Scottish higher education needs up to £350 million more if it is to remain one of the major hopes for Scotland's economic regeneration, according to principals.
Universities Scotland's draft submission for the 2004 spending review warns that institutions face "a very real threat" if higher education continues to slide down the Scottish Executive's priority list.
But it says that if the funding is forthcoming, it will boost the knowledge economy by creating "classrooms of the future" and increasing research quality.
Current funding is not enough to ensure a sustainable, high-quality higher education sector, it says. Significant sums need to be spent on 45 per cent of estates, compared with a UK-wide figure of 36 per cent.
And Scottish institutions cannot fall back on their financial reserves, since they have lower levels of liquidity than the UK as a whole, 38 days, compared with a UK average of 58 days.
The submission says that European countries are increasing their investment in education, steadily eroding the competitive advantage that the UK, and Scotland in particular, has enjoyed until now. England, its closest competitor, has won substantial new funding, with more likely to follow in 2006 through top-up fees.
Scotland is between £100 million and £350 million behind the average level of funding of key competitors, Universities Scotland says.
But it is calling for £102 million as an "affordable" target that would enable Scottish institutions not only to maintain but to improve their competitive position, even if their rivals are financially stronger.
Radical plans are being drawn up to improve research through collaboration, linking researchers in different institutions.
Universities Scotland wants some £40 million to fund facilities, academics and projects, including a "catalyst fund" to promote collaborative work. And it would earmark another £40 million for teaching facilities.
It says: "This does not mean the fixing of leaking roofs. It means modernising teaching infrastructure to ensure that it meets the needs of learners in a digital age. Creating the 'classrooms of the future' will be essential to maintaining Scotland's competitiveness."
It also wants £10 million to support wider access, and a further Pounds 10 million for knowledge transfer.
Universities Scotland calculates that pay modernisation will cost at least £38 million in 2005-06, and wants this added to the Scottish Executive's grant for higher education.
"Pay modernisation must take place in the higher education sector. As responsible employers, higher education institutions recognise this," it says.
"While this modernisation process should lead to great efficiency in the long term, it must be carried out and funded now, both to meet statutory obligations and for reasons of fairness." This will cost between 3 per cent and 5 per cent of the total salary bill on top of annual settlements, it says, and unless the sector is given the extra resources, other areas will suffer.