Introducing Budget Norms for the Education Sector -A Concept Note- Jean-Marc Lepain Intergovernmental Fiscal Advisor Manilay Thiphalansy Research Consultant
Objective of the Concept Note• To define the policy framework for budget norm implementation in the education sector;• To define budget norm formula structure• To identify technical issues associated with budget norms implementation (linkage with fiscal policy, integration with school block grants, user fees, etc.)• To identify issues with the expenditure assignment,• To streamline the budget formulation process
Types of Budget Norms• Non-wage Norms for the Central Budget• Non-wage Norms for the Provincial Budget• Non-wage Norms for school block grants
MTFF Fiscal Planning Process Sector Ceiling Provincial Ceilings MTEF Budget Norms Provincial BudgetSector Provincial Plan Cost Units
Parameters and Indicator for setting non-wage budget norms• International standards for non-wage expenditures• Fiscal capacity of the Government: fiscal envelope• Equalization needs,• Education Development Index• Provincial disparities in enrolment rate• Provincial disparities in the number of student per teacher• Remoteness• Poverty
Education Development IndexThe Education Development Index (EDI) reflects four of the six “Education For All” goals: universal primary education, adult literacy, quality of education and gender parity.• Universal primary education is measured by the total primary net enrolment ratio (NER) which reflects the percentage of primary school-age children who are enrolled in either primary or secondary schools.• Adult literacy is measured by the Adult Literacy Rate (ALR) measuring the percentage of people over the age of fifteen who can read.• Quality of education is measured by the percentage of students who complete grade 5.
Macro Fiscal Parameters for the Fiscal Envelope• International standards for non-wage expenditure: between 20% and 35%. The higher the share of total education in GDP the lower the ratio is.• Present ratio Non-Wage Exp. /Recurrent Budget: 9.4% in FY2009/10• Equalization requirement for 14 provinces: 12%• ISDF Requirements: 35%• Short term objective: 22%-26%• Medium term objective (3 to 5 years): 30%
EDI Expenditure Need Ratiop1, p2 and p3 are expenditure need ratios based on the Education Development Index (EDI). Provinces have been grouped in three categories:• p1 for more advanced provinces with an EDI above 0.87• p2 for intermediary provinces with and EDI between 0.87 and 0.81• p3 for less advanced provinces with an EDI below 0.81
Scope of Budget Norms and Programme Grouping• First component (St): pre-schools, elementary schools and lower and upper secondary schools and informal training programmes• Second component(StU): all higher education institutions under the authority of MOE including teacher training• Third component(StV): all vocational training schools
Budget Norm FormulaPEA is the provincial allocation for the education sector PEA = p(St x A) + (StU x B) + (StV x C)A, B and C are fix amount per student
School Block Grant• Will ensure that the funding through the Provincial Education Allocation (PEA) is allocated to school on a fair and equitable basis.• Will be available for financing line-item expenditures of chapter 12 and 16 plus line- item 13.03.01.• Will pave the way for the complete relinquishment of user fees.
Development Grant• Earmarked grant not included in the Provincial Education Allocation• Target: poor districts• Purpose: school feeding programme, scholarship programme and other actions for poverty reduction or education quality improvement• Not exclusive of other grants
Expenditure Assignment four dimensions• Dimension 1: Responsibility for delivering services• Dimension 2: responsibility for administering the service,• Dimension 3: responsibility for financing a service• Dimension 4: responsibility for setting standards, regulations or policies guiding the provision of services
Revision of the Expenditure Assignment• Dimension 3 (Financing) will be affected by the introduction of block grants;• New regulation must be issued for user fees. Some user fees (not all) must be integrated in the provincial budget as revenue and accounted for.• Respective responsibilities of central ministries and provinces must be clarified in respect to planning.• Regulatory mechanism must be introduced to link local plan to national plans and to budgeting.• Reporting responsibilities must be completely revised.
Revision of the Budget Formulation Procedures• Bring the central budget formulation cycle and the provincial budget cycle closer;• Introduce a sector approach of budgeting;• Introduce elements of programme budgeting;• Ensure a better linkage between planning and budgeting, using quantitative and qualitative objectives.