Performance-Based Funding of Universities: The Italian Experience
Agasisti, Tommaso, International Educator
A COMMON INTERNATIONAL TREND IN HIGHER EDUCATION SYSTEMS is the growing autonomy of universities, especially in financial matters. The role of central governments has become setting political priorities and financial incentives for stimulating autonomous universities to accept these priorities as objectives. It is important to design good models to allocate public resources among universities.
This trend is particularly rel- evant in Italy, where traditionally, universities have held little auton- omy and were subject to strong control by the central government. Starting in the 1990s, numerous reforms have taken place in Italian higher education. The objectives of these reforms ranged from improving the financial autonomy of universities, giving them autonomy in the organization of teaching matters, and establish- ing procedures for higher education assessment. The most important change involved the budget situation. A law approved in 1993 defined new principles for allocating resources from the central government to universities. The traditional procedure was based on line-item budgets: the central government allocated to each university budgets for each activity (e.g., teachers' wages and buying scientific facilities). This system had many problems because it did not encour- age universities to form their own strategies about resource utilization. This mechanism was replaced by a lump-sum (block grant) budget, autonomously managed by each university. This reform forced universities to become more accountable. Now they have to manage resources without bounds and suggestions set by the Ministry of Education, Universities, and Research.
The First Allocation Model
After a period in which the allocation of public funds to universities was decided through a completely discretionary political process, in 1997, a formula-based funding model was introduced. The formula had the explicit goal to equilibrate the resources among universities. The previous situation was characterized by allocations related not to indicators about universities' activities but rather to their political ability in contracting with the ministry, creating an imbalance across institutions.
The formula was adopted from 1997 to 2003, but it was used for allocating only a part of the public budget: the main part of it was still distributed according to traditional procedures. The amount actually allocated through the formula was only 1.5 percent in 1997, but it increased to about 10 percent in 2003.
This formula faced two main problems. It did not consider research activities, which are important for all the Italian institutions. Moreover, the weight attached to the number of students (70 percent) excessively benefited large universities. Because of these problems, the government abandoned this formula and commissioned the National Evaluation Committee for a new one. The committee has rigorously worked on a performancebased model for many years, trying several methodologies for measuring universities' activities and involving groups of experts at many universities. Both academic communities and politicians seriously considered the committee's suggestions.
The New Model for Financing Universities
In 2004, following the advice of the National Evaluation Committee, the government adopted a new formula. The main concept of this new formula represents the three groups of indicators: number of students (33 percent), results of teaching activities (33 percent), and the amount and results of research activities (33 percent). In the first indicator, the number of students is weighted according to different programs to reflect instructional costs (e.g., students in medicine are weighted more than students in economics). The second indicator, results of teaching activities, is measured by the number of credits obtained by students and by the number of graduates (weighted using "time for graduation").
The final indicator, results of research activities, is measured by comparing the number of teachers and researchers (also research assistants and Ph. …