What are the problems facing the current arrangement for financing and providing public education?

1. Under investment in education.
The budget share for public education declined from 1960-1980 in most regions. This
was attributed to two major world recessions of 1974-1975 and 1980-1983.During this
period, most countries found it difficult to contend with the consequent tight finances and
more so in Africa where education share has remained stagnant for a long time, hence
some regions have experienced substantial declines between1975 and1983. Private
spending on education has also declined in most countries therefore under investment in
education is reflected not only in the form of shortage or in the new school places but
also in under spending in certain current expenditures. The allocation of total national
resources in education is not consistent with investment priorities in this sector.
In general, the returns to investment in education justify further increases in the resources devoted to education.
Educational development is low in many developing countries and rapid population
growth will continue to tighten the pressure on existing educational systems e.g. 8.4.4.

2. Misallocation of resources across levels of schooling
Existing empirical evidence derived from the effect of education on earnings and
products shows that investing in primary education returns twice as much as in higher
education. Since social rates of return to primary education are higher than those to
secondary or tertiary education, then primary education should receive the highest
investment priority followed by secondary then tertiary. Yet governments in these
developing countries heavily subsidies higher education at the expense of primary
education. The present financing arrangement contribute to the misallocation of resources devoted to education in the sense that the high degree of public subsidies of tertiary education increases the demand for higher education, the relatively less socially efficient
(profitable) educational investment is realized by individuals and this does not benefit the
society as much as the primary level would. For example, university education in Kenya has the highest private rate of return at 19.7% and the lowest social rate of return at 5.7% making it the level with the widest gap.

3 Inefficiencies within schools or institutions
The current financing criteria also result in resources not being used in schools as
efficiently or optimally as they might be.
Public spending in LDC’S is channeled to schools and institutions according to a
standard funding formula that do very little to encourage staffing rules, pay scales and
allocation for other school inputs which are normally fixed so that such principal’s or
head teachers have very little budgetary leeway. And often too little is spend on other
inputs relative to teachers’ salary. The mix of purchased inputs such as teachers’ services
and other school materials is usually inefficient. However, in such cases the same amount
of funds could achieve more if allocated among other educational inputs.
Inefficiency also rises when lower income students with good learning potentials are not
able to secure places at the next grade or level either because they dropout because of
economic reasons or they cannot be able to compete with students from higher socio- economic backgrounds. Although many countries provide free education at the primary level like Kenya did in 2003, talented students from poorer homes still find it hard to enroll because they cannot afford to forego income or pay for the text books, transport, uniforms and other
incidentals .The lack of credit market for education makes this problem even worse.
Since poorer students cannot borrow against their future income to finance their current
education, many have to drop out.

4. Social inequalities (inequality and benefits among various income groups in the
distribution of educational costs).
The present distribution of public expenditures on education is highly unequal. The few
individuals who gains access to more education receive more subsidies than those in
lower levels (in absolute terms).Existing empirical evidence indicates that richer groups
are over represented at all levels of education but especially at the university level.
Public expenditure per student increases rapidly with the level of education especially in
the African countries where the public expenditure per student for higher education is 28
and 50 times than primary education. On average, the children of white collar workers in
developing countries accumulate 4-5 times as much of public expenditure as those for
rural workers. In general higher socio-economic group enjoy a disproportionately large share of the public expenditure on education.

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NatalieR answered the question on June 20, 2022 at 07:39