Wednesday, December 9, 2009

Budget Reform in Mexican Higher Education: Peril and Promise

A dominant theme of Mexican higher education in the 90´s and in the 21st century has been financial distress. Higher education faces problems throughout the world: universities are underfunded, rising worries about quality; student support is inadequate; the proportion of students from disadvantaged backgrounds is lamentably small (Barr, 2005). Also, the financing of universities in many countries is regressive since the money comes from general taxation but the major beneficiaries come from better-off backgrounds (Barr, 2005). Higher education finance is therefore salient to an extent that it is timidly addressed in many developing countries, because of its politically sensitive nature.

Around the world, a cause of higher education´s austerity is the increasing scarcity of public revenue (Johnstone, 1998), a function, in turn, of competition from several other societal needs. In political terms, tax funding leads to under-resourcing because higher education will always lose out to competing and politically more popular claims (Barr, 2003).

Within this context, a number of developed and developing countries have undertaken significant transformations of the financing of their tertiary educational systems. In most nations, the goals of such reforms have been: (1) to implement budgeting process based on performance indicators, and (2) to generate additional sources of revenue.

In the past eight years, the Mexican federal government has made important efforts to increase the national spending for public higher education institutions. In 2000, Congress enacted a law that requires the State to invest at least one per cent of the GDP in public higher education -currently federal investment reaches the 0.68 per cent of the GDP. Particularly, in the past three years Mexican Congress has increased the funding for higher education institutions by almost 15 per cent, amounting 4.5 billion dollars more, in comparison to 2006.

However, these fiscal efforts have not yet been accompanied by a deep financing reform in higher education. Still, year to year, the presidents and directors of higher education institutions go to Congress to lobby for extra resources. Every year, they argue, the very existence of their universities is in jeopardy if budget resources do not increase. In some cases this is true, but in some others such claim is just a political maneuver. At the end of the day, we cannot blame university leaders for this behavior; they are just reacting to the incentives in place.

The perverse incentive system is as follows: the Mexican Department of Finance prepares and presents a budget that is underestimated, knowing that public universities are going to ask for more. Aware of this, universities prepare their lobbying strategy well in advance during the year, distracting themselves from other central academic issues. The end result is usually a budget very close to the one originally planned by the Department of Finance, but after a fierce political battle, where many people get hurt -politically speaking of course.

Unfortunately, this perverse system of incentives only delays the deep reform that our higher education budget process urgently needs. There have been many interesting proposals on the table in the past few years, in order to correct the situation. Perhaps the most relevant is the implementation of multi-year budgets, designed for some special academic and research projects. This mechanism is already in use in some OECD countries, as well as in Brazil.

Negotiations will be hard in order to implement such a policy, however, it is worth it. Multi-year budgets can provide public higher education institutions with a very scarce resource in Mexico: financial certainty for long term planning.

The bad news is that any attempt to reform the higher education budget process that does not include a series of reforms within the higher education institutions is incomplete. The federal budget process needs to change, yes; but we also need to improve the way public universities generate their own sources of revenue. So far, only roughly 15% of resources for public higher education come from private sources, compared to countries such as Chile (84%), Korea (75%), and the United States (65%).

In short, if we really want to develop a world-class higher education system in Mexico, we cannot solely rely on fiscal revenue. As observed by Barr (2003), around the world higher education will always lose to other more pressing social needs in the competition for fiscal revenues. Hence, attempting to develop a system of great universities solely based on public revenue is building on shaky grounds.


Barr, N. (2005). Financing higher education. Finance and Development, 42(2). Retrieved from

Barr, N. (2003). Financing higher education: Comparing the options. United Kingdom: London School of Economics and Political Science.

Johstone, B. (1998). The financing and management of higher education: A status report on worldwide reforms. Washington D.C.: The World Bank.


  1. En la escuela les enseño a mis alumnos a citar.... poner la referencia.... de lo contrario se llama plagio

  2. Totalmente de acuerdo Dr. Villagomez, asumo que te refieres a la cita de Nick Barr (2005). Sin duda hace falta la referencia, haré el ajuste. Por cierto, te recomiendo el capítulo sobre plagio del libro de Becker & Posner (2009). Saludos. cim

    Becker G. S., & Posner, R. A. (2009). Uncommon sense: Economic insights, from marriage to terrorism. The University of Chicago Press.