Budget deals become ‘curse’ as inflation opens €500 million hole

Austrian universities cheered the predictable three-year budgets they agreed with the government in October 2020, but the ravages of inflation have driven them back to the negotiating table.

The Austrian University Conference (Uniko) has estimated that public universities will face a €500 million (£423 million) budget shortfall from 2022-24, driven chiefly by actual and anticipated payroll inflation. 

“Having a secure university budget for three years quickly turns into a curse when inflation is rising,” Oliver Vitouch, Uniko’s vice-president, told Times Higher Education. 

Universities THE spoke to were staring into similar-sized holes. The University of Innsbruck is down €20 million and expects to be short another €20 million over the next two years as annual collective labour agreements lift staff salaries. 

“We are now in a difficult position because if we will not get additional money from the ministry of science, if they do not want to fill the gap, then we have to start cutting activities,” said Tilmann Märk, Innsbruck’s rector. 

Professor Märk usually replaces up to 50 professors a year but has postponed those and other investment decisions until he knows the ministry’s offer.  

All 22 public universities have passed revised costs to the ministry, and Professor Vitouch, who is also rector of the University of Klagenfurt, said there had been “signals” from science minister Martin Polaschek that officials “see the problem” and are “working on it”. 

The Medical University of Graz gets about 80 per cent of its income from the ministry, with the rest coming from the contracted services its hospital and laboratories offer to patients and the pharmaceutical industry.  

Birgit Hochenegger, the university’s vice-rector for financial management, said universities “need to prepare for hard negotiations” and that “at the end of the day, we are competing against each other”. 

“I’m confident that there will be additional funding, it’s just a question of how much,” said Harald Badinger, vice-rector for financial affairs at Vienna University of Economics and Business. “It won’t be 100 per cent, it won’t be 10 per cent of the gap.” 

He said that the ministry was likely to ask for burden-sharing with institutions, agreeing to cover 50-70 per cent of their shortfalls, but requiring structural reforms and efficiency savings. 

Any cuts would probably begin with early career staff on temporary contracts, said Ms Hochenegger, who said some universities would be able to turn to reserves at first, while others would need to cut back immediately. 

Professor Badinger said that the next wave of multi-year performance agreements, which set budgets based on student and staff numbers, among other statutory factors, should at least in part be linked to inflation to avoid deals having to be reopened. 

The four leaders THE spoke to were all confident they would get some extra money from the ministry, because other sectors had been supported by the government and there were strong arguments for universities’ economic benefits.  

However, Professor Märk warned that if talks dragged on more employment contracts would lapse and opportunities to invest in ongoing, long-term projects would be lost. 

“If we start cutting this will have a very adverse effect. It’s not like turning on a machine producing screws, you can turn this machine on and off. When you cut down universities it will cost a lot more money to get up to the level.”

ben.upton@timeshighereducation.com