The Funding of School Education

OECD

• Publisher: OECD
• Year: 2017
• eBook ISBN: 9789264276185
• Topic: Social Sciences
• Subtopic: Sociology
• Index: Social Sciences

Chapter 1. Why look at school funding policies?1

This report is concerned with school funding policies that can help countries achieve their educational goals and student learning objectives. This chapter sets the context for the subsequent analysis. First, it highlights the importance of well-designed school funding strategies for achieving quality, equity and efficiency objectives in schooling. Second, it explores major contextual developments shaping the funding of school education across different countries. Third, it explains how this report looks at school funding and the evidence base that it draws from. The annex to this chapter provides detailed definitions and discussion of the concepts of effectiveness, efficiency and equity that will be used throughout the report.

Why school funding policies are important

Directing school funding to where it matters

The overall level of school funding matters, but funding allocation strategies are at least as important. While the ability to provide quality education for all and to respond to new priorities depends on the availability of adequate funding for education, the mechanisms through which school funding is governed, distributed and monitored play a key role in ensuring that resources are directed to where they can make the most difference.

Previous OECD (2016a) work found that while larger education budgets are no guarantee of better student results, a minimum level of spending is necessary for ensuring good quality education provision. A school system that lacks quality teachers and school leaders, adequate infrastructure and textbooks will have more difficulties to promote quality education. At the same time, the overall level of school funding does not seem to be a key factor for the success of high-performing school systems (OECD, 2016a).

Indeed, Figure 1.1 shows that among the countries with lower overall levels of school funding (falling below a cumulative spending per student threshold of roughly USD 50 000 in purchasing power parity [PPP] terms), there is an observed positive correlation between cumulative spending per student and students’ performance in the OECD Programme for International Student Assessment (PISA). Among the countries with higher overall levels of school funding, there is no observed relationship between cumulative spending per student and students’ performance. This suggests that beyond a certain level of investment what matters more is not the aggregate level of expenditure, but rather the design of education policies, the mechanisms through which funds are allocated and how these determine where additional resources are channelled.

Figure 1.1. Cumulative spending per student from age 6 to 15 and science performance, 2015

Source: OECD (n.d.), PISA 2015 Database, www.oecd.org/pisa/data/2015database/, Tables I.2.3 and II.6.58.

Even in countries where the overall level of funding for schools is comparatively high, there may be underinvestment in certain parts of the school system, which can result in serious educational inequalities, as resource challenges tend to concentrate in certain disadvantaged areas or schools (OECD, 2012a). Research in the United States has shown that finance reforms directed to guarantee an adequate provision of resources in low-income schools were crucial to reduce overall achievement gaps between high- and low-income school districts (Lafortune et al., 2016), increased the likelihood of high-school graduation and educational attainment for children from poor families, and diminished their socio-economic disadvantage in terms of earnings and income later in life (Kirabo Jackson et al., 2014).

Making the best use of limited resources

School systems have limited resources with which to pursue their objectives. As most school funding in OECD countries comes from public budgets, the best allocation of this funding among competing priorities is a relevant policy concern.

School education is costly and getting more so (Baumol, 2012; Wolff et al., 2014; Wolff, 2015). The long-term pattern of education spending largely reflects a continuous increase in the cost of human resources. Since public sector services and education in particular have limited ability to substitute human resources by less costly productive capital, such as machines, it is expected that the public costs of education will continue to rise (Baumol, 2012). Since long-run education expenditure has been increasing among OECD countries and education services have become relatively more expensive than other goods (De Witte and López-Torres, 2017), ensuring an efficient allocation of school funding is a key concern for OECD governments.

Policies aimed at reshaping the organisational structures and changing institutional habits in school systems are typically not easily accepted by public opinion and need to be carefully developed and implemented in collaboration with key stakeholder groups, such as social partners and parents. A recognition of the fact that the costs of education tend to increase in the long run helps to justify a focus on achieving greater efficiency by minimising expenditures that do not contribute to the quality and equity of education. Otherwise the pressure on resources and limited available funding could eventually crowd out the most talented human resources in the school sector. In order to build momentum for change and engage stakeholders in designing a more efficient provision of education, it is important not to focus merely on cost savings but to ensure that strategies to achieve greater efficiency in a school system go in line with a focus on improving quality and equity.

While the effective use of resources is a general aim of all public activity, in times of economic downturn, expectations for an efficient use of public resources are typically even stronger: the allocation of public resources is more scrutinised and political choices are increasingly based on efficiency arguments. Despite the long-term continuous increase in educational expenditures as a share of gross domestic product (GDP), public spending on education across the OECD has lagged behind the growth of GDP since 2010 (OECD, 2016b). The recent pattern in education expenditures also reflects a prioritisation of public expenditures between education and other public services. Figure 1.2 shows this trend, although also including expenditure in tertiary education. In such contexts, governments willing to further invest in education may justify their choices based on reforms targeted to increase the external efficiency of school systems, that is to show how the costs of providing quality education translate into better social and economic outcomes (for detailed definitions of efficiency and equity, see Annex 1.A1).

Figure 1.2. Change in public expenditure on education as a percentage of total public expenditure, 2008 and 2013

Primary to tertiary education (2008 = 100, 2013 constant prices)

Source: OECD (2016b), Education at a Glance 2016: OECD Indicators, http://dx.doi.org/10.1787/eag-2016-en, Figure B4.2.

Looking at school funding from an educational perspective

Educational efficiency is typically conceptualised as the ability of fulfilling maximum educational potential at the lowest possible cost. In this context, improving the efficiency of a school or school system can be attained in two ways: either by maintaining identical levels of outcomes while lowering the amount of school funding, or by attaining better outcomes with the same level of funding (for a detailed discussion and definitions of efficiency see Annex 1.A1). However, as described in Box 1.1 there are limitations to efficiency analyses in the education sector. Recognising these limitations is important to frame the analysis provided in this report.

Box 1.1. Limitations to efficiency analyses in education

Annex 1.A1 provides a brief summary of the main methods used for quantifying effectiveness and efficiency in the use of school resources as well as their main advantages and drawbacks. Analyses of effectiveness and efficiency are sometimes used for school benchmarking, increased accountability, local and school capacity building, as well as for cross-country comparisons and peer learning among countries. However, quantitative analyses of educational efficiency are subject to several conceptual and measurement concerns and it is important to keep these limitations in mind when using such analyses as a source of expertise for educational policymaking. Due to the limitations explored below, the use of this type of studies generally provides an incomplete picture for policy. The use of qualitative and mixed-methods provides more room to take into account specific governance contexts.

Conceptual limitations

• It is not possible to have an absolute account of efficiency. In this sense, no abstract school or school system can be conceived as perfectly efficient. Absolute efficiency would imply knowing the limits of the educational process; however, it is bo...

Table of contents

• Title page
• Legal and rights
• Foreword
• Acknowledgements
• Abbreviations and acronyms
• Executive summary
• The funding of school education: Main findings and policy pointers
• Chapter 1. Why look at school funding policies?
• Chapter 2. Governing school funding
• Chapter 3. Distributing school funding
• Chapter 4. Planning the use of school funding
• Chapter 5. Evaluating the use of school funding
• A. Country profiles
• B. Glossary
• C. Notes on country profiles
• D. How the School Resources Review was conducted
• About the OECD