CS Machogu proposes debt write-off for struggling universities

The Education ministry has proposed a number of measures to bail out 35 public universities facing financial challenges.

Education Cabinet Secretary Ezekiel Machogu said the universities owe Sh61 billion, including unremitted statutory deductions, bank and Sacco loans and pending bills. He also indicated that the government owes universities Sh147 billion.

“Unremitted pay-as-you-earn (PAYE) accounts for the bulk of this amount,” Mr Machogu said in a report tabled in the National Assembly.

The CS blamed the government for the plight of higher education institutions, saying it had not optimally funded universities at 80 per cent of the Differentiated Unit Cost (DUC) as agreed. He recommended that the outstanding PAYE be waived because the government had not released the Sh147 billion to the universities.

“The amount owed by the government to the universities is higher than the PAYE owed to the Kenya Revenue Authority. Going forward, with the sustainability that is expected from the new funding model, universities will remit PAYE as and when due,” he added.

Earlier this year, 35 vice-chancellors of public universities said their institutions were crippled by financial challenges. The VCs said the institutions had accumulated debts of Sh60.6 billion in staff pensions and statutory deductions such as Pay As You Earn and National Hospital Insurance Fund, with the figure rising due to interest.

“The national government should take a firm and necessary decision to write off the pending Sh18 billion PAYE bill owed to KRA by public universities,” said University Fund chief executive Geoffrey Monari during a meeting with VCs in Mombasa in February.

Further, the CS urged the National Treasury to start writing off the pending Sh19.6 billion pension bill in instalments.

He went on to say that the new funding model, which brings several benefits to the financing of higher education in Kenya, will save the institutions.

“Firstly, the model promotes equity in the funding of students, whether scholarships, loans or bursaries, will be based on need. The model will also promote inclusivity as every student who achieves the minimum university entrance standard will be funded based on need,” he explained, adding that it will also increase the cash flow to universities and Technical and Vocational Education and Training (TVET) institutions.

“The new model will also eliminate the risk of universities being underfunded because funding will be student-centred and based on the actual cost of a programme,” the CS said.

According to Mr Machogu, the funding will also motivate universities to raise additional funds and improve the quality of education to attract more students.

“It is projected that a total of 45,186 university students and 42,144 TVET trainees will be fully supported by the government and their families will not have to pay anything,” he said.

The total funding requirement for the new model is Sh39.4 billion for the 2023/2024. To support it, the CS said the government has already increased funding by Sh12.5 billion.

“The current funding gap of Sh18.6 billion will be provided in Supplementary Budget One of the 2023/2024 financial year,” the CS said.

Mr Machogu noted that continuing students in their 2nd, 3rd, 4th and 5th years were funded at Sh34.1 billion, which is 42.6 per cent of the DUC.

“To support these students, the ministry recommends that funding for continuing students be increased to 60 per cent of the DUC,” he said. “This will require an additional Sh7.4 billion to enable universities to meet the cost of salaries and operational expenses. Without such an increase, universities are likely to face financial challenges.”

Mr Machogu said the 345,802 continuing trainees in TVET institutions were funded at Sh5.2 billion, which translates to Sh15,038 per trainee, below the agreed amount of Sh30,000.

The ministry is recommending Sh3.4 billion as additional funding for the continuing trainees so that each trainee receives Sh25,000.