Financing of undergraduate education

The intention with this post is to describe different financial aspects that impacts undergraduate teaching. Everything written here is based from my experiences and collected information from various sources like reports and other teachers and then compiled by me. The main comparison will be between UC Berkeley and University of Borås but some discussion will also be made from a general Swedish perspective.

System at UC Berkeley

The university system was rather stable for a several decades regarding funding (for teaching), student number and faculty in Chemical engineering. The amount of money allocated from the state to each separate campus within the University of California system (totally 10 campuses) was previously calculated from Budget operations and Management using a somewhat non-transparent formula (tillväxtanalys 2012). It is important to note however that there seemed to be no correlation with the amount of students and the allocated funds. More recently, this has changed and it has been agreed upon that each student should have the same amount of state funding regardless of which campus the students belong to. From 2011, it was decided that the revenues to each separate campus (originating from student fees, patents etc.) will stay at that campus and this will thus separate the actual amount of money available for teaching at the different sites.

Somewhere around 2005, a change was started where more students were expected and at the same time budget constrains were made so that fewer faculty positions were available. Within this change also the student fees increased and these are now about $ 15,000 for California residents and $ 38,000 for other residents on a yearly basis.

Tuition fee at UC Berkeley 1994-2014 (data from Berkeley)

 One of the reasons for the change was a cut in state funding (a large reduction was in 2011-2012 and in inflation-adjusted dollars the amount of state financing has dropped with 60% between 1990-2012, Bienenstock et al, 2012) while at the same time an increased social responsibility was made (that means to give financial aid to students in specific groups such as low-income or first college student in family etc.) and therefore the university had to bring in more money. Looking at the numbers for student fees, it is more attractive to bring in students from outside the state of California. Due to the high interest in science and engineering from especially Southeast Asia, these faculties have increased their number of students while other departments have declining numbers. One of the success factors for UC Berkeley is its ability to attract money from different sources including; governmental funding, federal authorities, foundations and private donations.

Each year, the chair of the department negotiates about the revenues from undergraduate teaching. This does not necessarily reflect the amount of students in one particular year but should rather be seen as a projected average and possibility to manage the load. 

System at Swedish universities

The system used today was started with reform in 1993 and is based upon a specific resource that follows with every student. There is a limit of the number of students that are paid for in each educational area by the UKÄ (Swedish higher education authority) and the payment is done by the number of registered full time students and the actual achievements. Courses have different resource allocation depending on education area (Prop 2013/2014:1, Expense area 16); in humanities, social studies, law and theology the yearly allocation is 48,533 SEK in 2014 while media has an allocation of 531,660 SEK so the difference is dramatic and it is not very clear how to decide in which educational area a specific course belong. For the technical education area, the yearly allocation is 94,647 SEK ($ 13,145). Currently, a large evaluation is being performed where each educational program is included (it is a continuous process where different areas are considered every year). The outcome of this evaluation is that some programs might have problems and must show progress within one year otherwise they will be shut down. Another outcome is that programs that are evaluated as the highest grade will receive an extra allocation of funds from the government as a carrot to maintain and improve the good standard. The amount could be substantial for a whole university if they succeed to have many programs in the highest grade.

The general idea is that there are no tuition fees and the reason is to give the same opportunities to all students regardless of their economic status. Due to the fact that Sweden is a member of the European Union, this will therefore be applied to all its member states (including the European Economic Area and Switzerland).  It should be noted, that students from outside the EU are subjected to fees decided by each university and currently the yearly fee for an engineering master’s program is $ 18,100 at University of Borås and $19,400 at Chalmers.

Comparisons between the two systems

We have two totally different systems for the undergraduate level; one with tuition fee and one with full state financing.  For the Berkeley system, not the whole cost is associated with the fee, there are also other contributions where the state is an important part as a base but donations are also given from foundations and companies when for example new buildings are to be erected or new equipment (laboratory equipment or computer rooms) are needed. It is interesting to see however, that the amount of money from the tuition fee for the undergraduate level at UC Berkeley is higher than the amount of money allocated by the Swedish government ($15,000 for in-state students vs $13,000 for engineering education in Sweden) and that the state of California is giving additional funding. 

The educational system at Berkeley do not directly reflect the number of students in the class; as a professor you have the same time allocated regardless if there are 15, 150 or 500 students in the class.  What differs is the amount of extra help provided in terms of GSI’s and student graders. This is highly apparent when lecturers are hired for a single course and the offered amount of money does not reflect the size of the class, it only reflects the number of lectures you have and the amount of office hours.

From what I have seen, there is not something obvious from educational point of view that motivates this higher cost at UC Berkeley. The teachers are not paid significantly higher salaries and the lectures halls are not more technically advanced nor have a higher standard regarding interior (black boards, furnishing etc.).  So why is there a difference in cost for the two systems? One possibility is that there is a substantial overhead cost in order to take care of the whole campus area; there are many buildings (not only for education but there are for example  a number of sport arenas) and a large campus. These need money to look after (utility, repairs, janitors, gardeners etc.). The other possibility for the cost is the possibility for the university to direct money into supporting systems (financial aid). This helps high-performance students from low-income families to manage university education. 

The system in Sweden is more transparent; each university gets a commission to educate a certain number of students in various areas and this is assigned with a predetermined amount of money. It is, however, up to each and every of the universities to decide the internal allocation, which could be quite different from the achieved money, as long as they fulfill their commission. This means that there is a possibility to transfer money from one area to another area on a short or long term basis depending on the interest of that university; it could for example be to promote a special education or to make short term initiatives.

What can we learn from this?

Is teaching outcome (meaning student progress and performance) depending on number of students in the class? For sure, it will be a more intimate relation between teacher and student if the numbers are low. It can with some validity be said that it is more likely that you can push (help) students in the lower end better if they are just a few leading to higher percentage of the class passing the course. This would of course be positive for the outcome but the real question is if you really have helped the students in the long run. They have a great responsibility for their own learning and they have to show the ability of learning new things. In Sweden, we often use the ratio of teacher versus student as an objective number to decide if the teaching is good or not (it is more so a direct measure when you apply for a new program or new degree rights that the ratio must be high enough).  It is my firm belief that a more targeted teaching can be done if the groups are small and that you can tailor-made the lectures based upon the unique set of students and that this will help these individuals to perform better not only for the course but also in the long run. However, it is not rationale to do a one-to-one teaching (there is simply not enough money or people in the system for this) and the student learns a lot when they discuss among themselves.

A system where the university or the student decides the enrollment can be difficult to master for the single department (course giver) and demand some sort of negotiation to decide boundaries etc. This is especially true for courses involving practical laboratory work; these are often time consuming and the student needs hands-on experience to really understand and learn (in some parts it is a crafts work). Larger classes without proper allocation of new funds (especially equipment) and teachers this will lower the impact of this specific element. 

One has to see the driving forces beyond the economic structure and the picture the scenarios, both good and bad. Starting with the Swedish system; the system makes it highly transparent to follow the cost for the education and connects the cost not only to enrollment but also to completed courses. It is dependent on a higher national structure (government and the minister of education) to decide the allotment of students in each area for each university. This division is crucial for each university and is based upon previous performance and attractiveness (number of applicants). A fear would of course be to have an examiner for a course directly responsible for the money coming in to that specific course and therefore tend to pass more students (the money is not depending on how good the students pass the course, i.e. what grade they have, but only if they pass or not). However, to my knowledge there is no such structure at any university and instead the money is directed through the system by schools or departments and often handled by a director of studies (at Chalmers there is even a trading system regarding courses) and there are always a quality insurance program run by the univeristy. What we can see however is a willingness of letting the students be enrolled in the system until they have passed the course which would prolong their time of studies but that they finalize the course (program). 

In the beginning when the whole amount of money was given on student enrollment it was possible for universities to have base courses offered as distant learning courses with more than 200 students enrolled but only 20-30 were active. This led to a modification of the system so that about half of the money is given after passing the course. Even so this has been attractive. However, new ranking scores better emphasize of the ratio of enrolled students and completed course works which leads to modifications in especially the distant learning programs where the number of enrolled student is not reported until they have finished the first home works.

The system at UC Berkeley with decision by the university campus about the number of students and their major allows for a higher autonomous of the university at the highest level but lower degrees of freedom further down in the system. The departments have little influence and are totally in the hand of the board/leaders. The system are not emphasizing the students as individuals but rather as a group and for the large classes there is very little time for interaction between each student and the teacher. 

The tuition fee is a mean of attractive more money to the university which in principle is used to maintain a high standard for the education. At the same time it becomes a burden for the students and the student’s family which has to pay for this. In a way, one can say that using this system with financial aid means that students paying the full fee are supporting the students who come from households with low-income. Nobel and altruistic idea. Problem is who is excluded. If the selection of student purely based on merits then it might be so but there are more to this because it is encouragement of having underrepresented groups included (often low-income but it could be race dependent etc.). On a larger scale, this might still have a good and justifiable impact as it would level out the differences between the groups in society and thereby minimize friction and spread the wealth. On the individual level, this means that possible students with good grades are sorted out and must apply for universities outside their state to become the wanted group (out of state students yield more tuition).

As a conclusion, both systems have its merits and flaws. However, it is apparent that the financial structure adds a lock-in effect and has freedom at different levels. The UC Berkeley system allows for a higher degree of freedom at university level, but a complication could be how this relates to actual needs in the society (for chemical engineering there has been a decline in available jobs but an increase in number of students). The Swedish system gives the government a high power when it decides the allocation of funds. It is important to stress that the universities are free to educate more students than the given number but in that case they will not be funded for these. However, apart from the overall allocation, the university is free to decide how it will divide the funds. Each course will have its own budget that is to a large extent dependent on the number of students but also on what type of course it is and what elements that are included. For the UC system, the governmental funding is only a part of the total revenues for the undergraduate teaching and it will therefore mean less than in the Swedish system (especially so nowadays when the funds have been dramatically reduced).

Disclaimer

I am fully aware of that I only have skimmed the surface regarding financing of undergraduate education and that I sometimes made assumptions but there is a substantial difference in how the financing system looks like and what implications this might have for the whole system.

References

Bienenstock, A., Schwaag Serger, A., Benner, M. and Lidgard, A., “Combining excellence in education, research and impact: inspiration from Stanford and Berkeley and implications for Swedish universities”, SNS (Centre for business and policy studies), 2014

Prop 2013/2014:1, Expense area 16 p 220 http://www.regeringen.se/sb/d/17776

Tillväxtanalys  “Hur fördelas statsanslag till forskning och utbildning – en omvärldsanalys”, Dnr 2011/315, 2012