Early this month, the media reported that Soochow University was indebted to a sum of NT$500 million (US$18.08 million), bringing attention to the financial crisis facing Taiwanese universities.
During the 2020-2021 academic year, the school’s debt-to-asset ratio was 8.1 percent, which is not too bad compared with other private universities.
The Ministry of Education’s open platform for information about college and university affairs showed that the highest debt of a private university stands at NT$6.2 billion, with a debt-to-asset ratio of 34.16 percent, much higher than the average ratio of 6.85 percent.
TOP DEBTORS
Most of the universities with the highest debts are high-ranking universities internationally, each with affiliated hospitals.
As competition among universities is severe in Taiwan, they should not be criticized for investing in hospitals. However, it has been difficult for these hospitals to remain profitable after they were hit by the COVID-19 pandemic.
Of the 29 hospitals that reported a deficit in 2019, losses at five exceeded NT$100 million, and the loss at one university-affiliated hospital was as high as NT$375 million, according to hospital financial data provided by the National Health Insurance Administration.
Despite that public universities cannot go bankrupt as they are funded by the government, their average debt-to-asset ratio of 15.95 percent is higher than that of private schools. The most indebted public school, for example, had a debt of NT30.3 billion in 2019, with a debt-to-asset ratio of 44. 8 percent.
SUBSIDIES
In addition, public schools with the highest debts are mostly top universities that receive the most government funding.
Despite huge subsidies from the ministry, top universities are heavily indebted and the figures are snowballing every year.
Such debts are mainly caused by schools trying to expand into other areas by building a second campus, as well as a string of impractical construction projects in disregard of the nation’s declining birthrate.
The investment in hardware has increased maintenance costs while reducing personnel costs, causing the working conditions of young lecturers to deteriorate.
Unfortunately, under the umbrella of university autonomy, school authorities cannot be held responsible. Even the school assembly consisting of more than 100 professors at each university is unable to fulfill the ideal of self-governance.
RESTRICTIONS
A university and a company are different in terms of borrowing money.
On the one hand, it is much more difficult for schools to expand their financial resources, while donations to universities are not as common as they are in the US.
On top of this are the various legal restrictions for universities that want to operate businesses.
On the other hand, it is difficult to frequently increase tuition fees, so universities are unable to transfer the growing costs to customers.
GUIDANCE LACKING
The ministry has failed to guide universities on how to transform themselves or to withdraw from the market in the face of structural demographic changes.
It has also failed in its responsibility of supervising schools in how they conduct their finances, to prevent them from getting further into debt.
It is the taxpayer who will ultimately need to shoulder the burden of this debt.
Tai Po-fen is a professor of sociology at Fu Jen Catholic University.
Translated by Eddy Chang
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