Although public money remains the main source of financing for most European universities, a growing number of institutions are turning to such additional sources of revenue as private contracts with industry, service-related income, philanthropy, and, in some countries, increased tuition, says a new report by the European University Association.
The report, “Financially Sustainable Universities II: European Universities Diversifying Income Sources,” urges governments to maintain and even increase their support, but also acknowledges the pressure on public treasuries and advises university administrators to push ahead with their own efforts to bring in other types of revenue.
The report marks the culmination of a two-year project by the association, which is in Brussels and represents institutions and rectors’ organizations across Europe. Its findings were based on an online survey of 150 institutions in 27 countries, as well as site visits and workshops. The research was conducted during the worst of the recent global economic crisis.
Thomas Estermann, head of the association’s unit for governance, autonomy, and finance, is the lead author of the report. When his unit first began working on the income-diversification project, in 2008, the extent to which the economic crisis would affect European universities was still unclear, he said. “It was not like in the U.S., where you immediately had an impact on endowments, for example,” he said. “It took really a year or so until the most severe impact became apparent, and expectations got more and more pessimistic throughout the running of the project, as it became clear that this crisis will not end so quickly and that the impact will continue for some time.”
Public money accounts for, on average, 73 percent of the budget of European institutions, but that level of support seems increasingly in danger, the report says. And while universities have had some success in diversifying their income streams, the report underscores that “we don’t believe that these funding sources can replace sufficient public funding,” Mr. Estermann said.
Almost without exception, European policy makers acknowledge the importance of public support for higher education. Unfortunately, said Mr. Estermann, “we don’t see this translated into reality.” Instead, governments continue to slash higher-education spending. In just the past month, for example, the Netherlands has announced plans to cut 10 percent from its higher-education budget, he said.
The big debate in Europe at the moment, Mr. Estermann said, is about how best to finance the teaching mission of universities. “Whereas in the U.S., more institutions are focused on the teaching mission alone,” he said, in Europe most universities incorporate an emphasis on research, and many countries also have separate institutes that are fully devoted to scientific research.
The report underscores major differences throughout Europe in terms of how countries and institutions finance the teaching mission of universities and the role tuition plays in those calculations. Some countries charge no tuition, while in others it is an increasingly important part of universities’ revenue, and, on average, student fees contribute 9 percent to university income across Europe.
The report found that more than half of the universities surveyed expect public money for teaching to fall, while less than a third expected state financing for research to drop.
Several European countries, including Britain and Ireland, have seen recent student protests over fee increases, and the report’s findings underscore the political sensitivity inherent in governments’ and institutions’ decisions about how to finance the teaching mission of universities.
The report makes a series of recommendations, aimed at both public bodies and universities. Governments should invest more in higher education and try to reach a longstanding European Union target of 3 percent of gross domestic product spent on research and education. Universities in many countries remain under the direct authority of education ministries, and the report also recommends that institutions should be allowed greater autonomy over their own governance, especially in regard to financial decision-making and human resources.
University administrators, the report says, should make diversifying their income streams a core part of their institutional strategy. Faculty and staff should be fully engaged in such goals and be given incentives to take an active role in how their institutions seek other sources of income. One approach that the report endorses is the adoption of programs to match private donations with public support, which it says “appear as the most popular measure for income diversification” even though only Britain and Norway, and to a lesser extent Finland, have enacted such arrangements.