Case Study of Per Student Financing: Macedonia Session 11 Education Policy Reform Course Kiev, March 26, 2008 Jan Herczyński

Structure of the presentation Political decentralization: Ohrid agreements Phases of fiscal decentralization Education decentralization strategy Allocation formulas Impact on municipalities Jan HerczyńskiMacedonia case study2

Political decentralization Ohrid agreements of 2001 defined decentralization as an instrument to preserve unity of the country and accomodate ethnic tensions Significant powers promised to municipalities Altogether, 31 laws have been adapted by Macedonian parliament to implement decentralization Jan HerczyńskiMacedonia case study3

Political decentralization 2 Main laws: Law on Local Governments (defined which sectors will de decentralized) Law on Financing of Local Governments (defined new financial mechanism and phases of fiscal decentralization) Law on Territorial Organization (consolidated 123 municipalities into 83) Jan HerczyńskiMacedonia case study4

Fiscal decentralization Phases of fiscal decentralization: First Phase: transfer of properties, of management responsibilities, and of financial responsibility for maintenance of institutions Second Phase: transfer of responsibility for employment and for salaries Jan HerczyńskiMacedonia case study5

Fiscal decentralization 2: Types of grants for two phases: First Phase: categorical grants for the financing of specific programs, without the salaries, Second Phase: block grants for the financing of sectors, including the salaries Jan HerczyńskiMacedonia case study6

Fiscal decentralization 3 During Phase 1 fragmentation of public finance: Maintenance expenditures from local budgets, using the categorical grants, Salaries directly from the central budget, Fragmentation is temporary but lasts from July 2005 until now Jan HerczyńskiMacedonia case study7

Fiscal decentralization 4 First Phase started on July 1, 2005 Selected 42 out of 83 municipalities begun Second Phase on September 1, more municipalities entered Second Phase on Janury 1, 2008 It is expected that all municipalities will enter the Second Phase in 2009 or 2010 Jan HerczyńskiMacedonia case study8

Decentralization of education In 2005 Ministry of Education adopted an Education Decentralization Strategy, for the First Phase of fiscal decentralization The strategy discussed a number of functions not specified in decentralization laws (student transportation, dormitories) On the basis of the strategy laws on primary and secondary education were ammended Jan HerczyńskiMacedonia case study9

Decentralization of education 2 Student transportation was decentralized immediately to local governments in 2005 Decentralization of dormitories was delayed until 2007 Transfer of ownership of school properties is a long process and is still not completed Jan HerczyńskiMacedonia case study10

Decentralization of education 3 Principles of per student financing were defined in the education laws The responsibility for defining the allocation formula rests with the Ministry of Education Allocation formula is adopted each year by the Government of Macedonia Jan HerczyńskiMacedonia case study11

Decentralization of education 4 Important part of decentralization is the transfer of responsibilities for appointment of school directors The ammended laws define specific professional selection procedure Mayor of municipality must appoint the selected candidate Depoliticized appointment process Jan HerczyńskiMacedonia case study12

Allocation formulas It was legally necessary to have separate allocation formulas for primary and secondary schools In 2005 and 2006 a separate formula for student transportation, Since September 2007 also separate formulas for the categorical and block grants Jan HerczyńskiMacedonia case study13

Education grants 2 July 2005 to December 2006 Categorical grant for primary Categorical for secondary Categorical grant for student transport January to August 2007 Categorical grant for primary Categorical grant for secondary Since September 2007 Categorical grant for primary Categorical grant for secondary Block grant for primary Block grant for secondary Jan HerczyńskiMacedonia case study14

Allocation formulas 3 Allocation formulas for education grants were developed by Ministry of Education It was decided to use population density as the main criterion of allocation Since this is not a characteristics of local education systems, initially there was opposition to this idea Jan HerczyńskiMacedonia case study15

Allocation formulas 4 Twice allocation formulas were used for incomplete fiscal year (in 2005 and 2007) The Ministry decided it is not possible to use a per student formula in this situation Instead, allocation proportional to historical costs was used Jan HerczyńskiMacedonia case study16

Allocation formulas 5 Categorical grants for primary education: Lump sum for all municipalities Additional weights for students in sparcely populated municipalities: below 25 pers./sq. km.: to 40 pers./sq. km.: to 70 pers./sq. km.:0.2 Jan HerczyńskiMacedonia case study17

Allocation formulas 6 Block grants for primary education: Lump sum for all municipalities Additional weights for population density: below 20 pers./sq. km.: to 35 pers./sq. km.: to 70 pers./sq. km.:0.6 Weight 1 for special needs students, 0.2 for subject teaching Jan HerczyńskiMacedonia case study18

Allocation formulas 7 Categorical grants for secondary education: Weight if population density is less 40 per. per sq. km. : 0.1 Weight for general academic schools: 1 Block grants for secondary education: Lump sum for all relevant municipalities Weight for general academic schools: 0.1 Jan HerczyńskiMacedonia case study19

Allocation formulas 8 Block grants for secondary education: Lump sum for all relevant municipalities Weight for general academic schools: 0.1 Jan HerczyńskiMacedonia case study20

Impact on municipalities Local education strategies New budgeting procedures for schools Review and reorganization of student transportation Network planning and consolidation Functional reorganization of municipal education departments Jan HerczyńskiMacedonia case study21