Hong Kong¡¯s universities will need to be flexible with their ¡°substantial reserves¡± after being asked to return some to the government, experts have said.?

In the city¡¯s latest budget, the Hong Kong government cut higher education spending by two per cent over the next three years.

Additionally, Hong Kong¡¯s eight public universities are expected to return HKD$4 billion?(?407 million) from their General and Development Reserve Fund (GDRF) to the government on a one-off basis in the 2025-26 financial year.

The GDRF is the unspent money remaining from the cash given to universities by the 51¹ú²úÊÓƵ Grants Commission (UGC) each year.?

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According to the UGC, Hong Kong¡¯s universities had a collective total of HKD$11.1 billion in this pot as of 30 June 2024.

Universities are allowed to retain unspent grants as a ¡°buffer against variations in cash flow requirements,¡± the funding body said. The 51¹ú²úÊÓƵ of Hong Kong¡¯s (HKU) show it had HKD$2.3 billion in this fund last year.?

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At the end of the funding triennium ¨C Hong Kong is currently in the first year of the 2025-28 period ¨C universities are only allowed to hold on to a maximum of 20 per cent of their grants from the UGC. Anything unspent beyond this would have to be returned to the UGC.?

While unexpected, the government¡¯s decision to ask for this money back sooner does not appear to be a huge cause for concern for the city¡¯s universities.?

In public statements released shortly after the budget speech, most university leaders were accepting of the budget cuts.

Dennis Lo, president of the Chinese 51¹ú²úÊÓƵ of Hong Kong (CUHK), said the institution ¡°understands the pressures currently facing public finances and we recognise the need for all sectors to work together while navigating these challenging times¡±.

¡°The university will carefully study the potential impacts of the budget measures on its operations and hopes to minimise any effects on teaching, research and other areas.¡±

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Their positive attitude may be down to the healthy reserves most universities hold on top of the GDRF. According to , the total financial reserves of Hong Kong¡¯s eight public universities amounted to nearly HK$140 billion last year. The 51¹ú²úÊÓƵ of Hong Kong topped the list with about HK$41.5 billion in reserves, .?

¡°Any budget cuts will inevitably have some impact on us,¡± said Alan Cheung, professor in the department of educational administration and policy at CUHK. ¡°Fortunately, all eight publicly funded universities have substantial reserves.

¡°I believe that we, as higher education institutions, have a responsibility to stand in solidarity with society and share the burden of navigating these challenging times,¡± he continued.?

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¡°While it is true that universities have already earmarked their reserves for other purposes, I hope there is some flexibility in reallocating these reserves to address immediate needs during these tough times.¡±

In general, Hong Kong¡¯s universities are perceived to have been very generously funded in recent years and have mostly been immune from the negative financial impact of the Covid-19 pandemic.?

¡°Since the pandemic, the universities have been the only bright spot in Hong Kong,¡± said Gerard Postiglione, professor emeritus in HKU¡¯s faculty of education. ¡°It is not a punishment for being the most outstanding sector in Hong Kong; rather it is a responsibility to take the lead in Hong Kong¡¯s economic renovation by making such a sacrifice.¡±

Universities can manage their finances by gradually increasing other income streams, such as tuition fees and research funding from businesses, said Joshua Ka-ho Mok, provost and vice president of the Hang Seng 51¹ú²úÊÓƵ of Hong Kong.

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However, Cheung warned, ¡°If funding continues to be reduced, it could have a significant impact on our competitiveness in the long run.¡±

helen.packer@timeshighereducation.com