Case Study of Per Student Financing: Macedonia Session 11 Education Policy Reform Course Kiev, March 26, 2008

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Case Study of Per Student Financing
MacedoniaSession 11Education Policy Reform
CourseKiev, March 26, 2008

• Jan Herczynski

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Structure of the presentation

• Political decentralization Ohrid agreements
• Phases of fiscal decentralization
• Education decentralization strategy
• Allocation formulas
• Impact on municipalities

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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

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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)

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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

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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

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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

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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

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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

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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

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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

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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 process

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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

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Education grants 2
July 2005 to December 2006 Categorical grant for primary Categorical for secondary Categorical grant for student transport
January to August 2007 Categorical grant for primary Categorical grant for secondary
Since September 2007 Categorical grant for primary Categorical grant for secondary Block grant for primary Block grant for secondary
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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

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Allocation formulas 4

• 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

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Allocation formulas 5

• Categorical grants for primary education
• Lump sum for all municipalities
• Additional weights for students in sparcely
  populated municipalities
• below 25 pers./sq. km. 0.6
• 25 to 40 pers./sq. km. 0.4
• 40 to 70 pers./sq. km. 0.2

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Allocation formulas 6

• Block grants for primary education
• Lump sum for all municipalities
• Additional weights for population density
• below 20 pers./sq. km. 1.4
• 20 to 35 pers./sq. km. 0.8
• 35 to 70 pers./sq. km. 0.6
• Weight 1 for special needs students, 0.2 for
  subject teaching

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Allocation formulas 7

• 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 0.1

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Allocation formulas 8

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

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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