Introduction
In recent years, Hungarian higher education reform has focused on one basic objective: the shift from a reliance on central planning to a system characterized by more effective mechanisms of serving social (e.g., unemployment and a population with new skills and ways of thinking about the world) and economic needs (an emerging market economy). Expansion in student volume has been a priority in this effort.

Prior to 1989, Hungary's higher education system was small and elitist. Today, among European Economic Community (EEC) countries, Hungary's aggregate student population has experienced one of the largest expansions of the last decade. The number of full-time students has doubled, from 64,000 to more than 140,000, a figure representing only 16 percent of the 18-to-22 age group (as the system cannot admit even half of its applicants).

The growth of private higher education in Hungary is an important element in the effort to train students in fields now greatly in demand. Also, the private sector is expected to help achieve national targets for increased enrollments, but without a concomitant increase in state support.

Private-Sector Characteristics
Among the 33 nonstate higher education institutions, 5 universities and 23 colleges are church owned, and five colleges were established through private foundations. Despite the relatively small size of the nonstate higher education sector and some regulatory constraints on development, its enrollment has increased significantly during the last three to four years. The total number of students in nonstate higher education is around 25,000 at present, a number representing nearly 12 percent of total student enrollment. Considered alongside all nonstate higher education institutions, the increase in enrollment is highest among colleges established by foundations.

Church and foundation-run private schools have significantly different profiles--in degree of political influence and in organizational, academic, and financial strategies. For instance, church-owned institutions focus primarily on religious and theological training, rather than humanities, teacher training, or social work programs. Out of 28 church institutions, only 7 (2 universities, 2 theological academies, and 3 teacher training colleges) conduct nontheological training. The teacher training colleges train first through fourth grade primary school teachers and are financed entirely by the state. The 2 universities have arts and science faculties. One has a law faculty. To date, the diversification of programs at church-owned colleges and universities and the extension of their profiles into nonreligious programs have not been significant. This may partly be explained by their traditional charters and cautious strategies, but slow state accreditation and authorization processes are clearly also a factor. Compared with state institutions, church-owned universities and colleges have a much higher percentage of part-time faculty. Much of their teaching staff are drawn from faculty at state institutions, where, compared to the emerging and fragile private sector, teachers have had "stable," long-term appointments. Church-sponsored higher education institutions continuously seek and receive state support either through informal lobbying or through official state-church agreements. Their general strategy is to gain support equaling that of state higher education institutions.

Private institutions, supported through foundations, try to fulfill regional and community development functions. Their training programs have a strong focus on present and future professional labor market needs, for instance, computer literacy, managerial and business training, or foreign language skills. These fields also promise higher than average starting salaries. This is important in a country where the relative equity in salaries is long past. Private institutions seek equal recognition, but not necessarily equal support from public resources.

Hungary's 5 foundation colleges currently train 13,365 students, an amount greater than the 28 church schools combined. Graduates' employment opportunities are a high priority for foundation college leaders, and they pursue various strategies to enhance prospects for their students in the labor market. Foundation colleges are also characterized by higher student-teacher and student-staff ratios than is the case in state colleges.

Legal and Financial Environment
Nonstate higher education institutions are required to gain state recognition and approval from the parliament. In addition to the requirements state institutions must fulfill, nonstate institutions also have to show the existence of appropriate personnel, material, and financial capacities. All higher education institutions must be accredited at least once in every eight years. According to administrators of several private higher education institutions and some ministry officials, the procedure for gaining state recognition is quite long and bureaucratic. Within this environment, state institutions usually consider private institutions competitors for scarce resources, and, in the long term, decreasing student cohorts.

The government's 1995 Parliamentary Resolution on the Development of Higher Education declared a somewhat contradictory set of objectives concerning private higher education. The resolution called for neutrality between public and private sectors, and freedom to found institutions and run training programs. It also urged an increase in the role of the state in stimulating competition in the development of the academic marketplace. At the same time, however, the resolution called for overall institutional restructuring, with priorities given to larger, more integrated (public) institutions. This strategy may, even if indirectly, disfavor the establishment of new, perhaps smaller and specialized private institutions.

Neither foundation schools nor church-owned schools would have been able to initiate activities without significant initial support from a major sponsor. Most of the schools received buildings free of charge from municipalities. Operational costs in foundation schools are generally partly covered through foundations, tuition fees, and state support. Finances at church schools are less transparent, as support from the state comes partly through direct funds, and partly through churches that receive allocations from the state. Municipalities, however, are experiencing increasing difficulties in maintaining their own services. As a result, their participation in supporting and influencing private institutions is decreasing--a significant problem in cities where private colleges are the only higher education institutions. Further, there are no clear incentives for local businesses to invest or sponsor these schools, as their higher education sponsorship entitles them to only a limited tax deduction.

A substantial part of foundation school budgets is generated by tuition fees. Per semester tuition fees are autonomously determined by each school, the highest reaching about 200 percent of the average monthly salary. According to the 1996 Personal Income Tax Code, students or parents may deduct 30 percent of the amount state institutions charge as tuition from their taxable incomes, irrespective of whether tuition is paid in private or public schools. Private colleges do not pay taxes on tuition, but do on other revenues.

The 1997 white paper on higher education describes a coherent government development policy over the medium term (1997-2002). The paper assigns an important role to the development of private higher education, which should greatly contribute to an expansion of enrollments as well as competition in market-oriented fields of study. Nevertheless, only time will determine whether present or future governments can collect enough political leverage to implement these goals.