14. juni 2010
Adjustments necessary to protect future economy
Economy
Along with the Danish government's highly debated restoration plan follows a great deal of economic uncertainty for the country's universities. The University of Copenhagen Board has therefore voted to accept an economic scenario, which will help secure the university's future during a time of government cutbacks.
By Carl Hagman
Globalisation funds, restoration plans, the Finance Act, administrative cutbacks, budget predictions and strategic planning. There have been quite a few issues thrown into the current, highly emotional debate concerning the future economy of Danish universities.
The University of Copenhagen Board has today voted to accept an economic scenario, which will help secure the university's future during a time of government cutbacks.
However, with the Danish government's proposed restoration plan one thing is certain - the University of Copenhagen will in a worst case scenario have to cut down expenses by up to 366 million kroner. That's how much the university's bottom line difference will be in 2013 compared to 2010, unless the government allocates more basis funds for the university in the upcoming years.
- "We know what funds are granted in the Finance Act and we know about the cutbacks in the government's restoration plan. However, we are very unsure as to which budget cuts will affect the university specifically, and it is uncertain how and when the globalisation funds will be allocated to the universities," says University of Copenhagen's Budget Manager Thomas Vind.
Four scenarios
The globalisation funds consist of a pool of approximately 2,4 billion, which the government can choose to distribute towards education and research. In a perfect world these funds would help reduce a significant portion of the predicted deficit in 2013. This would, according to Thomas Vind, make it possible for the university to accurately budget the future.
- "A university is quite different from other institutions, mainly because we provide educational programmes over a longer period of time. Our research is also long-term. That is why it is essential for us to know what will happen with the globalisation funds.
"These funds can be allocated as basis funds, which the university can freely dispose of, but they can also be earmarked for very specific research projects. Unfortunately, this is completely out of our hands at the moment, which makes it very difficult for us to plan the future. It is urgent that the politicians announce something more definite as soon as possible," explains Thomas Vind.
But the politicians have in fact been very reluctant to hand out any promises. Just last week Minister for Science, Technology and Innovation Charlotte Sahl-Madsen stated that the globalisation funds would indeed be made available to the universities. However, the announcement of how the money would be distributed could be held back as late as the fall of 2012.
With such uncertainty regarding the distribution of these vital funds, University Finance presented four possible future scenarios to the University Board earlier today (see figure 1). The Board has chosen to focus on scenarios B and C as the most realistic estimates of how much money the university will receive from the mentioned globalisation funds.
- "The more optimistic the scenario, the bigger risk there is that we will not receive the expected globalisation funds. In the two scenarios suggested by the Board, it is expected that the university must conduct gradual adjustments to our budget," Thomas Vind states, and he adds that the scenarios will be adapted accordingly, as soon as more concrete information is provided by the government.
Future still uncertain
The prediction is that the 2011 budget will balance, and this estimate includes all of the faculties. However, necessary adjustments - in the form of either budget cuts or increased earnings - have to be made if the university is to ensure a sustainable economy in the future.
- "We have to be prepared for some lean years ahead. How lean they will become is hard to tell, but there will already be initiatives made in 2011 as to how we can adjust the budget. It is similar to sitting in your car and hearing on the radio that there is a traffic jam ahead. You automatically start to slow down and you start searching for alternative routes. This is what the university will try to do," explains Thomas Vind.
How eventual budget cuts will unfold is still quite uncertain. The government has announced that there will be a focus on the universities' administrative costs. This will undoubtedly become a great challenge given that the University of Copenhagen just recently went through extensive administrative adjustments. Additionally, the VIP (academic staff) to TAP (technical and administrative staff) ratio has actually changed somewhat during the past five years (see figure 2).
- "It is important for us to get to work on those things that we ourselves can influence and control, for example increasing education and project income, and adjusting costs. Thereafter, we can only encourage the politicians to provide us with answers regarding the future distribution of the globalisation funds, and to do it now rather than later," concludes Thomas Vind.
Figure 1: Scenarios for the development of the University of Copenhagen’s fixed Finance Act contributions after reductions and new contributions – level of uncertainty medium to high.
Figure 2: Development of the number of academic staff (VIP) versus technical and administrative staff (TAP) from 2005-2009.