Higher Education Finance

Higher Education Finance

As the providers of higher education, the federal states guarantee basic funding for universities. In total, almost 90 per cent of funding for higher education institutions stems from government sources and the vast majority of that comes from the federal states (around 75 per cent). The Federal Government is involved in the funding of higher education institutions by financing research projects, through special programmes (e.g. Excellence Initiative / Excellence Strategy in future, Higher Education Pact, the Programme for Women Professors (Professorinnenprogramm)), and also through the construction of research facilities (approx. 15 per cent). Around 10 per cent of funding comes from private sources. This is largely a result of commissioned research, but also covers research funding from private donors (patronage), sponsoring of university activities and income from tuition fees.

Over recent years, the Federal Government has become an ever more important factor in higher education funding. The demand for higher education has increased significantly, which has necessitated enormous additional investments in the capacity of higher education institutions; at the same time, research and innovation have become more and more significant for global economic competition, which has similarly demanded enhanced government funding.

The states as the providers of higher education had increasing difficulties to provide adequate basic funding for universities. They are severely constrained in their budgets due to obligations imposed at a federal level, above all in the area of social expenditure. Neither do they have any options for generating their own income in the face of rising expenditure in the education area.

The Federal Government has continuously increased its spending on research. In 2007, the Federal and State Governments launched the Higher Education Pact in order to meet the great demand for higher education.

Since the Federal Government was able to make funds available for a limited period only, the funding structure of the universities underwent a change for the worse. Programme and project funding increased at the expense of basic funding, with the result that ongoing tasks at universities had to be covered by short-term funding to an ever greater extent.

Following the initial reduction in mixed funding from Federal and State Governments that had taken place in 2006 as part of the "Federalism Reform", the developments led to a long debate at universities about an amendment to the German Basic Law that would grant the Federal Government expanded co-funding rights.

A corresponding amendment to the Basic Law entered into force on 1 January 2015. Whereas in the past the Federal Government had only been only permitted to provide co-funding in the area of research, but was forbidden to provide ongoing funding in the area of teaching at universities under the "ban on cooperation", the Federal Government can now also contribute to the funding of teaching. Whether and to what extent these expanded options will be taken up has not yet been decided.

For the Federal Government’s part, the view was repeatedly expressed that it would continue to contribute an increased amount to the funding of universities, but would not interfere in basic funding. Instead, it would provide targeted financial incentives in order to introduce particular developments.

The German Rectors’ Conference has demanded an about-turn in higher education funding. In its “Zwei-Säulen Plus” (Two pillars plus) model, it calls for funds being received currently as part of the Higher Education Pact to be made permanent, in other words, to be converted into basic funding (Pillar 1).

The HRK furthermore maintains that universities require additional funding for higher education facility construction and renovation, digitalisation, overheads, national licences etc., in order to be able to compete successfully with non-university research institutions at a national level and with foreign universities at an international level. According to the HRK, this additional funding can also be provided as part of programmes (Pillar 2).

However, in its view the proportion of basic funding should amount to 75 per cent. In addition, the HRK points out that it is necessary for basic funding (Pillar 1) to experience continuous growth, such as is guaranteed for non-university research institution as part of the Joint Initiative for Research and Innovation.

The HRK has adopted a detailed statement in relation to higher education funding and the problems resulting from the changed funding structure: Entschließung zur Finanzierung der Hochschulen, 11. Mitgliederversammlung am 22.11.2011 (Resolution on the funding of higher education institutions. 11th General Assembly on 22 November 2011).

The HRK likewise named specific examples of financial commitment by the Federal Government in a resolution: “Future contribution of the Federal Government to Higher Education Funding,” 124th Senate on 11.6.2013.

The “Two pillars plus” model is described in the resolution “Funding of the higher education system from 2020 onwards” of the 22nd General Assembly on 9.05.2017.