Экономические науки/3.Финансовые отношения

PhD (Economics), Ass. Prof. Konstantiuk N. I.

PhD (Pedagogics), Ass. Prof. Babiak J. V.

Ternopil Ivan Pul’uj National Technical University, Ukraine

The transition from financing expenses to financing the results - the strategic direction of higher education

reform in Ukraine.

Governments around the world are in struggle with politically and socially justified needs in increasingly scarce tax revenues. In many developing countries and in many countries with emerging economies, competition to government revenues constitute unsecured pension liabilities, social security system and the cost of environmental degradation.

Finally, if the government in most developing countries is still the main source of income for higher education, we have unflattering picture of fall in government revenues for study of students, leaving few resources for enhancing learning, development of new programs and investment in research.

Taking into consideration the global reduction of government financial resources, performance-based funding (PBF) takes considerable popularity.

Performance-based funding has several subtypes, the most popular of which is the funding on the basis of signing contracts between the university and the government on the implementation of clearly specified types of activities or performance of services for which the university receives public funds. Another popular type of university funding is based on formula, in accordance with this subtype institution receives budget funds for the achievement of certain pre-defined parameters. These parameters are included in the formula by which the funding is determined.

Introduction of this model was made for the first time in the US state of Tennessee in 1978 (Friedel J. et al., 2013). Subsequently, performance-based funding gradually began to apply in other states. In 2015, this model was used in varying degrees to finance higher education in 32 of 50 US states. In most cases, using the model provides only part of the funding – from 5% to 50%. Another five states are gradually introducing university performance-based funding now (Friedel J. et al., 2013).

Since the mid 1990s, countries of the European Union gradually introduced performance-based funding for the financing of certain expenses of universities. As of 2014 the calculation of state funding according to the formula containing certain indicators is carried out in 21 EU countries and several separate administrative territories of Germany, Spain and the United Kingdom (Claeys-Kulik and Estermann, 2015).

In Ukraine, a model based on the needs of university is used for university funding. Financing of higher education in Ukraine under this model is made from the budget on the basis of costs of previous years. Funding completely depends on the number of students, leading to deterioration in the quality of higher education, because universities are not interested in expelling these weak students. Formalized monitoring of public procurement does not encourage universities to meet the needs of society, regional or national economy priorities. Higher educational institutions mostly take into consideration their staffing needs when forming proposals for state order. In fact, Ukrainian universities are in constant struggle for financial resources to cover their current needs. Covering only the current needs of universities makes it impossible to provide quality of educational services. Only 3,5% of the funds in the educational institutions are aimed at upgrading logistics, repair facilities, purchase of vehicles, equipment.

On the basis of this research we can conclude that it is necessary to use a more flexible funding model in Ukrainian universities. This flexibility is seen as search for the optimal model for funding of various types of services. In addition, it is necessary to change the object of funding. It means it is necessary to move away from funding of university needs to funding of specific tasks, objectives and obtain predetermined results. As a result, this will increase the responsibility of all members of the educational process and enable efficient use of limited financial resources.

It is advisable to use diversified approach during formation the financial model of Ukrainian universities.

It is necessary to combine various financial strategies, tactics and financial arrangements for each type of institution or organization activity during introduction the financial diversification in the activities of domestic universities.

So, we should improve the existing model in which government funding is carried out within 42% and at the expense of households – 55% for financing education of students, which is the main goal of university activity. Government funding at 42% is advisable to increase and divide into two stages: the first stage – 20%, second stage – 20-30%. Funds of the first stage should be allocated at the beginning of the academic year to ensure normal flow of learning process. Funds in the amount of 20-30% for education of university students are advisable to allocate based on the performance of the university, which should include the following indicators: enrollment and number of graduates, number of foreign students, level of student achievement, share of employed graduates, number of students participating in international internships and mobility programs enrolled through grant funds, rating evaluation of teaching staff of the university (here should be included international internships, international publications, level of pedagogical skills of lecturers). This model of distribution of public funds must establish a healthy competition among students, for example, if a student did not fully comply with the workload, untimely passed session or level of his knowledge was low, he should pay for his education and another more responsible and successful student should be placed instead.

Funding of households in expenditure structure to study students is advisable to reduce by 30% and to set criteria for selecting applicants who would provide high-quality contingent of students. In higher education we can see a phenomenon of predominance of quantity over quality because of low criteria for selecting applicants. Higher education became a mass phenomenon in Ukraine and thus lost its competitive position in domestic and international labor market.

Enterprises, institutions and organizations should be involved to the funding of education of students. Their share in the structure of spending on higher education is meager – 2%. Promotional incentive can be tax breaks for entities that prepare professionals for their needs at their own expense. A balanced financial policy of the country should support this initiative.

Another source of funding of academic activities of the university should be varied grants and financial support for students, encouraging them to better results in education, increasing personal responsibility for their participation in the learning process. Unfortunately, Ukrainian universities do not actively use student loan in higher education. The mechanism to provide, receive and return credits for education should be improved. To support talented students, it is advisable to introduce premium, the amount of which depends on results of each session.

If we talk about the funding of research activities of the university, there should be used model based on results of activity. The return of funds invested in scientific research and development should be the maximum, and the effect should have both financial and social connotation.

Higher education institutions in Ukraine are a specific type of business entities. On the one hand, they perform state functions to create social product “higher education”, on the other hand they are economic agents. The vast majority of Ukrainian universities have in usage hundreds of hectares of land resources, hostels, appliances, sanatorium-and-spa facilities, own businesses and so on. Universities have the right to conduct their own financial and economic activities, and conduction of financial and economic activity involves profit. Therefore, this type of activity should be carried out only on the basis of self-financing and profitability. However, conduction of financial and economic activities of the university must fully correspond to the core objective of the university – provision of quality educational services and conducting of effective research work. However, most educational institutions belong to the state property, so all their assets are also state-owned, respectively, there are significant restrictions on management, these institutions cannot freely dispose their assets. Ukrainian universities need financial autonomy, which would solve the problem of funding and improve the quality and competitiveness of higher education.

For this purpose, it is necessary to give them a real financial autonomy, eliminating inconsistencies in existing legislation. Higher educational institutions of Ukraine are experiencing acute shortage of financial resources, and this requires finding alternative routes and sources of financing, which is not possible without autonomy, including financial. If the country is not able to provide universities with sufficient financial resources for their full operation, it should at least allow them to earn and freely dispose their funds.

Finding and developing of effective model of university funding should take into account all activities of a university and should be based on the principles of efficiency, transparency and autonomy and serve the primary goal – provision of quality educational services, training of demanded specialists in the labor market and conduction of effective research.

References:

1. Claeys-Kulik, A.-L., Estermann, T. (2015). DEFINE Thematic Report: Performance-Based Funding of Universities in Europe. European University Association. 61 p.

2. Designing strategies for efficient funding of higher education in Europe by Thomas Estermann, Enora Bennetot Pruvot and Anna-Lena Claeys-Kulik: EUA. – 2013. – 20p.

3. Friedel J., Thornton Z., D’Amico M., Katsinas St. «Performance-Based Funding: The National Landscape» Education Policy Center. September 2013.

4. Konstantiuk, Nataliia. Higher Education as a Determinant of Sustainable Economic Development of Ukraine: Financial Aspects. Barometr Regionalny. Analizy i prognozy 1 (43) (2016): 69-77.

5. Konstantiuk, N. (2014). Human capital as the major financing in the welfare state. Megatrend revija, 11(1), 73-88.