The future of funding

February 07, 2020

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The writer is a senior research fellow at the Institute of Development and Economic Alternatives, and an associate professor of economics at Lums.
The writer is a senior research fellow at the Institute of Development and Economic Alternatives, and an associate professor of economics at Lums.

FUNDING for the Higher Education Commission was cut this year. Since the HEC funds all public-sector universities, this meant cuts for universities. Even with a 10-15 per cent cut in their budgets, some universities have been impacted to the point that they are struggling to pay salaries and/or pension benefits.

One could argue that the funding cuts are transitory. As soon as the economic situation improves — and the prime minister has claimed that 2020 is a year of good news on the economic front — the funding cuts will go away. But three things should be kept in mind.

One, our growth rate will not respond quickly and, given the poor budgetary conditions, it might be several years before the fiscal space can give the universities what they would like to have. Even before the cuts were introduced, the approved funds were less than what the HEC had asked for. After the cuts, the gap between what the HEC and universities feel they should have and what was given by the government was even larger.

Two, at the same time as it has been cutting funding, the government has also been talking about opening more universities/programmes and increasing enrolments at the tertiary level. Even if HEC funding recovers, the need for expansion will be a damper on what will be available to existing programmes/universities.

Even before the cuts, the approved funds were less than what the HEC had asked for

Three, the HEC is beginning to focus more on issues of quality of education. Quality enhancement, howsoever we may think about it, is not going to happen without certain financial implications. If quality enhancement programmes are instituted, certain allocations will need to be made for them too. Opportunity cost for resources is likely to increase.

Public-sector universities, thus, should really start thinking about other sources of funding if they want to (a) expand programmes and offerings, (b) enhance quality, or even (c) continue to offer services at current levels. There will be people who will say that this is not good enough, that we as a society should put pressure on the government to increase university funding, and that looking for funds elsewhere is letting the government off the hook. Fair enough. Put pressure on government. But I do not really see it working.

An estimated 20 million children between the ages of five and 16 are out of school. Our constitution guarantees these children the right to education. Yet almost a decade since this constitutional guarantee was codified, there has been absolutely no progress in getting these children into school.

Universities can raise more money by raising tuition fees. But raising tuition fees restricts access as well. Since public-sector universities cater to many students who have limited ability to pay, optimal tuition fee levels might not be very high anyway. Furthermore, raising fees will not be a popular move with existing and potential students. It will be politically unpopular as well, and it is unlikely that the government will allow universities to raise tuition fees by much.

Some of the public-sector universities, especially those located in the middle of larger cities, are located on very valuable real estate. Could these universities rethink their use of real estate and create revenue streams for themselves through real estate usage and/or investment? But such an option can, at best, create only a relatively small revenue stream. Universities must somehow think of raising money from the private sector.

Some public universities are quite old and well established. A lot of our medical schools and older engineering schools are examples. Similarly, Karachi University, Punjab University and Quaid-e-Azam University have large numbers of distinguished alumni. These universities have to appeal to their alumni and solicit financial help from them in the form of both one-time as well as over-time repeated contributions. Pakistani universities, private and especially public ones, have never worked on their alumni relations. Alumni groups are important stakeholder for universities across the world. These are people who often have strong connections with the universities they attended, are concerned about the future of these institutions and sometimes even feel they would like to ‘give back’ to institutions that helped them reach and achieve their goals and aspirations.

Most universities in Pakistan that I know of are not even in touch with their alumni, do not keep active contact with them and do not involve them in university affairs/governance. This will have to change if universities want their alumni to contribute.

Younger universities have fewer alumni and an even smaller number who might have reached positions of wealth, power and/or influence. Going forward, if the HEC wants universities to take the task of fundraising seriously, it might have to build incentives within its funding structure to encourage universities to raise finances for themselves. If such adjustments are done, older and more established universities might have stronger incentives to look outwards for funds than newer universities.

Though our society gives significantly to philanthropic causes, most of it tends not to be to and through institutions, and most of it is for poverty relief and access to basic health and education. It is unlikely that universities will be able to capture a significant proportion of this potential source of funding in the short to medium term. But this option can be developed over time.

Public-sector universities have to work seriously on diversifying their sources of funding. They will continue to receive government funding, but given economic conditions and plans for expansion in higher education, individual universities should not expect significant increases in funding. Tuition fee hikes are also not a promising option for public universities. They must look to the private sector for sources of funding. Within the private sector, alumni should be the first group that universities appeal to. They are likely to be the biggest supporters of their alma mater. Work on diversifying sources should start urgently, as funding issues are already dogging most public universities and are likely to get more severe over time.

The writer is a senior research fellow at the Institute of Development and Economic Alternatives, and an associate professor of economics at Lums.

Published in Dawn, February 7th, 2020