Public Financing of Education in Mongolia Equity and Efficiency Implications M. Caridad Araujo and Katie Nesmith The World Bank

Motivation Education financing in Mongolia in context Components of the report Summary of findings Recommendations Outline of presentation

Motivation Document how resources are allocated across and within schools Understand the institutional framework for school financing and how the sector has been affected by recent reforms Analyze teacher salaries and current incentive schemes for teachers

Motivation (2) Identify the factors that may help reduce the observed disparities in educational outcomes For the first time, collect information by surveying teachers, students, principals, accountants, parents, and aimags to empirically documents schools' needs, characteristics, and resources.

Education Financing in Mongolia in Context 2003 Public Sector Finance and Management Law re-centralized public finance and aimed to improve efficiency and transparency. Funding formula has been used since 1998 for variable cost component of school budget. Many school authorities and policy practitioners are not satisfied with current funding formula. To compensate schools with small enrollments, micro-coefficients were introduced into funding formula in

Components of the report Overview of education sector in Mongolia Design and implementation of school funding The stages and actors of the school budget process Variation in teachers ’ salaries and their components across rural and urban schools

Data collected Quantitative and qualitative data came from the 2005 Public Expenditure Tracking Survey (PETS) Central level data-MoF and MECS Provincial level data-MECS ECD officers and MOF treasury officers School level data-118 schools

Principal Findings : School financing 1) Small, rural schools have significantly higher per-student spending than their larger and more urban counterparts.

Principal Findings : School financing (2) 2) Provincial reallocations (micro- coefficients) correct some of the imbalances in resource allocation, but create inequities across regions. Simulations in report suggest national micro-coefficients could be more equitable solution

Principal Findings : School financing (3) 3) The funding formula for school financing is not used by schools in Ulaanbaatar (UB). UB schools submit budgets based on past expenses, without information on enrollment numbers.

Principal findings: Budget Process 1)Education financing was re-centralized in 2002 with Public Sector Finance and Management Law (PSFM), but reform has not happened in UB. 2)An analysis of school budgets in Western region documents discrepancy between what is reported at school and aimag level.

Principal Findings: Teacher salaries 1)Urban teachers appear to earn more than rural teachers, but they also have higher costs of living and work more hours. Potential implications for attracting teachers to rural areas.

Principal Findings: Teacher salaries (2) 2) Decisions regarding teacher bonuses and deductions are made at the school-level and often do not reflect outcome-based contracts. Reporting of deductions at school and aimag level would help improve transparency

Principal Findings: Teacher salaries (3) 3)A large number of teachers are engaged in income generating after-school activities and receive non-monetary benefits from the school.

Differences among teachers by type of school RuralUrban Years of educationMore Years of experienceMore Hours of workMore Absences/school closings More Receive non- monetary benefits More Salary + Supplements More Receive performance bonus More

Recommendations 1)Efficiency in School Spending Encourage more efficient use of human resources Multiple-subject teachers Multi-grade classroom

Recommendations (cont.) Funding formula should be modified to provide incentives for schools to make savings on fixed costs

Recommendations (cont.) Schools should have autonomy to generate their own income to offset any gaps from government funding.

Recommendations (cont.) Performance bonuses for teachers should target behaviors that teachers can control and that the school administration can monitor Consider reducing the number of salary supplements and increasing the base salary for teachers.

Recommendations (cont.) 2) Enhancing equity Micro-coefficients should be applied at the national level, rather than the provincial level. School funding formula and financing reforms should be uniformly enforced in all provinces and Ulaanbaatar.

Recommendations (cont.) Financial management training should be provided for provincial and school level budget officers Teacher promotion procedures should be adapted to provide equal opportunity for rural teachers.

Recommendations (cont.) 3) Promoting Transparency Deductions from teachers salaries and salary supplements should be made at the school, provincial and central level. Encourage schools to develop strategy for sharing school budget information with parents and the community.

Public Financing of Education in Mongolia Equity and Efficiency Implications M. Caridad Araujo and Katie Nesmith The World Bank