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Financial sustainability Print

An ever more global market for education and research means universities must struggle to remain competitive. The costs of higher education and research have been growing rapidly. The reasons for this are well known; advances in the field of technology, particularly ICT and its wider usage in higher education and research, a growing participation rate, new societal demands on institutions, rising pension costs and tougher quality requirements are  increasing costs and necessitate additional financing.

Despite the fact that universities are at the centre of knowledge creation and development, which itself is seen as one of the main motors of economic growth, public funding of higher education in most countries is not increasing or at least not increasing enough in real terms. “Massification” has led to the fact that the higher education budgets per student are relatively low in most European countries compared to Europe’s competitors. Despite political declarations of intent to increase spending on higher education and research, it is not very likely that public expenditure will grow significantly and therefore keep up with rapidly inflating costs in the years to come. One of the reasons for this is that higher education and research have to compete with other priorities in public budgets (security, health, etc.). Demographic trends and an aging population dictate that the health sector will take priority over higher education.

The recent economic downturn has furthermore contributed to the decision in many European countries to decrease the levels of investment into higher education and research. Such trends are particularly worrisome for universities across Europe, whose continuing dependence on public funding puts their future sustainability under pressure.

All the above reasons are forcing universities to respond by taking action. The first step is for universities to master their cost structures and identify the real costs of their activities for both internal and external purposes. While calling for vital additional financial support from public authorities, which have a responsibility in the universities’ long-term financial sustainability, universities also need to increase and diversify additional sources of funding. Finally the design and implementation of higher education funding policy should be carefully calibrated to the needs of the sector in order to improve overall funding efficiency with full consideration for the possible impacts at institutional level.

Since the launching of its Glasgow Declaration (April 2005) – “Strong Universities for a Strong Europe”, EUA has addressed the issues of autonomy, accountability and funding through promoting conferences and workshops, and engaging its members in an evidence-based debate on improving university governance and leadership competencies and updating funding structures.

Since 2006, EUA has been conducting ambitious research on universities’ financial sustainability. This issue was first addressed in a study “Towards Full Costing in European Universities”. The EUIMA Full-Costing project (2010-2012) took these findings further by promoting the implementation of full costing in European universities through stimulating coordinated approaches to the development of full costing on national or regional levels.

In parallel, financial sustainability of universities was also addressed through the EUDIS study, which focused on raising awareness on and identifying good practices in the field of diversification of income streams in universities across Europe.

In 2012, EUA launches a new study on the design of sustainable strategies for efficient funding of higher education in Europe, which is notably exploring the impact of performance-based funding mechanisms, merger processes and excellence schemes on the sector.

Financial sustainability is also a major consideration in EUA’s work on university autonomy. The freedom to allocate and manage financial resources, but also to establish partnerships and raise income from the private sector is crucial element that fully contributes to the universities’ long-term financial health.