This document discusses financing models to promote equity in education. It argues centralized financing based on historical allocation promotes separate schools for students with specific needs, while decentralized financing based on categorical equity emphasizes fairness of allocation but does not support inclusion. The best model is decentralized financing based on fiscal neutrality, which funds both integration and differentiation of supports. This approach finances mainstreaming of students rather than segregation.

1. Equity of Financing
and
Financing for Equity
The best fit of financing to a more equitable
education system
Péter Radó
educational policy specialist
senior consultant, Expanzió Consulting Ltd.

2. E
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3. F
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Two competing basic principles
Categorical equity:
unit cost (standardized inputs) are emphasized and
equalized (the traditional access-oriented framework)
Fiscal neutrality:
learning outcomes and choice are emphasized, inputs
are adjusted (financial argument for decentralization)

4. K
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Governance
The systemic
environment
that determines the
latitude for school
operations
The quality of
teaching
and schools
School System
Characteristics
External challenges
with high impact on the
school system

5. E
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• The magnitude of school failure in Serbia: more than fifth of
students do not reach secondary enrollment, nine out of ten
Roma children do not complete primary, more than half of the
15 years olds are functional illiterates = education gets rid of
the most „problematic” children and offer poor average quality
to the rest.
• Large inequities and poor average quality is caused buy the
combined effect of the failure of schools and governance
failures
• Distinction between medium- and long-term policy objectives.
– Medium-term: improving participation (increased
enrollment, decreased dropout and early school leaving)
– Long term: improving learning outcomes (reduced learning
failures)
• Primary objective: enabling schools to respond to equity
challenges by placing them to the appropriate systemic
environment and by empowering them with the necessary
pedagogical and institutional capacities

6. P
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Overcoming governance failures
• Making school failures visible, strengthening professional
accountability
• Generating vested interests for avoiding school failure
• Making easily accessible professional support to schools
and children available
• Extending the scope of professional, organizational and
financial autonomy of schools
• Effective anti-discrimination measures, strengthening legal
accountability
Acculturation of schools (teaching + school operations)
• Making teaching more differentiated
• Providing individualized supplementary support (drop-out
prevention, inclusion)
• Adjusting school operations to the problems to be solved
(self-evaluation based school improvement)

7. The potential of normative financing
The decline of dropout in primary education in Hungary after
introducing per capita financing in 1991.
School year Completion rate Number of school
leavers without
completed primary
1990/91 92,9 10300
1991/92 93,5 12400
1992/93 94,5 10000
1993/94 96,1 6800
1994/95 96,0 6600
1995/96 96,8 5000
1996/97 96,5 5200
1997/98 95,2 5000
1998/99 96,2 5200
1999/00 97,5 5000

8. How can be the vested interest of schools
in full enrollment created?
• Per capita based financial allocation
+ Setting hard budgetary constraints (it’s not
automatically flows from normative financing!)
+ Perpetual adjustment of the capacities to the
declining number of students enrolled (= local
ownership instead of brainless central school
network rationalization campaigns)
→ Two layers financial allocation system

9. Financial relationships at two levels
Central financing
Technically easy automatism that
ensures minimum level efficiency
+ allows for flexible local financing
regimes with revenue sharing +
allows for using financing as policy
instrument
Local financing
By balancing incomes and cost
harmonizes the distinct logic of
central financing and school level
planning + allows space for
adjusting to the diversity of local
and school level diversity of
educational needs

10. S
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Financing for mainstreaming
Centralized financing on a historical basis: schools
are financed regardless of the task they perform
(→ pupils with specific needs are taught in
separate schools)
Decentralized financing on the basis of categorical
equity: emphasis of fairness of allocation
↔integration is financed but not inclusion → no
space for ensuring fairness of outcomes
Decentralized financing on the basis of fiscal
neutrality: mainstreaming is financed = integration
+ differentiation + individualized supplementary
support

11. A
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The evolution of Roma educational policies
• „Paper based” demonstration policies
– Success reports for the international community
– Financing: long list of small-scale grass-root projects
mainly funded by the donor agencies
• „Ghettoized” policies
– Roma education strategies or medium-term working plans
(compilations)
– Financing: set-aside for small grants + scholarship
schemes + limited resources for development
• „Mainstreamed” policies
– Operationalization and implementation of mainstream
strategies
– Financing:
• Roma education is a „horizontal goal”
• Funding is incorporated to the normal allocation
system (i.e. incentives)
• Direct costs of development