# **6. CONCLUSION - OPTIONS FOR CHILE**

The critical importance of tertiary education in a knowledge-based society suggests a need for strengthening linkages between the funding of institutions and achieved results in Chilean tertiary education. First, results-based funding would provide Chilean policymakers with an opportunity to balance increased accountability with institutional improvement. Second, funding by results may increase the efficiency and transparency of the market for tertiary education in Chile. Finally, tying incentives to political priorities would serve as an effective driver for addressing key sector issues.

The educational sector is no stranger to transparency and evaluation. Chile has a long tradition of openness about learning outcomes and responsiveness to comparative evidence from abroad. In tertiary education, a mechanism was recently established to fill information gaps on the labor market outcomes of graduates. In addition, accreditation processes have provided tertiary institutions with important diagnostic tools and a small fraction of direct public support (AFD) is tied to performance. Hence, Chile is in a favorable position to take the next step toward funding by results.

The current concentration of public subsidies and student loans in traditional universities can be understood in historical terms. Yet, it is important to evolve the funding system toward a system that relates public subsidies more closely with results. When considering design options, Chile would be able to draw on a rich base of international experiences and good practices in results-based funding.

One of the main prerequisites for funding by results is the existence of a system for collecting and reporting performance information. Although universities and the Ministry of Education collect some statistics, significant effort would need to go into building necessary information structures with build-in verification procedures and safeguards. The proposed law on accreditation would provide a clear mandate to commence this task.

A simple taximeter design does not suffice. Chile is faced with several sector issues that concern more than efficiency and dropouts. Multifaceted sector issues require complex responses, which should be mirrored by the incentive structure established by the funding system. Multiple-criteria funding can be used to drive the implementation of reforms, e.g. pertaining to equity and curricula reform.

Any funding methodology will need to recognize that there are major differences between Chilean tertiary institutions in terms of size, offered degrees and cost structure. The University of Chile, for example, has the responsibility for the National Seismology Center. The financing of such a center should not be based on the educational performance of the Department of Geology.

Given the heterogenic nature of Chilean tertiary education, a contract design may be most effective and manageable. Performance contracts, with periodic adjustments, can be tailored closely to institutional specifics and linked to sector priorities. However, contracts would require capacity building in the Ministry of Education – beyond the current capacity in the Higher Education Division – for analyzing data and effectively negotiating evaluation criteria and targets.

Results-based funding may strike hard in institutions far from the frontier of knowledge. Maintaining a competitive fund for tertiary education with rigorous review processes would allow underperforming institutions to improve themselves by obtaining time-limited funding for institutional restructuring.

- 21 -