State's new plan to pull public universities out of choking debts

Kisii University Masters Degree graduands toss their hats to the air during their graduation ceremony on December 14, 2022. [Sammy Omingo, Standard]

The government has come up with a plan to settle more than Sh60 billion owed to public universities with the first step involving phasing out of the current funding model that has been in existence for more than 30 years.

Concerned with the ever-increasing debt, the government is proposing measures that will not only reduce the debt that is choking universities but also make them financially sound.

As late as June of this year, the debt, which is growing by about Sh500 million each month, stood at Sh60.2 billion.

To save the institutions, authorities have outlined a raft of measures among them a change in funding formula, adoption of renewable energy to cut costs on electricity bills which account for the biggest expenditure, reserving 30 per cent of government consultancy services to universities, commercialising university research and entering into private-public partnerships to improve on infrastructure.

Change in funding is touted to be the remedy to chronic financial woes in most public universities. State technocrats on Friday painted a gloomy picture of how the current funding model drove universities into debt.

The model entails the government paying 80 per cent of student fees admitted under government sponsorship while students would use a student loan issued by the Higher Loans Board (Helb) and direct fees paid by a parent or guardian to clear the remaining 20 per cent.

This model is commonly referred to as the Differentiated Unit Cost (DUC). However, it is emerging that both the government and the students have not been paying the expected amount.

For the government, explains University Fund Chief Executive Geoffrey Monari, inadequate cash is allocated to pay for the government-sponsored students despite the number of students growing rapidly.

This has in turn compromised the initial plan for the government to cover the 80 per cent tuition fees for students admitted under the government-sponsored programme.

Higher Education Loans Board CEO Charles Ringera (right) chats with Kenya School of Tvet Chief Principal Dr Edwin Tarno after meeting with President William Ruto and University Vice Chancellors over University funding at State House, Nairobi on May 3, 2023. [Boniface Okendo, Standard]

Over the past few years, the government has failed to keep its side of the bargain. For instance, during the 2019-2020 financial year (FY), the government paid 61 per cent while in the FY 2020-2021, government-sponsored students received 54 per cent.

The situation kept worsening with the amount further decreasing to 50 per cent in the 2021-22 financial year, and by FY 2022-2023, the amount was a mere 48 per cent.

Assuming that students pursuing medicine are supposed to pay Sh720,000 each, under the DUC, the government is obliged to pay Sh576,000 for each student studying the programme, but as of last year, the institutions only got a mere Sh345,000 for each student pursuing medicine translating to 48 per cent of the total amount the government was supposed to give.

On the other hand, parents and Helb were expected to raise the remaining Sh144,000 but they only paid Sh16,000. “You can actually see how we got into the mess we have as a country, because of underfundings. Households have not been supporting at the rate which they were supposed to support and the government is not doing the same,” Monari said.

 Poor training

Helb Chief Executive Charles Ringera says the decline in government funding resulted in a decline in quality education thus leading to poor training and inadequately prepared graduates to take up roles in the job market.

“When you give 48 per cent of the total amount expected, what kind of graduate do you expect the universities to produce? That is where the term half-baked graduates came from,” Ringera said on Friday in Naivasha.

He spoke during a media sensitisation workshop on the new funding formula. The new funding formula takes effect this September and will phase out the older model progressively.

This means, the model will only be used to fund the new students to be admitted in September while those in the second year and above will still be funded under the old model. Monari indicated that the government has set aside Sh34.1 billion for DUC for continuing students.

Shockingly, this amount will provide only 40 per cent of the total amount that the government is expected to provide under that model, meaning the continuing students and universities will have to continue grappling with the funding problems. “This year, if we had continued funding all students under the model we would be funding the students at an average of 35 per cent,” said Monari.

He reveals that further simulation showed that by 2028, the government could have been funding students at 20 per cent; thus the need to review the funding model

The ripple effects, Monari explained, sank universities into debt as they were unable to pay salaries and statutory deductions. They also failed to remit pensions for their staff. “This resulted in underfunding leading to poor infrastructure, some universities pay lecturers at 60 per cent, universities struggled to provide quality education thus students were ill-prepared for the job market,” he said.

According to the University Fund boss, the new funding model will fund new entrants at the market rate charged by universities, which will be facilitated by the Sh19.6 billion allocation provided in June by the exchequer.

That means, for the first time, the universities will get funding for the full amount they charge for a programme. Under the new formula, the government will fund students through scholarships and loans.

Students’ neediness has been classified into four –  the vulnerable which represents the poorest students, and the extremely needy who come second in the level of need.

 Loans and scholarships

These two categories will benefit from 100 per cent of government support with scholarships accounting for the bigger chunk of the support and a minimal loan to be paid back once they graduate.

The last two categories include needy and less needy. They will get 93 per cent of government funding in loans and scholarships. Their parents will be required to pay seven per cent of the tuition fees.

To support the student loans, the government in June increased allocation to Helb from Sh15.8 billion to Sh30.3 billion. The model, Monari argues, is more sustainable and will ensure universities get the right funding to provide quality education and meet other overhead costs.

He touts the new model as ingenious in promoting equity by giving bigger support to the neediest students as opposed to the current model, which supported all students equally.

“What we were doing before is equality where every student got the same funding whether they wanted it or not but the current model promotes equity because we support the neediest more who otherwise would not be able to attend higher education,” explained Monari.

However, this alone will not be enough to tackle the current debt according to the University Fund boss. “We are looking at diversifying the revenue streams in universities, from a single revenue stream from grants to government-sponsored students and it was becoming very difficult because vice-chancellors were always lobbying to be supported using more money,” he said.

Other reforms

The University Fund proposes that higher institutions of learning will be required to enter into public-private partnerships to improve their infrastructure. For example, Monari says the institutions would need to use such a model in the construction of hostels for their students.

A popular model, Build-Operate-Transfer, has been suggested for this project, where the university provides land for a private investor to build a hostel facility and they will be allowed to operate it for the agreed number of years to recoup their investments and then transfer it to the university.

Another proposal is for universities to cut down on sourcing electricity from Kenya Power and instead build capacity to generate their own power.

Power cost, Monari indicates, has been one of the major debt accumulators in universities; thus suggests investment into renewable energy such as solar power to be utilised by the institutions.

Cutting down on this expense, Monari says will not only save millions from universities but also could be turned into an income-generating activity.

“Strathmore University is a good example. They not only generate their own power but if you look at the list of independent power suppliers to the KPLC, you will find that they are there,” Monari said.

An additional area the universities have been encouraged to tap into is consultancy services. This, Monari suggests, will be done by academic staff of various institutions as they are equipped to provide the expertise required in various sectors.

Monari noted that they are lobbying government institutions to make exclusive reservations for consultancy services to public universities. This way, State agencies will be compelled to use universities when they seek consultancy services.

“We are lobbying so that universities will be able to provide consultancy at maybe 30 per cent of government services,” he revealed. Moreover, universities will be required to commercialise their research projects to attract funding.