Jordan: Public Expenditure ReviewIssues in Education

Ayesha Vawda

June 18, 2003

Outline

• Purpose of PER in Education

• Key Questions to be Addressed

• Data Requirements

Purpose of PER in Education

• Assess how much is spent on education

• Evaluate allocation across levels and inputs

• Analyze efficiency of resource use

• Gauge whether public financing is being used to minimize poverty

Key Questions

1. How much is spent?

2. How does government finance?

3. What does government finance?

4. Should government finance?

5. Does public spending protect equity?

6. Is the public getting its money’s worth?

7. How much is enough?

How does the PER define the sector?

• Basic education only?

• All levels of formal education?

• Does it include training?

• R&D operations attached to universities?

1. How much is spent on education?

• Public expenditures – as % of GDP and of total public expenditures

• Private payments– For public services (informal payments, formal

cost recovery by level of education)– For private services

• If not integrated into public budget: donor grants and loans

How much does government spend on education (as a % of GDP), 2000

2.7

3

3.6

4.1

4.6

4.6

4.7

5.1

5.3

5.5

5.7

0 1 2 3 4 5 6

Uruguay

Turkey

Chile

Korea

Hungary

WEI Average

Brazil

United States

OECD Average

Jordan

Portugal

What share of total public spending has gone to education in Jordan

0%

5%

10%

15%

20%

1992 1993 1994 1995 1996 1997 1998 1999 2000

Current Capital Total

Private expenditure

• ECD: 99% private

• Basic and Secondary: 14% private, 12% UNRWA

• Tuition fees account for 30% of university recurrent expenditures

Private expenditure as % of total

0% 50% 100%

S. AfricaMalaysia

BoliviaFranceUK

VenezuelaGhanaUSA

Indon.German.

PeruUgandaSierra Leone

Source: Psacharopoulos and Nguyen 1995 “Fighting Poverty: the role of government and the private sector” World Bank.

Netherlands

Private enrollment as % of total

0% 50% 100%

MexicoUSANigerCyprus

KuwaitFrance

AustraliaKorea Chile

Belgium

NetherlandsMauritius

Is public spending sustainable?

• Macro-economic projections• Government’s sectoral goals that impact

costs:– Education Reform for Knowledge Economy

• Demographic projections for school-age projections

• Government’s goals that affect intersectoral allocations

Education Reform for Knowledge Economy

200

250

300

350

400

450

1 2 3 4 5 6 7Years

JD m

Baseline Scenario

Reform Scenario A

Reform Scenario B

2. How does government finance?

• Intergovernmental fiscal relations– Central vs. local financing?– Tax rate setting authority for governorate?– Subventions to governorates?

Conditional/unconditional?– Local “top up” in education financing?

2. How does government finance? contd.

• Budget framework and process– Recurrent and capital budgets delinked?– NGO/Donor/IFI financing linkages with

government budget– Accumulating arrears? Why?

3. What does government finance? Budget share by level of Education

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Higher

General

What does government finance? Budget share by Type of Expenditure (Basic and Secondary, 2000)

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

Current Capital

Composition of Current Expenditures

Salaries, Wages andAllow ances

Other

Transferrable expenditures

Other current expenditures

Are wages crowding out complementary outputs?

% of total current education expenditure for teacher’s compensation, 1997

Jordan 75.0Low income 67.5Lower-middle income 64.1Upper middle-income 47.8Higher income 57.3

Source: World Development Indictors, 2001

4. Should Government Finance?

• Supply and Finance of Education Originally Private

• And, why not?• So why should government

intervene?

Because….Market Failure

• Equity

• Externalities

• Capital market imperfections

• Information asymmetries

Child Mortality by Education of Mother

Mali 1995-96

Bolivia 1994

Uganda 1995

Philippines 1993

Nepal 1996

Yemen 1991-92

Morocco 1992

Deaths per 1,000 live births

No Education Primary Only Secondary or higher

But…Government Failure

• Equity

• External Efficiency

• Internal Efficiency

• Sustainable finance

Disparities between Girls’ and Boys’ Enrollment

• 1990, avg 6-year-old girl in low, mid-income country: 7.7 yrs of school; up from 6.7 yrs, 1980

• Gap between boys and girls widest in S. Asia: 1990, girl could expect 6 yrs of school; boy, 8.9

• Middle East: girl 8.6 years, boy 10.7

Government Failure: External Efficiency

• Over-subsidized higher education– In Africa, spending per student in higher

education is 44x that per primary student

• Continuing high proportion of secondary education that is supply-driven vocational education

• Tertiary more costly than primary

Government Failure: Sustainable Finance

• Increasingly difficult to meet demand for education, especially where little economic growth (e.g. Africa)

• Aid can help, but not sustainable

Service Delivery

Public schools lack spur for efficiency• Operated by Government• No competition• Teachers paid according to experience

and education, not performance• Schools closed or opened depending on

demographics, not how well they perform

So What is the Answer?

• Market has strengths and weaknesses (“failure”)

• Government has strengths and weaknesses (“failure”)

• Draw on strengths of both market and government

• Minimize weaknesses of both

• Context-specific

Emerging Role of Government

Draw on Market Strengths• Matching of Demand and Supply• Competition• Willingness to pay

Draw on Government Strengths

• Broad National Vision• Capacity to redistribute and

promote equity• Information

Avoid Market Failure• Promote Equity• Achieve Externalities• Overcome Capital Market

Imperfections• Overcome Information

Asymmetries

Avoid Government Failure• Promote Equity• Avoid Inefficiency• Achieve Sustainable Finance

Financing and Provision

Provision

Financing Private Public Private

Private schools Home schooling

User fees

Public

Vouchers Charter schools Contracting out

Traditional public schools

5. Does public spending protect equity?

• Check for variations by level in:– Enrollment ratios– Completion rates– Learning outcomes

• Between:– Poverty quintiles– Regions (rural/urban)– Genders– Minorities vs. majorities

Distribution of Expenditures by Income Quintile

0

10

20

30

40

50

Armenia 1996

Côte d’Ivoire 1995

Nepal 1996

Nicaragua 1993

Romania 1994

Vietnam 1991

Poorest 20% 2 3 4 Richest 20%

Poor get less education

What else to check

• Fiscal decentralization

• Formal and informal private payments by level and poverty status

• Public subsidies/transfers to students by level and poverty status

• Public subsidies of nonpublic schools

6. Is the public getting its money’s worth?

• Measuring educational outcomes

• Improving quality of public spending:1. Spending on the right thing

• Correcting for market failures• Demand vs. supply side interventions

2. Efficiency in spending• Absorptive capacity• Leakages and M&E

Outcomes

• What are the trends in:– Enrollment rates– Completion rates– Expected years of education and training during lifetime– Average learning outcomes– Variance in learning outcomes– Employment rates and wages for recent graduates

• Are trends going in the right direction? Fast enough?• Compare outcomes to those for regional neighbors

and countries at similar incomes. If major differences, why?

Education Expenditure and Education Expenditure and AchievementAchievement

0 2,000 4,000 6,000 8,000

United StatesSwitzerlandAustriaCanadaNorwayDenmarkJapanNetherlandsNew ZealandSpainCzech Rep.KoreaHungary

TIMSS RankingMaths Science

28 17 8 2512 818 1826 2027 34 3 3 9 624 2231 27 6 2 2 414 9

Expenditure/student

Efficiency

• Cost implications of curricula structure (e.g. specialized teachers, textbooks, IT)

• Efficiency of ratios between quantities of different inputs (e.g., schools, classes, teachers, students, textbooks)

• Estimated savings/costs of reducing/increasing quantities of different inputs

• Estimated costs of achieving savings• Estimated savings of reducing repetition

rates/dropout rates

Efficiency

• Cost/benefit and cost/effectiveness analyses– Prices for teachers and non-teaching staff– Facility design and construction materials (best cost

per year over lifetime)– Consolidation of facilities– In-service training options– Textbook printing standards– Utility use– Maintenance schedules

• Rough estimates of savings/costs from adopting different standards and policies

School Size of MOE Schools in Jordan

No.of Students Per School

No. of Schools

% of MOE Schools

Cumulative %

Less than 100 706 25.2 25.2

101 – 200 478 17.0 42.2

201 – 400 710 25.3 67.5

401 – 600 375 13.4 80.9

601 – 800 254 9.1 89.9

More than 800 282 10.1 100.0

Total 2805 -- --

Cost Efficient School Size

Amortized cost of Capital and EquipmentNew Schools for student sizes: Vertical

1,200 720 360 Extension

Construction 58,539 42,040 29,666 608

Furniture & Equip 13,558 12,549 11,791 80

Computers 7,914 7,914 7,914

Total 80,011 62,503 49,371 688

Per Student (JD) 67 87 137 19

School Construction Alternatives

New Schools with 720 students each without capacity

utilization

Capacity utilization and

some new construction

Capacity utilization, 20%

vertical extensions and

some new construction

Students needing places 157,365 117,836 117,836Classrooms Required 4371 3273 3273Number of extensions 0 0 655Number of schools 219 164 131Cost of construction 110,820,671 82,983,196 66,386,557Cost of vertical extension 4,013,608Total Cost of Construction and equipping 110,820,671 82,983,196 70,400,165

Capital costs as a proportion of MOE General Education budget 2001Total 43.98% 32.93% 27.94%Annually for 5 years 8.60 6.59% 5.59%

Input

Water

School furniture

School facilities

Hardware

Textbook usage

Writing materials

Software

Teacher salary

Training

Logos II

4 year primary

3 years secondary

Cost (US$)

1.81

5.45

8.80

16.06

1.65

1.76

3.41

0.39

2.50

1.84

2.21

5.55

Achievement change by input (coefficients)

3.513

-5.650

7.228

8.969

6.403

4.703

4.864

0.055

-0.160*

3.594

3.177

2.383

Achievement gains per US$ spent

1.94

-

0.82

0.56

3.88

2.67

1.43

0.14

-

1.95

1.44

0.43

Cost-Effectiveness Analysisof Inputs for Portuguese Achievement, Brazil

7. How much is enough?

• Using comparators:

• Compare expenditures to:– Regional neighbors– Countries at similar income levels

• But: comparators are imperfect benchmarks, no matter how selected– Number of students differ, prices differ

Is public spending adequate?

On the basis of country context, depends on:• Thoughtput volume (# of school age hildren

and their enrollment rates)• How efficiently resources are used• Government’s goals for the sector that affect

spending• Mobilization of private resources (e.g., private

provision, cost recovery)

Date Requirements

• Measures of outcomes: existence of assessment system, household surveys

• Measures of inputs and costs: school and household surveys with expenditure data, program data, administrative data on budget allocations and spending

• Impact evaluation data to estimate program effectiveness