Financing Higher Education in Germany and Europe: Performance-oriented Models of State Funding and Institutional Resource Allocation

Ziegele, Frank; Mordhorst, Lisa: Financing Higher Education in Germany and Europe: Performance-oriented Models of State Funding and Institutional Resource Allocation, Tokyo: Daigaku Hyoka Gakui Kenkyu, Bd. 23; 2021

 

This paper investigates the changes in public higher education funding models in Germany and Europe and illustrates the advantages of the currently prevailing approaches. The traditional, now mostly abandoned, funding models were characterized by detailed state regulation and incremental budgeting, which led to uneconomical behavior and incentives, as well as reduced autonomy and flexibility of higher education institutions (HEIs). Since the 1990s these traditional models have been replaced by decentralized funding models with a focus on basic funding and performance-orientation. These approaches grant HEIs more autonomy on how to spend their budgets, which is balanced with transparency and performance agreements. Performance-oriented funding models throughout Europe usually operate on a so-called ‘three-pillar model’: 1) basic funding, which is task-oriented and mostly stable, 2) performance-oriented funding, which, for instance, incentivizes excellence in teaching and research, and 3) innovation- or profile-oriented funding, which allows for the development of new research, teaching and transfer ideas in line with profiles of HEI. The three-pillar model also applies to and affects internal funding allocation: decisions about objectives, allocation architecture and financial discretion between central and decentralized units must be made. Furthermore, state strategy and goals must be balanced with and linked to internal HEI culture and structures. Even though practice and design of performance-oriented funding approaches are still discussed, its benefits are widely accepted, and the model is implemented throughout Europe.

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