№ 2/2018

№ 2/2018

Nauk. pr. NDFI 2018 (2): 133–145https://doi.org/10.33763/npndfi2018.02.133

EDUCATION FINANCING

RAINOVA Larysa ¹

¹SESE "The Academy of Financial Management"
OrcID ID : https://orcid.org/0000-0002-8275-3094

Formula funding of higher education in EU countries

Extension of discussions about the introduction of new forms of providing budgetary funds, successfully used in foreign practice, to ensure higher education financing in Ukraine actualizes the issue of their study. The aim of the article is to investigate the specifics of the development of formula funding for higher education sector in the EU countries, when more traditional approaches to providing this funding are replaced by modern approaches oriented on introducing competitive mechanisms for regulating the distribution of funds. It is noted that over time there is a gradual departure from the tight line-item budget funding of higher education institutions on the basis of estimates. Block funding takes top priority among financial mechanisms for allocating state funds in most EU countries. A formula approach to determining the size of public funding is usually supplemented by other mechanisms of its provision, although the whole amount of the block grant can be calculated by the formula. It is established that the wider use of formula funding based on performance indicators in EU countries is due to the search by the public authorities for ways to increase the efficiency of funding allocation, especially in periods of significant budgetary constraints and a decrease in investment potential. The main argument in favor of introducing formula based approaches to funding is that this method of providing funds stimulates more rational use of them. Efficiency orientation creates incentives for improving the quality and effectiveness of universities activities; both are key aspects in terms of functioning in an increasingly competitive environment. It is noted that although the use of funding formulas is very widespread, however, certain effects of their use remain the subject of discussions. Implementation of the approaches that take into account the effectiveness of universities activities in the provision of funding does not yet mean a guaranteed increase in the latter. This process may depend on a number of factors, the identification of which remains the subject of further research. One of the main problems with this type of funding is the development of incentives that will be sufficient to achieve the desired results, but will not lead to disbalances of the university functioning. After all, although universities of European countries increasingly diversify their own revenue structures, responding to the challenges of time, they still remain too dependent on state funding.

Keywords:formula funding, block grant, performance-based funding, input indicators, output indicators, higher education, competition

JEL: Н52, І22, І25, І28

RAINOVA L. . Formula funding of higher education in EU countries / L. . RAINOVA // Наукові праці НДФІ. - 2018. - № 2. - C. 133-145.

Article original in Ukrainian (pp. 133 - 145)

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