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Performance-Based Funding of Universities: The Italian Experience
Tommaso Agasisti
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 relevant in Italy, where traditionally universities have held little autonomy 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 establishing 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 since it did not encourage 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 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%) 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 performance-based model for many years, trying several methodologies for measuring universities' activities and involving groups of experts at many universities. The committee's suggestions were seriously considered both by academic communities and by politicians.
The New Model for Financing Universities 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 PhD students) with the ability to obtain research-targeted financial resources from public and private companies and organizations and the rate of success in winning research funds from the ministry.
Policy Implications A few reflections can be drawn from the Italian experience, perhaps with international relevance, in terms of a possible agenda to be followed to develop a good performance-based system. First, the amount of resources allocated through the formula must be quite high, while in Italy it is definitely too low, because the formula is used for allocating only a part of the total public budget. In 2006 and 2007, about 99.5 percent of the budget was allocated according to traditional procedures and only 0.5 percent according to the formula. To improve the effects of incentives, the formula must be rapidly used for distributing at least 10 to 15 percent of the public budget. Second, the indicators for research must be as increasingly accurate as possible, including measures of quality. In Italy the indicators adopted are still quite rough (e.g., publication counts are not considered at all). The difficulty in adopting accurate measures is well known, but if one of the objectives remains to improve quantitatively and qualitatively the research relevance of Italian universities, adequate incentives must be established. The recent initiatives of the Italian National Evaluation Committee for a qualitative assessment of research products (publications, patents, etc.) seem a feasible way for improving the data available. Last but not least, the issue of differentiation must be considered. Giving the same incentives to all universities mean to accepting the uniformity of their activities. Based on the formula, each university should improve the quantity and the quality of its teaching and research to obtain a good score. Instead, internationally, the diversity of universities' offerings and their differentiation seem to be a positive trend, to improve efficiency and effectiveness of higher education performance as a whole—especially because the demand for higher education is increasingly differentiated. Perhaps, a possible option to face this challenge would be to separate research and teaching funds and to distribute them according to different formulas. Examining these three issues can lead to a reconsideration of some important characteristics of the present performance-based formula in the Italian university system and can contribute to a wider international debate about the fundamental topic of better models for distributing public resources among universities. [Online] Available: http://www.bc.edu/bc_org/avp/soe/cihe/newsletter/Number51/p21_Agasisti.htm
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