Generation 40s – 四十世代

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More competition for funding will drive excellence in universities, whether in the US or Hong Kong

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South China Morning Post
Comment›Insight & Opinion
2015-06-22

Sun Kwok

Sun Kwok says the more competitive funding system for top US universities offers lessons for Hong Kong

In recent weeks, there has been quite a lot of discussion about university autonomy in Hong Kong. People have raised concerns about political interference in university affairs and questioned whether the chief executive should automatically be the chancellor of local universities. Critics have accused some professors of being too comfortable and neglecting their jobs. Some have argued that universities here would be better off as private rather than public institutions in order to free themselves from government intervention or be open to competitive forces.

All major universities in Hong Kong are publicly funded. In comparison, many top universities in the US are private and are considered among the best in the world. How do the US private universities manage to perform so well?

Some may attribute their success to private donations and endowments. Harvard has a US$36 billion endowment, Yale US$24 billion, Stanford US$21 billion, and MIT US$12 billion. These universities also charge very high tuition fees. Annual tuition, not including room and board, can cost as much as US$50,000 per year.

Are these high tuition fees and endowments enough to run the universities? If we look at MIT’s 2014 operating revenues, out of a total income of US$3.12 billion, 10 per cent comes from tuition fees, 20 per cent from investment returns, and 48 per cent from research funds (mostly federal). For Stanford University, 16 per cent of its income comes from student fees, 25 per cent from endowment and investment income, and 26 per cent from sponsored research. Federal dollars therefore represent a major source of income for many top private universities.

The federal government also plays a large role in public universities. The University of California system has a total budget of US$27 billion. About 11 per cent comes from the state of California, 12 per cent comes from student fees, and 15 per cent comes from sponsored research. So the financial pictures of private and public universities are not that different.

According to the US constitution, education is under the jurisdiction of the states, not the federal government. Unlike Britain, China and Japan, where the central government plays a key role in higher education, the US federal government is in a peculiar situation of not being able to do so.

In the late 1950s, when the US faced strong competition from the Soviet Union, the government realised that special measures were necessary. Federal agencies began to inject huge amounts of money to support universities. Such support came in the form of research grants and contracts. Funds flowed from the departments of defence, energy, education and commerce; the Environmental Protection Agency; Nasa; the National Institutes of Health; and the National Science Foundation.

When I was a graduate student in astronomy at the University of Minnesota, the US Navy and US Air Force paid my stipend. Later, when I was a visiting professor at the University of Colorado, my salary was paid by the Department of Commerce.

Not only does the US federal government fund research projects, it erects buildings and maintains large-scale infrastructure for universities. The Jet Propulsion Laboratory at the California Institute of Technology, for example, is paid for by Nasa at a cost of about US$1.7 billion per year.

Of the top 20 universities in the US that received the most federal funds in 2010, a significant fraction (up to 50 per cent) of those funds is in the form of overheads, which helps pay the operational cost of the universities. This is how the US government subsidises universities. Among the top 20 recipients of government funds, 10 are private universities, including four in the top 10 – Johns Hopkins (No1, received US$1.7 billion in 2010), University of Pennsylvania (4), Stanford (7) and Columbia (8). For many of these institutions, federal dollars represent a large share of their income. So, strictly speaking, Harvard (15) and Yale (14) are not private universities, but national universities like the University of Tokyo, Peking University, Moscow State University, National Seoul University, and National University of Singapore.

The distinctive feature of the US model is not whether universities are government funded or not, but how they are funded. The funding mechanism is highly competitive. The federal government’s support is not tied to any specific university but is open for bidding by all. The universities are under tremendous pressure to recruit the best personnel in order to compete successfully for these funds.

Let us go back to the local scene. Every year, the University of Hong Kong receives HK$3.5 billion from the University Grants Council to run our teaching programmes and another HK$200 million from the Research Grants Council for research support. An additional HK$887 million comes in the form of tuition fees.

Just for reference, the 101st ranked Washington State University in the US gets US$105 million from the federal government (which is about four times the support HKU gets from the Research Grants Council). We can see that HKU relies heavily on the University Grants Council income. If it were to go private, the income from research grants would have to greatly increase to compensate.

This would be too drastic a change for anyone to contemplate. However, some small adjustments may be possible. For example, the University Grants Council can shift some funding to the Research Grants Council to fund professor salaries.

In the US, professors are paid a nine-month salary, and each faculty member has to raise the rest from competitive grants. This system puts a great deal of pressure on individuals to perform. Professors who do not generate enough overheads for their university will not be promoted or receive salary rises, and they may even be pressured to quit. A bit of market discipline can do wonders.

At present, the University Grants Council allocates funding to the universities primarily according to student numbers. Tying funding to research performance would give more money to stronger research universities, allowing them to better compete with research universities in other countries.

Professor Sun Kwok is the dean of science of the University of Hong Kong

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