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The World Bank Page 1Finance and governance reforms
The World Bank
Finance and governance Finance and governance reforms in educationreforms in education
Feb 14, 2009
Presented by:Lars Sondergaard
World Bank
The World Bank
The World Bank Page 2Finance and governance reforms
The World Bank
Efficiency of spending is poor in the ECA region…
Student-teacher ratios
15
17
19
21
23
25
27
29
31
33
35
1970
1980
1990
1992
1994
1996
1998
2000
2002
2004
(pup
il-te
ache
r ra
tio, p
rim
ary)
East Asia & Pacific
Europe & Central Asia
Latin America & Caribbean
Middle East & North Africa
Source: World Bank EdStat and World Bank estimates
cheaper
more expensive
The World Bank Page 3Finance and governance reforms
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…and there is lack of flexibility in the budgets allocated to education
Bulgaria 2005
Compensation71%
Non-compensation
29%
The World Bank Page 4Finance and governance reforms
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WHY? Lack of financial incentives to downsize
• This is problematic when school populations are declining
Population dynamics, age 6-18 (1990=100)
60
70
80
90
100
110
120
1990
1992
1994
1996
1998
2000
2002
2004
2006
Low-CIS
Mid-CIS
EU
Balkan (Albania andB&H)
Turkey
The World Bank Page 5Finance and governance reforms
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Remainder of presentation
Is that really true?
Remainder of presentation: 1) Answer:
– (i) Yes and input-based financing provides no incentives;
– (ii) Evidence from Bulgaria. 2) Addressing concerns: What happens when you
change to per capita finance?
The World Bank Page 6Finance and governance reforms
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There isn’t a financial incentive to consolidate schools with input-based financing
Municipality
School
Local government
School
Ministry of Education
Gra
nt to
co
ver
non-
sala
ry
exp
end
iture
Grant to cover non-salary expenditure
Grant to cover non-salary expenditure
Numbers of teacher determined by “standards”.
Teachers financed from central government
Num
bers of teacher determined by
“standards”. Teachers financed from central
government
Nu
mb
ers of te
ach
er
dete
rmin
ed
by
“s
tan
da
rds”. T
each
ers
fin
an
ced
from
cen
tral
go
vern
me
nt
Grant
to co
ver n
on-s
alary
expe
nditu
re
Numbers of teacher determ
ined by
“standards”. Teachers financed from
central government
School
A local government is losing students and is, therefore, considering closing one of its schools.
The World Bank Page 7Finance and governance reforms
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Summary
Input-based financing systems have problems!
-> Lack of incentives!
Question: Are there other financing systems that work better? If so, what are the pros and cons of such systems?
The World Bank Page 8Finance and governance reforms
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Input-based financing often goes hand-in-hand with lack of clarity on important questions
Who is responsible for identifying failing schools and
turning them around?
Who is responsible for identifying failing schools and
turning them around?
Who is responsible?Who has an incentive
to be proactive?
Who is responsible for ensuring that innovations gets
spread and adopted?
Who is responsible for ensuring that innovations gets
spread and adopted?
Someone may be formally responsible but does he/she have
an incentive to be pro-active?
-> With input-based financing, the answer
is often no or unclear!
Someone may be formally responsible but does he/she have
an incentive to be pro-active?
-> With input-based financing, the answer
is often no or unclear!
Who is responsible for reducing student drop outs?
Who is responsible for reducing student drop outs?
Who is responsible for ensuring that resources are
spent wisely?
Who is responsible for ensuring that resources are
spent wisely?
Is the responsible person
(financially) empowered to do something about
problem?
Input-based financing places
education managers in a straight-jacket: they have very
limited ability to respond to new problems and
innovate
Input-based financing places
education managers in a straight-jacket: they have very
limited ability to respond to new problems and
innovate
The World Bank Page 9Finance and governance reforms
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Answer: a per capita financing system provides better incentives
Municipality
School
Local government
School
Ministry of Education
One block of money based primarily (but not
exclusively) on how many students are
located in municipality
School
x
The World Bank Page 10Finance and governance reforms
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Does this logic work in practice?
Case study: Bulgaria’s finance and governance reforms 2006-2009
The World Bank Page 11Finance and governance reforms
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Mathematics performance of eight graders in TIMSS, 1995-2003
NMS (1995), 510
NMS (2003), 508
420440460480500520540560
Bulg
aria
Hung
ary Czec
h
Slov
ak
Latv
ia
Lith
uani
a
Slov
enia
Neth
erlan
ds
Unite
dSt
ates
Swed
en
Selected new member states .
1995 2003 NMS (1995) NMS (2003)
Bulgaria (2005) Challenge 1: Quality had fallen and was seen as unacceptably low
The World Bank Page 12Finance and governance reforms
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Real expenditure per student and TIMSS math scores
0
20
40
60
80
100
120
140
160
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
(ind
ex, 1
995=
100)
450
460
470
480
490
500
510
520
530
540
(TIM
SS s
core
)
TIMSS (Math)
Expenditure per student(real, index 1995=100)
Challenge 2: More money wasn’t (yet) buying better quality
The World Bank Page 13Finance and governance reforms
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The reforms
1) Finance: Introduce per capita finance
2) “Safe-guards”: support municipalities in the transition process and ensure that access.
3) Governance: revisit rules and regulations
4) External evaluation: introduce external assessments to monitor the quality of education
The World Bank Page 14Finance and governance reforms
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Reforms led to improvements in efficiency…
Reformyears
10.0
10.5
11.0
11.5
12.0
12.5
13.0
13.5
14.0
14.5
1991
/92
1993
/94
1995
/96
1997
/98
1999
/00
2001
/02
2003
/04
2005
/06
2007
/08
(stu
dent
-tea
cher
rat
io)
The World Bank Page 15Finance and governance reforms
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…a significant improvement in the composition of spending…
2009
Compensation, actual (w/ reforms)
60%
Non-compensation
40%
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…and freed up significant resources which could be reallocated within the sector
-> In Bulgaria, the sector gets to keep the savings and can now ask: where are these savings best re-invested to raise quality of learning!
3.70
3.80
3.90
4.00
4.10
4.20
4.30
4.40
2005 2006 2007 2008 2009 Budget
2010forecast
(sha
re o
f GD
P)
Cost on education with reforms
Cost of education without reforms (ie counterfactual)
Amount “freed up”
The World Bank Page 17Finance and governance reforms
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BUT WHAT ABOUT?
Concerns:
Impact of school closures?
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Concern: what about access?
School
x
Ministry of Education
Municipality
School
School
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Possible solutions to concerns regarding access
Ministry of Education
School
x
Municipality
School
School
+
The World Bank Page 20Finance and governance reforms
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There are four pillars behind successful finance and governance reforms
Incentives to accelerate
optimization
Addressing concerns
before they materialize
Design issues
Political and administrative leadership and
cooperation
The World Bank Page 21Finance and governance reforms
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Initial design is important…
Articulate your vision in a multi-year action plan. Given that their role will change, stakeholders need to know where you are heading
– In Bulgaria, the Minister started the reforms by articulating the vision in a strategic document (2006-2015) which was passed in parliament.
Know that there are different per capita models to choose from but there are “do’s” and “don’ts”!
Do– Consider different models: to municipalities or to schools? [e.g.
Bulgaria vs. Georgia]– Consider different paces and implementation schedules: [e.g. start
with pilots, in certain areas, types of schools, allow for long/short transition period]
– Consider different formulas: distinguish by types of students (primary vs. secondary, poor/non-poor, different-mother tongue etc) or structural features of municipalities (e.g Bulgaria)
Don’t- Differentiate per capita amount by features within the control of
education planners/principals! [e.g. don’t give more money to “small schools”, schools with poor insulation etc]
- Make the formula too complicated!
Design
The World Bank Page 22Finance and governance reforms
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…but is not enough
Think through intended and unintended impacts of the reform and be prepared with measures to provide support, e.g
– Principals will need training. Bulgaria established an Institute for School Directors which, immediately, started providing ad hoc courses.
– Municipal education officers will need hand-holding (seminars, training materials, information campaigns)
– Teachers will need to be brought on board [this wasn’t done so effectively in Bulgaria]
– How are you going to ensure quality education? (i.e. education is not just about saving money!!)
– School closures are likely to increase. Be prepared with a strategy to support this process
Address concerns
before they materialize
The World Bank Page 23Finance and governance reforms
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You need to be proactive in designing programs to address concerns
Addressing concerns that switch to per capita finance will lead to a deterioration in quality– Commitment to rigorously monitor quality of education– Identify the cause of the concern? What exactly is the
fear? • Recognize that closing small schools may be a good thing for
quality• Recognize the weaknesses of input-based financing from a
quality perspective! – SEE NEXT SLIDE
The World Bank Page 24Finance and governance reforms
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Preparing a program to address concerns related to school closures is essential
Addressing concerns that arise with school closures– Transportation of children
• Bulgaria introduced a program to supply municipalities with busses
– Provide funds to rehabilitate/expand “receiving” schools– Concerns about safety of children
• No simple fix! Listen and allow municipalities to experiment with local solutions.
– Safeguards to ensure that access isn’t impaired as a result of school closure
• Introduce notion of “protected schools”• Review and strengthen your procedures and consider expanding
staff who will be involved in reviewing applications• Built in mechanisms to do ex post evaluations: track students to
their new schools!
The World Bank Page 25Finance and governance reforms
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Complement per capita finance with “sticks” and “carrots”
Introducing per capita finance may not be enough to accelerate school consolidation: it sets in place the right incentives but it could still take years for municipalities and schools to respond to those incentives (especially if you are not careful in the way the per capita formula is designed (again, for discussion)).
Think of additional sticks and carrots to accelerate the process
Sticks: tighten the screws! – Set per student amounts low to force
municipalities to take action Carrots: Create generous national programs to
support the process (e.g. bus program, rehabilitation of school program, severance program to teachers)– Require that municipalities close down/ merge a
school to receive funds from program
Incentives to accelerate
optimization
The World Bank Page 26Finance and governance reforms
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Strong political leadership and cooperation is required
Strong political leadership is needed: Closing schools and laying off teachers are unpopular decisions! -> You need a broad political consensus that the quality of
education will not be improved unless some drastic measures are done.
– In Bulgaria, (i) the current minister of education is also the deputy prime minister and leader of one of the main coalition parties; and (ii) his strategic vision was passed in parliament before the reforms began.
– Be willing to face down strikes! [6 weeks in Bulgaria] and protests over school closures
Interministerial cooperation is critical. These reforms are complicated and require knowledge and skills from ministry of education, ministry of finance, and the statistical office.– Ad hoc collegial interministerial teams of trouble-shooters
was established in Bulgaria. – Flexible funds were available from newly established
Director’s Institute to conduct seminars and provide training.
Political and administrative leadership and inter-ministerial
cooperation