Has public spending on education been effective?

– This article was originally published by Ashesh Shrestha in The Himalayan Times on November 18, 2018.

If we look at government spending on public education in past decade, we can see that it has increased significantly. Between the period of 2007/08 and 2015/16, the education budget has grown by 26.96 percent per annum, adjusted for inflation. The reasoning given for the rise in government’s spending on education is that education spending leads to formation of human capital causing the rise in productivity of labour.  But, an important question that arises is, would invariably increasing the education expenditure will have this effect. One of the ways to know is by testing the effectiveness of the government spending on education by looking at the relationship between the spending and educational outcomes.

Two important variables which can be considered for testing the effectiveness of educational spending are total enrollment of students in community/ public schools and the pass rates of the students in these schools. For educational spending in the community schools to be effective there would have to be strong positive correlation between educational spending and these variables.

Relationship between educational expenditure and total enrollment

The relationship between educational expenditure and total enrollment of students in schools is generally expected to be positive. As one of the major objective of the government in its plans is also to increase the level of enrollment in schools, the total budget allocated in the education sector has also been rising. But a study conducted by Samriddhi Foundation has shown that there has not been significant rise in total enrollment of the students in community schools. The enrollment trend of last eight years shows that the total enrollment in community schools has been more or less stagnant. However, inflation adjusted educational expenditure shows an increasing trend over the years. Comparing the trends of these variables, we can see that government spending has no effect on enrollment of the students in these schools. Furthermore, the same study has also conducted correlational analysis between these variables which shows negative association between educational expenditure and total enrollment in community schools.

Relationship between educational spending and educational outcome (pass rate of students)

Educational outcomes or pass rate of the students is an important measure of the effectiveness of educational spending. Increase in education expenditure must result into improvement in the quality of education leading to attainment of higher educational outcomes. But there seems to be no substantial relationship between educational expenditure and total number of passed students. Instead of the showing positive association over the years, these variables seem to be have been moving in opposite direction. The negative association has shown that increase in educational spending in public education has not led to increase in pass rates.

As both total enrollment and total number of passed students are not positively associated with government’s spending on education, we can seriously question effectiveness and efficiency of current system of financing public education. In order to make spending on public education effective, therefore it becomes necessary to diagnose the problems that exist in public education system and the method of financing it.

The centralized financing of public education is one of the reasons that many public schools have not been able to deliver the desired result. As the funds to be spent on various headings are allocated centrally and as the public schools do not have the autonomy with regards to the utilization of funds, this has led to misallocation of resources. Under some headings, the schools receive lesser amount of funds than required, whereas under other headings schools receive more amount of funds than required. This has led to inefficiencies in public education in Nepal.

Similarly, in the current financing mechanism, parents are nowhere involved. As parents are not involved in the process, they are least concerned about their children’s education. They think that government is solely responsible for their children’s education. As parents are not much concerned, the performance of the students in public schools has also been poor. Similarly, various other problems like mismatch between demand and supply of commissioned teachers also exist in the public schools.

In order to make educational spending more effective and efficient, the government should focus on improving the existing model of financing public education. The schools should be given more autonomy with regards to allocation of budget under various headings as required, parents should be made involved in financing education as it will make them more responsible towards their children’s education. Similarly, we can also look for alternative models of education like voucher and charters which have been successful in many countries. Instead of increasing the budget that goes into education, bringing reforms in the educational system would help to bring better educational outcome and create better human capital in the long run.