How should universities be funded?

The funding of universities consists of governmental core funding and external funding. Most of the external funding also comes from public sources. In 2017, 56% of the expenses of the University of Helsinki were covered with core funding. The largest external funder was the Academy of Finland, whose competitive funding accounted for 40% of the University’s external funding.

Due to cuts to governmental funding, the percentage of core funding in the overall budgets of universities has been on the decline since 2010. Correspondingly, the percentage of competitive external funding has increased. Even though external funding is increasing, core funding must not be ignored, for several reasons.

If the balance tips too much in the direction of competitive funding, funders may gain an undue amount of power over the strategies of Finnish universities. As the amount of competitive funding increases, universities will focus their activities on areas where funding is forthcoming. In such a case, the remaining core funding will also end up supporting the application processes for external funding via self-financing shares and administrative work hours spent on the applications.

Cuts to core funding are effectively cuts to teaching resources, as competitive funding is typically intended for research. It is impossible to increase the quality of teaching if teaching resources are being decreased. One way to increase quality would be to enable more intense teacher–student relations and increase interaction. This cannot be replaced by digital tools.

The University of Helsinki has the lowest amount of money relative to its staff numbers among the top eight Nordic universities. We are also near the bottom of the list when it comes to the amount of teaching and research staff. The lack of resources will inevitably have an impact on how attractive the University is seen as an employer.

This means that we might invest less in our expert staff than others, but also that we are currently operating extremely cost-effectively in comparison with similar institutions. For example, among Nordic universities, we are second only to the University of Copenhagen in terms of the ERC funding granted to top researchers by the European Research Council. It is believed that the high percentage of core funding is the main reason why Denmark produces research at a level higher than the Nordic average (Öquist & Benner, 2012).

Competition does not automatically improve the quality of research. According to Otto Auranen’s dissertation (2014), the countries that have been able to improve the level of their research have been those with less funding competition. Such countries include the Netherlands, Sweden and Germany.

Robust core funding enables long-term research work, freeing researchers to take risks and explore new research directions. External project funding typically provides fixed-term contracts, meaning that researchers are compelled to focus on their short-term goals and career security.

As the significance of new ear-marked funding instruments increases, funding applications will require an increasing amount of work hours, taking staff resources away from research and teaching. Nevertheless, more than 80% of applicants do not receive funding from sources such as the Academy of Finland. Competitive Finnish funding requires no new funding instruments. Instead, the Academy of Finland’s researcher- and science-based unallocated research funding should be increased. At the moment, this form of funding has decreased by approximately €30 million, concurrent with cuts to the governmental funding of universities. Robust core funding and use of the Academy of Finland’s existing funding channels would be the best starting point for top research, to benefit Finland and the world.