For each level of government, there is a separation between where money comes from (“initial funds”) and where money ends up being spent (“final funds”). Considering a local area as an example, money can be raised by the local government by taxing its local citizens, setting aside funds for its schools. But when it comes to the money this local area spends, there may be extra money sent by higher levels of government (or other stakeholders) to be used on education. To summarise, initial sources show the financial cost for a specific government level, while final sources show its responsibility for allocating money that will be spent.
Public funding for education faces the challenge of ensuring both efficiency and equity
Use and allocation of public funds for education
When public budgets face more pressure, governments seek to channel funding to schools, colleges, universities and private stakeholders in a way that uses funding efficiently while keeping equitable distribution in mind. Money can pass through different levels of government. It is important to consider the way these transfers work and who decides where the money is spent when deciding on public funding systems for education.
Key messages
In primary and secondary schools, a significant part of central government funds is transferred to local governments, complementing revenues raised locally. Such a decentralised system relying on local revenue has benefits, such as more autonomy and better responsiveness. Sometimes, it unfortunately leads to unequal educational opportunities if less is spent on students in some areas, which can be seen in subnational data. Designing workarounds through measures that allocate additional funding to areas most in need can help to rebalance the spending.
When we see salary costs rise, they hide a combination of changes in the following four factors: salaries, instruction time, teaching hours and class sizes. If policymakers wish to keep overall salary costs the same, a change in one of these factors, such as an increase in teaching hours, may force adjustments in the other factors, such as an increase in class sizes. Policymakers should think about other factors affecting teacher quality on top of direct pay, such as job security, pensions and how fast direct pay grows throughout the teaching career.
Context
Various factors to salary costs of teachers per student in public institutions at primary level in 2021
This figure shows groups of countries, depending on teachers’ salary costs, ranging from high (on the left hand side) to low (on the right hand side). The contribution of different factors to the salary cost of teachers varies across countries – for example higher salaries drive costs up, while larger theoretical class sizes drive costs down.
Contribution of various factors to salary cost of teachers per student in public institutions, primary education (2021)
Share of current expenditure devoted to staff, by level of education
A majority of current expenditure-a type of funding spent on resources regularly needed throughout the year to maintain the school ecosystem- is spent on staff, from teachers’ salaries to librarians’ retirement pensions. Governments dedicate a lower share of total current expenditure to teachers at the tertiary level, not necessarily indicating that less is spent on teachers at this level but likely that tertiary institutions have a variety of other expenditures that do not exist for other grade levels.
