1. Empowering You Through Knowledge www.eprc.or.ug 1 THE IMPACT OF INTER-GOVERNMENTAL TRANSFERS ON DISTRICT EDUCATION SPENDING IN UGANDA BY CORTI PAUL LAKUMA, ROBERT MARTY AND ANNETTE KUTEESA

2. Empowering You Through Knowledge www.eprc.or.ug 2 Main Objective of this Evaluation Evaluate the impact of fiscal transfers on local education spending Identify crowding out effects of transfers on budgetary and total education spending Identify whether funding follows enrolment, and if so, is this policy efficient and equitable?

3. Empowering You Through Knowledge www.eprc.or.ug 3 Main Motivation for this Evaluation Decentralization of education services o The importance of education as a share of total transfers, 60% of total transfers. o Increased enrollment in the UPE Program and the Scope for UPE to alleviate poverty ( million children in 2012). o Legitimacy and importance of LG’s in delivering education services Inter-jurisdictional spillover/Externalities o Lack of fiscal capacity (Vertical imbalance). o Disparities in education service provision among recipient governments.

4. Empowering You Through Knowledge www.eprc.or.ug 4 Motivation for this Evaluation FIGURE 1: EVOLUTION OF INTERGOVERNMENTAL TRANSFERS 2012/13, % SOURCE: MOFPED BUDGET DATA, 2012/13

5. Empowering You Through Knowledge www.eprc.or.ug 5 Data VariableDescriptionSource Total education spendingRecurrent + developmentMinistry of Finance Budgetary education spending RecurrentMinistry of Finance Total transfersTransfers to all the 16 sectors Ministry of Finance Total district revenueTotal transfers + local tax collection LGFC Ministry of Finance Total transfers/Total district revenue (%) Ratio of total transfers to total transfers per district LGFC Ministry of Finance PopulationGeneral, student and teacher UBOS, EMIS Local tax collection Local taxes(LST, LHT)LGFC Agriculture Value Value of Agriculture pdn.MODIS, Globcover, UBOS Pupil Classroom Ratio (PCR) No. of students per classEMIS

6. Empowering You Through Knowledge www.eprc.or.ug 6 Key Messages from the Baseline OLS Model Inter- governmental transfer Positive relationship with district education spending Large share of fiscal transfer in district revenue Increased education spending Large share of fiscal transfer in district revenue Transferability/ fungibility of education spending

7. Empowering You Through Knowledge www.eprc.or.ug 7 Regression Discontinuity Design Method o Inter-governmental transfers follow enrolment, the Pupil Classroom ratio (PCR) of 70 is considered the cut off point. o Districts with PCR of > 70 are considered distressed and allocated the SFG and more SCG. o Districts with PCR of <= 70 do not receive the SFG and receive less SCG. o We examine a band along the cut –off point Intuitive explanation of the method o The potential districts (units) just above the cut-off point are very similar to the potential district just below the cut-off. o We compare outcomes for units just above and below the cutoff.

8. Empowering You Through Knowledge www.eprc.or.ug 8 Why Fuzzy RD? Higher enrolment should yield higher district spending District may manipulate statistics to qualify Political considerations may also play a role in allocation of funds

9. Empowering You Through Knowledge www.eprc.or.ug 9 The Density Distribution of the District PCR The figure suggest that there is no significant manipulation of the PCR around the cut off point

10. Empowering You Through Knowledge www.eprc.or.ug 10 Identification for fuzzy discontinuity y i = β 0 + β 1 D i + δ(PCR i ) + ε i D i = 1If district receives transfer 0If district does not receive transfer But Treatment depends on whether PCR i > or< 70 And Endogenous factors – manipulation of statistic and politics

11. Empowering You Through Knowledge www.eprc.or.ug 11 Identification for fuzzy discontinuity y i = β 0 + β 1 D i + δ(PCR i ) + ε i First stage: IV estimation Second stage: D i = γ 0 + γ 1 I (PCR i > 70) + η i Dummy variable Continuous function

12. Empowering You Through Knowledge www.eprc.or.ug 12 Identification Some Key results

13. Empowering You Through Knowledge www.eprc.or.ug 13 Key Messages from the fuzzy RD Model Inter- governmental transfer Insignificant relationship with district education spending Inter- governmental transfer No evidence of crowding out between budgetary and total education spending (improving of teachers welfare would not diminish school development

14. Empowering You Through Knowledge www.eprc.or.ug 14 Policy Options Increase funding to district (say 30% of national revenue) Consolidation of some of the current grant/increase district discretionary power Need for further information, analysis, expertise and coordination of MDA’s

15. Empowering You Through Knowledge www.eprc.or.ug 15 Key References Lu, X. (2010). Do Inter-governmental Transfers Enhance Local Education Spending in China? Working paper, Department of Political Science. Yale University. McMillan, M (2014). Initial Ideas for consolidation of intergovernmental fiscal transfers in Uganda. A Policy Brief to Ministry of Finance, Planning and Economic Development. Department of Economics University of Alberta, Canada Ministry of Education and Sports (MoES, 2013). Education statistical Abstract

16. Empowering You Through Knowledge www.eprc.or.ug 16 Thank You!

17. Empowering You Through Knowledge www.eprc.or.ug 17 Q & A ?