Credit: Educate a Child

Missing the Bulls Eye -- Financing Education in an Unfair World

Why it’s important to fix how education expenditures are allocated

Thomas Piketty’s new book Capital in the Twenty-First Century isn’t remarkable for documenting the massive growth in inequality. Others have done that. The buzz around the book is rather because he shows that such growing inequality is part of the natural order of a capitalist world. A legitimate role for the State must therefore be to act to offset this natural tendency. In many countries a combination of progressive tax policies and in-kind transfers, such as through the delivery of social services and social safety net programs, are deployed to offset inequities. In low-income countries, however, where tax administration and social security systems are weak, providing access to services, and especially to education, is one of the few effective vehicles to address inherent biases and prevent the intergenerational transmission of poverty.

Quality education is key

So providing equal access to quality education is surely the least that governments should do. Getting the number of out-of-school children to zero is a necessary prerequisite for getting to zero poverty and fulfilling the “no one left behind agenda” set out in the High Level Panel Report for the post 2015. So it is no surprise that inclusion in education is one of the key themes of the Global EFA Meeting (GEM 2014) this week. Sufficient and well-targeted financing for education will be a key component in achieving equitable education for all.

Education needs sufficient resources

Smart developing country governments have also understood this, and have allocated significant resources to education.

Domestic public spending in low-income countries has grown significantly over the past decade, from 3.1 % to 4.1% of GDP. In sub-Saharan Africa, total spending on education rose from $18 to $38 billion. This is impressive by any standards.

The donor community hasn’t been doing as well. At a time when inequalities are reaching record levels and allocations for poor populations are most urgently needed, education has become less of a priority for international donors. While total global ODA for low-income countries increased by 6% from 2009 to 2012, aid for education fell by 5 %.

And while a huge unfinished agenda at the basic education level still exists, with 57 million children out of school and 250 million not acquiring basic skills, aid for basic education fell by 11%.

This was mainly due to donors' increased interest in higher levels of education, which often tend to reinforce inequalities rather than reduce them.

Increasing overall levels of education spending is not enough

How funds are allocated between and within countries can have an even bigger impact on equality than the total level of spending. Since the dawn of charity, donors have had to make choices in terms of allocating resources to where they are most needed or where they have the biggest impact. A recent analysis of aid allocations reveals that aid to education has often been poorly targeted according to need.  Among 41 countries in need, aid allocations varied from $4 per child in Chad to $63 per child in Haiti. About one-fifth of countries received less than $10 per primary-aged child, much too low to bring these countries to an acceptable level of spending on education.

Were these allocations driven by the potential for greater impact? This is rather unclear. Impact in education has been notoriously difficult to measure and often –in the case of basic education – too long term to provide a politically satisfying short term result.

There is a concern that the new focus of donor agencies on impact and immediate value-for-money may skew allocations towards the easy-to-measure rather than the longer term systemic societal and inter-generational gains.

It is clear that a more rational and coordinated approach to allocate aid resources across countries is urgently needed. This is a central function of the Global Partnership for Education.

Wealthier children should not receive more support than poor children

Global level misallocations are further exacerbated by perverse allocation rules within countries. Wealthier children often receive a much greater proportion of public expenditure than poorer ones. A Brookings study in Kenya showed that the share of the primary education budget allocated to the 12 poorest Arid and Semi-Arid Land counties was much lower than their share in the primary school-age population. In Turkana, the budget share was less than 40% of the county’s share in the school-age population. Other ongoing country studies of education spending have highlighted similar problems.

Many countries, including developed countries, have experimented with various approaches to mitigate inequities in financing for education. While there are no blueprints, and each model depends on countries’ political processes and institutional arrangements, existing experiences offer a few lessons. Often set within the context of broader decentralization reforms, reform efforts have included adjusting intergovernmental transfers from the central government to subnational units aimed at equalizing per student (or per child) expenditure. 

Many policy makers have also recognized that addressing pre-existing inequalities requires higher per student spending for disadvantaged students. Allocation formulas are thus adjusted on the basis of need (estimated, for example, based on the number of out-of-school children, poverty count, lack of access to clean water).

There are no correct or easy answers to the allocation issue. But one thing’s for sure. If children are not in school or not learning, it’s not right. And it’s not fair.

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