ECONOMICS OF EDUCATION: What are some of the challenges facing public financing of education?6a iii).

CHAPTER SIX

FINANCING EDUCATION

6a iii). Examine some of the challenges facing public financing of education

Challenges Facing Public Financing of Education:

1. Misallocation among education sub-sectors:

Public spending on education is often inefficient when it is misallocated across levels and within levels. In low and middle-income countries, the rates of return to investment in basic education (primary and lower secondary)are generally greater than those to higher education. Therefore, basic education should ideally get priority when it comes to public spending in education especially in countries that are yet to achieve universal enrolment in basic education. However, in most of these countries, spending per student is titled in favour of higher education students were subsidization is still very high. This subsidization increases the demand for higher education even though education at that level is generally less efficient for society as a whole in countries that have yet to achieve UPE and basic secondary education. Subsidization of Higher Education is most acute in Africa. Although private rates of return to higher education are 2.5 times higher than social rates, public spending per student in higher education in Africa is about 44 times spending per student in primary school.

2. Misallocation within subsectors

Inefficiencies which are prevalent within all education sub-sectors reflect an inefficient mix of input such as staff and instructional materials. For example, in Kenya and many other developing countries, about 80% of the public education budget is consumed by salaries for teachers and education personnel leaving very little for the acquisition of vital teaching-learning resources. Schools in low and middle-income countries could save costs and improve learning by increasing student-teacher ratios. They would thereby use fewer teachers and would be able to allocate resources for teachers to other inputs that improve achievement e.g. textbooks, in-service teacher training etc. the scope of improving efficiency through modest increases in student-teacher ratios is enormous because teacher costs typically account for 2/3 of total spending in education in most developing countries.

3. Inequitable public spending:

Public spending in education is inequitable when qualified potential students are unable to enroll in institutions due to lack of educational opportunities or because they are unable to pay or obtain financing, e.g. in Kenya only 10,000of the 60,000students who qualify for university admission get government funding.

Similarly, although public spending on primary education generally benefits the poor, total public spending on education in low and middle-income countries often favors the rich mainly due to the fact that relatively fewer poor children attend secondary and higher education institutions. Spending more public funds per higher education students than per primary student is inefficient in most countries as the social rates of return to primary education are higher than those of higher education, especially in counties with less than universal primary and secondary enrolments. It is also inequitable that those students who gain access to higher education receive a larger absolute subsidy that those at lower levels bearing in mind that higher education students come disproportionately from richer families which are better able to pay for higher studies.

4. Inadequate funds for education.

Although many developing countries devote almost a 1/3 of their national budgets to education, the funds are in a majority of the cases inadequate due to the numerous educational needs at all levels of education. This usually results to a thin spread of the financial resources allocated to education thereby comprising effectiveness.

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