Modeling Fiscal Implications of Education Policies

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Part 2

• Modeling Fiscal Implications of Education
  Policies
• Sajitha Bashir
• May 3, 2006

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Structure of the Presentation

• Why model fiscal implications of education
  policy?
• Structure of models
• Choice of Scenarios
• Examples DRC and Benin
• Limitations

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What will NOT be covered

• How to build a model
• Building a model is a technical exercise takes
  time and care. But it is a tool which can be done
  by a technician
• For the PER author, what is important is to
  understand how to use this tool

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Why Undertake Fiscal Modeling?

• PER analysis should reveal areas where public
  resources are
• not aligned with government objectives
• not used efficiently
• do not promote equity
• Government Education Plan sets out objectives and
  strategies - usually without costs

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Usefulness of Fiscal Modeling in PER

• Identifies fiscal impact of measures to improve
  efficiency
• Can assess sustainability/feasibility of proposed
  plan
• Has impact on policy discussions, especially with
  Ministry of Finance

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Different Modeling Approaches

• Aggregate Fiscal Discipline
• Sectoral Expenditure Envelope set by MOF (3-5
  years) usually as part of MTEF
• Within Sector determine priorities, objectives,
  strategies (PER sectoral analysis)
• Cost Strategies
• Is it consistent with resource availability?
• Iterations alternative strategies suggest
  savings

• Simulation Model
• Set Sectoral Objectives and Strategies
  (PER/sectoral analysis/sectoral plan)
• Estimate costs
• Check macro/budget implications
• Estimate domestic resource gap compare with
  external financing
• Iterations come up with realistic resource gap

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Simulation Model

• Purpose
• Evaluate tradeoffs required to arrive at fiscally
  sustainable and technically sound educational
  strategy consistent with government objectives
  for coverage, quality, equity
• Method
• Develop different scenarios with varying
  assumptions
• Results
• Evolution of expenditures by type
• Evolution of education system (pupil numbers,
  staff, schools, classes)

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Structure of Model

• Spreadsheet all quantifiable variables of
  education system are linked to each other
• Five categories of elements
• Base year data
• Objectives
• Assumptions about macro environment
• Policy parameters
• Results

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Simple or Complex Models?

• Model whole education sector?
• Usually desirable to see sub-sectoral trade-offs
• Level of complexity should be determined by
  purpose of exercise and results of sectoral
  analysis
• If focus is on primary, more detailed strategies
  at primary level

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Limit Number of Scenarios

• Macro Assumptions x Objectives x Policy
  Parameters potentially scores of scenarios
• Choose 3 5 scenarios!
• Judgment is required base selections on
  PER/sectoral analysis
• What are the critical decisions confronting the
  government?

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Macro Assumptions

• Economic growth
• Determines public receipts, public expenditures
• Demographic growth
• Determines growth of child population entering
  primary school
• Usually invariant across scenarios

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Sector Objectives

• Pre-primary
• Population coverage
• Primary
• Entry and completion rates (usually 100)
• Secondary and higher
• Transition rates
• Years by which objectives are to be achieved can
  also vary

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Key Policy Parameters (1)

• Internal efficiency
• Repetition and drop out rates
• Service delivery targets (access/quality)
• School availability (proximity to habitation) and
  size
• Teacher pay (by category of teacher)
• Pupil-teacher ratio
• Ratio of teachers to non-teaching staff
• Use of multigrade teaching
• Spending on non-salary items
• Year for attainment of target is also variable

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Key Policy Parameters (2)

• Construction
• Type of construction (community?)
• Financing
• of enrolment in private sector (residual
  determines maximum for public financing)
• Set public financing as ratio of domestic
  resources
• Household financing in public sector (by category
  of expenditure and sub-sector) reasonable in
  relation to household income?
• External financing (by category of expenditure
  and sub-sector) - realistic?

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Illustration Democratic Republic of Congo

• Challenges limited public resources high
  dependence on private financing low coverage
  even at primary level but rapid growth at other
  levels inefficiency in public spending
• Policy issues expansion of post primary levels
  abolition of fees raising teacher salaries
• EFA plan sets ambitious objectives and strategies
  which are not costed

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DRC- Common Assumptions of Scenarios
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(No Transcript)
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DRC- Cost Saving Measures of Scenarios 3 and 4
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DRC- Impact on Education Indicators
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DRC- Expenditure Requirements (FC and 2001US )
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DRC - Preliminary Conclusions

• Universal pre-school is not feasible
• Staffing rationalization/use of multigrade
  teaching yields considerable savings
• Reducing transition rates in post primary
  education is still required
• Scenario 4 is most acceptable
• Examine relative unit costs and composition of
  expenditures to further assess suitability

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Other trade-offs are possible

• Eliminate school feeding - expensive even when
  targeted to 30 of pupils
• What is its objective ? (increase attendance?
  improve student attentiveness?) Are resources
  better used elsewhere e.g., to raise teachers
  salaries?
• Raise pupil-teacher ratio
• Stagger construction
• Raise private financing share in higher education
  (but equity trade-off)

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Benin Issues

• Primary GER 97 but high disparities between
  regions, gender and social groups
• Quality very low less than 10 percent of 3rd
  graders could read with comprehension
• Primary completion rate 46
• Repetition rate 36 in final primary grade
• Less than 2 of domestic education budget on
  books and teacher training
• Very rapid growth in higher education (mainly
  private, but also public)

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Large Differences in Salaries of Primary Teachers
Salary per teacher in ( of per cap GDP) of total teachers
Primary teachers 1 860 (4.9) 100
Permanent 3 011 (7.9) 56.1
Contractual 750 (2.0) 19.9
Community 300 (0.8) 23.9
Francophone Africa (6.3)
Anglophone Africa (3.6)
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Distribution of schools by pupil-teacher ratio in
grade 1
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Objectives for Primary Education
Goal Target Impact
Primary completion 100 (1.76 millions pupils by 2015) Classrooms/ teachers
Quality Pupil-teacher ratio  40 Teachers
Internal efficiency Repetition rate  10 Reduces rooms/teachers
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Expenditure requirements policy trade-offs

• Number of teachers will need to double
• If only permanent teachers at current salary
  levels expenditure needs will multiply by 4
• Using contractual/community teachers
  expenditures will multiply by 3
• A new statute for teachers?
• Post primary transition rate will also need to be
  reduced

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Major Reforms to Improve Quality Difficult to
Model

• Example Benin French as language of
  instruction from class 1 may be impeding quality
• Alternatives are
• use local language (18 in Benin)
• use small groups in classes 1 and 2 (teaching
  aides?)
• Use radio instruction to reinforce learning
• How do you model costs?
• Use some key cost drivers (eg additional
  teachers teacher support additional materials)

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To Improve Efficiency of Public Spending Link
with Budgetary Processes

• Usually modeling serves analytical purpose
  illustrates possible choices
• Whether it is used in practice to guide policy
  choices depends on institutional framework
• Often difficult to link with budget preparation
• Policy parameters with greatest fiscal impact
  often the most difficult to change (e.g., teacher
  pay policy, ratios of teachers to administrative
  staff)

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Address Public Expenditure Management and
Institutional Framework

• Who undertakes modeling in the sector?
• Are results evaluated by key policy makers?
• Are scenarios used in budget preparation? eg is
  discussion within MTEF framework based on these
  trade-offs?
• Is the model updated regularly?
• Is there willingness to undertake this work
  within the government?
• If so, what are capacity building requirements?