It is a well-known fact that there is a great fund shortage in our county’s higher education industry. Especially under the current conditions that the increase in budgetary appropriation is insufficient, that the charging standards are unlikely to be raised, and that loans from banks are severely hindered, universities and colleges almost have no way to finance and the financial risk are emerging gradually. The developed countries have achieved remarkable success in the fund-raising of the higher education industry. We shall make use of the developed countries’ experience in the fund-raising channels and approaches to solve the fund shortage in our county’s higher education industry.

An Analysis on the Fund-raising Channel Environment of Our Country’s Higher Education Industry

    1． Financial input has remained stagnant.
    According to statistics, from 1998 to 2004, the student scale of our country’ universities and colleges increased by 291%., whereas budgetary appropriation during that period increased only by less than 178% and the gross income of universities and colleges increased only by 267%, which led to the absolute decrease in the education fund per student. The education fund per student decreased from 15981 RMB in 1998 to 14999 RMB Yuan in 2004, among which the financial fund per student decreased from 9829 RMB Yuan in 1998 to 6982 RMB Yuan in 2004, and the ratio of public financial input to the total input in higher education decreased from 78.6% in 1996 to 45.9% in 2004. Moreover, the 2005 Statistic Report on the Implementation of the National Education Funding jointly issued by Ministry of Education, State Statistics Bureau and Ministry of Finance on December 29, 2006 shows the budgetary operating expense per student of universities and colleges nationwide was 5375.94 RMB Yuan, down by 3.18% over the previous year’s 5552.5 RMB Yuan, which marked the fifth consecutive year of decrease in the budgetary operating expense per student of ordinary universities and colleges nationwide; while the budgetary public fund per student in 2005 was 2237.57 RMB Yuan, down by 2.65% over the previous year’s 2298.41 RMB Yuan, which marked the sixth consecutive year of decease in the budgetary public fund per student.
    2．The charging standards are unlikely to be raised.
    Since the pay-for-education system was initiated in 1997, the tuition fees and extras of universities and colleges have been increasing continuously at a high speed. Statistics show in the year 2000, the tuition fee per student of domestic universities and colleges took up over 50% of the per capita GDP while the ratio of residents’ expenses on education to their household expenditures almost reached the level of the developed countries. Citizens’ affordability and social complaints forecast there will be no more substantial rise in the charging standards of universities and colleges in our country. Ministry of Education has promised to the press not to raise the charging standards as well.
    3． Loans from banks are severely hindered
  Since 1999, the loan-lending of universities and colleges in our country from banks has experienced a course from non-existent to existent, from small amount to large amount, from hot to slack, and from slack to cold. Especially, as Jilin University disclosed its financial crisis and the debts of universities and colleges became a hot topic during the “Two Sessions”, and moreover, due to the staging of the monetary squeeze policy, the universities and colleges’ loan-lending from banks is severely hindered.

The Hidden Perils of the Fund Shortage and Excessive Loans of the Universities and colleges in Our Country

    While the universities and colleges in our country are making use of bank loans to expand their scale, there are such problems as the dissymmetry between loan scale and loan mix, and the dissymmetry between expansion speed and debt servicing capacity, which causes financial risks and bank credit risks to the universities and colleges easily.
    (1) The loan scale is overlarge and the loan mix over-concentrated, which will cause financial risks to the universities and colleges. Since 2001, the approach of “Bank-Institute Cooperation” has been promoted rapidly in the universities and colleges throughout the country and the loan scale of the universities and colleges has become increasingly large. For instance, the loan scale of the universities and colleges in some central province of China was 1.128 billion RMB Yuan in 2003, but by July, 2005, it had amounted to 7.752 billion RMB Yuan, up by 587.23% within three years. The expanding momentum is startling. However, meanwhile, the loan mix of the universities and colleges is very concentrated. Firstly, the loans granted to the universities and colleges are concentrated on certain clients. Investigations and statistics show that the loan balance of the ten largest universities and colleges takes up over 50% of the total amount of loans to the universities and colleges; secondly the loans granted to the universities and colleges are concentrated on certain purposes. Over 90% of the loan funds is used in the construction of new campuses and the reconstruction of old campuses; thirdly, the target dates for loan repayment are concentrated. Relevant data show that the universities and colleges in the province mainly lent loans between 2003 and 2005, and the terms of most of these loans are five to eight years, which will bring forth the peak loan repayment after 2007. As the loan scale is overlarge, each year the universities and colleges have to expend a lot on loan interests, which seriously affects the sustainable development of the universities and colleges. Moreover, as the loan mix is over-concentrated, when the peak loan repayment comes, the construction projects of such universities and colleges are still at the concluding stage, and all the projects and the proportion of teachers have not yet entered the normal teaching and scientific research stage. As a result, there will be huge financial risks in the repayment of principals and interests.
    (2) The expansion speed is over-high and the debt servicing capacity is over-weak, which will cause financial risks. Supported by the funds provided by banks, universities and colleges develop rapidly, with their scale and number of enrolled students expanding by leap and bounds. Relevant data from the Commission of Education of some province show that, from 2002 to 2004, 19 new universities and colleges were established in the province, with an increase rate of nearly 40%, and meanwhile, the number of enrolled students grew rapidly from 266.3 thousand students in 2002 to 489.9 thousand students in 2004, up by 84%. However, despite their rapid expansion, the debt service capacities of these universities and colleges are decreasing continuously. In terms of the ratio of liabilities to assets, by now the ratios of liabilities to assets of some relatively conservative universities and colleges have reached 35% whereas those of some relatively radical universities and colleges are close to 80%. If such factors as depreciation are disregarded, the ratios of liabilities to net assets have reached the fringe where assets cannot make up for debts, which fully manifests the debt servicing capacities of these universities and colleges are rather weak; in terms of income growth rate, due to the continuously enlarged student enrollment in recent years, the accommodating capacity of the universities and colleges has almost met its limits, there is little possibility for student sources to grow substantially. Moreover, according to relevant policies and provisions, there will not be any big rise in the charging standards of universities and colleges in five to ten years, which means there is very limited space for the universities and colleges’ income growth and their debt servicing capacity will be further affected. Under such conditions, once the universities and colleges’ chain of fund breaks and therefore causes financial crisis, it is bound to affect the on-schedule repayment of bank loans, produce a lot of stagnant loans, and cause financial risks.

The Fund-raising Practices of the Higher Education Industry in the Developed Countries

    1． Governmental Input
    (1) The United States. The U.S. government’s fund investments in higher education include inputs by three levels of governments: the federal government, state governments, and local governments, among which the federal government gives financial aids to the education and scientific researches of both public and private universities and colleges. Its input in corresponding universities and colleges mainly takes the form of budgetary appropriation, basic and special grants and contract provisions, and fund for independent state-level research and development center, etc. The federal government’s input in public universities and colleges takes up 10% to 12% of its gross income. The federal government’s input in private universities and colleges takes up 10% to 15% of its gross income. The federal government’s fund for research obtained by some excellent private universities through efforts even can take up 29% of their regular account incomes. Most of the public universities in the U.S. were established by states. Therefore, financial input by the state governments constitutes one of the major sources of their funds. The private universities in the U.S. can hardly get financial aid from state governments or local governments, and the sum of the two takes up 3% of the regular account incomes of private universities. State and local governments’ input in universities and colleges also mainly takes the form of budgetary appropriation, basic and special grants and contract provisions, etc.
    (2) The United Kingdom. The government-appropriated fund obtained by the universities and colleges of higher education in the United Kingdom is mainly provided by the central government, which provides fund for the universities and colleges throughout the country through the Higher Education Funding Councils. There are mainly two forms of government-appropriated funds: one is to provide student loans to university or college students; the other is to provide research fund to universities or colleges. The universities and colleges in the United Kingdom get governmental fund for research through two channels: one is the research scholarship set up by five research committees, namely Research Committee of Science, Research Committee of Natural Environment, Research Committee of Agriculture, Research Committee of Medicine, Research Committee of Economy and Society; the other is governmental fund for research obtained through application for research topics.
    (3) Japan. The national universities of Japan mainly rely on state allocations for their fund, which taking up 50% to 60% of their total fund.
    (4) Australia. The fund of the universities and colleges in Australian mainly comes from government appropriations, whereas the latter mainly come from the federal government of Australia. State governments are only responsible for the legislative management of the higher education industry in their states and a small amount of budgetary appropriation to universities and colleges. The federal government’s appropriations are implemented mainly through Committee of Higher Education, Research Committee of Australia, and Department of Higher Education. Generally speaking, there are two kinds of appropriations: package appropriation and research appropriation. From 1974 to 1987, the universities and colleges in Australia provided education to undergraduates and graduates for fee.

Table 1  1995-1996 source composition of universities’ funds in Denmark, Flanders, France, Germany, Holland and Sweden (%)
Fund sources Denmark Flanders France Germany Holland Sweden
Pubic funds 94 90 60 97 70 96
Basic public funds 78 74 — 84 66 82
Fund for Research 16 16 — 13 4 14
 (Tuition) fees 0 5 9 0 7 0
Contract behaviors 3 — 31 3 15 4
Other sources of income 3 5 — — 8 —
Gross Income 100 100 100 100 100 100

  Notes: ① Pubic funds may include part of the tuition fees. What needs to be reminded is that other sources of income may also include contract activities with different levels of governmental entities. ② In France, the expenditures of governmental employees taking up approximately 80% of the total of the university faculty are not included in the budget of universities, which maintains French universities’ income from tuition fee (9%) and contract activities (31%) at a relatively high level.
Source of data: Wang Ye, “The Higher Education Financing Practice in Developed Countries and its Revelations for China”. Studies of Finance and Accounnting in Education. 2007(2)

    (5) Denmark, Sweden, Holland, Germany and Belgium. The fund-raising pattern of the universities and colleges in these countries is still the traditional government appropriation system with the characteristics of being concentrated and unitary. As an important pubic utility, the higher education industry in these countries is also mainly implemented and financially supported by the federal government and local governments. As a result, almost all or the absolute majority of the running funds of the universities and colleges in these countries come from the public budgetary appropriations of the central or local governments, and only a very small portion of the funds come from other incomes, especially private income (as shown in table 1). From 1995 to 1996, the funds of universities in Denmark, Flanders of Belgium, Germany and Sweden concentratedly come from public funds, whose ratio is as high as 90% to 97%; the fund sources of universities and colleges in France and Sweden are not so unitary, but the ratio of public funds also amounts to 60% to 70%. It is safe to say that public funds provided by the national governments constitute the decisive source of fund for the universities’ existence and development.
    2． Tuition Fees and Extras
   (1) The United States. 25% to 50% of the education cost of a college undergraduate is shared by the student and his or her family in form of tuition fees and extras. The tuition fees and extras in the United States consist of tuition fee, accommodation fee, and board expenses, and fall into two categories: one is the tuition fees and extras paid by the U.S. students, and the other is the tuition fees and extras paid by foreign students studying in the U.S. Various universities’ and colleges’ degree of dependence on tuition fees and extras completely depends on their abilities to obtain other incomes (such as governmental input, research subsidies and private donations, etc.) through efforts. On the whole, as to public universities, the ratio of tuition fees and extras to their gross income is less than 20% on average, while as to private universities, the said ratio more than doubles. Except first-class private universities, other private universities’ degrees of dependence (measured by the ratio of tuition fees and extras to their gross income) on tuition fees and extras all exceed 50%. In some two-year private vocational training schools or below, the ratio of tuition fees and extras to the gross income is even as high as 73%. In recent years, the fee-charging of the universities and colleges in the U.S. has been on the rise. With the continuous increase in fees, many U.S. families have to work out a long-term saving plan in order to set aside more money to pay for the children’s college education.
  (2) The United Kingdom. As the scale of higher education expanded continuously and the government’ burden became increasingly heavy, the United Kingdom started to charge students in 1998. The income from tuition fees constitutes nearly 50% of the total of the regular fund for higher education allocated by the Committee of Appropriation for Higher Education. The income from attracting students of the non-EU countries to receive higher education in the U.K. is an importance source of the U.K’ educating funds. The United Kingdom charges her own students less than 2000 pounds for tuition fees and extras while the educating fees she charges students from the non-EU countries double are two to four times the former.
  (3) Japan. The national universities take up a very small proportion. The daily funds of Japan’s private universities mainly rely on the tuition fees paid by students, which takes up around 50% of the total fund.
  (4) Australia. Since the Australian legislative body ratified “the Act of Contribution to Higher Education” to increase the sources of fund for implementing higher education in 1998, every student receiving higher education must make his or her own “contributions”, i.e. pay tuition fees. It is also prescribed that the charging standards for postgraduates should be one time higher than those for college undergraduates.
  (5) Denmark. In the year 2000, private input took up 4% of Denmark’s gross input in education.
    3．Incomes from sales and service
  (1) The United States. Incomes from sales and service are mainly incomes drawn by universities through making use of such advantages as their own science and technologies, intelligence, equipment, facilities and assets, etc to provide service or sales to the external world, for instance, incomes from the operation of university assets, including running hotels, restaurants, university hospitals and real estate, or renting out equipments or space for activities; and incomes from sales, including selling teaching software, tapes, and printed matters. In the United States, some private universities and colleges with a long history and a solid foundation get substantial income from such industries. The states usually save these universities and colleges’ expenditures by exempting their assets and sales from taxes. 
  (2) Japan. The incomes from service provided by the universities to the society by making use of their university assets are another important source of fund.
    4．Donations
  (1) The United States. Besides governmental input, tuition fees and extras, as well as incomes from sales and service, other fund-raising channels also provide a considerable proportion of fund to the higher education industry of the United States, mainly including private donations and grants, as well as incomes from contract provisions and donated funds, among which private donations and grants, as well as income from contract provisions are the most important fund-raising channels. In public universities, incomes from these two channels take up 3% to 6% of the gross income; whereas in private universities, incomes from these two channels take up constitute a much larger proportion of the gross income, usually taking up 10% to 18% of the gross income. In the United States, the amount of donations a university or college receives from individuals and social groups is another decisive factor that influences its ranking. As a result, all the universities and colleges attach great importance to donations and take up collections actively. The American people have strong consciousness and traditions of donating money to run a school, which stems from their love for higher education and gratitude for their alma masters on the one hand, and the direction set by policies worked out by the U.S. government in this aspect on the other hand. For instance, according to some provisions of the tax law, anyone, no matter company or individual, who donates to the education industry or other social public utilities, can be exempted from taxes; the government provides accessory funds for such donations to the universities and colleges and does so under the donators’ name, encouraging the universities and colleges to take up collections actively and making the donators “gain immortal fame”.
     (2) The United Kingdom. There are donating traditions among the people and in the society of the United Kingdom. The running funds of all the schools of Oxford University and Cambridge University mainly come from the donations of big syndicates and different social circles. The donations received by other ordinary universities take up around 3% of their gross fund income. In recent years, different social circles’ donation to universities has taken on a rising trend. The donators usually donate to obtain some research results or share the rights for some intellectual property. This kind of give-and-take donation is one of the major characteristics of the British way of fund-raising for education.
  (3) Japan. Financial assistance from various social groups and individuals is another importance source of income.
   As we can see from above, the financial channels of universities and colleges in the developed countries take on the typical diversified pattern, and the fund-raising approaches are fairly flexible, which enables the developed countries to maintain the sound operation of their higher education systems even when the world is confronted with the problematic fund shortage in the higher education industry and lay a solid fund foundation for the improvement of their higher education levels.

Solutions for the Fund Shortage in the Higher Education Industry of Our Country

  To promote and perfect the diversified fund-raising pattern of our country’s higher education industry, making use of the experience from the developed countries, and taking the realities of our country into consideration, I’d like to put forward the following suggestions:
    1. The government shall adjust relevant policies concerning the fund of universities and colleges of higher education.
  Universities and colleges are public institutions where quasi-public-products are provided. Governments of all levels shall undertake due responsibilities and obligations for the problems emerging subsequent to the enlarged student enrollment and the operating quality of the entire higher education industry. Our government’s financial input is obviously insufficient, which leads to the severe fund shortage in our country’s higher education industry. The Personnel Department of Ministry of Education sampled more than 90 universities and colleges throughout the country at the end of 2003, and found from 2000 to 2002, the ratio of central government appropriations to the gross fund remained unchanged on the whole while the ratio of local government appropriation even dropped gradually. Therefore, governments of all levels shall strengthen their input in the daily maintenance and development of the higher education industry, which is an important guarantee for the sustainable development of China’s universities and colleges.
  Moreover, governments of all levels shall perfect the policies concerning universities’ and colleges’ use of credit and keep their use of credit sustainable: specially establish graded guaranteeing universities and colleges to provide fund-raising guarantees for universities and colleges; the governments shall discount in full amount for loans on such teaching infrastructures as teaching buildings, libraries, labs and teaching equipments, etc. and alleviate the indebted universities and colleges’ pressure to repay interests; regulate and perfect the accessory policies for the socialization reforms of universities and colleges, allow idle capital in the society to enter the field of higher education, and introduce the competition mechanism into universities and colleges. The governments may also consider establishing local higher education investment companies and constructing a multi-level fund-raising platform. They shall set up local higher education investment companies and make use of socialized low-cost funds to solve the short-term fund shortage in the rapid development of universities and colleges. As to the source of fund for such higher education investment companies, local finance may appropriate 0.5~1 billion RMB Yuan in one lump sum as their registered capital and then obtain low-interest-rate fund-raising funds every year by issuing higher education development bonds. The higher education investment companies are not designed to make profits. They are merely required to keep recovering the cost, avoiding fund deposition and maintaining self-circle and sound development.
    2．Raising funds for universities and colleges through multiple channels
  The above analysis on the United States’ and several European countries’ pattern of raising fund for higher education shows that although there are two different fund-raising patterns, with the former depending much more on public funds whereas the latter actively turning to market for funds, seeing from the overall trend, we can outline the general patterns of fund-raising in modern higher education industry of the world. There is no doubt that public input from governments, tuition fees and expenses from students, the increased income from the universities and colleges themselves by providing paid service, as well as external assistance each will play an important role. As the public resources and student expenses are limited and the external assistance is uncertain, our country shall raise funds for universities and colleges through multiple channels and form a diversified fund-raising pattern.
    3．Employing the market mechanism to raise non-public funds
  Non-public fund is an inexhaustible source of fund. Governments shall fully employ the market mechanism and rely on professional teams as well as professional and marketized operations to raise non-public funds: firstly, governments shall actively adapt themselves to the market mechanism and market ideas, comply with the law of market, actively expand the market of educational services, consultations and training, and creatively implement the marketized transformation of intellectual productive forces. Secondly, governments shall construct systemized and professional modern donation management systems, implement the foundation system and operate the donated funds scientifically, professionally and systematically with the broad vision of globalization.
    4．Establishing scientific cost-sharing mechanism for the higher education industry
  The practice of charging students for receiving college education itself is beyond controversy. The heart of the matter is how to determine the charging standards and conduct reasonable cost accounting so as to ensure the realization of the “win-win situation”, i.e. increase in educational income and fairness of education. Therefore, reasonable cost-sharing pursuant to principle of profit and principle of capability and necessary cost compensation shall be the standards for universities and colleges charging fees. Besides, there must be perfect accessory national student financial aid system for the scientific cost-sharing mechanism of the higher education industry, so as to expand and protect students’ opportunities and abilities to receive higher education as much as possible.
    5．Educational Donations
  Educational donations play a very important role in promoting universities’ construction and development. In the universities of some American and European countries, educational donations, along with government appropriation and income from tuition fees, have become important sources of fund for universities and colleges. In our country, with the deepening of reform and opening up as well as the implementation of the strategy of invigorating China through science and education, people’s material and spiritual civilization have been substantially enhanced and the social morality of showing respect for teachers and their work has come into being on the whole. Different social circles have given great care and support to the development of education. Funds generously donated for education has gradually become one of the most important sources of funds for the development of universities and colleges in our country. However, for many years, the ratio of donation incomes in universities and colleges of our country has been at a relatively low level. Governments of all levels shall make use of the advanced experience of the developed countries, strengthen the construction of the incentive system for educational donations, and raise the percentage of donation income in the fund source structure of the universities and colleges in our country. For instance, in the aspect of the legal system, relevant provisions of Law of the People’s Republic of China on Donation for Public Welfare Undertakings and Tax Law shall be revised to encourage donations by individuals, enterprises and social groups, implement tax reduction or exemption policies for donators, and enable donators to receive the double return of both wealth and fame; governments of all levels shall work out special policies to encourage universities and colleges to take up collections actively, for instance, matching and granting the income from donations received by universities and colleges and place the granted funds under the name of the donators establish open, transparent and highly efficient educational donation management organizations, systems and methods, enabling the donators to have a clear idea of the whereabouts of their donations and their important role in universities and colleges; universities and colleges themselves shall attach great importance to the income from donations, set up special fund-raising committees, visit alumni, social groups and relevant enterprises regularly, and expand the donation network continuously.
    6．Increasing incomes from sales and service
  Incomes from sales and service are mainly incomes drawn by universities through making use of such advantages as their own science and technologies, intelligence, equipment, facilities and assets, etc to provide service or sales to the external world. In the United States, some private universities and colleges with a long history and a solid foundation get substantial income from such industries. The states usually save these universities and colleges’ expenditures by exempting their assets and sales from taxes. In our country, with the exception of several prestigious universities and colleges, most universities’ and colleges’ ability to provide sales and service for the external world is weak, and as a result, their incomes from this aspect are very limited. Therefore, it is a must to increase the income from sales and service of the universities and colleges in our country. We can refer to the pattern of the United Kingdom to set up a “promotion and management center of national science and research” and construct a practically operable platform between scientific research achievement transformation of the universities and colleges; except some basic or top scientific research projects taking the form of national program bid invitation, the fund for other applicable scientific research programs shall be provided by the industry circle, so as to make higher education meet the needs of social development, and we can also refer to relevant Japanese policies and implement special policies for the fund for scientific research obtained from the industry circle, for instance, universities and colleges will not reserve any portion of such funds for scientific research management governments shall actively encourage universities and colleges to make use of their won intelligence, science and technologies, equipments and assets to provide consultations and trainings, organize and arrange meetings, rent out school facilities, sell software and hardware products and conduct scientific research cooperation with the external world, and exempt such incomes from sales tax and income tax. The universities and colleges themselves shall transform their concepts, combine production with learning and research, and view it as an importance fund-raising channels of the universities and colleges.
    7．Giving full play to the governments’ role in overall coordination
  Governments must play their parts. In this aspect, the practice of Jiangsu government and Chongqing government is praiseworthy. At present, the debt of universities and colleges in Jiangsu Province is around 10 billion RMB Yuan. That is not a small figure. However, what lies behind the figure is the fact that the running conditions of most universities and colleges have been improved, the campuses have become larger, the facilities of universities and colleges have become more advanced, and the living environment of students has become better. Nevertheless, the debt problem of universities and colleges must not be overlooked. It will be very dangerous if it is let lone. To a university or college, the annual interest of millions of RMB Yuan’s debt alone is ten to twenty million RMB Yuan. If it is a short-term loan, the repaying pressure will be greater. If so, the universities and colleges will have no money to update equipments, purchase books, increase scientific research undertakings, or bring in talents, etc. and as a result, the teaching quality of these universities and colleges will be bound to decline. There are three solutions for the debts of universities and colleges: government appropriation, fund-raising by universities and colleges themselves and social donations. Under current situations, if universities and colleges are supposed to repay the debts all by themselves, there must be no way out. Jiangsu Province has held several meetings for this and up to now has worked out a preliminary solution. As to the 10 billion RMB Yuan’s debt, the government will provide three to four billion RMB Yuan, another three to four billion RMB Yuan will be raised through fund operation, and the rest shall be undertaken by the universities and colleges themselves.
  Up to now, there are 57 universities and colleges under the jurisdiction of Chongqing government, and their funds for basic construction are insufficient. To cope with the pressure of enlarged student enrollment, Chongqing municipal government gives full play to its leading role and supports the construction of universities and colleges actively, where there are six shining points: the construction of universities and colleges have been promoted by classification through the two approaches of constructing a new campus in another place and expanding the scale in the same place; the government’s real estate group conducts the capital operation, and the new land of universities and colleges assume the administrative appropriation price, i.e. 70,000 RMB Yuan/mu; the lands of old campuses in the main urban area are displaced (amounting to 2.5 million RMB Yuan/mu); the government exempt the universities and colleges from several taxes and provide financial assistance to them, and as to the special difficulties of some universities and colleges having no land to displace, the government solves their problems by “penalty” (appropriate a land for such a university or college for sale ); the government provides subsidiary fund for the loans of the universities and colleges; the government establishes a loan monitoring mechanism and takes keeping the ratio of liabilities to assets below 30% as an non-yielding working principle and an important management idea.

(Executive editor: Xu Dong-qing)