THE FINANCIAL DYNAMICS OF FUNDING UNIVERSITIES IN THE TWENTY-FIRST CENTURY –

ARTICLE IN “EDUCATION TODAY” - MOSCOW STATE PEDAGOGICAL UNIVERSITY  

 THE FINANCIAL DYNAMICS OF FUNDING UNIVERSITIES IN THE TWENTY-FIRST CENTURY –

RUSKIN SVETSKY – MOSCOW STATE UNIVERSITY – RUSSIA 

SUDHANSHU BHUSHAN – VEDATYA INSTITUTE – GURGAON, INDIA

VERONIKA ANFISA – MOSCOW STATE PEDAGOGICAL UNIVERSITY –RUSSIA

The funding of higher education throughout the world and especially within the low-income, or developing countries has faced dramatic changes in the last decades of the twentieth century and the first decade of the twenty-first century, which will only accelerate in the decades ahead. The funding-pattern shifts are caused by rising needs for higher education based on economies and democratic 'societies, by growing demands for higher education access, and by the worldwide expansion of higher education costs-or revenue require-ments-above the corresponding rates of increase of available revenues, especially those that are dependent on government. The consequence in most of the world has been a shortage of revenue to accommodate both the greater costs of instruction and research as well as (and exacerbated by) the increasing revenue needs of rising enrollments.

These diverging trajectories-of rapidly increasing resource needs amidst static or even faltering revenues from state budgets-must, in turn, be met by solutions on the cost side and/or the revenue side. In the absence of solutions to the underlying dilemma of university funding, the resulting and steadily wors-ening austerity will compromize the goals of higher education throughout the world, that is, improving the quality of both teaching and research, expand-ing and assuring more equitable participation, and bringing greater economic and social benefits to the expenditure of scarce public revenues. At the same time, such solutions are exceedingly difficult, both politically and managerially, which is why their implementation, on the parts of both governmental minis-tries and university leaders, has been so elusive. Thus, higher education leaders as well as policymakers must understand the nature of this underlying funding dilemma, the s(!)-called solutions that may be available (on both the cost and the revenue sides), and the cultural and political as well as the strictly managerial dimensions of this worldwide higher education funding dilemma.

THE HIGHER EDUCATION FUNDING DILEMMA

The underlying higher education funding dilemma is mainly propelled by three trends. These situations are worldwide and are not dependent on economic development, the prevailing political ideology, the form of government, or the current structure of a country's higher (or more broadly, its entire tertiary) education system. These trends, in summary, are:

(1) the tendency of unit, or per student, costs to increase in excess of a country's prevailing rate of rising prices (that is, in excess of the prevailing rate of inflation);

(2) the worldwide pressure of increasing enrollments, whether powered by demographics and/or by increasing rates of participation, which accelerates the previously mentioned rise in per student costs and thus in total revenue needs; and

(3) the inability of governmental revenues (in all but a few countries) to keep pace with these surging revenue requirements.

Increasing Per-Student Costs

The per student costs of instruction (that is, before considering the additional costs of increasing enrollments) conform closely in most economies to the rate of increase among faculty and staff wages and salaries, which in most countries tracks over time the rate of increase of wages and salaries in the general econ-omy-or, if there is any real growth in the economy, at inflation plus. This is the so-called cost disease, or the phenomenon of the rising relative unit costs in the labor-intensive and productivity-immune (or at least productivity-resistant) sectors of the economy. This condition meets relatively little of the cost-cutting substitution of capital for labor that is the source of productivity increases in the goods-producing sectors of the larger economy. This phenomenon, first articulated by William J. Baumol and William G. Bowen (1966), applies as well to such labor-intensive, productivity-resistant enterprizes as symphony orches-tras, most governmental and nongovernmental organizations, schools, and universities. This rate of increase of unit costs (or revenue needs) may be driven even faster in colleges and universities by two additional cost drivers peculiar to higher education:

(1) technology, which in institutions of higher education tends not to be a productivity enhancer or unit-cost reducer, rather increases unit -costs, altering the very nature (and supposedly improving the value) of the product, but still requiring more, not less, revenue; and

(2) curricular change, in which new programs tend to be input faster than old programs or faculty can be shed.

INCREASING ENROLLMENT

Accelerating this natural rate of increase of unit (or per student) instructional costs or revenue needs, are growing enrollments. This expansion in low-and middle-income countries is a function of two main forces.

1.    The first of these is demographic: specifically the change (generally the growth) over time in the number of youth within the conventional college or university age cohort (usually ages 18 through 24). Some highly industrialized countries-such as, in much of southern Europe, Russia, and Japan – are experiencing demoraphic declines, for which they are trying to compensate via recruitment matriculation of students from other countries (e.g., Japan through students from China and Indonesia and Russia through students from China an central Asia). However, most low- and middle-income countries, with the notable exception of China, have been experiencing sharp increases in youth populations.

 2.    The second force affecting enrollments consists of the increasing participation rates of these (generally increasing) university age cohorts. Increasing participation rates, in turn, are a function of three factors:

 (1) an increasing proportion of youth completing secondary education;

 (2) changing employment opportunities and a perception of increasing competition for fewer goo jobs, the attainment of which is likely to be enhanced by higher education; and

 3) an increasing regard for social and economic mobility and justice, leading to policies designed to increase higher education participation particularly among those who are traditionally underrepresented on account of poverty or other reasons for historical low participation rates-including gender, ethnic, and linguistic minority status; poor secondary schools; or any number of conditions associated with marginalized populations. Countries with high birthrates also tend to encounter low participation rates (especially in sub-Saharan Africa Latin America, and the Caribbean). Such countries are likely to experience both of these enrollment accelerators-steeply rising participation rates of surging numbers of university-age youth-resulting in extreme enrollment pressure upon what is most likely to be a highly constrained university capacity.

 The increasing enrollments impact the financing of higher education by accelerating the natural rate of increase among per student costs. Thus, steeply and continuously, an extension of public resources will be required to maintain the quality of the higher education product. Without the coming forth of more public resources-which is the case in most countries, the totally industrialize, and affluent but especially most of the low-income or developing world-inevitably higher education austerity will be enforced, bringing with it both diminished quality and equity.

 FALTERING GOVERNMENTAL REVENUES

 The final crisis involving funding of higher education in low- and middle income countries is the inability of governmental revenue to keep up with these rapidly increasing higher education revenue needs. And again, the causes are obvious. Governments everywhere, especially in the less-developed world, are burdened with the similarly escalating costs and revenue needs of other public pending obligations. Furthermore, growing middle-class electorates in many countries are becoming more fiscally conservative, particularly given the dis taste for continually rising taxes and the perception of wasteful government spending. The so-called transitional, or post communist, countries also continue to labor under the enormous costs of building an internationally competitive productive infrastructure from their outmoded industrial factories an evening a labor force away from its deeply rooted dependence on state enterprizes and guaranteed employment.

In developing countries, enrollment pressures and revenue needs are steeply rising. Yet, since production and incomes (and thus taxable wealth) tend to be low, taxation is also a difficult issue, technically. Governments face the financial challenge of obtaining a share of purchasing power when relativel~ ittle wealth comes from large, stable enterprizes that can be taxed and also counted upon to withhold taxes from their employees. For example, an analysis of taxation, tax capacity, and needed tax reforms in sub-Saharan Africa from Norway's Michelsen Institute found the tax-to-gross domestic product ratio around 21 percent in sub-Saharan Africa (as low as 10 percent in Tanzania and Uganda)-compared with an Organization for Economic Cooperation and Development-based average of some 32 percent-and cited many example If ineffective, costly, and coercive tax collection efforts, especially at the local levels. Researchers also warned that "attempts to squeeze additional revenue: from poorly designed taxes may exacerbate the negative effects of the tax system on the economy and the society in general" and concluded "it is unlikely that a substantial widening of the tax base can be achieved without increasing he tax burden of the poorer segments of the society’. Former communist countries, once dependent on easy and extensive turnover taxes on state-owned enterprizes, now need to tax personal or corporate incomes, retail or commercial transactions, and/or property-all of which are difficult to calculate, expensive to collect, and relatively easy to evade. To worsen the difficulty of taxation, the globalization of the world'! economy makes it easier for businesses and individuals in many countries to hide or shield incomes or to simply move themselves and their taxable assets to lower-tax countries.

Finally, governments everywhere, but especially in the low-and middle income countries, are contending with fiercely competing needs for the scarce public revenues. Many of these issues may become more politically and socially compelling than a voracious and still elitist pubic higher education sector-especially one that most citizens' children in low-income countries will probably not see. In much of the developing world and in many transitional countries, for example, the competitors for scarce public revenue include the replacement of decrepit public infrastructure, unfunded pension obligations, the need for a workable social safety net, and the cost of reversing generations of environmental degradation. In sub-Saharan Africa, competition for the scare public dollar is truly formidable and includes, in addition to the needs listed earlier, public health, (e.g., the old scourge of malaria and new pandemic of HIV-AIDS and now corona virus), elementary and secondary education, and assistance to faltering economies. Thus, although the government (or taxpayer) will continue world-wide as the main revenue source for public higher education, the limited addi-tional revenue can be squeezed out of the public treasuries for public colleges and universities will be forced to accommodate some of the inevitably expand-ing higher education enrollments, leaving little or nothing to maintain faculty and staff salaries, improve faculty-student ratios, or meet the needs of deterio-rating physical plants.

INCREASING AUSTERITY IN HIGHER EDUCATION

These trends on the financing of higher education-again, varying by coun-try, but considerably more severe in low-and middle-income countries-have been increasing the austerity in universities and other institutions of postsec-ondary education as well as in national systems of higher education. This nearly universal and growing higher education austerity in turn has affected universi-ties and other institutions of higher education as evidenced by: overcrowding of lecture theaters; insufficient or outdated library holdings, computing, and Internet connectivity; a deterioration of physical plants; less time and support for faculty research; and a widely assumed loss in the quality of both teaching and learning as well as of research. At the national or system level, the austerity is manifested by capacity constraints, the inability to accommodate all gradu-ates of academic secondary levels who are capable and desirous of further study, a loss of the most talented faculty to countries with fewer financial troubles, and an increasing inability to compete in the global knowledge economy. Finally, the financial austerity effects students, who face tuition fees where there used to be none or meet rising costs where fees have existed, in addition to the rising costs of student living. These crises are contributing to the need to work and earn while studying or face going into debt, or both-for individuals fortunate enough to find a place at all (with many having left the system long before sec-ondary school completion, never experiencing even the possibility of tertiary education).

This austerity has been most crippling in sub-Saharan Africa but is serious throughout the developing world, as in many of the transitional countries, especially those emerging from the former Soviet Union. The solutions, sim-plistically, are clear. First, governments can be urged to contribute more. This is invariably the solution preferred by university leaders, faculty and other staff, and students. However, as we noted earlier, governmental taxation in many low-and middle-income countries is frequently near the point of diminishing returns, as additional taxes can lead to increasing costs of collection, increas-ing tax avoidance and corruption, or the departure of taxable individuals and productive enterprizes from the country altogether. Furthermore, while sys-tems and institutions of higher education almost certainly have a valid claim on additional public revenues, should they be found, so do a myriad of competing public needs such as elementary and secondary education, public health, and public infrastructure. Thus, while higher education leadership must not aban-don pressing their claims for additional public resources, the solutions to the cost-revenue squeeze-particularly for low-and middle-income countries- must increasingly come from university leaders via solutions on the cost side, which in turn means getting more teaching and learning from fewer faculty and staff and, on the revenue side, obtaining more nongovernmental revenue. First, cost-side solutions will be discussed, which in theory are a quest for greater efficiency, or the elimination of waste, but in practice may frequently simply involve the cutting of costs.

COST-SIDE SOLUTIONS

Solutions to the diverging trajectories of costs and revenues attempt to lower per student instructional costs. The claims of the faculty and staff-first, to pre-serve their jobs and, second, to maintain or enhance their emoluments-often have the highest political and emotional leverage. Thus, other non instructional and non personnel cuts tend to be made first: for example, deferring mainte-nance of the grounds and the physical plants, suspending the replacement of equipment, and freezing or cutting such current expenditures as books and journal subscriptions, replacement of computers, travel, and other noninstruc-tional expenditures. In the most economically stressed countries, bills for utilities and other needed supplies and services may simply not be paid.

Beyond the sacrifice of most nonpersonnel expenses to the preservation of jobs, but continuing at the most drastic, simplistic, and least—strategic level, governments or universities may cut costs simply by not paying or seriously delaying salaries of faculty and staff. Only slightly less simplistic but still decid-edly nonstrategic are such relatively easy expense-cutting actions as the freezing of salaries or student bursaries-especially when increases are expected and counted upon, as in a highly inflationary economy-or the termination of staff who are part time or not yet entitled to any form of permanency or tenure. More politically or legally acceptable than the nonpayment of salaries, but still damaging 10 the university's instructional mission, is the freezing of faculty replacements. As the more productive faculty in many (not all) fields arc the most mobile, they are frequently the ones who leave. Colleges and universities experiencing pro longed freezes may wind up with few-and oftentimes inferior- faculty in the new high-demand fields, with excessive numbers of faculty in older fields and prog rams that have fewer students.

 More strategic expenditure reduction at the institutional level- whether to meet an aggregate budget reduction or to free revenue for reallocation and investment-must reduce costs of personnel and do so selectively to shed the faculty and staff who are the least productive and/o r least central to the core mission (s) of the university. The least productive and /or least central faculty may well be some of the most senior and politically powerful members, whose scholarly productivity or teaching effectiveness may have seriously declined. Otherwise, they may be administrative staff whose days could be spent in hard work but in work that no longer adds commensurate value to the mission of the institution . Eliminating faculty and staff position s may be both politically and legally difficult and at times impossible to carry out. Strategic cost cutting Cannot ignore contractual obligations or be oblivious to sensitivity and decency when it comes to the excruciatingly difficult task of terminating faculty and staff. At the same time, if the future needs of the university and the quality of the instructional programs are to take precedence, university leaders must be allowed to make such hard decisions: in short, to maintainl11ission and quality, if necessary, at the cost of sacrificing lower-priority program s (as well as losing popularity. political support, and smooth labor relations).

The management of government agencies and the norms of civil service employment, especially in most developing and transitional countries, which prize continuity of employment above all else, are generally incompatible with strategic cost-side solutions to financial problems. Typical problems with government agencies include laws, contracts, and political pressures that forbid terminating staff for any but the most egregious causes, hiring part-time or temporary staff in place of full-time workers, or contracting out services. Additional frequent impasses involve denying other good management practices such as carrying unspent funds forward from one fiscal year to the next or shifting available funds from one budget category to another. However, a clear shift in such management -con straining laws and regulations has occurred in the last decade or two, especially in the highly industrialized countries of the Organization for Economic Cooperation and Development. Such reforms, most of which would give greater managerial autonomy and flexibility to universities, have been proposed and /or are on the table in many middle- and low-income countries as well. Such reforms often entail transforming universities from governmental agencies to public corporations with authority, for example, to: (a) establish wage and salary policies; (b) reallocate expenditures based on institutionally determined priorities; (c) carry forward unspent funds from one fiscal period to the next, thus supporting savings and institutional investment and discouraging spending to avoid loss or an excessive budget; .(d) enter into contracts with outside agencies and businesses expeditiously and competitively; and (e) receive and own assets or borrow and incur debt. All of these powers, and more, in many developing and transitional countries were formerly reserved to the minis try or parliament and to the government's financial. personnel, and civil service bureaucracies.

 Thus, managerial authority is being strengthened and vested in chief executive officers (presidents, rector s, or vice chancellors) who are selected by governing boards rather than by heads of state or ministries. Further strategic cost-side remedies to financial shortfalls may lower the average per student costs of instruction by increasing teaching loads and /or average class size. However, such strategies, as well as curtailing research, diminish the time the academic staff can spend with individual students and limit the possible instructional modalities, favouring larger classes, fewer examinations, and fewer or shorter written assignments over small classes, discussion-centered pedagogies, and more written examinations. Yet, such relatively obvious cost-side strategies may have already run their course, particularly in middle- and lowincome countries. Decades of budget cuts and of absorbing more students and instituting new academic programs with little or no added public funding have arguably taken most if not all of the low-hanging fruit of obvious waste and budget cuts in most countries. Further across-the-board increases in class sizes or teaching loads sufficient to lower the average per student cost of instruction may not be possible without further serious deterioration in the quality of teaching and learning and a further loss in the desirability and attractiveness of the professoriate as a profession.

 In many countries, including affluent and highly industrialized as well as middle- and low-income countries, the view remains that much more fundamental and drastic cost-side solutions must still be sought to lower per student costs and provide some cost-side solutions to the otherwise steeply rising trajectory of higher education costs. Three newer, more fundamental cost side solutions are more radical sector diversification, institutional mergers and more reliance on technologically assisted instruction- such as distance earning and virtual universities. We conclude our review of solutions on the cost side by consideration of these newer possible strategies for increased higher education efficiency. Sector Diversification This strategy constitutes a shift from a preponderance of higher education insti-tutions being (or at least aspiring to be) research universities toward alterna-tive short-cycle, less-expensive, less-selective, more vocationally oriented, and more hierarchically managed institutions, whose faculty are oriented to teach-ing rather than to research. Thus, sector diversification is commonly viewed as a partial solution to higher education's increasing austerity. The presumably lower per student costs of these so-called non university alternatives to the classi-cal research university lie in their higher teaching loads, which in turn are a con- sequence of the lessened expectations for research, a less-extensive involvement in university governance, and the presumption of a lower-reliance on expensive equipment, laboratories, libraries, and technology as well as the shorter dura-tion of study of their students. The form and extent of these alternatives to the classical university vary throughout the world. Among the best known are the German technical universities, or Fachhochschulen, the Dutch higher technical schools, the French institutes universitaires technologies, the Japanese public and private junior colleges, and the American community colleges-most of which attempt to provide, in these countries, tertiary level education shorter in dura-tion, more practical, less academically rigorous, and less costly. Sector diversi-fication will continue to meet resistance from university students and faculty, who frequently see alternatives to the classical university as lower in status and designed mainly to track less-well-prepared students-more likely from poor or otherwize marginalized families-into forms of tertiary education that will limit their opportunities. Nevertheless, sector diversification will likely remain prominent on the agenda of international higher education reform both for its presumed increased relevance and usefulness to many students (and employ-ers), as well as for the presumption of greater cost-effectiveness.

MERGERS

At least in theory, mergers can lower unit costs by increasing the scale of opera-tions and achieving savings on such overhead expenditures as physical plant, libraries, and top-level administration. However, actual savings from mergers still require cutting faculty and staff, including highly paid administrators as well as closing facilities, eliminating some academic programs, and giving up precious institutional identity-measures that are often bitterly resisted, both institutionally and politically. If the merger is only nominal-that is, retaining most facilities, programs, and faculty .and merely eliminating a president or rector and a few other top-level administrators-the result may simply be more complicated and less-effective management, a demoralized faculty (of both institutions), and a failure to realize the potentially significant savings of either a genuine merger or the outright closure of one of the supposedly "merged" institutions. At the same time, institutional mergers may be both necessary and possible-and indeed have occurred-in countries where many universi-ties and colleges developed on small and frequently narrow scales for histori-cal reasons that are no longer relevant or have been discredited. Examples of such fruitful settings for cost-effective mergers include South Africa's apart-heid division of higher education institutions by race as well as the old Soviet communist model of small and academically narrow universities owned by and oriented to the research and employment needs of a single industrial sector or production ministry.

TECHNOLOGICALLY ASSISTED INSTRUCTION

Finally, an explosion of interest in most countries, especially in middle-and low-income countries, designates technologically assisted instruction, dis-tance learning, and virtual universities. The most successful applications have focused on the margins, or peripheries, of higher education rather than radical transformations of existing universities. However, undoubtedly great interest will continue among existing universities in instructional technologies of all sorts-largely to supplement traditional modes of instruction. The mission will include the ability to deliver true distance learning to older or return-ing students as well as to midcareer professionals needing efficient refresher learning (perhaps to maintain licensure, as might one day be required of phy-sicians, teachers, and lawyers). In developing and low-income countries, the potential of technologically assisted distance learning may lie more in serv-ing traditional-age students in remote locations, where the principal costs of higher education are the living expenses away from home (although a lack of personal computers and good Internet connectivity may continue to form major barriers).

Whether new developments in instructional technology can ease the finan-cial austerity of institutions is unclear, although experience from more-affluent industrialized countries suggests that these procedures may enrich the teaching and learning but rarely lower-and frequently increase, at least in the short run-the per student costs of instruction. In theory, of course, one professor, with considerable technological investment and extensive staff support, can teach at many locations and possibly to far more students than he or she could teach "face-to-face" at a single site. And if the goal is to reach out to other-wize place-bound students, unable to travel to a common site but able to get to remote sites to receive a transmission, distance learning can extend access at considerable savings over the alternative of placing faculty and a full facility at each remote site. In countries with surging enrollments, financially unable to build and staff more institutions, virtual or distance-learning universities may be a key to relieving some of the enrollment pressures, especially in areas remote from the metropolitan centers. China, India, Indonesia, Turkey, and sub-Saharan Africa (African Virtual University) all claim large enrollments in distance, or virtual, universities for a single institution or even a national system of colleges and universities. cope with diverging trajectories of costs and revenues, most applica-tions of distance learning can enrich the learning but are unlikely to provide measurable efficiencies for the existing institutions.

In the end, while cutting instructional expenses needs to be part of the solution to be higher education's underlying financial dilemma, cost-side solutions alone will be insufficient for both substantive and political reasons. More Importantly, the gap from the diverging trajectories of higher education costs and available revenues is simply too wide to be closed by further cuts in expen-ditures, even with some of the more radical cost-side "solutions." In short- and as segue to the next section-higher education in almost all countries must turn to nongovernmental revenues to supplement the increasingly insufficient revenue available from governments.

 REVENUE-SIDE SOLUTIONS

These solutions to the diverging trajectories between surging costs, or revenue needs, and limited public revenues look to increasing nongovernmental revenue. The most efficient and robust stream—that is, a revenue stream that is potentially sizeable, continuous, and least likely to divert the faculty from their mission of instruction—is from the parent and/or student via tuition and other fees. In fact, tuition fees along with financially self-sufficient provision of food and lodging, and the rise of tuition fee-dependent private institutions, are increasing phenomena in most countries of the world. The issue of higher education costs being shifted from a predominate reliance on governments, or taxpayers, to families and students is at times referred to as cost sharing. Having entered into common parlance in the discourse of higher education policy, the term cost sharing has become both a statement of fact-sharing costs of higher education among governments (or taxpayers), parents, students, and philanthropists—as well as a reference to a near worldwide policy shift of some costs from a predominate reliance on governments to sharing among parents and/or students in addition to taxpayers.

 Cost sharing is associated with tuition fees and "user charges,” especially for governmentally or institutionally provided room and board. However, a policy shift toward greater cost sharing can take several forms. The most common version is the introduction of tuition in systems where higher education was formerly free or nearly so. This would be the case in China in 1997, the United Kingdom in 1998, or a number of countries in sub-Saharan Africa in the first decade of the twenty-first century. In formerly Marxist countries such as Russia, most of eastern and central Europe, and other countries that were once part of the former Soviet Union, as well as in East Africa with its legacy of African socialism, a common variation is the addition of a special tuition-paying track within the public universities while maintaining free or low fees for the regularly admitted, state-supported students. Such a dual track tuition fee, particularly as practiced in Uganda and Kenya, preserves the legal and political appearance of free higher education, which is particularly important (and may be enshrined in a constitution or a framework law). At the same time, such a policy imposes high tuition fees on many (sometimes, as in Uganda's Makerere University, a majority) of the otherwize qualified university students. Furthermore, such a system is considered by most policy analysts to be inequitable in that the highest subsidies go disproportionately to the students whose parents could and would afford a modest tuition fee but who are accorded the limited number of free places in part because of the quality of their (frequently private) secondary education and all of the other cultural advantages of a middle- and upper-middle-class education.

Many countries contemplating the imposition of some form of cost sharing turn first to "user charges" or fees, to recover at least some of the expenses of governmentally or institutionally provided (and heavily subsidized) residences and dining halls. This has been happening in most countries, including virtually all the formerly communist/socialist countries and most of the countries in sub-Saharan Africa, where subsidized living costs at one time absorbed the bulk of higher education budgets.

Still another form of cost sharing is the elimination or reduction of student grants or scholarships. This approach is sometimes accomplished simply by "freezing" grant or loan levels or holding them constant in the face of general inflation, which then erodes their real value. This trend began with the once very generous grants in Britain (which were later abandoned altogether), as well as with the value of the maintenance grants in most of the communist or socialist countries of the former Soviet Union, eastern and central Europe, and Asia, as well as many countries in Africa. A similar policy change in the direction of greater cost sharing would be an increase in the effective cost recovery on student loans. This goal can be accomplished through a diminution of the subsidies on student loans (similar to the diminution in the value of nonrepayable grants) and possibly through an increase in interest rates, as was on the policy table in Kenya during 2009. Or, the additional cost recovery might be accomplished through a tightening of collections or a reduction in the instances of default--as has been occurring in South Africa and Kenya.

A final policy of cost sharing, would constitute the purposeful limitation of capacity in the low-cost or tuition-free public sector together with the official encouragement (and frequently some public subsidization) of a tuition-dependent private higher education sector. A number of countries—notably Japan, Korea, the Philippines, Indonesia, Brazil, and other countries in Latin America and East Asia—have avoided much of what would otherwise have formed a significant governmental expenditure on higher education by keeping a limited public sector—usually elite and selective—and shifting much of the costs of expanded participation to parents and students through the encouragement of a substantial and growing private higher education sector.

Although cost sharing may take on these different forms, the imposition of and/or large increases in tuition fees provide the greatest financial impact. This is because tuition fees—aside from the need to rebate some of the aggregate income in the form of loans, grants, or discounts to preserve accessibility can be both financially significant and ongoing and even designed to regularly increase, thus keeping pace with the inevitably rising per student costs of instruction. Also, unlike most forms of faculty entrepreneurship, tuition fees do not divert faculty from the core instructional mission and, according to many observers, actually have a beneficial effect of improving the quality of teaching and the relevance of the curriculum. Perhaps for these reasons, tuition fees are also the most politically charged and ideologically resisted form of cost sharing and thus have become a symbol of the conflict between people who believe that government must continue to provide higher education free of any charge and those who believe in the imperative of cost sharing and especially of tuition fees.

Rationales for Cost Sharing Cost sharing has three principle rationales. The simplest is the austerity, or the sheer need, rationale, which is a function of the afore-mentioned divergence between the increasing costs and revenue needs of universities and the limited availability of taxpayer revenues. Such a rationale is the most politically and ideologically neutral and is probably in itself sufficient to account for most of the recently observed worldwide shift in costs from governments to parents and students.

Many economists and policy analysts also see an equity argument for cost sharing. They observe that so-called free higher education (sometimes extended in the past, although rarely into the twenty-first century, to free tuition, free room, free board, and pocket money) is virtually everywhere partaken of disproportionately by the sons and daughters of the elite, who will clearly benefit handsomely in greater occupational choices and prestige and usually in income but is in almost all cases paid for at least proportionately by the average citizen and worker.

Finally, efficiency arguments have been advanced in favor of cost sharing: based on the principles of market economics, among which is the assertion that having to pay at least a part of the costs of higher education should make both parents and students more discerning consumers—just as having to charge at least a partial price for the higher education (or the food or the lodging), particularly with some competition, should make the university and/or the government a more efficient and responsive provider.

The economic rationale behind the case for students bearing a portion of the costs of their higher education identifies substantial private benefits, both monetary and nonmonetary, that accrue to the student from higher levels of education. These benefits are said to justify a tuition—especially a modest one that can be deferred and repaid through some form of loan or a surtax upon income or current earnings. The case for parents bearing a portion of the costs of their children's higher education is driven both by the assumption of private benefits extending to parents and by a cultural notion of parental obligation. This rationale includes the presumption that governmental or philanthropic subsidies will fill in for parents who cannot afford to pay. The fact that tuition fees have provided revenues to higher education throughout the world and that public needs, including public higher education, are outrunning the available public revenues means that free higher education is rapidly disappearing almost everywhere.

In most countries few policy alternatives seem to exist to the adoption of some tuition fees. The alternative (again, in most countries) would seemingly deny universities the revenue that they need and cause the losing either of higher education quality or capacity (and thus access.) The effects of these circumstances especially harm the poorest students, who lack the options of expensive private higher education or attending a college or university abroad. In fact, at least in the abstract, most economists maintain that tuition fees—meanstested grants and/or sufficient available student loans—are actually more equitable than free higher education, since students everywhere are largely from the middle and upper classes and the taxing systems in most countries tend to be proportional or even regressive.

Student Loans Any element of cost sharing that presumes a contribution from students requires a student-loan program, which is simply a way for students to bear a portion of the costs of their higher education. The financial burden is deferred into the future when the students should be able to pay—presumably from employment made more remunerative by virtue of the higher education they have received. Student loans have become widespread throughout the world

Some student loan schemes are small: (a) severely rationed by limited loan capital; (b) sponsored only by a single institution or consortium of institutions (generally private); (c) focused only on low-risk borrowers such as advanced professional students or borrowers who can produce multiple, credit-worthy cosignatories. A few schemes, including several in Africa, are financially fragile and have little record as yet of repayment recovery (although the loan schemes in South Africa and Kenya are at least financially viable). However, excessive subsidization of interest rates, high rates of default, and high costs of servicing and collecting seriously detract from the rates of recovery on many student-loan programs. For this reason, student-loan schemes may be resisted both by ministers of finance and other governmental leaders, who may justifiably fear their financial cost to the treasuries, as well as by students, who may fear the further encroachment of tuition fees. Student-loan schemes are also complex, widely misunderstood, sometimes misrepresented, and frequently contested. However, although the political and ideological opposition tends to be aimed less at the notion of student borrowing itself than it is at a presumption that a governmental loan scheme is a kind of camels nose into the tent of further cost sharing. Furthermore, some of the misunderstanding, on the part of student borrowers and politicians alike, is a result of the terms used by politicians and loan agencies alike—such as "free to the student at the point of entry,” or “no tuition fee but only a deferred obligation”—to play down what remains an imposition of tuition fees and student loans.

Some Fundamental Questions and Issues of Cost Sharing As most low- and middle-income countries move further into forms of cost sharing, some critical questions or issues must be addressed at the outset by higher education leaders and government authorities. Five such questions are particularly salient. The first issue is whether cost sharing is to be advanced through tuition fees, through higher (that is, more nearly break even) fees for governmentally provided food and lodgingor through encouragement (and even some partial subsidization) of a growing private sector—or any combination of the aforementioned? A second question that must be addressed at the start of a consideration of tuition fees is whether it is parents who are expected to contribute to the costs of higher education instruction—that is, via an upfront tuition fee (as, for example, in the United States, the Netherlands, China, Canada, and Japan)—or whether the burden of a shared cost of instruction is to fall mainly on the student in the form of deferred fees or loans (as in Australia, England, and Ethiopia).

Once a decision has been made to impose a tuition fee and on whom to impose it (in low- and middle-income countries usually on families who are financially able to contribute), the third question is the approximate percentage of public college or university instructional costs that ought to be covered by the tuition fee. The range throughout the world in 2018 seems to be from strictly nominal, as in 5 to 10 percent, to the 20 to 25 percent sought in China, up to the relatively high percentages in some American states of 35 to 40 percent. In almost no countries, however, (save possibly in Mongolia) do tuition fees at public colleges and universities exceed 40 percent, which means that virtually all governments, even those having embraced the appropriateness of tuition fees, continue to believe in substantial public benefits from higher education and commensurately substantial public subsidies.

If there is to be a tuition fee, then, a fourth critical question is whether the fee should be the same for all institutions, faculties, and degree levels. Or, might the tuition fee be greater, for example, for the most selective faculties or for the institutions, faculties, and programs in greatest demand (and likely to lead to the most remunerative careers)?

The fifth and last, but absolutely critical for policymakers and university leaders to debate, question is how accessibility is to be maintained given the increasing costs shifted to parents and/or students. The principal answer in all cases rests with some mix of need-based or means-tested grants and loans. But grants and loans are expensive and can quickly undo the revenue benefits presumed to have stimulated cost sharing in the first place. In other words, subsidies—whether in the form of grants, bursaries, tuition fee discounts, subsidized food and lodging, or the subsidies embedded within most student loans—must be cost effective, that is, make a difference in the enrollment behavior of the student, rather than merely reduce what would otherwize be parental contributions or reasonable student borrowing or enhance the students standard of living with no effect on enrollment or persistence.

Other questions and issues need to be faced in the consideration of a policy of increasing the higher education cost shares borne by parents and/or parents. But these five are essential to be faced and answered as a part of any cost-sharing policy. The answers will be contested, but the stakes are high. In the end the revenue needs of higher education in virtually all countries are high and will continue to rise. The alternatives to some form or forms of cost sharing are few, and most of them unacceptable.

CONCLUSION

The increase in higher education costs for most low- and middle-income countries, where both the increasing size of the relevant age cohort and the expanding percentage of this rapidly growing cohort that wants and deserves access to some form of higher or postsecondary education, is both great and unrelenting. The resulting trajectory of continuously rising costs and revenue needs is almost certainly above the capacity of any country's tax revenues to meet (save perhaps some of the low population oil-rich countries of the Middle East). There are so-called solutions on the cost side in the forms of economies, but the easy ones (e.g., increasing class sizes and teaching loads) have already been met, and the more difficult ones (particularly shedding excess personnel, mainly nonteaching staff) tend to be exceedingly difficult. Efficiencies must still be sought, both because savings must be made in most countries and also because college and university administrations must be seen making the difficult internal decisions if the alternatives to such savings—that is, higher fees paid by students and/or families—are to be politically feasible.

However, cost sharing in the form of tuition and other fees is becoming accepted throughout the world, including developing (both low- and middle income) and transitional (post communist) countries. Although opposition to tuition fees and other elements of cost sharing is virtually inevitable, a number of parents in all countries clearly can and will pay for some of the costs of higher education, as vividly demonstrated throughout the world by the growth of tuition-dependent private higher education (which is in most cases inferior in quality to that offered by the public universities and colleges), as well as by the growth of the privately funded tracks within the public universities. More parents and students, including those from low-income families, could afford a modest tuition fee and bear some or all of the costs of student living. The requirement will include available targeted, or means-tested, grants (nonrepayable) and generally available student loans, as well as grants and loans to increase access to higher education opportunities.

None of these funding patterns deny the need for governments to continue—and in fact to increase—their support of higher education. Parental and student participation must supplement, not supplant, the larger financial role in support of higher education, which must continue to be played by the state. However, it seems unlikely that enough additional resources devoted to higher education will meet the rapidly growing needs, given the enormous revenue needs of the public higher education system and the competition for additional revenues from such needs as elementary and secondary education, public health, public infrastructure, and all other social services. This emphasis on financial solutions on the revenue side also must not deter the government or the universities from continuing, as they have, to aggressively pursue financial solutions on the cost or efficiency side. Such measures should consider, for example, additional privatization of nonacademic services such as food and lodging, changes to teaching loads, and the ability of university management (with proper attention to employee rights) to shed less productive members of the faculty and/or staff.

Finally, these so-called solutions to the mounting financial problems of universities in the twenty-first century call for enlightened and courageous leadership at many levels, including not only rectors, presidents, and vice chancellors but deans, heads of departments and institutes, politicians, and citizen members of governing boards and councils.

 THANKS

sudhanshu

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