Education Spending

1. Reorienting education
spending  better outcomes

2. Education Spending:
The extremely fragmented education system in BiH is
expensive in terms of unit costs and inequitable in
terms of who benefits from funding. High costs are
leading to system breakdown (teacher strikes) and
mounting arrears. Despite high spending,
educational outcomes (the relevancy of what children
learn) are thought to be poor.

3. Public education expenditures are
high
 Education spending as a share of GDP is high in BiH,
especially in the Federation of BiH, compared with
average spending in transition CEECs and in EU countries
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4. Unsustainable spending is driven by
high unit costs
 High spending reflects high unit costs at all education levels
relative to per capita GDP, which is twice as high in BiH as in
Europe—unit costs at secondary and higher levels are especially
high
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Federation RS Avg.Europe
Primary Secondary Higher

5. The System is Characterized by Extreme
Inefficiency
 Higher Education is highly fragmented and poorly managed
 the cost per graduate in all higher education institutions is
unsustainable —reportedly, only 15-20 percent of university students
graduate on time – far below European standards
 the fact that universities operate as loose associations of independent
faculties leads to redundancy, inefficiency, and ultimately low quality
 the creation of separate universities for political reasons also creates
redundancy and inefficiency, and is a major contributor to low quality
programs
 managing higher education institutions at the canton level is inherently
inefficient and ultimately unsustainable if quality is deemed more
important than political ownership

6. The System is Characterized by Extreme
Inefficiency
 Expensive Secondary technical and vocational education is
externally and internally inefficient
 External inefficiency: over 50% of secondary children are locked into
learning specific occupations for which there are no jobs; rather than being
given flexible skills for a modern economy
 Internal inefficiency: occupational courses are expensive due to low
student:teacher ratios and the need for specialized equipment

7. The System is Characterized by Extreme
Inefficiency
 Input-based funding (focusing only on teachers,
books and materials) encourages inefficiency
 A focus on teachers has lead to salaries crowding out all other
spending and low student teacher ratios
 The focus on inputs detracts from what is really important:
what students are learning
 A per student formula approach is needed to provide an
incentive to use resources (teachers, school buildings, etc.)
more efficiently

8. Public Education Expenditures are
inequitable
 Wide disparities in per capita
and per pupil education spending
reflect differences between economic
development and fiscal capacities
 Public spending for higher education benefits almost exclusively higher
socioeconomic levels and people who will find the best jobs; this inequitable
situation is exacerbated by the fact that the best students–who are strongly
correlated with higher socioeconomic levels--are given free admission to
university
 There are also wide disparities in the availability of academic or general
secondary education; the fact that over 50% of secondary students are enrolled
in three year occupational programs which offer inflexible skills and limited
potential for employment creates a vicious circle of poverty and unemployment
Federation Federation Federation Federation RS
Central Bosnia Sarajevo Tuzla Neretva
Primary 669 1,098 757 800 623
Secondary 950 1,358 813 1,188 507
Tertiary -- 1,282 1,529 553 1,266
Source: Official data.
Table 4.14 Public Spending Per Student by Level of Education (KM) Selected
Federation Cantons and Republica Srpska (2001or latest available)

9. Public Education Outcomes and Quality
are Reported to be Low
 Curriculum and the structure of education are
increasingly out-of-date
• The emphasis is on transmission of factual information rather than
building skills and competencies and teach children how to learn
• As mentioned, the secondary vocational curriculum is excessively
specialized and inflexible
• Students are tracked into academic and vocational streams at age 15
while European countries are rapidly moving away from such practice

10. Public Education Outcomes and Quality
are Reported to be Low
 Enrollment rates in secondary are dramatically low—enrollment
is about 57% at secondary in the Federation of BiH and much lower in
RS, compared to well over 90% throughout Europe
 Little evidence-based information exists on the quality of
programs: a Standards and Assessment Agency has only recently
been established to measure quality in general education, and
accreditation and quality assurance is almost totally lacking in higher
education

11. The Financial Dilemma
According to the macroeconomic framework agreed with the
IMF, recurrent spending in Bosnia will not increase over the
next 3-4 years, and will only increase after that depending on
future economic growth. Therefore, current levels of public
spending on education in Bosnia will not grow in the
medium term. At the same time enrollment rates for
secondary and higher education must increase and quality
must improve. Consequently, there are two options open to
policy makers:
1. increase efficiency in secondary and higher education; and
2. increase non-public funding for education.

12. Increasing Efficiency
Efficiency must be increased in three priority areas:
1. expensive specialized secondary vocational programs must be
gradually eliminated and replaced with general programs for
which student:teacher ratios can be increased;
2. higher education must be funded at the State or Entity level,
universities must be quickly consolidated under a European
standard central management and the number of redundant
programs reduced, and students must complete degrees faster;
3. the introduction of per student funding formulas at all levels
must provide incentives for efficiency at all levels

13. Message
If politicians in BiH do not overcome their
political differences and cooperate to reduce
redundancy and increase efficiency,
participation rates in secondary and higher
education will continue to be below European
standards and the quality of education will
continue to be low for the foreseeable future.

14. Non-Public Funding for Education
Increasing non-public funding for education can be
achieved by introducing fees for higher education FOR
ALL STUDENTS WHO CAN PAY and introducing a loan
scheme and scholarships for the poor, as well as
encouraging both secondary and higher education
institutions to find ways to supplement their revenue,
which they are already in part doing

15. Message
Establishing universal fees for higher education
and gradually increasing them over time is a
necessity in BiH if the quality of higher
education is to improve. There is simply no
additional public funding with which to improve quality
and increase enrollments. As nearly 50% of students in
the most prestigious faculties pay significant fees
already, the political difficulty of such a policy change
may not be as great as expected.

16. The Reform Agenda
The following policy actions are necessary in the short term:
 Adopt State or Entity level management of higher education
 Transfer legal authority for university management from the faculties to
the university
 Establish universal fees for higher education and increase them over time
(together with a scholarship and loan scheme)
 Introduce per student formula funding mechanisms at all levels of the
system
 Transform the 3-year occupational programs in secondary to 4-year
broad-based programs
 On the basis of increased efficiency from the above reforms, increase
enrollment in secondary and higher education and measure improvements
in quality over time