Heavy Hand at the Controls

Relationships between universities and governments are changing in Europe. Policy makers recognize that colleges and universities need greater latitude if they are to remain globally competitive.

But a new research paper, University Autonomy in Europe, has found that governments still retain too much control over universities. Published on November 30 by the European University Association, the study provides evidence that, in the authors’ words,  government procedures remain “heavy and cumbersome, and, in a number of cases…irrelevant.”

The EUA represents 800 members in 46 countries, including universities, an association of rectors (the heads of universities), and other organizations. On its website, the group says its long-term goal is to enhance “the governance, leadership and management” of Europe’s universities.

To gather information on 34 European countries’ higher education systems, the EUA distributed surveys and conducted interviews. The conclusion: most European governments have failed to live up to their promises to lift controls.

The researchers—Thomas Estermann and Terhi Nokkala—looked primarily at universities’ financial autonomy. That is, do universities have genuine freedom to set tuition and fees, borrow and invest money, buy and sell real estate, and accumulate and keep surpluses? The authors claim that focusing on financial autonomy leads to better understanding of other university activities such as  organizational, staffing, and academic processes, because funding underlies all of them. The researchers conclude that most schools are not autonomous, but, rather, heavily dependent on government bureaucratic decisions.

The primary source of funding for European universities, by a broad margin, is the government.  The University of Warsaw, for example, receives 80 percent of its funding from the national government, one per cent from private donors, and 19 percent from international donors—both public and private. Absent are any funds generated from tuition, as the school charges none.  To put this in perspective, a government-owned university in the United States, the University of California at Berkeley, receives 29 percent of its funds from state and local governments, 20 percent from student tuition and fees, 19 percent from private donations, 12 percent from the sales of its services, and the remaining 2 percent from other sources.

In a move generally perceived as a step toward granting greater independence, a number of governments have instituted block grants—providing funds with few strings attached. By and large, these block grants replaced line-item budgets in which governments specify to universities exactly how appropriated money should be spent.

Twenty-six out of 34 university systems receive their funding in the form of block grants, but the study notes that “this does not necessarily mean that universities are…free to use…funding as they see fit.” Only eight countries—Austria, Belgium, Estonia, Norway, Poland, the Slovak Republic, Switzerland, and the United Kingdom—of the 34 “encounter no or very few restrictions as to how they spend” their block-grant funds, according to the researchers.

In the other countries, regulations remain, effectively making block grants just larger versions of line-item budgets. For example, in Sweden the block grant is subject to government “categorization.” That is, universities cannot move those funds to different departments or different types of expenditures. Even though the university supposedly decides how to use block grants, once a grant is subject to “categorization,” the school cannot change how it is used.

The EUA study also examined universities’ capacity to act as independent financial entities. For example, to what degree can schools raise and retain surpluses? Every country allows its universities to keep monies raised themselves—such as from tuition and fees. However, when it comes to state funds, seven countries—Portugal, Cyprus, Romania, Turkey, Latvia, Lithuania, and Serbia—require their universities to return “any potential surplus to the state at the end of the financial year.” Thus, these universities have an incentive to spend as much money as they can from the amount they are allotted by the state, lest they lose it at the end of the year.

And while most universities can keep surpluses from funds granted by the government, nearly every country has extensive regulations on those reserves.

Another element examined in the study was the ability to borrow and raise money through various financial markets. In about two-thirds of the countries governments permit universities to raise money. However, those same governments either 1) set limits to how much those universities can borrow; 2) require government officials to sign off on those moves; or 3) allow universities to borrow only from national banks.

In one-third of the countries, universities are not allowed to borrow any money.

The study also criticizes other restraints on the extent to which universities can own real estate and property, make decisions over staff and university leadership, and control their academic programs and profiles. In eight systems, for example, universities are unable to determine their faculties’ individual salary levels; public authorities do that. In more autonomous systems, universities may decide on professors’ pay, as long as that amount falls within a government-specified pay band. Less government control on salary levels, the researchers argued, would allow those universities to attract top domestic and international talent.

Estermann and Nokkala conclude that autonomy is more present in western and northwestern Europe and less present in Eastern and Balkan countries, but the discrepancy is less extreme than one might think. Western European nations have more independence in how they use public funding, the study states, but less autonomy in how they collect tuition and fees. Conversely, in Eastern Europe, universities have less autonomy with budgets—being forced to accept more direction from the national government in how they use their funds—but often more latitude in deciding on the fees they collect from students.

The EUA concludes that its study “confirms the existence of a trend toward greater university autonomy” in Europe, but that there is “still a large number of countries that do not grant their universities enough” to excel.

Although the American and European systems are different, state universities in the United States can learn something from the EUA’s analysis. When large amounts of funding come from the state, government bureaucrats are likely to wield more control. He who pays the piper calls the tune.