Download Analyzing the Results of Transition from Line

From Line-Item Budgeting to Per
Student Funding Formulas.
Successes and Failures from the
Experience of Post Soviet
Countries
Jan Herczyński
Baku, April 21, 2014
Movement towards formulas
• Accross transition countries there is
movement towards using per student
allocation formulas in the education sector
• The formulas have many different forms and
applications
• Some countries which have not moved
towards per student formulas have instead
implemented repeated pilot projects
Jan Herczyński
2
Movement towards formulas 2
• Historically, school budgets were defined
separately for each budget line (salaries,
heating, etc.), on the basis of budgets of
previous years and negotiating incremental
changes
• Per student formulas give hope of much
simpler approach to set school budgets
• However the movement is not easy
Jan Herczyński
3
Movement towards formulas 3
• Successful countries have used the formula as
an instrument supporting decentralization
efforts
– Poland, Macedonia, Georgia, Bulgaria
• Less successful countries used the formula as
a purely technical tool to achieve
rationalization of education finance
– Romania, Ukraine
Jan Herczyński
4
Example 1: Georgia
• „Rose revolution” in 2004 led to establishment
of strong reformist government
• Fight against corruption was one of dominant
motivations
• In education, this led to complete removal of
local governments from management and
finance, in contrast to historical experience
• The Ministry of Education needed a formula to
finance all Georgian schools
Jan Herczyński
5
Georgia 2
• Georgian schools became autonomous
institutions with legal persona and own
budgets
• In each school, the School Board oversees the
school operations and selects the school
director
• National Government sets minimum teacher
salaries
Jan Herczyński
6
Georgia 3
• National formula determines only the overall
volume of funds for each school
– School vouchers of three levels (city, rural, mountain)
• Detail line budget is set by school director and
approved by the school board
• The same applies to budget execution report
• Extensive support from Education Support
Centers managed by the Ministry
Jan Herczyński
7
Georgia 4
Results:
• School operations uninterrupted
– Frequent updating of budgets
– Only few conflicts between directors and School
Boards
• Increased transparency and openess of
schools
• Significant reduction of corruption in the
sector
Jan Herczyński
8
Georgia 5
Results:
• About one third of schools are deficit schools
– No real budgeting procedures
– Monthly additional transfer above vouchers
• Large schools became successful budgetary
operations, especially in the cities
– Large schools have ample budgets and little
motivation to economize
Jan Herczyński
9
Example 2: Romania
• No real motivation for decentralization
• Education strictly controlled by judet (oblast)
level administrations subordinated to the
Ministry
• No clearly defined financial transfers for
education from the central budget to judet
budgets, and from judet budgets to schools
Jan Herczyński
10
Romania 2
• Deep fragmentation of education finance
– Employment levels and salaries in every school set
and stricly controlled by the Ministry
– Maintenance costs uncontrolled and quite
differentiated in different municipalities
• Administrative and not political responsibility
for education
Jan Herczyński
11
Romania 3
• Many attempts to define and implemented
per student formula for school finance
• National Council for Financing of PreUniversity Education was established in order
to achieve this objective
• The council developed a series of complex
formulas and published several books
Jan Herczyński
12
Romania 4
• Repeated pilot projects which remained
purely formal (only on paper), in part because
they contradicted existing legislation
• The pilot projects were not related to other
reforms of school management
• No formula was finally implemented
Jan Herczyński
13
Example 3: Bulgaria
• System of delegated budgets gave budgetary
autonomy to schools
• Beginning with a few pilot municipalities ,
gradually extended to the whole country
• In 2007, a national formula implemented for
transfers from central budgets to
municipalities
• An obligation to use local formulas for schools
Jan Herczyński
14
Bulgaria 2
• National formula used 4 values of per student
amount depending on the municipality
• Pure per student formula from central budget
to municipal budgets
• Local formulas have to be based on student
numbers:
– 80% allocated on a pure per student basis (no
coefficients)
– 20% allocated according to additional standards
Jan Herczyński
15
Bulgaria 3
• Initially, great opposition from teachers and
municipalities
– Long strike by teachers, which the teachers lost
– Many municipalities used pure voucher formulas
in gesture of protest
• School directors supported the reform
– More autonomy of directors over budget
– More school discretion over teacher salaries
Jan Herczyński
16
Bulgaria 4
• Over time, opposition to the reforms was
decreasing
• School directors implemented necessary cuts
in school expenditures to adapt to new
allocation levels
• Education efficiency was increased accross the
system
– Increased class sizes
– More efficient use of funds
Jan Herczyński
17
Conclusions
• Per student formula should be applied to a
specific and legally well defined flow of funds
between different levels of governance
– From the central budget to local budgets
– From the local budget to schools
• Formula should be a part of the budgeting
process
• Formula must be public
Jan Herczyński
18
Conclusions 2
• Formula is an instrument of communication:
– It communicates the priorities of the institution
setting the formula and sending funds
– It should be used for dialogue between the sender
and receivers of funds
• Therefore formula should be comprehensible
– All details necessary to understand the formula
must be publicly available
– Receivers of funds should be able to verify
whether the formula was applied correctly
Jan Herczyński
19
Conclusions 3
• Simple formulas are easier to implement than
complex formulas which nobody can
understand
– Bulgaria, Georgia used very simple formulas
– Formulas developed in Romania were very
complex
• Simple formulas are much easier to maintain
and change (adapt) over time
Jan Herczyński
20
Conclusions 4
• Success depends on creating a real
independent actor with strong competencies
who will implement the reforms locally
– In Poland, Macedonia: local governments
– In Bulgaria, Georgia: schools
• Vigorous activities of that actor are necessary
for the reform to benefit students
Jan Herczyński
21