Government mulls new public university funding model

The Kenyan government is looking at overhauling the current funding model for public universities in a move that could see tuition fees increased, lecturer pay hinged on performance, and staff numbers slashed.

Sector regulator, the Commission for University Education (CUE), and the Universities Fund – the agency charged with providing funding to universities on behalf of the government – have indicated that the current system is no longer sustainable and plans are underway to review the structure.

The country’s public universities are currently largely financed by the government under the Differentiated Unit Cost (DUC) system whereby funding is based on the cost of mounting a degree programme. For private universities, the agency also issues conditional grants for specific programmes.

The reforms could see the government increase tuition fees in state universities, reduce the workforce and pay lecturers based on their productivity and ability to attract research grants.

A different approach

Mwenda Ntarangwi, the chief executive officer at CUE, told University World News the government is no longer able to offer the kind of financial support needed by universities. This, he said, calls for a different approach to funding universities to carry out their mandate.

“There was good intention in instituting the DUC. It focuses on funding a student in a specific programme but that arrangement has proven inadequate because of the different levels of cost associated with training students. It may seem like we are providing equity with the DUC arrangement but it costs more for a university to train a student in a subject using a full-time professor than to use a part-time lecturer,” said Ntarangwi.

“We may have to think more about financing than funding university education. Funding is a good model in a context where there are few universities in the country, but as numbers grow, such a plan is not sustainable. It is true that university education is a public good but we have to tweak the system we have,” he added.

For the current financial year which started in July, the government cut funding to public universities by US$400 million. Universities will have to make do with US$1.13 billion, down from the US$1.53 billion the government planned to spend on institutions earlier in the year. The 26% reduction has been necessitated by a cost-cutting drive by the government, with the coronavirus crisis also significantly hurting revenue collections and reducing economic activity.

Milton Njuki, Universities Fund chief executive officer, said the agency is reviewing the current model to bring in a more equitable and sustainable approach.

Funds mobilisation strategy

“The DUC funding model has brought transparency, equity and accountability in the funding process. However, there are emerging issues which are being addressed through the DUC review process. The fund is in the process of reviewing funding models and will advise the government in due course. However, the focus is on finding a model that guarantees financial sustainability for universities,” said Njuki, adding that the board has completed a funds mobilisation strategy, which will be used to source funds from various partners and donors.

Public universities rely largely on government subsidies to run their operations. The government capitation, however, currently covers only 57% of the learners, instead of the target of 80%.

This allocation is applied mainly to pay staff salaries, leaving little or no funding for promoting quality. Additionally, most of the public universities were not able to pay contractors for ongoing projects, resulting in delayed project implementation, pending bills and potential cost escalation.

“The country needs to address the challenges in the entire university sector. There is need to address the lack of accurate data for decision making, lack of clear focus in investment particularly in the university sector, and the need for controlled expansion of universities, among others. The debate is much broader than mergers. New universities need to be strengthened through adequate funding and proper structures to enable delivery on their mandate,” said Njuki.

Push to increase fees

A revision of university fees, said Ntarangwi, is also unavoidable given that fees have remained unchanged for nearly 30 years. Vice-chancellors from public universities have been pushing the government to allow them to increase annual fees almost three-fold with effect from this year.

This would mean that all state-sponsored students would be expected to pay an annual US$600 in tuition fees, up from the current US$265. Private universities are seeking to double their fees from the current US$700 to US$1,400 per year.

Late last year, Education Cabinet Secretary Professor George Magoha asked universities not to increase tuition fees and instead to execute austerity measures aimed at freeing up funds for investment in academic projects.

“The first step to be undertaken when dealing with university funding is to look at areas with inefficiencies in the current model of funding. We cannot, for instance, treat all students the same in terms of their financial capacity the way we do now. Currently, all students are charged the same amount of fees irrespective of their capacity to pay the full price,” said Ntarangwi.

“Further, there should be a way of rewarding productivity among faculty that in turn encourages more output. We cannot pay a lecturer teaching 1,000 students the same salary we pay one that is teaching 50 students. We cannot pay the person bringing in millions of shillings’ worth of research the same as the one not bringing in any. There should be a base pay for everyone but then differentiate the final pay based on output in all the key areas of university work – teaching, research and community outreach,” he added.

Decline in self-sponsored students

Universities have been struggling to fund their operations as the lucrative parallel (self-sponsored) degree programme was curtailed when the government dropped the university entry grade from a B to a C+ for state-funded students two years ago. This resulted in a decline in student numbers in the parallel programme, then the biggest revenue generator for the public institutions besides the government subsidies.

“There are two ways to think of funding when it comes to universities: one, the kind of funding that involves supporting universities as service entities that have multiple functions that need to be supported financially (most aligned with the holistic funding as guided by the university’s budget); or two, funding that sees students as the primary receivers of the services provided by universities and as the units used to provide universities with the funds to support the students’ direct costs (most aligned with the DUC),” said Ntarangwi.

He argued that the former allows for institutions to look at the totality of their operations and cost them, while the latter looks at the student numbers and how much it costs to provide for their learning.

A recent World Bank policy report has also recommended a review of the national tuition fees policy applicable to Kenyan universities – to address both financial sustainability and equity of the higher education sector.