Jordan: Public Expenditure Review Issues 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

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

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. Africa Malaysia Bolivia France UK Venezuela Ghana USA Indon. German. Peru Uganda Sierra 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% Mexico USA Niger Cyprus Kuwait France Australia KoreaChile Belgium Netherlands Mauritius

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 Years 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

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

Are wages crowding out complementary outputs? % of total current education expenditure for teacher’s compensation, 1997 Jordan75.0 Low income67.5 Lower-middle income64.1 Upper middle-income47.8 Higher income57.3 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

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

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 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 Achievement 02,0004,0006,0008,000 United States Switzerland Austria Canada Norway Denmark Japan Netherlands New Zealand Spain Czech Rep. Korea Hungary TIMSS Ranking Maths Science 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 – – – – More than Total2805--

Cost Efficient School Size Amortized cost of Capital and Equipment New Schools for student sizes:Vertical 1, Extension Construction58,53942,04029, Furniture & Equip13,55812,54911, Computers 7,914 7,914 7,914 Total80,01162,50349, Per Student (JD)

School Construction Alternatives

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$) Achievement change by input (coefficients) * Achievement gains per US$ spent Cost-Effectiveness Analysis of 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