Pre-investments: a recipe for failure

Autumn 2020. Dozens of students queue up in front of Groningen's university library, and the queue is getting so long so fast that it winges its way from the Broerstraat street towards Oude Kijk in ‘t Jatstraat. When the library was renovated in 2017, the number of places to study was increased to 2,200. Three years later, students have to queue up on the street again because of the coronavirus restrictions. Each student stands at a safe distance of one and a half metres from others.

“Students were quite satisfied with that renovation”, says student Jasper Been as we stand on the steps of the Academy building, gazing at the library across the street. “The building dates from the eighties and had become outdated. It was also deteriorated quite badly. In addition, there was a shortage of study places. Students had to fight for a spot every exam period”.

Therefore, Been concludes, the problem isn’t with the building’s facelift, but rather with the misleading information provided by the board of the University of Groningen about the financing for the renovation works. This was demonstrated by the Democratische Academie Groningen (DAG), the student movement founded by Been and a number of like-minded people back in 2017.

The university claims that it set aside an additional sum of 13 million euros to increase the number of study places in the library, to compensate students who were no longer eligible for the basic grant as of 2015. However, research carried out by Been, in collaboration with his DAG colleagues Bram Omvlee and Hidde Luchtenbelt, has shown that the university's board didn’t allocate a single euro for the first generation of loan system students.

Since 2015, students who can’t rely on a financial contribution from their parents are forced to accumulate significant debts to finance their studies. But they will have access to education of a higher quality than their predecessors who were still entitled to a basic grant. At least that was the promise made by the then Minister of Education Jet Bussemaker (PvdA), back in 2015, in her Strategic Agenda titled "The value of knowledge". The hundreds of millions that the abolition of the basic student grant would free up each year were to be used in full to improve education.

The money would allow higher education institutions to recruit four thousand extra teachers, tutors and coaches, which would lead to more intensive education, provided on a smaller scale. That means less lectures for large groups, more practical sessions, more individual feedback and personal supervision. The introduction of the loan system was not supposed to be a blunt spending cut, but rather a targeted quality impulse.

Large reserves
There is just one small problem: the bursary millions only became available in small bits as of 2018, which means that the first generation of loan system students would not benefit from the quality impulse at all. That is why higher education institutions agreed with the minister to invest 600 million euros from their own pockets between 2015 and 2017. After all, the money was available: in 2012, 2013 and 2014, both universities and universities of applied sciences accumulated 700 million euros in reserves.

600 million euros sounds like a lot of money, but in reality it’s only 280 euros per student annually -- just a fraction of the amount the first generation of loan system students would miss out on. In 2015, students who still lived with their parents received a basic grant of 1.233,24 euros and students living away from home received 3.433,80 euros. 

"A delusion from politicians"

“A delusion from politicians”, Paul Rüpp angrily summarises five years later. The opinion of the Board President of the Avans University of Applied Sciences is shared by many administrators at universities and universities of applied sciences. The promise to free up 600 million euros was necessary to convince the House of Representatives to abolish the grant and secure the its millions for higher education. “The minister simply demanded from us that we would prefinance the promises she made to students”, Rüpp vents.

The board president vividly remembers the mood among politicians. “The abolition of the basic grant was a painful issue in the House of Representatives, because 'oh my god, these students will go out and cast their votes in the upcoming election. We need to compensate them one way or another'.” That's why the pre-investments had to “yield results the next day already, so that students who were no longer eligible for a basic grant would immediately see the quality of education improving”, Rüpp continues. “Impossible to implement in practice, because you can’t improve education overnight.”

Minister Bussemaker’s promise that the millions from the basic grant would also allow higher education institutions to recruit four thousand extra teachers didn’t go down well with administrators at all. “It’s not that easy to recruit new teachers. You need a plan first, you need to know how and where you want to use them. Setting up a plan like that takes time”.

No firm commitments
The associations representing universities and universities of applied sciences tried to do damage control by formulating the promises concerning pre-investments in the vaguest possible terms. The goal was to prevent firm commitments about the recruitment of extra teachers or more contact hours to which individual institutions could be held accountable. 

VSNU spoke of investing in "higher-quality, more intensive education and facilities that are in line with a higher education that is internationally competitive", while VH promised "more supervision and improved monitoring, more teachers and an optimal infrastructure". The money should come from their reserves, said the VH, while the VSNU believed that the universities could also free up money by making "rearrangements within their budgets".

In the interactive map below (in Dutch), you can see how much each institution spent with pre-investments. Just type the name of the university in the field on the left.

New Master's tracks
The University of Groningen claims to have freed up a total sum of 18 million euros for pre-investments, which amounts to 207 euros per student annually. Of those 18 million, five million were intended for the development of new Master’s tracks, which had originally been budgeted at 30 million euros. Thanks to the pre-investments, the budget was raised to 35 million euros, according to the university board.

The rest of the money supposedly went to the renovation of the university library. Not the kind of investment that immediately comes to mind when you think about the improvement of education. But the quality of the learning environment has an effect on learning results, which is why intitutions counted "modernizing the infrastructure" among the ways to improve education.

Old wine in new bottles
Jasper Been represented DAG in the university council in the academic year 2017/2018, and therefore had access to all policy documents about pre-investments. He ploughed through all documents from the period 2014/15 and discovered that the University of Groningen had set aside 35 million euros for the development of new Master’s tracks in March 2014 already -- months before national agreements about pre-investments were made. The renovation plan for the university library – including the 2,200 study places – was even drawn up in January 2014.

Therefore, the University of Groningen apparently presented old plans as new pre-investments, the DAG researchers concluded in their web publication Hoe de RUG haar beloftes brak en jij geen beter onderwijs kreeg ("How the University of Groningen broke its promises and you didn’t get better education"). They state that the university failed to do anything extra for the first generation of loan system students.

With the minister’s approval
Been decided to confront the executive board with these findings during an university council meeting in March 2018. “And we were allowed to! We had the minister’s approval”, says Executive Board President Sibrand Poppema. He claims that the former minister of education said, in a verbal consultation with the VSNU, of which Poppema was vice-president, that previously made expenditure plans could also be regarded as pre-investments.

“You’re also allowed to include the things that you already do to improve the quality of education. You can count buildings, you can count anything and everything”, the minister supposedly said. “I remember very well that we were in the meeting and we said: well, if that’s how things stand, then we have no problems agreeing to those pre-investments”.

What about Utrecht?
In its 2015 budget, Utrecht University opted to invest more money in small-scale education. The university allocated six million euros to that purpose in 2015, and from 2016 onwards this investment would be increased by 10 million annually. The educational faculties would benefit the most from this measure, the university claimed. The interpretation about what "small-scale education" meant was left to the faculties themselves to make. One faculty would use it to facilitate smaller working groups, while another one could opt for more personal guidance. Each faculty should demonstrate what the money was used for and how education would have become smaller from those initiatives.

In practice, that plan did not go well. On the one hand, faculties were too cautious about filling vacancies, which caused universities to have more money left at the end of the year than they first expected. On the other hand, some faculties were faced with declining student numbers and,  therefore, less money. The Faculty of Humanities, for example, had to cut back costs considerably, including those allocated to education. The extra money may have meant less cutbacks, but students noticed little to no improvement in education.

New sport hall
Other universities used similarly broad definitions for their pre-investments. In 2015, the University of Twente listed 1.3 million euros in expenses for its new Design Lab as a pre-investment, even though that laboratory had already been officially launched by Minister Bussemaker in the previous year. Wageningen spent 5 million euros – at the students' request – on a sports hall that also functions as an exam hall. VU Amsterdam claims that the 27 million euros it spent on the new building for its science departments is in fact a pre-investment, even though that building didn’t open its doors until February 2020. By that time, the first loan system students had already obtained their Bachelor’s diploma.

Even though the institutions weren’t exactly strapped for cash, they refused to put down in writing any promises about the level of pre-investments at individual institutions. They were, once again, guided by the fear of being held accountable. But Minister Bussemaker was worried about the large reserves. Higher education institutions had been hoarding their money and therefore saw their capital grow from 1.1 to 1.7 billion euros in the period between 2009 and 2014. In universities alone, capital grew from 2.8 to 3.4 billion euros. Bussemaker was afraid that political support for pumping back the millions from the basic grant into higher education would dissipate if the hoarding didn’t stop. During closed meetings with administrators and supervisors, she urged them to stop setting aside money for prestigious construction projects and to spend it on education instead. Use the accumulated reserves as pre-investments: that was her message.

At first sight, it appears that the thirteen universities and the twelve major universities of applied sciences we investigated listened to the minister’s appeal. Their annual reports show that they collectively earmarked 642 million euros for pre-investments. That's 343 euros per student on average, almost 60 euros more than promised.

The variation in pre-investments sums, however, is inexplicably large. The VU was by far the most generous institution, with 1,132 euros per student, whereas students at the University of Amsterdam came off worst, with 109 euros. Avans leads the universities of applied sciences with 850 euros per student, while the HAN University of Applied Sciences in Arnhem and Nijmegen finishes last with 85 euros per student.

These significant differences have nothing to do with the level of reserves. The Amsterdam University of Applied Sciences has been at the bottom of the ranking when it comes to equity position for several decades, but it nevertheless claims to have freed up 78.7 million euros as pre-investments, which amounts to 570 euro per student annually.

Deep pockets, small investments
Even though the University of Groningen had the best equity position and the deepest pockets by the end of 2014 – it had a total of 73 million euros left in the period between 2012 and 2014 – its executive board decided to earmark only 18 million euros for the improvement of education for loan system students, which amounts to 207 euros per student annually.

Practically none of the institutions – with a few exceptions – explain in their annual reports how they arrived at those pre-investment sums. The millions appear to have been chosen at random, not to mention they also change over the years. In 2015, the University of Amsterdam, for example, claimed to have no money for pre-investments as their priority was keeping staff employed at the shrinking humanities department. A year later, however, the records suddenly show a pre-investment of 4.4 million euros that was supposedly spent in 2015.

The word pre-investment doesn’t even appear in HAN's annual reports. After extensive research, it became clear the university of applied sciences used 8.6 million euros from pre-investment money to pay for Student Performance Coaching.

Court of Audit conducts extensive study
In 2018, the Netherlands Court of Audit, which investigated whether the institutions delivered on their promises, reached the conclusion that it is unlikely that they invested the extra 600 million euros they promised. Only one third of the 860 million euros presented to the Court of Audit as pre-investments was actually spent according to the original intentions, the researchers said. A sum of 280 million euros was recognized by researchers as actual expenditure on students who started their studies without a basic grant in the period from 2015 to 2017.

Thirty percent of the presented pre-investments did not meet this requirement, according to the Court of Audit. As for the remaining 330 million euros, the Court of Audit cannot determine where the money came from and what it was spent on.

The higher education institutions responded furiously. They claimed that the Court of Audit used its own definition of pre-investment, which didn’t correspond with the agreements made with the minister. Therefore, its research wrongfully rejected many pre-investments. It can’t be determined whether the Court of Audit have indeed gone about their work unreasonably, since the sub-reports about the individual institutions remain confidential until this day. Additionally, the members of co-determination bodies who were allowed access to these reports are bound to confidentiality clauses.

Growing reserves
Our research shows that it is unlikely that universities have touched their own reserves to make pre-investments. Collectively, they had 303 million euros to spare from 2015 until 2017. Their reserves didn’t shrink -- instead, they grew.

Universities of applied sciences, on the other hand, took the minister's encouragements to draw from their reserves more seriously. In the Autumn of 2014, when they realised that they would once again have tens of millions of euros left unused by the end of the fiscal year, a number of universities of applied sciences announced their intention to use their hoarded millions to appoint hundreds of extra teachers.

The results prove it. The twelve universities of applied sciences we investigated went deep in the red between 2015 and 2017.  In 2016, all twelve of them closed the fiscal year with a deficit. Collectively, the ate into their reserves for a total sum of 84 million euros over a three-year period.

Behind the scenes
The fact that the universities of applied sciences drew from their reserves had already been confirmed by the Court of Audit. To find out why students barely noticed that financial injection, we need to take a look behind the scenes. Take The Hague University of Applied Sciences, for example. In 2016, the chair of the Executive Board, Leonard Geluk, announced in an interview with newspaper AD/Haagsche Courant that his institution intended to invest 40 million euros in the recruitment of hundreds of new teachers over the next four years. The university of applied sciences drew from its reserves to carry that plan out: a deficit of six million euros deficit was budgeted for 2016, which drew compliments from the minister of education. She said that The Hague University of Applied Sciences set the right example by investing in teachers instead of measures to increase the number of students.

One year later, however, the "Quality & Work Pressure Policy" (as the pre-investments are referred to by The Hague University of Applied Sciences) suffered a serious blow after it turned out that the 2016 deficit was 11.3 million euros instead of six million. The Executive Board then decided, just before the start of the summer holidays, not to extend all its 350 temporary contracts. “As a result, the teachers who had been recently hired suddenly had to leave again”, recollects Mathieu Heemelaar, who was the chair of the University council at the time. But the financial problems weren’t caused by the pre-investments. “The institution was financially out of control, all departments went seriously over budget”.

Plugging the shortfalls
“The department directors simply wanted a bigger budget to plug the shortfalls”, Heemelaar explains. “Those hundred teachers never materialized, the personnel numbers prove it. That promise wasn’t delivered on. What it basically comes down to is that the departments got a few million euros extra, which I’m sure were used sensibly. But how the money was spent exactly, is something that can no longer be determined. The Court of Audit came to the same conclusion”.

The annual reports indeed only show the "extra financial means made available to the departments to lift the quality of education to a higher level and to reduce work pressure": five million euros in 2015, 10 million in 2016 and 11 million in 2017. No information is provided about how the money was spent. “Sad,” Heemelaar concludes. “We urged for earmarks, because otherwise you can’t demonstrate the validity of your choices. You also need to be able to explain to students what happened with the money from the basic grant”.

With the collaboration of Altan Erdogan, Laura ter Steege, and Henk Strikkers.

This is the third in a series of investigative stories about the basic student grant, made possible by the Stimulation Fund for Journalism, as well as several editorial boards at universities and universities of applied sciences in the Netherlands. Previously in this series:

• How the basic student grant was abolished
• How the millions from the basic student grant evaporated in five years