How Are Public Universities in Germany Funded?
How a university is funded has a considerable impact on the quality and accessibility of its teaching and research. In Germany, public universities receive the majority of their funding from the government. This basic funding is supplemented by external funding and additional sources. Managing the finances of a university requires maintaining a balance between the basic funding it receives from the government, the competitive sphere of obtaining external funding, and any additional activities it carries out to boost revenue. The ultimate aim is to ensure that the university can function efficiently, ensure fair access to higher education, and remain competitive on the international stage.
Why is funding now an issue?
Simply put, a big university like Freie Universität Berlin requires a big budget. The university’s annual budget is over 700 million euros, including external funding. At first glance, this seems like a lot. However, most of this money is tied up in long-term financial commitments, such as personnel costs, rental contracts, building maintenance costs, infrastructure, and research projects.
When 37 million euros are suddenly missing from this very carefully balanced budget, it is difficult to maintain the illusion of “business as usual.” The significance of these budget cuts and their repercussions for Freie Universität are explained in detail below.
Where does Freie Universität Berlin get its funding?
Freie Universität Berlin’s annual budget comes from three main areas:
- State funds (approx. 462 million euros): This is the university’s main source of funding. It supports daily operations and covers things like personnel, teaching, administration, and building maintenance.
- “Third-party” funding (approx. 153 million euros): External financial support from research organizations, such as the German Research Foundation (DFG), EU programs, and various foundations, institutes, or business. Often research grant based and only for a limited period of time.
- Additional revenue (approx. 91 million euros): Some funding comes from partnerships, payments for services, such as veterinary fees at the university’s veterinary clinic, and special funding for state programs, such as the Berlin Equal Opportunities Program.
Where does Freie Universität Berlin’s spending go?
Freie Universität Berlin’s budget plan is generally set biannually and is based on the contracts concluded between state universities and Berlin’s government, in which specific funding amounts are set for a period of two years. This budget plan is divided into individual categories based on the purpose for which the money is to be used – different funds are reserved for different projects, making it difficult (if not impossible) to move money around should circumstances change. The budget cuts announced by the Berlin Senate refer exclusively to the state funds provided by the State of Berlin. Additional revenue or third-party funding that is used to finance projects or collaborations such as the Berlin University Alliance are unaffected by these cuts. So are the budget cuts really that bad? Unfortunately, yes. As explained above, state funds form the backbone of Freie Universität Berlin’s funding. The money the university receives from the State of Berlin is used to keep its basic structures running. This includes personnel costs, IT, rent, infrastructure, and much more. For example:
- Approx. 390 million euros for personnel costs (including student employees)
- Approx. 53 million euros for building maintenance and rent
- Approx. 63 million euros for construction projects (renovation works and new projects)
- Approx. 47 million euros for administrative expenditures (IT, operating costs, daily administrative costs, etc.)
Why are the budget cuts such a big deal?
The State of Berlin has slashed Freie Universität Berlin’s funding for 2025 by approx. 8% – this corresponds to approx. 37 million euros. Not only is this an enormous sum of money, these cuts also raise other serious problems. It will be more or less impossible for Freie Universität to bridge this financial gap in the short term. This is because:
- Most of the money has already been earmarked for specific purposes (contracts, infrastructure, construction projects).
- You often have to spend money to save money. If, for example, you would like to reduce administrative costs, you need to invest in digitization to improve efficiency – an approach that requires a big initial investment in order to save money further down the line.
- The university has a responsibility to carefully consider all of its options. Taking a frivolous approach could be disastrous and mean fewer study places, the termination of important research projects, and untenable workloads for employees.
Can’t the university simply use its reserve funds to make ends meet?
While Freie Universität Berlin does have reserve funds, using them to bridge the financial gap in the short term is problematic. For example, these reserves are used to pay the pension contributions for civil servants (the responsibility for which lies with the university according to state law). They are not simply a rainy-day fund – they have also been deliberately put aside for long-term construction and renovation projects.
For decades, Freie Universität has put aside funds for important and much-needed investments such as:
- Renovating buildings
- Modernizing technical infrastructure
- Improving the university’s climate footprint (e.g., the installation of solar panels) and digitization efforts (e.g., safeguarding basic IT operations)
- Advancing strategic developments such as new degree programs or research clusters
In the majority of cases, these reserve funds are legally/administratively tied to specific projects, meaning that they cannot be used for other purposes. If Freie Universität were to make use of these funds regardless, this would mean:
Sacrificing long-term security for short-term gain.
If Freie Universität makes use of its reserve funds to mitigate the immediate effects of the budget cuts, it runs the risk of creating even more problems for itself in the long term. The State of Berlin is planning the creation of a Hochschulbaugesellschaft (building society for universities) as a potential solution to this issue. This specialist building society or credit union would provide universities with loans that can be used for construction and renovation work. It is, however, unclear who would ultimately be responsible for financing such an operation. Until there is more clarity surrounding the issue, this makes it hard to rely upon a Hochschulbaugesellschaft as a realistic solution. Freie Universität will be keeping a close eye on this and other options, and will provide more information as soon as it becomes available.