groups more involved in quality improvement and effectiveness would have access to additional funds to carry out their goals. The result should be continuous feedback that will gradually improve the system's overall quality. Increases in competitiveness should not cause us to forget that this program is designed for a public university system. Some level of coordination must be maintained. Even so, because it is a system mainly financed through taxes, the p r o g r a m must be extremely careful with the improvement of efficiency and accompanied by strict criteria for accountability, not only for financial resources (which currently work quite effectively), but for the effectiveness and quality of programs and services. The proposed increase in resources must go hand in hand with a continuous assessment of higher education institutions. Financial objectives. The main objective of the new financial program is to improve quality in the SPHES. This is necessary because the quality level of a strategic sector such as higher education is crucial for economic and social development. However, improvement is necessary for very practical reasons as well. Presently we have a massive system that demands resources without control. By increasing those financial resources focused on quality we m a y reduce the size, improve outcomes and bring the system under control. The Report states: "Either the system resources are increased to improve quality and performance or we will face the social and economic consequences of a system growing up out of control" (Consejo de Universidades, 1995, p. 20). In short, either we invest in quality or we will spend resources on poor services in overcrowded universities, which in the long run could turn out to be even more expensive. Comparison between expenditures in higher education in Spain and other developed countries (Table 2) shows that despite dramatic increases in recent years, the Spanish figure remains below international standards. Table 2 illustrates perfectly the feeling in Spanish universities that current financing is not enough for the quality services
Table 2:
Higher education expenditure, 1991 (percentage of the GDP and per student--$PPS)
U.S. Canada Netherlands Sweden Denmark Finland Ireland Germany Spain Source: OECD (1993).
% GDP
$ (PPS) per student
2.4 2.6 1.7 1.2 1.3 1.4 1.4 0.9 1.0
13,639 10,415 9373 8548 7685 7218 7047 6322 3875
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Table 3: Objectives in higher education expenditure (percentages of the GDP)
University sector Non-university sector Total higher education
Public expenditure Private expenditure Tot. expend, univ. sec. Public expenditure Private expenditure Tot. expend, non univ. sec. Public expenditure Private expenditure Tot. expend, higher educ.
1993
2004
Increase
0.72 0.19 0.91 0.09 0.01 0.10 0.81 0,20 1,01
1.02 0.29 1.31 0.18 0.01 0.19 1.20 0.30 1.50
42% 51% 44% 102% 6% 93% 48% 49% 49%
Note: Forecasting made under hypothesis of no changes in GDP. Source: Consejo de Universidades (1995),
the university has to offer at the moment. The financial program states that increasing financial input must be a central objective in the near future. The financial objectives proposed for higher education in the year 2004 are presented in Table 3. A substantial increase of funds (49%) is outlined in the program at a similar pace for public and private funds. The proposed increase for the university sector is 44%, with a more marked rise in private funds, whereas the non-university sector (vocational higher education) would double the funds. This means an annual rise in real terms of some 3,7% across the coming decade.
A newfinancial structure for universities The following general considerations underlie the new financial program for universities (from this point the paper focuses only on the university sector): 1. the major part of the financing of universities should remain public; 2. the self-financing in universities (fees and external contracts) should be increased; 3. part of the funds to universities should be based on competitive criteria to promote quality; 4. capital expenditures will decrease as a logical consequence of the end of the period of expansion; and 5. current expenditures for goods and services should be increased more than for staff. Following these priorities, the new financial structure is defined along three dimensions: (I) the total amount of resources in the universities; (2) the income structure; and (3) the expenditure structure. Table 4 sets out both the resources committed to universities in 1993 as a percentage of the GDP, and the resources proposed for the year 2004. The total increase in public funds reaches 42%. The main increase (340%) is committed to student grants and loans. The objective is to improve direct financing to students in three ways: (1) by increasing the number of beneficiaries; (2) by raising the amount of the grants; and (3) by creating a new program for loans. The proposed increase in private funds is 47%, which includes student fees and additional funds from external contracts. It is assumed that private universities will grow, but their student share will not change greatly. Thus, the structure of university income will also change. The current distribution and the new one are presented in Table 5. The most significant change is the addition
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Table 4: Total resources in universities (percentages of the G D P )
Public funds
To public universities To student grants Total public funds To public universities To private universities Total private funds
Private funds
Total university funds
1993
2004
Increase
0.67 0.05 0.72 0.15 0.04 0.19 0.91
0.80 0.22 1.02 0.22 0.05 0.27 1.31
19% 340% 42% 47% 25% 42% 44%
Note: Forecasting made under hypothesis of no change in GDP. Source: Consejo de Universidades (1995).
Table 5: Income structure of public universities (billions of Spanish pesetas)
Basic financing Competitive funds Students fees Capital transference Other income Total incomes
1992
2004
Increase
267 0 81 84 37 469
314 77 124 42 65 623
18% 53% - 50% 76% 33%
Source: Consejo de Universidades (1995).
of competitive funds as a new and crucial part of the finance model. These funds would represent about 18% of the direct funds allocated to universities from public sources, and universities would have to bid for them. Student fees (53%) and other income (76%), especially from external contracts, should increase markedly. The third point to note is the structure proposed for expenditures. Increases in current expenditure and especially expenditures unrelated to staff salaries should increase substantially. This is reflected in Table 6, which provides for an increase of 162% for current expenditure in goods and services (the part of current expenditure not related to salaries). Increases in staff expenditure (38%), with the hypothesis of a similar number of students, means a significant increase of funds to boost both staff numbers and salaries. A new allocation model.
An important feature of the new financial program is the proposed alteration for model distributing public funds* among the universities. It introduces criteria and variables that ought to lead to a desirable improvement in quality. The model is based on two main types of funds and follows a general trend in other countries (OECD, 1990; Eicher and Chevaillier, 1992). The first is tied to university basic figures (students, graduates, programs, etc.). It supports the regular working of the institutions in teaching and basic research. The second part is made up of funds tied to specific objectives that will be awarded to universities on a competitive basis. The first part is *The allocation model is only for funds for current expenditures. The capital funds would be given to the universities depending of the specific needs of each one after direct discussion between universities and regional administrations.
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Jos~-Gines Mora and Enrique Villarreal Table 6: Expenditure structure of public universities (billions of Spanish pesetas)
Current expenditures Staff Other (goods) Capital expenditures Total expenditures
1992
2004
Increase
356 303 53 113 469
556 417 139 67 623
56% 38% 162% - 41% 33 %
Source: Consejo de Universidades (1995).
distributed to the universities as a lump sum, whereas the second is contingent upon the achievement of the proposed aims. This dual system should stimulate the innovation and quality of the universities. Basic financin 9 should allow each university to reach its goals with at least a standard level of quality. This basic financing may be related to a formula that includes basic costs and additional variables representing factors related to efficiency improvement. The structure of this basic financing is defined by an estimate of the real cost of each university with some incentives to improve efficiency. In estimating basic costs the model contains criteria to determine total cost per given credit. The key component to assess expenditures is the teaching staff. The structure of teaching staff in different types of schools can also be fixed. The next step is to set teachers' expenditures per student in a specific field, since it is possible to set up the number of credits per program through several hypotheses involving the size of student groups and the way lessons are given. Non-academic staff expenditure may be fixed as a proportion between the teachers and this type o f personnel with an increasing trend according to the experimental teaching. Current expenses are fixed through modules per teacher and per student. The basic cost per student is multiplied by the number of students, but to slow down the number of dropouts and repetitions the concept of students to finance has been introduced. The number of students to be financed is the outcome of a formula containing the number of enrolled credits, the number of graduates, and the number of dropouts. No specific formula is proposed in this model, but the one used in the Valencian Region could be an example to follow (Mora and Villarreal, 1995a,b). The results of these calculations may be adjusted by several additional factors to improve efficiency and quality: (1) a factor to reward the balance between supply and demand of places in the programs; (2) a factor to correct scale diseconomies in particular programs with small student numbers; (3) a factor to correct the expenditure increase caused by the bilingual character of many courses or other factors that raise costs; and (4) a factor rewarding efficiency in the use of human resources. To basic financing, the allocation model adds further funds that must be distributed competitively. The objective of these funds is to stimulate quality and diversify the services offered by universities. These funds are requested by universities, university departments and university teams and will be granted in competition with other groups from the same or other universities. Though they are open to other possibilities, three kinds of programs are proposed in the Report:
1. third cycle programs: doctoral programs that offer outstanding quality and demand may seek a special grant; 2. adaptation programs: the aim is to cover the extraordinary cost of implementing
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new academic programs and the special needs they generate, to close or to adapt inefficient programs; and 3. innovation programs: the aim is to promote educational innovation by financing those projects aimed at achieving teaching improvements. The funds for the National Program of Institutional Evaluation recently launched by the Council of Universities would come under this line.
Student grants and a proposal of loans Equal opportunities in access to higher education is a constitutional principle in Spain. The current program to ensure equity is composed exclusively of grants. There are three kinds of grants:
1. compensating grants for people from the lowest economic level, which cover not only the direct cost of studies but also the opportunity cost in the case of the poorest families; 2. direct cost grants to cover extra costs (residence, books, transportation, food, etc.); and 3. fee grants, given directly to the universities to cover student fees. Academic performance and economic level are the relevant factors to get a grant. In 1983, 3.4 billion pesetas were set aside for grants. This figure rose to 41.7 billion in 1993, that is, from 0.012% of the G D P to almost 0.08% (Mora et al., 1995; G r a o and Mora, 1995).* Despite this dramatic increase, total funds devoted to higher education students are still below the level to fulfill the constitutional principle of equality. To increase the total funds for promoting student access to higher education is also an objective of the new financial program. Several additional reasons justify this increase in resources: 1. the level of grants seems insufficient to cover even the total direct cost of the students from the poorest families. In any case, they do not cover the opportunity cost for these students. Therefore, an increase in the basic grant seems necessary; 21 the new financial structure foresees a significant increase in student fees. It seems appropriate to offset the negative effect of this proposal; 3. student mobility is very low in Spain. Only a few students choose universities on grounds other than proximity to family residence. This has negative effects on competitiveness and the drive for improvement in the universities. Lack of mobility also diminishes the possibility for young people to broaden their mental horizons, their experience, and avoid parochialism. Historical and sociological reasons explain this situation, but the lack of programs to enhance mobility could be also an important consideration; and 4. the economic conditions to get a grant are currently very strict. Only 16% of students get some kind of financial help. Since opportunities for part-time jobs are very rare in Spain, there is a high degree of dependence on family resources amongst university students. The lack of direct responsibility of students for the cost of their studies has important sociological consequences and may well influence the low level of performance in the system.
*In Table 4 the figure for "public funds to students grants" is 0.05% of the GDP. In this case the funds given to universities to pay the fees of the granted students are included in the other section ("public funds to public universities").
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The plan proposed for student aid seeks mainly to develop equity in access, but other aims such as mobility or increased responsibility of students should be developed as well. The program proposes to create both specific grants to develop mobility and a new program of loans. The proposed scheme for grants and loans will develop along the following lines:
1. grants for lower income groups: a first level of grants for people of lower economic level will compensate opportunity costs. Only minimum academic requirements would be demanded. About 3% of the university population would fall into this category; 2. grants for mobility: based on academic and economic criteria, some 10 % of students would get a grant of this type. It would allow them to select any university in Spain or even in other European Union countries; 3. grants for fees: about 17% of students would get grants to cover university fees alone; and 4. loans: the Report proposes a system of loans available to 20% of students. The loan system is not completely defined but would be underwritten and partially subsidized by the government. Thus, about 50% of higher education students would have access to some kind of financial aid. To implement this ambitious program will require adjustment to current criteria. Currently, selecting students for a grant works rather unfairly (Mora, 1995). Some from upper income groups manage to get a grant, especially if the parents are self-employed. Yet, a significant portion of students from the lower income groups do not get grants because the academic requirements are too strict (at least stricter than for the average student). New mechanisms to regulate the criteria to avoid abuse and to distribute grants and loans more equitably will be necessary.
SUMMARY Over the last decade Spanish higher education has undergone a profound process of change that has led the system to a promising position. Nevertheless, some improvements must still be carried out to reach the level of quality that the economic and social development of the country needs. One of the most important reforms is finance. How and how much the Spanish universities are financed must be changed to improve both quality and efficiency. The program presented to the Council of Universities by its President (and Minister of Education) has been analyzed. Its main characteristics are: 1. total expenditures in higher education should rise from the current 1.01% of the G D P to 1.50%. The funds to universities would increase by 44%, while those for the non-university sector funds would rise by 93%; 2. the increase in public funds to public universities would be 19% and that of private funds should be 47%; 3. funding of university student aid should be increased by 340% and a new system of loans should be launched; 4. university fees should be increased by 53% and the universities should increase their resources from other private funds by at least 76%; 5. capital expenditures will decrease by 41%, while current expenditures will increase
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by 56%. This last increase would be especially significant in current expenditures on goods and services (162%) and less important in staff salaries; 6. public funding of universities should split into three blocks: capital funds, given to universities depending on specific needs, basic financing, given as a lump sum, and competitive funds (18% of total public funds); and 7. a formula-based model should be used to allocate basic funds among universities. This formula should include incentives to improve quality and efficiency. The implementation of this program at present faces some obstacles. Political, economical and organizational problems could blunt its edge. Amongst the most relevant are: 1. The current need to balance the budget is as much a priority in Spain as in other countries. Consequently, there is a strong drive to cut public expenditure. This program, however, increases public expenditure, though less than private ones, so it may well be that those in charge of finances in regional governments will be reluctant to implement it. It should be brought to their attention that higher education is a strategic sector, will be more important in the future, and will be one of the most profitable investments for the country. 2. The Report f o r Financing the University has been developed for a multi-party group and experts with different points of view. The main lines of the document were explicitly endorsed by the members of the Committee. Nevertheless, political changes at central and/or regional government could alter the willingness to implement this program depending on party programs. Regional governments are sensitive to increasing fees, though the program considerably improves funds for student aid. While this is a framework for the whole country, regional governments will have to implement it following (or not) the guidelines set out by the Report. 3. The University Reform Act of 1983 democratized and modernized the Spanish university but also revealed some shortcomings. One of the most important, from an economic point of view, is that those responsible for finances and human resources management are elected by faculty colleagues. Still, public universities have a Social Council (a body that represents external political and social interests) •that should control the financial and managerial issues in each university. The effectiveness of this body is extremely low. Consequently, universities are not subjected to real external control. The lack of professional management and real external control eases universities into institutions that are inclined to be inefficient. Extra resources are needed to implement this program. Political will to improve the public higher education system and organizational changes in the universities to increase efficiency are also necessary. The future of the system depends now on the policy-makers.
REFERENCES Clark, B. R. (1983) The Higher Education System: Academic Organization in Cross National Perspective, Berkeley:Universityof California Press. Consejo de Universidades (1995) lnforme sobre Financiacion de la Universidad, Universidades, 6 (Dic./Enero), 3-46. De Miguel, M. and Rodriguez, S. (1990) Evaluating the University System: A Spanish Faculty Point of View, Paper presented in the 12th Forum of the EAIR, Lyon, September. De Miguel, M., Mora, J.-G. and Rodriguez, S., (Eds) (1991) La EraIuaci6n de las blstituciones Universitarias, Madrid: Consejo de Universidades.
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Eicher, J.-C. and Chevaillier, T. (1992) Rethinking the finance of post-compulsory education. Higher Education m Europe 17, 1.6-32. Garcia, P., Mora J.-G., Pdrez J.-J. and Rodriguez S. (1995) Experimenting institutional evaluation in Spain. Higher Education Management 7, 1, 111-118. Grao, J. and Mora, J.-G. (1995) An/tlisis y disefio de sistemas de ayudas econdmicas a los estudiantes universitarios, Research memorandum. Kaiser, F., Koelman, J. B. J., Florax, R. J. G. M. and Van Vught, F. (1992) Public Expenditure on Higher Education, London: Kingsley. Mora, J.-G. (1992) Calidad y Rendimiento en las Instituciones Unh,ersitarias, 1991, Madrid: Consejo de Universidades. Mora, J,-G. (1995) Socio-economic Equity in Access to Higher Education in Spain, lnvited paper in the Conference Addressing Under-Representation in European Higher Education, Council of Europe, University of Cambridge, U.K.. Mora, J.-G. and Villarreal, E. (1995a) Un Modelo para la Financiacion de las Universidades Pfiblicas, in E. Oroval, Ed., Plan!ficacidn. Evaluacidn y Financiacirn de Sistemas Educativos, pp. 175-199, Madrid: Civitas. Mora, J.-G. and Villarreal, E. (1995b) New Financial Relationships Between the Administration and Universities: The Valencian Case, Higher Education Management 7, 297-307. Mora, J.-G., Palafox, J. and Prrez, F. (1993) La Financiacidn de las Universidades Valencianas, Valencia: Alfons el Magnanim. Mora, J.-G., Palafox, J. and Prrez, F. (1995) The Financing of Spanish Public Universities, Higher Education 30, 389-406. OECD (1990) Financing Higher Education, 1990, Current Patterns, Paris: OECD. OECD (1993) Education at a Glance. OECD Indicators, Paris: OECD. OECD (1995) Education at a Glance. OECD Indicators, Paris: OECD. Palafox, J., Mora, J.-G. and Prrez, F. (1995) Capital Humano: Educacidn y Empleo, Valencia: Fundaci6 BANCAIXA. Vila, L. and Mora, J.-G. (1995) Earnings and Workers' Education: Evolution in the 80s, Paper presented in the I Conference of the European Association of Educational Research, Bath, U.K.