Performance-related university funding reform agreed

The Danish parliament has agreed a new model for university funding, placing less emphasis on the taximeter model in which institutions are awarded funds based on the number of students who have graduated and introducing elements of funding based on quality and outcomes.

At stake is each institution’s share of the DKK13 billion (US$2 billion) higher education budget, affecting 270,000 students.

The agreement, which was passed unopposed, means that from January 2019 higher education institutions will be financed by a basic allocation of 25% fixed upon the present budget level, an activity allocation of 67.5% and an outcome-oriented allocation of 7.5%.

After four years 5% of the basic allocation will be dependent on quality achieved, measured using a research-based model of quality assessment, and another 5% of the basic allocation will be dependent on having fulfilled strategic contracts. The quality funding will be allocated after “political prioritising”.

The basic budget component will be fixed until 2023 when it will be renegotiated.

Performance incentives

One of the incentives introduced is that 3.75% of funding per institution will be based on completion time. If a higher education institution’s students finish their degree requirements within three months of the allocated study time, the institution will get a full reward, but for the students that complete their degree more than one year delayed they will not get any reward.

Also, another 3.75% of funding per institution will be based on whether the graduated cohort has the same percentage in employment as the working population (minus an uncertainty fraction dependent on the economy) one year after graduation, when the university will get a full reward in the budget component. But if the proportion in employment is 25% lower than the general level, this budget component will be cut completely.

The framework for quality measurement will be further developed and tried out in 2018.

“This reform has a stronger focus upon quality in higher education and on how the graduates are getting employment after graduation, and we are increasing the admission to the natural sciences and the technological higher education,” Minister of Higher Education and Science Søren Pind said.

In particular the new model will strengthen the regional higher education institutions in Aarhus, Odense and Aalborg via a decentralised allocation from basic funding of up to DKK12 million (US$1.9 million) a year being given to higher education institutions outside Copenhagen.

The agreement represents a reduction of the results-based share of funding compared to an earlier proposal from the Ministry of Higher Education and Science to base 10% of budget allocation on higher education institutions’ graduate employment outcomes, 20% as the basic allocation and 70% allocated on the basis of the number of graduated students.

But parties signing the agreement think they have found a good balance.

Former minister of higher education and science Sofie Carsten Nielsen said that it will pave the way for rewarding quality in the budget.

Mette Reissmann, the Social Democratic Party spokesperson on education and research, said that the new system means greater budget security for the universities and that there are more resources for technical and natural science degrees that are in demand by the business and Danish industry.

However, inclusion of allocation of funds based on political priorities is controversial.

'Still underfunded’

Anders Bjarklev, chair of Universities Denmark, the Danish rectors' conference, noted that a proposed reduction of 2% of the budget, representing a total cut of DKK3.3 billion (US$527.5 million) for the period 2016-21, has not been revised.

“The reform does not change the fact that universities are underfunded,” he said.

He also criticised the reform for containing “more political governance and double controls”.

He said they would be “afraid of a system where the budget allocation depends on student satisfaction more than the quality of the education. A demanding study programme will not necessarily get good evaluations by the students in a satisfaction survey, even if they make good grades at the exams".

Lars Qvistgaard, chairman of the Danish Confederation of Professional Associations (Akademikerne), said the agreement was good.

The demand for faster completion time is still alive, he said, but in a “more intelligent and less rigid form” and the share of outcomes-based funding had been reduced.

He said he expected universities to reduce admission numbers as a result of the reforms and introduce some new study programmes.

'Serious shortcomings’

Mads Hareskov Jørgensen, spokesman for the Danish National Union of Students or DSF, told University World News that the new model had some good elements but also a number of serious issues.

“We like the new fixed basic allocation. This will give more stability and freedom to the universities and is something DSF have wanted for years. We are however very critical of the new employment element. The current employment rate of recent graduates should not be mistaken for the potential employability that their education has provided,” Jørgensen said.

He said employment depends on a large number of factors, many of which are completely outside of the control of universities.

“The best starting point for good education with high employment is a high quality education. That can be ensured by politicians if they provide stable and sufficient funding of our education.”

DSF fears that depriving struggling universities of the quality funding element would make them less able to improve their quality.

“The biggest issue is that the new system does nothing to tackle the systemic problem of insufficient funding for higher education in Denmark. In the years to come there will still be yearly budget cuts on higher education,” Jørgensen said.