Every year the Cabinet forwards an overview of the education sector’s financial condition to the Dutch Lower House. A document called De Financiële Staat van het Onderwijs (The Financial Condition of the Education Sector) lists the reserves held and expenditures made by all Dutch education institutions, ranging from primary schools to universities.
Kept in reserve
“We are having a hard time explaining increased levels of reserves in the education sector at a time when society is calling for more permanent funding to be awarded to education institutions,” Arie Slob and Ingrid van Engelshoven (the Ministers for Primary/Secondary Education and Tertiary Education, respectively) wrote in their response to the document. “We are concerned about the fact that funds designated to be spent on degree programmes are being kept in reserve.”
They commissioned the Oberon research agency to investigate how these things happen. Some causes were already known. For instance, politicians sometimes allocate a great deal of money to a particular cause right before the end of a year, which money can then not be spent in the same calendar year, and ends up staying in the universities’ coffers for a bit.
Furthermore, the government is unpredictable. For example, education institutions are sometimes awarded additional funding to counteract inflation, but sometimes they aren’t, so can they count on these payments or not? Also, try telling faculties specialising in the humanities and social science that they must spend the money they are sitting on when they know they are about to see their budgets slashed. After all, the Ministry of Education has announced that it will award an additional €100 million to STEM programmes in the next few years, at the expense of the humanities and social sciences.
However, Oberon has identified another reason why the universities are sitting on so much money: optimism. You might not expect that answer, because you’d think that optimists are likely to spend a lot of money and thus end up in the red, but that is not how things work.
Sometimes universities and departments will include expensive plans in their budgets, only to overestimate the speed with which they will be able to implement those plans. For instance, they may not be able to get a project off the ground as soon as they expect, or they may have difficulty finding the right people to implement the project. As a result, the implementation of the project is delayed, and the money allocated to it is added to the next year’s budget.
“The education institutions believe that such optimistic scheduling is undesirable, and are therefore increasingly raising awareness of it during the budgeting process,” Oberon’s researchers stated in their report.
Another practical problem identified by Oberon is the fact that the people in charge of the universities’ financial condition (in particular, their supervisory boards and faculty directors) tend not to be in favour of budget deficits. “Faculties are very concerned about the fact that all the projects they are going to invest in may be halted in just a few years,” one of the interviewees told Oberon. Because obviously, education institutions won’t be allowed to have budget deficits for ever.
In recent years, a lot of money has remained on the shelf at Erasmus University. A deficit of 27 million was therefore deliberately budgeted in the 2020 budget.