1st International Conference on Engineering and Business Education (ICEBE) Wismar, 2008

①①① A Study of Higher Education’s Financial Reform and Impact

HONG WU ØSTFOLD UNIVERSITY COLLEGE / SHIJIAZHUANG UNIVERSITY OF ECONOMICS Liu Dezhi, Li Guozhu, Wang Bifeng SHIJIAZHUANG UNIVERSITY OF ECONOMICS

ABSTRACT China’s higher education catches the recent years’ global trend and moves to a more market oriented reform process. There has been a drastic change in the Chinese education market in the past 30 years. The change of financial structure and investment is one the latest experiments and this change, like others, results significant impact to every involved actors, as university’s staff members, professors and students. The current study is a comparative analysis on the financial structures of sampled universities in China, and USA. The study focuses on the different budgeting models and specifications used in these universities’ and their financial structure by different sources. The intention of this paper is providing readers an international aspect for the debate on financial structure principle and practice, sharing and learning experiences from different countries, thereafter, recommending a viable option for this reform process in China’s higher education.

Key words: Financial structure and investment, comparative analysis, budgeting models and specifications, higher education

INTRODUCTION

The global education development process in the last decades has changed this market drastically and one of the consequences is the popularity of the education. More and more people are able to take education and even higher education is not longer only regarded as an elite opportunity for few, but gradually common availability for people in general.

Following this trend, there are many questions to be addressed and different opinions to be debated: What is the nature of higher education and how higher education can be served for people most in the best ways? Is education becoming a commercially based market and how this market can be managed for the customers’ in this term, people’s best will?

Many China’s higher educational institutions have also, due to mentioned trend and its impact, been through a restructuring process and experienced significant changes and challenges. One of the process steps is decentralizing of universities’ ownership, from centralized ministry of education or other central ministries, down to the provincial or regional governments, followed by the universities’ financial ownership. The tuition and accommodation fees are also introduced to balance the universities’ financial sources.

The challenges are, however, reflected in many dimensions and many issues need to be handled by an

① The current study and writing of this paper is sponsored by the Chinese national research project entitled as “A study and analysis on higher education’s financial sources for Chinese universities after a decentralization moving from central government budgeted to regional government self-financed, a process and impact” (Project no. DIA050125). 全国教育科学规划课题：“政府与高校新型关系下部委院校属地化管理后高 校投入制度改革的调查与研究”（编号：DIA050125 ）

1st International Conference on Engineering and Business Education (ICEBE) Wismar, 2008 university’s management: The limited investment options and lack of financial sources; avoiding and limiting gradually increased tuition and accommodation fees as a significant burden for common students; maintaining the nature and specialty of each university, as well as the quality of teaching and research; meeting the competitions from other educational actors and keep universities’ further development and positive contributions to the society, etc.

This paper describes a comparative study of sampled universities and university colleges in China, Norway and US state universities. Their financial sources and budget models will be compared and similarities and differences will be discussed. The intention is, through this limited discussion, “kick off” a further and profound debate to explore the new options for China’s higher education reform and smoothing its process.

THE CHINA’S HIGHER EDUCATION CASE

For the last 6 decades, China’s higher education has been mainly divvied into two major developing phases:

 1949–1985: Planning based and central controlled financial model  1985- Now: Self responsibility and performance based financial model

The dividing of two phases is also naturally reflected the economic development in China for the period, as the economics reform process started in early 1980s. The planning economics model in China has been questioned at that time and many economic experiments were launched and tested.

1949–1985: Planning based and central controlled financial model Planning based and central controlled financial model is state funding, calculated by each university’s sizes and daily operation needs, plus national financial situation and university’s further development need. The key word for this model is fixed and single source (by the central government) and financial sources are depended on the university’s size and routine operation needs, which is relatively fixed.

From 1950 to 1979, all Chinese higher education expenses were covered the government. The students did not only avoid paying tuition fees, but also could get free accommodations, many even receive further scholarships to cover the meal and other daily costs. Hence, the free education in China for this period was really free. However, this financial model is also totally based central government fully financed, so as a result, the higher education in China is relatively costly.

Table I Summary of Financial Sources for China’s Higher Education 1950-1985 (RMB million)

Total financial Total governmental % of Total financial Total governmental % of Total Year sources funding source budgeting financial source 1950 56 56 100% 56 100% 1955 428 428 100% 428 100% 1960 1362 1362 100% 1362 100% 1965 741 741 100% 741 100% 1970 205 205 100% 205 100% 1975 1032 1032 100% 830 80% 1980 3458 3206 93% 2690 78% 1985 7996 7323 92% 6237 78%

1st International Conference on Engineering and Business Education (ICEBE) Wismar, 2008

As table I [4] illustrated, the government financed China’s higher education 100% before 1980, so we can call that period as fully state funded. Since 1980, there has been “none central governmental financial” budgeting, thus, total governmental funding for education is less than 100%, and for local/regional universities, the financial sources are partly covered by the local or regional governments. This movement represented a significant changing movement from a central planning economy to a free market economic competition.

1985- Now: Self responsibility and performance based financial model This financial model is also state funding, but calculated based upon each university’s real costs/prices for educating candidates, so the different type of studies might cost differently, as for an example, education engineering students might cost more than philosophy or law students, and therefore might receive more financial sources. The former needs laboratory, equipments and maintaining cost, while the latter needs reading materials mostly.

The revolutionary part of this model self responsibility for financial sources and budget. Each university carries the responsibility for budget spending, so the overspending will not be covered by the government. On the other hand, the saving and profit will be rewarding for that particular university, so the market economic principle was introduced into higher education’s financial issues.

Table II Financial Sources and Budget Model for China’s Higher Education 2006 (RMB billion)

2006 financial sources RMB bill 2006 Budget model RMB bill % Total financial source (i) 294 100.00% Total expenditure (ii) 259 100.00% 1.State financial source total 126 42.86% 1.Operating budget 222 85.67% Hereof state financial budget 121 41.09% a) Personnel 103 39.64% 2.Private and none-government source 23 7.92% Basic wage/salary 19 7.25% 3.Gift and contribution 2 0.66% Additional salary 23 9.03% 4.Business income 122 41.65% Other salary 23 8.87% Hereof tuition fees 86 29.18% Employee welfare 5 1.88% 5.Other incomes 20 6.92% Social security 22 8.53% Scholarship 11 4.09% b) Functional/administration 119 46.03% Operating budget 31 11.97% Business budget 17 6.62% Equipment purchase 26 9.94% Maintaining cost 11 4.24% Other expenses 34 13.26% 2.Infrastructure 37 14.33% Construction cost 4 1.71% (i) Total financial sources = 1+2+3+4+5 Self-financed 28 10.89% (ii) Total expenditure = 1 (a, b) + 2 Other cost 5 1.93%

Table II shows a summary of financial sources and budget model for China’s higher education in 2006. For the financial sources, the state financial part is already low to 42.86%, far below the 1980 level (see table I) and this was unthinkable for 1950 situation. However, the largest none- governmental financial part is still tuition fees in 29.18%. Gifts and contribution is less than 1%, only 0.66%. For the budget model, operating budget is the largest part, and hereof including personnel cost, which sounds normally. Additional salary is in fact higher than basic wage/salary and this distinction is properly based on an incentive system and a performance based rewarding system.

However, the phenomena of functional/administration budget is higher than personnel budget is still debatable and one can question about the efficiency of functional/administration. As 1st International Conference on Engineering and Business Education (ICEBE) Wismar, 2008 pervious study indicated, the higher education is different from a business company, so the intention and result expectations are different. Therefore, there is potential of increasing functional and administration size in higher education section without economic profitability and this efficiency issue is a common debate topic for many [26].

THE NORWEGIAN HIGHER EDUCATION CASE

The higher education system in Norway consists of 7 universities, 8 specialized universities, 34 accredited university colleges and 27 institutions with partly accredited programs. The majority of these universities, colleges and institutions are state owned and funded, which means no need for tuition fee or only a symbolic fee for student registration [10]. The majority of students in Norway are therefore attending state owned and funded, or called public funded institutions.

The financial structure of Norwegian higher education is therefore relatively simple and single in its dimensions. Actually, all public funded universities and colleges are receiving their major financial supports, sourced through the Norwegian national parliament budget proposal annually. Table III and IV below indicated an overview of such financial supports, detailed down to each university or college, as a part of the 2008 national budget.

Table III Norwegian National parliament 2008 budget proposal for all public funded Norwegian universities (NOK million) [18]

Universities and specialized universities Basis % Teaching % Research % Total The University of 1996 52.80% 799 21.10% 988 26.10% 3782 The 1052 49.70% 505 23.90% 560 26.40% 2117 The Norwegian University of Science and Technology 1585 55.30% 613 21.40% 671 23.40% 2869 (NTNU) The University of Tromsø 771 62.70% 189 15.40% 270 21.90% 1231 Norwegian University of Life Sciences (UMB) 324 60.00% 94 17.30% 122 22.60% 540 The 467 64.40% 192 26.40% 66 9.10% 725 The University of 480 65.90% 202 27.80% 47 6.40% 729 All universities in total 6676 55.70% 2594 21.60% 2724 22.70% 11993 Norwegian School of Economics and Business 162 56.80% 69 24.20% 54 19.00% 285 administration The Oslo School of Architecture and Design (AHO) 60 57.20% 34 32.20% 11 10.60% 105 Norwegian School of Sport Sciences (NIH) 84 63.20% 23 17.30% 26 19.50% 133 Norwegian Academy of Music (NMH) 117 70.80% 39 23.40% 10 5.80% 166 Norwegian School of Veterinary Science (NVH) 129 57.90% 40 17.90% 54 24.20% 223 All specialized universities in total 552 60.60% 204 22.40% 155 17.00% 911

The Norwegian parliament’s proposal for annual budget model to each university or college is basically calculated upon 3 categories, as basic funding, teaching activities and research budgeting. The detailed budgeting proportion for each institution is based on few measurable and performance based criteria, as size of the university or college, the student enrollment, the total ECTS (European Credit Transfer System, a common course standard used in Europe) courses have been taught and finished with examinations (usually called as ECTS production), and level and activities of research work, reflected by pre-defined criteria, as recruiting of PhD 1st International Conference on Engineering and Business Education (ICEBE) Wismar, 2008 candidates, paper published in international journals, book writing, etc.

Though the total budget for each university might vary different due to different sizes of universities, the average percentage of basic, teaching versus research funding seems quite similar. We can easily noticed from table I that the basic funding for each university might vary from 49% for The University of Bergen and upon to 70.8% for Norwegian Academy of Music (NMH). Correspondingly, budget for teaching activities also varies from 15.4% for The University of Tromsø, but not more than 27.8% for The .

There are 3 universities, The University of Stavanger, The University of Agder and Norwegian Academy of Music (NMH) have proposed research budget less than 10% of total budget. It shall be noticed that both The University of Stavanger and The University of Agder are previously university colleges and newly accredited as universities.

Table IV Norwegian National parliament 2008 budget proposal for all public funded Norwegian accredited university colleges (NOK million) [18] Accredited university colleges Basis % Teaching % Research % Total Akershus University College 165 65.80% 80 32.10% 5 2.10% 250 Bergen University College 355 65.60% 172 31.80% 14 2.50% 540 Bodø University College 263 68.50% 96 24.80% 26 6.70% 385 Buskerud University College 154 67.40% 64 28.30% 10 4.30% 228 Finmark University College 127 70.40% 46 25.50% 7 4.10% 181 Gjøvik University College 110 68.60% 43 26.70% 8 4.70% 160 Harstad University College 75 70.10% 28 26.40% 4 3.50% 106 Hedmark University College 229 66.20% 106 30.50% 11 3.30% 346 Lillehammer University College 137 57.20% 89 37.20% 13 5.60% 240 University College 88 63.50% 39 27.90% 12 8.60% 138 Narvik University College 111 76.40% 27 18.40% 8 5.20% 146 University College 74 72.20% 25 24.10% 4 3.70% 103 Nord-Trøndelag University College (HiNT) 229 70.40% 87 26.80% 9 2.80% 326 637 66.00% 298 30.90% 30 3.10% 965 Sogn og Fjordane University College 154 67.50% 66 29.20% 8 3.30% 228 Stord/Haugesund University College 147 67.50% 65 29.60% 6 2.90% 218 Sør-Trøndelag University College 371 64.90% 184 32.10% 17 3.00% 572 Telemark University College 296 67.00% 132 29.80% 14 3.30% 442 Tromsø University College 172 67.70% 76 30.10% 6 2.20% 254 Vestfold University College 250 74.30% 72 21.50% 14 4.10% 336 University College 131 62.20% 71 33.60% 9 4.30% 211 Østfold University College 272 71.70% 98 25.90% 9 2.40% 380 Aalesund University College 106 70.90% 39 26.00% 5 3.10% 150 Sámi University College 51 84.00% 4 5.80% 6 10.20% 61 All accredited university colleges in total 4705 67.50% 2006 28.80% 254 3.70% 6965

Both universities and university colleges will, aside of the Norwegian national parliament’s budget, seek for other financial sources to compensate their limited budgets. Traditionally, there is no such culture in Norway to contribute private donations or gifts to a public funded higher 1st International Conference on Engineering and Business Education (ICEBE) Wismar, 2008 institution, though there has been initiated this practice early 2006 and recently also improved this practice [7].

The extra financial sources to these institutions will therefore be most likely research funding from Research Council of Norway (RCN) or external assigned projects from companies or other governmental assignments (see table V and VI for sampled cases). Noticeably, the RCN funded projects are still accounted as a minority compared with other sources of external projects.

Further comparison outcomes from Table V and VI, there are noticed significant differences between the average percentages of financial sources by Ministry of Education (ME), Research Council of Norway (RCN) and other external funded projects (Ext. Project). The universities are apparently the “winner” of none ME financial sources, especially RCN funded projects (11% vs.1.8%). It was because the natures and requirement of these two categorizes are different, as the former is primarily intended doing research work, while the latter is mainly responsible for teaching.

Table V Three sampled Norwegian universities’ major financial sources (NOK million)

Universities and specialized universities ME % RCN % Ext Project % Total The [21] 3702 72.5% 591 11.6% 383 7.5% 5103 The University of Tromsø [22] 1146 70.7% 142 8.8% 183 11.3% 1620 Norwegian University of Life Sciences (UMB) [12] 481 66.6% 92 12.7% 97 13.4% 722 Average 70.0% 11.0% 10.7% ME: Sourced by Ministry of Education and Research according to Norwegian parliament’s annual budget proposal RCN: Research Council of Norway’s project assignment

Table VI Seven sampled Norwegian university colleges’ major financial sources (NOK million)

Accredited university colleges ME RCN Ext Project Total Bergen University College [1] 541 92.3% 45 7.7% 586 Buskerud University College [2] 214 88.1% 2 0.8% 19 7.8% 243 Gjøvik University College [6] 160 82.1% 35 17.9% 195 Narvik University College [9] 142 92.8% 1 0.7% 5 3.3% 153 Oslo University College [13] 918 91.2% 15 1.5% 58 5.8% 1007 Sogn og Fjordane University College [16] 213 89.9% 5 2.1% 11 4.6% 237 Telemark University College [19] 443 88.8% 36 7.2% 499 Average 89.9% 1.8% 5.9% ME: Sourced by Ministry of Education and Research according to Norwegian parliament’s annual budget proposal RCN: Research Council of Norway’s project assignment

Table VII has illustrated how the Norwegian parliament’s proposal for annual budget model (including basis, teaching and research elements) has used as principle guidelines for a higher education institution’s own, called local budget model within a particular university or university college. There are different definitions for these elements, such as basis, for some, it can be a part of ordinary and routine teaching activities, while for others, this is a reserved post, purely for infrastructure budgeting and building. For details, see sampled case from Østfold University College and table VIII. 1st International Conference on Engineering and Business Education (ICEBE) Wismar, 2008

There might be different percentage or proportion on these budget elements, as basis, teaching and research part for each institution, but these elements are in most cases included within the budget model for each institution. The strategic reservation is a small, but important part for a higher education institution. The intention is providing sufficient source to strategic focus when other reservation is not available.

Table VII Four sampled Norwegian university and colleges budget model (NOK million)

The University of Oslo [20] Teaching % Research % Basis % Total % Faculties 559 19.40% 827 28.60% 1503 52.00% 2890 76.40% Supportive functions 0 0 40 4.50% 852 95.50% 893 23.60% Sum total for The University of Oslo 559 14.80% 867 22.90% 2355 62.30% 3782 100.00% Gjøvik University College Teaching % Research % Basis % Total % 43 26.70% 8 4.70% 110 68.60% 160 100% Telemark University College [19] Teaching % Research % Basis % Total % NA 30-35% NA 5-10% NA 60-65% NA 100% Østfold University College Teaching % Research % Basis % Total % 154 52.20% 34 11.60% 97 32.70% 532 97.70%

Below listed up 3 Norwegian university colleges’ essential budget elements all mentioned teaching, research and basis in their budget documents. Strategic reservation is also en essential element for the budget model for many.

Gjøvik University College Strategic reservation Teaching Research Basis Narvik University College Result-based teaching Research Basis Østfold University College Strategic reservation Teaching Research Infrastructure

Further more details for a budget model in implemented practice, a budget model is usually defined based these mentioned basic elements, divided into further detailed subsections, operative activities and daily routines.

For illustration of how this method works in a practical case, we can study closely to a sampled case of Østfold University College. The university college’s top management has defined these mentioned 4 criteria into its budget model, with even more details. A budget model 2008 for Østfold University College includes these detailed activities (see table VIII) and this budget model has been discussed and approved by the university college’s board committees [27]:

1. Strategic reservation  Equalizing unacceptable deviation and negative developing during the operative process  Acclimatizing and providing operative section a sufficient reservation to maintain the recession and lower activities’ levels.  Providing sufficient source to strategic focus when other reservation is not available 2. Teaching  Based on measurement on pre-course, special program, international exchange students, ECTS course production, number of enrolled students 3. Research 1st International Conference on Engineering and Business Education (ICEBE) Wismar, 2008

 Doctoral candidates recruited, internal research seminars and research committee, publication and disseminations 4. Infrastructure and assisting functions  Administration services, library, IT and internet services, location renting cost, other direct cost within Østfold University College’s budget framework

Table VIII A detailed budget model picked up from Østfold University College (NOK million)

Basic budget elements Detailed activities NOK mill. % 1. Strategic reservation Strategic funding 6.85 2.30% Acclimatizing lower activities’ levels 3.49 1.20% Funding saving 0.00 0.00% Strategic reservation in total 10.34 3.50% 2. Teaching Pre-course and special programs 5.20 1.80% International exchange students 0.60 0.20% Number of courses taught (ECTS production) 0.35 0.10% Basic teaching activities 89.03 30.10% Teaching in total 154.17 52.20% 3. Research Doctoral candidates recruited 7.67 2.60% Internal research seminars 0.14 0.00% Publication and disseminations 26.45 9.00% Research in total 34.26 11.60% 4. Infrastructure Common activities 2.38 0.80% Administration services 8.17 2.80% Common services 86.03 29.10% Library 0.00 0.00% IT and internet services 0.00 0.00% Infrastructure in total 96.58 32.70%

As table VIII illustrated, the majority of the budget was assigned for teaching or teaching related activities, where basic teaching activities, as classroom lecture and group work, followed by pre- course and other special programs. Noticeably the international exchange students and number of course taught (ECTS production) were 2 parameters used to measure the performance based progress.

Reviewing the Norwegian higher education’s financial sources and budget models, we can generally conclude the following remarks:  The Norwegian higher education institutions are highly public funded and the financial sources are mainly approved by the Norwegian national parliament, through national annual budget, and this practice is heavily centralized and controlled economic model [table III+IV].  There are clear distinction and work definitions between Norwegian universities, specialized universities and accredited university colleges in their financial sources and budget models, by their different percentages of teaching versus research budgets [table V+VI].  There are very limited alternative options for financial sources for most public funded higher education institutions in Norway and their budget models are also more or less the same, followed by the Norwegian national parliament’s annual budget elements [table VII+VIII]  There is still no or little tuition fee (only registered fee NOK 2000 annual, less than a monthly room renting fee) among the public funded higher education institutions, so this was not accounted as a major financial source for the institutions.  The government provides directly financial aids for the students through the Norwegian State Educational Loan Fund (http://www.lanekassen.no/), so this was not accounted as a 1st International Conference on Engineering and Business Education (ICEBE) Wismar, 2008

part of financial source for the institutions neither.

In a way, the Norwegian higher education’s financial sources and budget models reflect the Norwegian economic system, which is heavily mix of central governmental investments and free market economic approach. However, this mix economic system is also developing toward to a more free market direction, so this will also affect the higher education sector, definitely.

THE USA HIGHER EDUCATION CASE

USA is a world leading power in many aspects and this leading position is also counted for higher education, especially research based higher education. The USA universities and colleges are divided into four categories: public universities, private universities, liberal arts colleges, and community colleges all have a significant role in higher education in the USA higher education [3].

The public and private universities can be distinguished by their different financial sources and options. The liberal arts colleges are mainly targeting to undergraduate students with focus to general knowledge based curriculum (not professional). Community colleges are primarily targeting to local students and providing certificates, diploma and associated degrees. In a way, both mentioned college types can be defined as supportive stage for further higher education at research based university level.

The unique and special characteristics with USA higher education is the heavily decentralized systems [3]. The federal government has no or extremely limited direct financial sources to the universities, but only through indirect research contracts [26] or scholarship to individual students [24]. The state universities, in a way, can be defined as mostly public funded universities in USA [3]. However, the real percentage of state financial sources is still lower in USA compared with other countries.

The US university financial systems combine economic profitability issues with educational purposes, and there are many debates focused on this practice. Whatever argumentations stand for, USA is definitely largest concentration of universities and colleges, both in terms of quality and quantity. By studying in US university financial structure and source options might provide us a better understanding economic mechanism and its impact to educational purposes and outcomes.

The University of Texas at Austin has listed up over 2000 universities in whole USA, by state (http://www.utexas.edu/world/univ/state/) and the current study has used this list to track up the sampled state universities for collecting data. The USA data collecting is based sampled universities’ financial reports or annual budget plan from 2005 or newer. The sampled universities are all belong to state universities, pick up randomly 3 from each of these regions, the west coast, the east coast, the south, the north and the middle.

Table IX listed up 15 sampled US state universities in their options on financial sources. Unlike data from Norway, the alternative options on financial sources have varied greatly even for these 1st International Conference on Engineering and Business Education (ICEBE) Wismar, 2008

state universities. Though many state supports are the majority of financial sources, the actual percentages can be varied from high as 54% (Indiana State University) to low as 4% (Texas State University Systems). Apparently, this is a clear indication of decentralized US higher education practice. It is upon to each state to regulate financial availability and source for own state university.

Table IX An overview over financial sources from sampled US state universities (USD million)

USD mill. Arizona State University State % Local % Gifts/Grants % 1694 778 46% 618 36% 298 18% Arkansas State University State % Local % Gifts/Grants % Tuition % Federal % 122 62 51% 0.5 0.04% 0.5 0.04% 58 48% 0 0 San Diego State University [15] State Research Other fees Tuition Federal 735 221 30% 160 22% 68 9% 132 18% 0 0 General Florida State University 2007 Revenue Sales US grants Tuition Fin. Aid

1192 281 24% 115 10% 118 10% 115 10% 68 6% Kansas State University State Local Gifts/research Tuition Federal 705 182 26% 32 5% 290 41% 132 19% 9 1% State Unallocated Middle Tennessee State University Sales Tuition Federal balance 236 100 42% 10 4% 7 3% 120 51% 2 1% Minnesota State University, State Restricted Capital Tuition Federal Mankato payment 175 55 31% 8 5% 17 10% 70 40% 11 6% North Carolina State University State Sales Gifts/Grants Tuition Federal [11] 1087 44% 15% 5% 15% 11% State University of New York State Grants/ Hospitals Tuition Federal System [17] Contract 8150 2910 36% 1621 20% 720 9% 918 11% 810 10% Texas State University System [23] State Sales Enterprises Tuition Federal 502 22 4% 13 3% 87 17% 314 63% 100 20% State Grants/ Wright State University Sales Tuition Federal Contract 377 74 20% 20 5% 62 16% 126 33% 45 12% Washington State University [25] State Sales Enterprises Tuition Federal 1600 32% 2% 12% 17% 1% State Grants/ Montana State University Services Tuition Federal Contract 406 86 21% 33 8% 131 33% 105 27% 5 1% State Aux. Grants/ Missouri State University [8] Tuition Federal Sales Contract 237 84 35% 36 15% 30 13% 66 27% 0 0 State Fee Indiana State University [5] Other fee Tuition Federal replacement 138 75 54% 5 3% 9 7% 48 35% 0 0

Even the highest 54% state financial support among the sampled universities is still far below 1st International Conference on Engineering and Business Education (ICEBE) Wismar, 2008

the lowest governmental supports in Norway, e.g. 66% of ME financial source for Norwegian University of Life Sciences (see table V), but this percentage is higher than China’s averagely national level 42.86% (see table II).

Tuition fee is an important financial source option for US universities, even for state universities. This might be varied from as low as 10% at Florida State University, up to as high as 63%, again, at Texas State University System. The federal government has usually limited or no support to universities. The highest federal contribution to Texas State University System is 100 millions (20%) noticeably belong to federal revenue-operating (PR-OP grants/contributions) and federal pass Though Revenue (PR-OP grants/contributions) categories.

Other alternative options for US state university financial sources are listed as research, local funding, capital, hospital, sales, services, auxiliary enterprises, gifts, grants, contracts or other fees, many more. There is only one thing in common that no common option for everyone. In a way, the financial options for US universities, even state universities are many and variant.

This practice reflects heavily decentralized higher education policy in USA. The positive element of this practice is self-regulated and freedom under one’s own responsibility making university research and teaching more efficiency [14]. The down side of this practice is heavily commercialized aspect of university education becoming more or less short term oriented and profitability focus, thus negative impact to lower income students [26].

Table X An overview over budget model from sampled US state universities (USD million)

Universities AZSU KSSU MTNSU MNSU NCSU NYSU Expenditures by Program Total % Total % Total % Total % Total % Total % Total 1464 100% 496 100% 210 100% 159 100% 1087 100% 7965 100% Instruction/teaching 709 48% 174 35% 111 53% 58 36% 311 29% 1909 24% Organized Research 60 4% 130 26% 4 2% 3 2% 216 20% 592 7% Public Service 21 1% 59 12% 3 1% 2 1% 130 12% 273 3% Academic Support 114 8% 51 10% 19 9% 23 14% 73 7% 2015 25% Student Services 57 4% 21 4% 29 14% 21 13% 18 2% - - Institutional Support 182 12% 30 6% 19 9% 15 9% 57 5% - - Scholarships/Fellowships 156 11% - - 8 4% 3 2% - - 111 1% Physical Plant - - 32 6% 17 8% 13 8% 80 7% - - Auxiliary Enterprises 105 7% - - - - 15 9% 117 11% 682 9% ASU at the Polytechnic campus 62 4% ------Depreciation ------9 6% 53 5% 380 5% Student Financial Aid ------30 3% - - Hospitals and clinics ------1724 22% Other non-operating expenses ------280 4%

AZSU - Arizona State University MNSU - Minnesota State University, Mankato KSSU - Kansas State University NCSU - North Carolina State University MTNSU - Middle Tennessee State University NYSU - State University of New York System

For the budget models, it seems that US universities are focusing on the same aspect as other countries’ universities as well, namely basic teaching activities, or called instruction in USA. 1st International Conference on Engineering and Business Education (ICEBE) Wismar, 2008

Table IX illustrated the sampled US state universities and their budget models, where instruction or teaching activities are budgeting from 24% at NYSU up to 53% at MTSU, a significant part of total budgeted expenditures.

There is a great variation for research budget among these universities, varied from low as 2% at MTSU and MNSU, up to 26% at KSSU. Other budget specifications can be noticeably revealed as great variation both in percentages, but also different specifications among these universities. As public service, academic support, student service and institutional support are budgeted for almost every sampled university, except NYSU without student service and institutional support. On the other hand, NYSU is the only one which has hospital and clinics and other none- operating expenses in its budget.

A COMPARATIVE OVERVIEW OVER FINANCIAL SOURCES AND BUDEGT MODELS

By now, there has been individual illustration of financial sources and budget models from sampled universities in China, Norway and USA. The next step is making a comparative overview over them all. Table XI is attempting to set up their financial sources in a systematic way to compare each other.

Table XI Financial Sources of Universities in China, Norway and USA

China Norway USA State financial source total 42.86% Ministry of 66%-92% State 4%-54% Hereof state financial budget 41.09% Education Federal 0-20% Private and none-government source 7.92% Local 0.04-36% Gift and contribution 0.66% Gifts/grants 0.04%-41% Business income 41.65% Research Council Norway 0.7%-12.7% Research fund 0-22% Hereof tuition fees 29.18% Tuition fee 10%-48% Other incomes 6.92% External Project 3.3%-17.9% Sales 2-15%

This table illustrated clearly the major distinction between the universities in these countries and we can summarize the distinction as the follows:  The financial sources from the central government or state are highest in Norway, and lowest in USA, but China keeps a good progress compared with 1950 level.  The tuition fee is becoming second largest single financial source in China and in the US but with a great variation from state to state.  Research fund is third largest financial sources both in Norway and USA, but did not indicated in China yet.  Gifts and contributions are becoming an own category in China, though still lowest contribution compared with other categories.  The US universities have the most variable and decentralized financial sources so it is hard to follow any single model in the USA.

Furthermore, a comparative overview over the different budget models for sampled universities in three countries is illustrated in table XII. The table is primarily made for comparison on qualitative elements, thus budget parameters and illustrates for the readers how different budget specifications will be for these cases. 1st International Conference on Engineering and Business Education (ICEBE) Wismar, 2008

By comparing qualitative elements of these cased universities, we can summarize the following remarks:  The personal budget for teaching is lowest in China (basic 7.25% only), highest in Norway (52.2%) while in the USA varied from 24 to 53%.  Functional/administration budget is higher than personal budget in China, which is not common neither in Norway or USA.  There have been assigned significant research budgets, both in Norway and USA cases, but not categorized in the China’s case  The infrastructure budget is highest in Norway, defined as common services, while seems to be lowest in USA. The China’s infrastructure budget mainly belongs to construction work to build up new or renew old campuses.

The quantitative elements as the percentages of different budget models/specifications are basic not comparable since the population and sample sizes are completely different in these cases. It is not comparable to set up China’s national statistics, against Norway’s single university college case only and US few sampled state universities only.

Table XII Budget Models with Specifications of Cased Universities in China, Norway and USA

China Norway (one case only) USA (sampled cases only) Budget expenditure % Detailed activities % Expenditures by Program % 1.Operating budget 85.67% Strategic funding 2.30% Instruction/teaching 24-53% Acclimatizing lower activities’ Organized Research a) Personnel 39.64% 1.20% 2-26% levels Basic wage/salary 7.25% Funding saving 0.00% Public Service 1-12% Additional salary 9.03% Strategic reservation in total 3.50% Academic Support 7-25% Other salary 8.87% Pre-course and special programs 1.80% Student Services 0-14% Employee welfare 1.88% International exchange students 0.20% Institutional Support 0-12% Social security 8.53% Courses taught (ECTS production) 0.10% Scholarships/Fellowships 0-11% Scholarship 4.09% Basic teaching activities 30.10% Physical Plant 0-8% b) Functional/administration 46.03% Teaching in total 52.20% Auxiliary Enterprises 0-11% Operating budget 11.97% Doctoral candidates recruited 2.60% ASU at Polytechnic campus 0-4% Business budget 6.62% Internal research seminars 0.00% Depreciation 0-6% Equipment purchase 9.94% Publication and disseminations 9.00% Student Financial Aid 0-3% Maintaining cost 4.24% Research in total 11.60% Hospitals and clinics 0-22% Other expenses 13.26% Common activities 0.80% Other non-operating expenses 0-4% 2.Infrastructure 14.33% Administration services 2.80% Construction cost 1.71% Common services 29.10% Self-financed 10.89% Library 0.00% Other cost 1.93% IT and internet services 0.00% Infrastructure in total 32.70%

CONCLUSIONS

Throughout this paper, we have examined the financial sources and budget models for China’s higher education, most Norwegian universities and sampled US state universities. As a result of comparison, we can conclude these temporary outcomes:

1st International Conference on Engineering and Business Education (ICEBE) Wismar, 2008

 The higher education systems, the financial sources and budget models are all different each other among universities in China, Norway and USA.  The Chinese model was closely to the Norwegian one in early 1950s, but moved rapidly to the US model at 1980s, basically with increasing tuition fees.  The US tuition fee system is combined with financial aids to the students, while in China there is not sufficient system to combining with tuition fee.  The Norwegian model is heavily centralized and governed by the state, but even so the change is moving toward decentralized direction with less and less state budgeting.  There is a clear need to rationalize the higher education system in every country, even in USA and decentralization seems to be a good option.  The impact of decentralization is commercialization of higher education, which is good for efficiency purpose, but at the same time, a danger for profitability directing, resulting a short term focus for higher education and creating high barricade for lower income students.

There is no clear answer, neither definitely perfect way to go, but certainly a debate on these issues might benefit universities and their customers, the students and their future.

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