University Budget Deficit Phenomenon And Control Measures

According to the Financial System for Colleges and Universities, which issued by Ministry of Education and Ministry of Finance in 1997, budget preparation for Colleges and Universities should comply with the principles of budget balance and break even, achieved self break even and without draw up budget deficit. However, in the practical work, whether the budget preparation and execution of colleges and universities in our country strictly enforced the above provisions? As used herein the case of the investigating university, does H University existed the budget deficit phenomenon that caused by the reason of borrowing debt during the enrolment expansion time. If does, how the budget deficit generated? How large is the budget deficit? What effect it produced as well as the effectiveness of control measures?Based on the problems described above, firstly, this paper used the literature polymerization method to define the university budget deficit and content. According to the explanation of annually balanced budget theory and cyclically balanced budget theory, we summarized the manifestations of the case university budget deficit. Secondly, the paper quantification calculated the scale of the case university budget deficit, which based on the designed model of free cash flow and excessive expenditure. Thirdly, based on the side of borrowing debt, excessive expenditure, interest selection, and institutional arrangements for the budget deficit, the paper presented a deep analysis of the reason for the case university budget deficit. Lastly, from the experience reference of the university budget deficit control and the main approach to control the budget deficit in case university, the paper proposed countermeasures for improving the university budget deficit control. The conclusions based on research as following:1.The budget deficit is a phenomenon of budget expenditure imbalances caused by excessive spending.This phenomenon includes budget expenditure imbalances in an annual and several years. The basic behaviour of the university budget deficit is the phenomenon of annual budget expenditure imbalances in universities. This means the university annual budget revenues supply not guaranteed the requirement of budget expenditure, which universities need to raise funds through bank loans and other borrowing debt channels.2.The essence of the university budget deficit is an excessive expenditure behaviour induced by the imbalance of budget revenues and expenditures. On the one hand the university borrowing debt is the basis of the excessive expenditures formation, on the other excessive expenditures behoove rely on borrowing debt to provide funding, thereby promoted the behaviour of the university borrowing debt.3.Educational resource allocation system under the background of benefit selection between government and universities is the institutional reasons of the university borrowing debt formation. During the expansion of China's higher education enrollment process in 1999, the government pursued the speed of educational development through the reform measures in management system and investment system of higher education to ease the "shortage phenomenon" in educational supply. These reform measures achieved the goal of rapid promotion of the government's public service ability. However, it transferred the contradiction between power and financial resources asymmetry to local government and universities. This forced local government and universities financing through borrowing debt, which lead to the generating of a nationwide phenomenon of university budget deficit.4.The university budget deficit needs to be controlled from both the behaviour of budget deficit and the scale of budget deficit simultaneously. On the one hand, controlling the university budget deficit based on two reasons. Firstly, the scale of the university budget deficit has emerged debt risk, which influenced the normal operation order of universities. Secondly, the university budget deficit mainly constituted by bank loans and other borrowing debt. These debts became a heavy economic burden on universities because of the large number of annually interest on bank loans, which affected the sustainable development capacity of universities. On the other hand, government must lead the university budget deficit governance process on enhancing coordinated actions between different government departments through system formulated and system implementation level, increasing the investment on high education, directly reducing the scale of university budget deficit, and strengthening the leading role of financial investment for the scale controlling of university budget deficit.5.To prevent the formation of overkill phenomenon during the government leaded controlling of the university budget deficit, this should be paid much attention by the theory and practical circle. As the effect of controlling of the university budget deficit can be formed by control the free cash flow in universities, the H province where the case university located achieved a certain degree of controlling the university budget deficit through adopting centralized payment by exchequer. However, free cash flow is the economic foundation for the sustainable development of universities. During the process of university development, talent people and funding are the two wheels which promoting the development. The role of funding to the normal running of universities just like the importance of blood to human body. Included the university budget deficit into the financial department for centralized payment leads the university lost hedge funds and value-added features, resulting universities finance heavily dependent on the external environment, which is not conductive to the conformation of self-development capability of the university. Therefore, this paper proposed reconsidering the problem of implementing the centralized treasury payment system in universities when the scale control of university budget deficit achieved some success.