case study of per student financing: macedonia session 11 education policy reform course kiev, march...

Case Study of Per Student Financing: Macedonia

Session 11Education 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 Herczyński Macedonia case study 2

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


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)


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


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


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


Fiscal decentralization 4

• First Phase started on July 1, 2005• Selected 42 out of 83 municipalities begun

Second Phase on September 1, 2007• 9 more municipalities entered Second Phase

on Janury 1, 2008 • It is expected that all municipalities will

enter the Second Phase in 2009 or 2010


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


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


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


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 processJan Herczyński Macedonia case study 12

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


Education grants 2

July 2005 to December 2006

Categorical grant for primaryCategorical for secondaryCategorical grant for student transport

January to August 2007

Categorical grant for primaryCategorical grant for secondary

Since September 2007

Categorical grant for primaryCategorical grant for secondaryBlock grant for primaryBlock grant for secondary


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



• 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



Categorical grants for primary education:• Lump sum for all municipalities• Additional weights for students in sparcely

populated municipalities: below 25 pers./sq. km.: 0.625 to 40 pers./sq. km.: 0.440 to 70 pers./sq. km.: 0.2


Allocation formulas 6Block grants for primary education:• Lump sum for all municipalities• Additional weights for population density:

below 20 pers./sq. km.: 1.420 to 35 pers./sq. km.: 0.835 to 70 pers./sq. km.: 0.6

• Weight 1 for special needs students, 0.2 for subject teaching



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: 0.1Jan Herczyński Macedonia case study 19


Block grants for secondary education:• Lump sum for all relevant municipalities• Weight for general academic schools: 0.1


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


case study of per student financing: macedonia session 11 education policy reform course kiev, march...

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