The Different Consequences of State Funding Cuts to Irish HEIs

During the Celtic Tiger years, state investment in third level institutions in Ireland saw significant growth. This upward trend was maintained even within a short period after the collapse of the property bubble. It was the financial crisis of 2008 that dramatically overturned the pattern, with the national economy sharply declining.

For universities and IoTs, as well as a number of other private HEIs, the main consequence was the reduction of state funding, as part of the government’s measure to address the urgent issue of public debt.

In a few previous blog posts, I have described the extent of funding cuts in Ireland and compared national policies in this matter amongst the EU countries. A less examined topic is the consequence of state funding cuts at the institutional level.

It is reasonable to presume that some institutions could be more badly hit than the others, while the higher education sector was, undoubtedly, having a tough time as a whole. In this blog post, I compare such differences between Irish HEIs, with results presented for the university sector and the IoT sector separately, considering the fact that most IoTs are much smaller than universities in terms of size.

1 The university sector

Figures 1 and 2 below show the changes in the university sector in sources of income between 2005-06 and 2011-12.

In general, income increased in the first 3-year period and then declined in the second 3-year period. The only exception was fees, which increased throughout the whole period, reflecting the shift of policy focus on funding. For the 7 universities, state grants decreased by 35% between 2008-09 and 2011-12, while fees increased by 10%. By the end of 2011-12, fees accounted for 43% of total income, nearly double of the share of state grants.

Figure 1
Figure 1
Figure 2
Figure 2

2. The IoT sector

Figures 3 and 4 below reveal the changes in the IoT sector. While most trends in this sector are similar to those in the university sector, there are still some differences.

For the 14 IoTs, state grants decreased by 27% between 2008-09 and 2011-12, while fees increased by just under 5%. By the end of 2011-12, state grants accounted for 45% of total income, which was higher than the share of fees (37%), and which was also significantly higher than that in the university sector (24%).

Figure 3
Figure 3
Figure 4
Figure 4

3. The 7 universities

In Figure 5 below, I show the changes in sources of income between 2008-09 and 2011-12 for the 7 universities, measured as percentage points.

The decrease of total income of NUIG – less than 15% – was the smallest in compared to the other 6 universities. DCU and UL were worst hit, with total income shrinking by nearly 35%. Reduction of state grants was most serious in the three largest institutions, namely UCD, UCC and TCD. While fees increased in all of the 7 universities, NUIG, MU and UL were the leaders in terms of receiving bigger amount of money paid by students. Lastly, UL was the only university which was able to secure more research grants in 2011-12 than in 2008-09, while the amount of research grants decreased by more than 20% in both UCD and TCD.

Figure 5
Figure 5
Figure 6
Figure 6
Figure 7
Figure 7
Figure 8
Figure 8

Figures 6, 7 and 8 above place the 7 universities in scatter plots, in the hope of revealing if there exist any association between the change in total income and each of the other factors.

A series of correlation analyses showed that the share of fees in total income was most significantly related to the change of total income (Correlation Coefficient = 0.78), while the share of state grants in total income was moderately related to the change of total income (Correlation Coefficient = 0.56). The share of research grants in total income was not significantly related to the change of total income (Correlation Coefficient = 0.24).

That research grants only having a limited impact on the overall change of total income was, in part, resulted by the fact that research grants only account for a small percentage of total income in all of the 7 universities.

4. The 14 IoTs

In Figure 9 below, I show the changes in sources of income between 2008-09 and 2011-12 for the 14 IoTs, measured as percentage points. At the sectoral level, IoTs were less badly hit by the state funding cuts than universities. During this period, a few IoTs actually saw their total income increasing, led by Limerick (14.6%), Dundalk (8.2%), Sligo (3.1%), Blanchardstown (2.4%), and, very moderately, Athlone (0.1%). This is a striking contrast to the picture of the university sector, in which all institutions saw their total income shrinking by more than 10% at least. Of course, many other IoTs did not perform as well as the above ones. Among the institutions with sharpest decline of total income were Letterkenny (-17.5%), Dublin (-16.1%), Galway-Mayo (-14.3%), and Tralee (-13.7%).

In terms of state grants, with the exception of Limerick, all the other IoTs saw their funding decreased, in line with what happened in universities.

Significant differences exist though between the IoT sector and the university sector when we examine the case of fees and research grants.

While all universities received more funding through tuition fees over the period, only a handful of IoTs – 5 to be exact – increased their income in this source. Athlone was most impressive, with its tuition fees increasing by nearly 40% during the period. An alarming issue could be that most IoTs were not as capable of universities in attracting fee-paying students, who are more likely to be international students.

While almost all universities – except for UL – saw their research grants decreased, the picture of the IoT sector was reasonably more promising. Research grants received by Limerick nearly doubled, while Dundalk saw its research income increased by more than 50%.

In general, there was much more diversity in the IoT sector than in the university sector.

Figure 9
Figure 9
Figure 10
Figure 10
Figure 11
Figure 11
Figure 12
Figure 12

 

Figures 10, 11 and 12 above place the 14 IoTs in scatter plots.

Similarly, a series of correlation analyses showed that the share of state grants in total income was significantly, but negatively, related to the change of total income (-0.51), suggesting that IoTs receiving more funding from state grants were more badly hit in terms of total income. The share of fees in total income was moderately related to the change of total income (0.35), while the share of research grants in total income was almost not related to the change of total income (-0.03).

5. Concluding remarks

It is clearly shown that, during the period of 2008-2011, institutions performed significantly differently in terms of maintaining their income. Some institutions, especially a number of IoTs, showed impressive resilience. Their stories could be very interesting to be examined further.

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Impact of the Economic Crisis on European Universities

Across Europe, countries have implemented different policies and practices to deal with the economic crisis of 2007. Those policies and practices, in consequence, have different impacts on the higher education sector. Many reports by the European University Association (EUA) have presented such results.

Skrbinjek and Lesjak (2013), largely based on the EUA reports and with a special focus on the case of Slovenia, conducted a categorisation of European countries according to changes in public expenditure on tertiary education between 2008 and 2012 and according to investment in tertiary education in 2007 (as measured in % of GDP).

Table 1 below presents the results and distinguishes a total of 6 groups of countries which show complex and diverse responses to the crisis.

Table 1: Changes in tertiary education funding in European countries in 2008-2012

Changes in public expenditure on tertiary education (2008-2012)

Stable or increase Decrease

Public expenditure on tertiary education in 2007

High

(>1.3% of GDP)

Austria, Belgium, Denmark, Finland, Norway, Sweden Iceland, Netherlands
Medium

(1.0-1.29% of GDP)

France, Germany, Switzerland Czech Republic, Estonia, Hungary, Ireland, Lithuania, Portugal, Romania, Slovenia
Low

(<1.0% of GDP)

Poland, Slovakia Greece, Italy, Latvia, Spain, United Kingdom

Source: Skrbinjek and Lesjak (2013).

As shown in Table 1, 11 countries maintained or managed to increase the level of public expenditure on tertiary education between 2008 and 2012, while another 15 countries decreased the investment in the sector.

With the exception of Iceland, all of Nordic countries provided stable or increased funding for their tertiary sector over the period, and all of these countries have a high level of public expenditure on the sector. France, Germany and Switzerland, with a medium level of public expenditure on the sector, were also able to increase funding for their tertiary education sector. Poland and Slovakia were another two impressive countries.

During the period of 2008-2012, 12 out of 15 countries decreased public funding for tertiary education by more than 10% and the rest 3 countries up to 10%.

At first glance, it is hard to tell what impact does increasing or decreasing public expenditure on tertiary education have on the recovery of the national economy (see Table 1 in the previous blog: https://tionchar.wordpress.com/2016/03/14/recession-and-recovery-in-europe-where-ireland-stands/). Many countries which have reduced public expenditure on tertiary education were also able to make a strong recovery from the economic crisis.

A Reflection on the Higher Education Funding Conference at Maynooth University

When a good friend, who is a PhD student at TCD researching higher education in Ireland, sent me a message on Whatsapp on 30th September, I just landed at Geneva Airport, on my way to visiting a friend. In the short message, he said that the conference he was attending – the Higher Education Funding Conference at Maynooth University – was pretty good and would be of interest to me. I replied immediately, saying that ‘unfortunately’ I was on a short holiday to Switzerland, but I would like to find out more about what has been presented during the conference after returning.

So I did.

The one-day conference had a total of six presentations given by five academics, with Prof. Bruce Chapman from the Australian National University giving two presentations, one in the morning and the other in the afternoon. All the slides have been put up on the conference website. My friend was right: the conference was pretty good.

In general, the conference was able to provide extensive empirical evidence of higher education funding in a number of countries.

The presentation given by Rory O’Donnell, Director of the National Economic and Social Council of Ireland (NESC), qualitatively outlined the approach adopted by the Expert Group on the Future Funding for Higher Education, which was established by the Minister for Education in 2014 in response to serious concerns about the adequacy of current funding model. After explaining the key components of each of the three phases undertaken by the Expert Group, O’Donnell concluded with a set of guiding principles under discussion about exploring a new approach to funding. As indicated by Peter Cassells – the chair of the Expert Group – when speaking at the Royal Irish Academy on 23rd September that the group will not report until the end of this year, it remains unclear what exactly the approach will look like.

The rest five presentations were more focused on empirical analysis of different countries: two on Ireland, one on England, one on the U.S., and one on Australia.

Delma Byrne, presenting the case of Ireland, paid much attention to access to higher education and argued that two key policy instruments which seek to facilitate access are compromised. Bruce Chapman, in his afternoon presentation, illustrated an ‘Irish Hypothetical Loan Scheme’. In particular, he used data from the EU Survey of Income and Living Conditions for the calculation of earning profiles and repayment burdens (RB). Although the results were preliminary, they seemed to suggest that ‘an Irish mortgage-loan system will have very low RBs for low income graduates’ but RBs may go upwards to more than 60% for many graduates. (Note: RB in period t is loan repayment in period t as a share of income in period t).

The rest three presentations focused on international evidence on the topic.

Claire Crawford, a Research Fellow of the Institute for Fiscal Studies and Assistant Professor of Economics at the University of Warwick, explained the case of England, with a special focus on the impacts of the higher education funding reform in England in 2012. The reform, of which the core is the change of tuition fees per annum from £3,375 to a maximum of £9,000, includes changes to the level of maintenance grants and maintenance loans, as well as the mechanism of loan repayment. For universities, as Crawford argued, it would mean more funding, while for students the reform means high debt at graduation. As a result of the introduction of the new loan repayment mechanism, there will be lower annual repayments for graduates, but repayments will be made for a longer period of time. Finally, while ‘these reforms increased upfront spending on HE’, they ‘reduced government borrowing and BIS’s departmental spending’. Reflecting on these issues, Crawford reminded the audience that the potential downsides for another government to consider implementing a similar system include: the system is complicated; extent of government subsidy uncertain; there is no incentive for universities to charge less than the fee cap; and may potentially damage (part-time) participation.

Titled ‘Making College Both Affordable & Accessible: Lessons from the U.S.’, the presentation by Sara Goldrick-Rab examined the performance of a number of types of financial aid to students in the U.S. In particular, the key questions to be answered include: Does aid induce people to choose college? Does aid increase full participation in college life? Does aid improve completion rates? Does aid level inequality? and Can aid be sustained? All these questions are important to bear in mind when determining whether any system would be effective.

In his morning presentation, Bruce Chapman firstly outlined some conceptual issues such as the need for government intervention in university financing, and secondly introduced the history and experience of the Australian income contingent loans (ICL) system. In the end of his presentation, he showed a slide of the international experience of ICL, which is adapted and presented below.

Figure 1: The international experience of ICL

ICL

Source: Chapman (2015).

While there have been many debates about the possible approaches to reforming the current funding model, the decision will nevertheless be made by the government in the end and any changes made to the system would probably have different influences on different stakeholders (e.g. universities, students, graduates, and government). The conference is useful in providing international evidence on the consequences of alternative higher education funding schemes, even so as it’s held a few months before the release of the final report by the Expert Group.

The Connected University: Ireland’s Higher Education Institutions and their Knowledge Exchange Activities

In this blog, I provide a summary of the working paper we have done on measuring the intensity and diversity of academic engagement with stakeholders in knowledge exchange activities in Ireland. The full paper is available at SSRN: http://ssrn.com/abstract=2671771

In this article, we focus on the wide perspective of knowledge exchange, and we analyse the outreach activities involved by academics based at HEIs in Ireland. We draw on the innovation studies and knowledge networks literature to explain the intensity and diversity of knowledge exchange activities.

Our main claim is that, academics in Ireland are much more actively involved in ‘conventional’ activities than in newly emerged ‘third mission’ activities, and Irish HEIs might have gone too far recently in attempting to meet the needs of industry.

Based on survey data collected from both universities and institutes of technology (IoTs), we investigate the current state of knowledge exchange that takes place between academics from all disciplines with partners in both the private and public sectors.

Modes of interactions

Figures 1a and 1b show how intensively respondents were engaged in a total of 24 types of activities within the past three years. In particular, Figure 1a illustrates the activities which were reported by at least 30 per cent of respondents, while Figure 1b displays the activities indicated by less than 30 per cent of respondents.

The two figures combined tend to suggest that staff in the Irish higher education sector were actively engaged in a wide range of external interaction activities with their partners. More importantly, knowledge transfer activities were much less frequently engaged by Irish academics, who were instead heavily involved in activities such as attending conferences, informal advice, participating in networks, giving invited lectures and joint research and publications. On the lower end of the spectrum were external secondment, community based sports, and standard setting forums, which were reported by less than 10 per cent of respondents.

Figure 1a: Academic external interaction activity (% of respondents)1a

Figure 1b: Academic external interaction activity (% of respondents)1b

Types of partners

Figure 2 illustrates how academics in Ireland’s higher education institutions interacted with various types of partners. When all respondents are considered, 57 per cent of academics stated that they engaged with private sector firms, while less than 52 per cent of the responding individuals reported interactions with public sector organisations.

There are some variances between academics in the six disciplines engaging with different types of organisations. While staff in engineering, mathematics and computer sciences, natural science, and management and business were intensively engaged with private sector companies, staff in arts, humanities and social science were most closely involved with public sector organisations. Arts, humanities and social science were the disciplines where staff were much more likely to engage with the public sector than with the private sector. An interesting note to make is that staff in human medical were engaged with partners from the two sectors at, more or less, the same level. In the pharmaceutical sector, although industry supplies the bulk of the funds devoted to research and development, the public sector supports most of the basic research which in general requires a large amount of investment and faces a high risk of failure.

Figure 2: Activities with private sector companies and public sector organisations (% of respondents)2

Constraints on knowledge exchange

Figures 3a, 3b and 3c compare the constraints identified by the respondents when engaging in their knowledge exchange activities.

Constraints in Figure 3a were indicated by more than 25 per cent of respondents, while Figures 3b and 3c include constraints identified by more than 10 per cent and less than 10 per cent of respondents respectively.

The most important constraints cited by academics include a lack of time to fulfil all university roles (62 per cent), insufficient resources devoted by the institution (34 per cent), bureaucracy and inflexibility in the institution (33 per cent) and insufficient rewards from interaction (28 per cent).

By contrast, cultural differences between universities and firms were the least frequently cited constraint by academics, which, in line with the UK evidence, seems to contradict the conventional wisdom that cultural barriers limit interactions between academics and firms (Lambert 2003).

Figure 3a: Constraints on interactions with external organisations (% of respondents)3a

Figure 3b: Constraints on interactions with external organisations (% of respondents)3b

Figure 3c: Constraints on interactions with external organisations (% of respondents)3c

Mission of higher education

The survey asks the respondents how they perceived the role of higher education in the economy. In particular, academics were required to indicate to what extent they agreed with each of the six statements about relationships between businesses and the society (Figure 4).

A 1-to-5 rating scale was used to measure the differences, with 5 referring to ‘agree strongly’ and 1 referring to ‘disagree strongly’. The most important factor is that academic freedom is of fundamental important to the future wellbeing of society (4.4). To a large extent, academics stated that higher education has a key role to play in increasing the competitiveness of business, which might positively influence the interactions between academics and firms (3.9). Nevertheless, academics were also more likely to consider that, over the past few years, universities have gone too far in attempting to meet the needs of industry (3.2). In general, academics tended to disagree that academia should focus on basic research and should not be concerned with its actual or potential application (2.4).

Figure 4: Extent to which agree with statements about relationships with external organisations (mean score)4

Concluding remarks

In this paper, we have examined the current state of university knowledge networks in Ireland, with the aim to understand the intensity and diversity of interactions between academics and business and the community.

Staff working at Ireland’s HEIs showed differences in how intensively they engaged in various types of networks, and IP-related activities were the least frequent type of interaction.

Our respondents were more closely engaged with the private sector firms than with the public sector organisations, showing that university-industry engagement in Ireland is in a relatively good position. Nevertheless, university and IoT staff were much more closely engaged with national and regional government bodies and much less intensively engaged with international organisations, many of which are important sources for competitive based research funding. In the architecture of world science, a major change has been the expansion of the global networks, and thus getting closely integrated into them becomes an important factor of maintaining research excellence.

In general, university staff were positive about the role higher education should play in supporting business development and regional growth, but they were, at the same time, concerned about the detriment of their core teaching and research roles as a result of ‘too much’ focus being put on meeting the needs of industry.

Our findings could also be of relevance to policies in higher education, innovation and knowledge-based economy. As argued, the policy focus, which has mainly been on capacity building of HEIs and on collaborations between HEIs, has recently shifted towards engagement between the higher education sector and the wider society. What this paper has found could be used as a first step to build a more comprehensive understanding of knowledge exchange activities between Ireland’s HEIs and their external partners.

A REVIEW OF HEA FUNDING MODEL

In early June, the HEA released the “Higher Education System Performance 2014-16”, the first annual system performance report in which the HEA presents how Irish HEIs are delivering those national objectives set out for them in the “National Strategy for Higher Education to 2030”. The performance based framework for the system governance of higher education in Ireland undertaken by the HEA is designed to serve multiple purposes, from the delivery of national priorities, to the increase of the visibility of performance of the system to government and the wider public, and to the identification of institutions’ strategic niche and mission.

 

One of the key issues addressed in the report relates to the reform of funding model, as means of improving the accountability and efficiency of the system. Although the overall level of funding of HEA-funded HEIs has been declining since 2007/08, the percentage share of public expenditure on tertiary education institutions in Ireland is still much higher than the OECD average, as well as, to a less extent, higher than the EU21 average. As shown in table 1 below, after a rapid increase from 1995 to 2005, peaking at 84.5% in 2005, Ireland’s public expenditure as a proportion of total expenditure declined to 82.6% in 2008 and further to 81.2% in 2010. The number for OECD average was only 68% in 2010, and for the EU21 average it was 76.4%.

 

Table 1 Percentage of share of public expenditure on tertiary education institutions

1995 2000 2005 2010
Ireland 69.7 79.2 84.0 81.2
OECD average 76.7 75.6 70.9 68.0
EU21 average 86.3 85.5 81.5 76.4

Source: HEA (2014).

 

It is projected that the overall level of funding of HEIs will continue to decline further in the coming years to 2016. There are a few measures which have been announced in the hope of maintaining funding levels. Firstly, the government expects privately paid student contributions will amount to 19% of total institution income by 2016, through ways such as an increase in the student charge. Secondly, the HEIs are hoped, if not required, to diversify the sources of funding for research, in particular by doubling funding from EU competitive research funds through the Horizon 2020 programme. To be more specific, Ireland aims to win €1.25bn of competitive funding from the EU over the next seven years, which seems, even in the HEA’s view, to be a highly challenging target.

 

Thirdly, the HEA calls for further changes to the funding model in order to support implementation of the reform agenda for higher education, changes which would shift funding towards performance based. In its newly published report, the HEA describes its funding allocation model consisting of three inter-related elements: a formula-based core funding element, a strategic funding component, and a new element of performance funding. In general, the performance is measured under the headings such as: widening access and improving student experiences; teaching and learning; research performance; and engagement with industry and community.

 

The introduction of the performance funding is arguably the most interesting aspect of the new model, an element that could encourage competition and improve efficiency. In many countries, such as the UK, this component has been implemented for a while. After a few times of modification, the public funding for research in the UK is now administrated under a ‘dual support’ system – partly from the Higher Education Funding Councils and partly from other sources such as the Research Councils and charities. In general, the majority of teaching and research grants for UK universities are from the Funding Councils, which calculate the level of teaching funding for each institution according to some formula based on its student numbers and mix between different subjects (similar to the core funding in Ireland).

 

Research funding is allocated in a more complex way of the Research Assessment Exercise (RAE), a method of assessing the research of UK HEIs from 1992 and which has been succeeded by the Research Excellence Framework (REF) in 2014. This exercise is said to have set up a ‘competitive mechanism’ within the higher education sector for the distribution of scarce research resources. Based on a peer review process, RAE rates the quality of research conducted in UK HEIs and counts the numbers of research-active staff. Consequently, funds will be allocated in accordance with the quality (from 1 to 5*) of the work undertaken.

 

Many studies have examined the results of RAE in English universities, and confirmed significant variations between them. In 2001, for example, as high as 90% of subject areas in the prestigious Loxbridge group (London, Oxford, and Cambridge) achieved ratings at level 5, compared to only 7% of subject areas that were rated at level 5 in the new (post-1992) universities. An overall finding is that new universities in the UK only secure a rather small share of the total research subsidy, grants, and contracts, while the majority still flows into established universities which are more research-intensive.

 

In comparison to the UK model, the performance funding model being undertaken by the HEA is rather different. On one hand, unlike in the UK where all institutions are benchmarked against the same standards, the performance indicators vary from one institution to another in Ireland and are thus non-comparable. It all begins with a process of strategic dialogue between the HEA and each institution, in which the two bodies align the missions, strategies and profiles of individual HEIs with national priorities, and then agree on how to measure its performance against its strategic objective indicators of success and to allocate funding. Those performance indicators are in detail presented in a so-called “Mission-based Performance Compact” between individual institutions and the HEA. In essence, Irish HEIs are benchmarking against their own performance and objectives, rather than against the other institutions.

 

On the other hand, the HEA approach is more comprehensive than the REF exercise as it not only considers the research capacity of individual institutions but examines a wide range of activities in which HEIs participate. Therefore, it seems more like a different version of ‘Strategic Plan’ that individual institutions have developed, only this version has been a collective output between the institutions and the HEA. It is, indeed, important that each Irish HEI is improving its performance and impact towards a higher level than its previous ones. An issue remaining unresolved is that, without an universal benchmarking framework of the whole sector (e.g. the research quality measurement in the REF), it is difficult for individual institutions to build up a roadmap to compete against other institutions, as well as global ones.