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The World Bank Finance 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

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

…and there is lack of flexibility in the budgets allocated to education

Bulgaria 2005

Compensation71%

Non-compensation

29%


The World Bank

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

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

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

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

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

Answer: a per capita financing system provides better incentives

Municipality

School

Local government

School


One block of money based primarily (but not

exclusively) on how many students are

located in municipality

School

x


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Does this logic work in practice?

Case study: Bulgaria’s finance and governance reforms 2006-2009


The World Bank

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

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

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

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

…a significant improvement in the composition of spending…

2009

Compensation, actual (w/ reforms)

60%

Non-compensation

40%


The World Bank

…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”


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BUT WHAT ABOUT?

Concerns:

Impact of school closures?


The World Bank

Concern: what about access?

School

x


Municipality

School

School


The World Bank

Possible solutions to concerns regarding access


School

x

Municipality

School

School

+


The World Bank

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

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


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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

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

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

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

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

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