# **Box 5. Funding model for French universities**

<mark>The basis for calculating funding is the number of students enrolled. The compensation that universities receive is tied to the level and type of program that the individual student is enrolled in. All programs are categorized in a grid that serves as a weighting device. Funding per student is determined using four criteria:</mark>

- <mark>Teaching staff not funded by the central government</mark>

- <mark>Compensation for non-academic staff</mark>

- <mark>Technical requirements and equipment</mark>

- <mark>Teaching facilities</mark>

_Source: CDUS 2002 and CHEPS 2001b_ The main advantage of the French system is the simplicity of the funding criterion. As pointed out, input indicators make it relatively unproblematic for decision makers to track spending and allocate funding. The drawback, however, is weak incentives for universities to provide quality education and ensure efficiency by avoiding delays in student completion.

The **Danish taximeter model** uses a simple output criterion to determine the level of funding for tertiary institutions. Depending on their research activities, institutions receive between 30 and 50 percent of their funding based on their educational production. For each student who passes an exam an amount of money is paid to the university. The total of these “active” students determines the available funding in a particular year. Universities do not receive compensation for students who fail their exams or do not take exams.

# **Box 6. The Danish taximeter-model**

<mark>The Danish tertiary education funding tariff paid per passed exam, the “taximeter tariff”, varies according to the field of study, and has three components:</mark>

- <mark>A tariff for the costs of education and equipment</mark>

- <mark>A tariff for joint costs (e.g. administration, buildings)</mark>

- <mark>A tariff for expenses for experimental sciences and practical training (e.g. in medicine and</mark> <u><mark>physics)</mark></u>

_Source: CPH and CHEPS (2001)_ The taximeter model promotes efficiency in the tertiary system by highlighting the need for students to complete their coursework and progress in the system. Hence, historically determined budgetary slack is dealt away with as institutions are only rewarded for their incremental “production”. In theory, the taximeter model also facilitates student mobility between institutions since funding is tied to the student and not the institution. However, the model as implemented in Denmark is not a real voucher since students cannot use the taximeter to buy services from private providers. The risk associated with the taximeter model is the incentive of institutions to artificially increase pass rates to receive more resources. To avoid decreasing educational quality, the model depends on the existence of a strong quality assurance mechanism and deep-rooted professional standards among university staff.

The **Dutch** funding system allocates about 50 percent of public funding for university teaching based on an output criterion. Whereas the focus in Denmark is exams passed, the Dutch system rewards student degree completion. To avoid unintended fluctuations in funding, resources are allocated based on two-year averages of the number of graduates. An important feature of the Dutch system is that the macro-budget for the university sector is determined before deciding on the distribution of resources to individual institutions. Hence, the formula does not imperil budget stability.

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