Abstract:
The article analyses revenue diversification in public higher education institutions of Latvia. Within the framework of the research, income diversification is understood as the source of income of the institution. Income diversification is studied specifically for public universities, academies and universities of applied science because of two reasons:
- Public institutions have a dual status – they are both higher education institutions and scientific institutions; therefore, in most cases their founder (state) grants funding from the state budget for both the study process and the scientific work.
- Public institutions have a dual funding income structure – they receive both a grant from the state budget and simultaneously compete in the common higher education market, attracting private funds from the tuition fee.
It is important to ensure diversification of funding sources specifically in public higher education institutions because it provides more autonomy in budget management on the part of higher education institution as well as ensures the improvement of operating efficiency, enhancement of capacity for resource generation.
On average Latvian public higher education institutions consisted of state funding for studies (40%), tuition fees (21%), research funding (22%) and other revenue. For example, some public institutions receive 70% of their revenue from general governmental subsidy but in other instances, this proportion is only 20%. This proportion has not always been like that – in past decades the proportion of state funding for studies has been significantly decreased; however, since 2004 the proportion of international funding, mostly from the EU funds, has been increased. There is a significant decrease in the number of students in Latvia, and especially there is a significant decrease in tuition-fee paying students. Therefore, it affects most of the higher education institutions and it clearly has impact on income resources of the institutions. Sustainability of the higher education institutions depends on their ability to diversify their revenues and manage their budgets effectively in order to achieve institutional goals. Institutions that depend on one financial source experience greater consequences during a crisis, and the existence of the institution may be at risk. This is shown by the data collected in 2017 on the financial sources of higher education institutions in Latvia, where institutions with a lower level of income diversification were subjected to liquidation or merger of institutions in the coming years.
