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(, ). 2 Executive Summary..............................................................................................................................4 ...............................................................................................................................................7 ........................................................................................................................................7 : ............................8 ....................................................................9 ................................. 11 ....................................................................................................................................... 13 ........................................................................................................ 16 ....................................................................................................... 19 ................................................................................................................... 23 I. .........................................................23 II. ................................................................... 25 ............................................................................................. 26 I. , .......................................26 II. ..........................................................................................................29 ............................................................................................................................................... 31 1: ................. 33 2: , : .......................................................................................... 35 3 EXECUTIVE SUMMARY This brief policy note reviews experience so far with the implementation of a new financing scheme for general education (based on the principle of `money follows the student') in the Russian Federation. The policy note, which also briefly discusses the lessons of international experience in the field, may be relevant to other countries that are in the process of moving to a system of per capita financing of education services. Of the four major issues facing the education sector in Russia ­ resource mobilization and efficiency, quality and output measurement, market linkages and equity and access ­ the first is central: other reforms will be difficult to implement without an improvement in mobilization and allocation of resources. The traditional budget allocation process is at the root of these problems: non-transparent, unpredictable, cumbersome and short-term, it results in an inflexible and inefficient use of scarce resources. The July 2003 law on subventions, which defines minimum educational standards that the state is expected to meet free of charge, and the division of responsibility between the different levels of the state in providing the finance to meet these minimum standards, is an important step towards improving the situation. It is backed up by the development of an alternative, transparent budget allocation mechanism based on the per capita principle of 'money follows the student'. An essential element of this mechanism is the decentralization of budget management to the school director, who should be able to receive a block grant, open and operate a bank account for the school, and flexibly manage a school budget (including funds obtained from non-state sources) without rigid budget headings. In all this, the school director would be accountable to a Board of Trustees at school level, and there would be similar Boards at municipal and republican levels. The pioneers in the introduction of the new scheme are the Samara and Yaroslavl Regions and the Chuvash Republic. Their experience so far suggests that it takes some time for the efficiency benefits of the system to be felt. Only in Samara Oblast has experience with the scheme been long enough for some evidence of positive impact to emerge. In particular, the number of schools and classes has fallen in line with the number of pupils, and pupil/ teacher and pupil/ non-teacher ratios have increased significantly. At school level, there are also examples of an increase in development expenditure and of increased ability to obtain non-budget funding. However, there is no evidence of a dramatic impact on salaries, which have fallen in real terms since 1997. Even before the impact of the new scheme can be properly measured, it has run into trouble from another source. The introduction of Treasury control of regional budget seems to threaten the possibility of schools achieving financial autonomy (because of the excessive number of line items and the apparent need to get Treasury approval of budgets in advance and permission to reallocate funds). International experience shows that there is no necessary conflict between centralized treasury control of expenditure and school autonomy (including their own bank accounts). The policy implications of experience in implementing the per capita financing schemes so far are as follows: 1. Experience underlines the importance of the new law guaranteeing sufficient state expenditure, through subventions from the federal to local budgets if necessary, in support of minimum standards. The per capita financing system cannot achieve efficiency and quality improvements if the total 4 amount made available for education is inadequate. This is one of the lessons of what has happened to teachers' real wages in Samara. The new law on subventions needs to be implemented and carefully monitored. After more than a decade of financial crisis, the funds needed for renovation of schools, as well as for other quality-boosting purposes, are substantial. The number of school-age children is falling and prospects for GDP growth are good but, even so, it will be important to achieve the State Council's target of increasing public expenditure on education as a proportion of GDP from 3 per cent in 2000 to 4.5 per cent by 2006. 2. 'Quasi-markets' in state-provided education can be dangerous without an adequate regulatory framework. A national curriculum and testing system, combined with national publication of test and examination results and regular inspection of schools and publication of inspectors' reports, is needed to stimulate autonomous schools to improve their efficiency and the quality of the education that they provide. Exit, entry and school size also cannot be left entirely to the market: the location of the decisions about these things and the criteria to be used have to be clear. With autonomous schools, financial audit becomes even more important and systems for this have to be developed. Some regulations need to be abolished, however ­ for instance, limitations on class size ­ to allow the flexibility that the system needs. And the precise extent of local flexibility on teachers' pay and conditions needs to be defined. 3. The institutions needed to make the per capita financing system operational, particularly the school- level Boards of Trustees and the mechanisms to strengthen the role of parents and to ensure school accountability, have to be created and/ or strengthened. The stakeholders to whom decision-making is decentralized under the PCF system also need to be trained. All three regions report a lack of budget- planning skills among school directors and accountants. Members of Boards of Trustees and local authority staff need similar training, and parents need to be aware of how the new system works. Particularly in the case of vocational schools, links with the local business community need to be built up. 4. There are local variations in the formulae being used for allocation of funds. As long as they are consistent with the 'money follows the student' logic of the new system (and with the equity objective) it may not matter much. In England, for instance, different local authorities use different formulae. But some federal overview may be needed here. 5. The experience of the pilot regions to date demonstrates that, although education resources are decentralized to the municipalities, adjustment coefficients are not working well. Consequently, school budgets continue to be based on a formula which, if used strictly, does not cover basic educational services in some schools. Therefore, per capita financing systems are still implemented only on the municipal level. As far as the problems arising from the Treasury system and the Budget Code are concerned, in general, the extent to which Treasury systems have been compatible with school autonomy in the regions that are implementing per capita financing depends mainly on the flexibility with which treasuries have approached their role. In the Chuvash Republic and (after some initial difficulties) Yaroslavl, treasuries seem to have accepted that they have a technical and not a policy-making role and the system is working reasonably well, but in Samara there are many issues still to be resolved. There are three possibilities to be considered for policy in this area. One is that of a series of local compromises ­ 'deals' at the regional level between the Education Department and the Finance Department/ Treasury, along the lines of those already struck in the Chuvash Republic and Yaroslavl. This is useful in the short run, but does not provide a long-run solution for the Federation as a whole. It would be an extremely wasteful path to follow, diverting the efforts of busy education professionals from 5 increasing efficiency and quality towards lengthy and often frustrating negotiations with their counterparts. A second possibility is to move towards a change in the status of schools (and other public social-service institutions). Such institutions would become a new type of legal entity ­ eligible to receive budget financing allocated on the basis of capitation or a fee for services, to provide additional services for private fees and to enjoy some operational autonomy. This might be similar to the English school- based management model (within a careful regulatory framework) described in the report. The third possibility is to develop national guidelines for regional Treasury control practices. A streamlining of budget classifications, planned in Russia for 2005, will be helpful to this process Whatever progress is made with other reforms, the development of such national guidelines should be an urgent priority. Without them, it will be much more difficult for the new per capita financing schemes to get off the ground. 6 1. ( " ") , . 2. (Canning et al. 1999), , : (i) , (ii) , (iii) , (iv) . 2004 . . , 2001 . PISA ( 15- ), (, 2001 .). - . , , , , , , , . 3. , , , , .. , 1999 . 7 , 1999 , . , , , , , . , , , , " " , , . : 4. , , ­ 3 % 2000 . ( : 5 % 6 % ). , , , , , , , . , , , , , . , . , . 5. . , , , . , , 8 . , , . , , " ", , , . . 6. (i) (ii) , . 7. 7 2003 , " , ". , () . . , , / , . . 8. , , " ". : - , , ; - ; - "" 9 ; - ( ) . 9. , : . , , , . , . , , : - ( ); - ; - (, ..); - ; - ; - ; - " ". 10. , , , , , , . 11. , , , ( , ). , . , : (PISA), (OECD 2001: 7.11). 10 12. . , - 1998 . , ( ) (formula- based block grant) . , , ( ) . , , . . , (25 15 ) . 13. , . , . . , . (, ). , . , 123 , , . 14. : , . , . 30 % , 50 % : ( ) , . , , . 11 15. 2001. . 2002 . 643 , 49 , 170 ( , ) 424 ( 4 ). , ­ . , , ; , ; " "; , . . 16. 2001 2003 . , , 2004 ., : , , , , , ( ). , , . . , , . 17. 2003 , « ». . . - , . 18. : - ; - ( , ); - ; - ; - . 12 19. , , . . , . 20. (. A) . , , . , , . . , , 1997 . 21. , 1 . , , , , . , , , , .. , , . 22. , , 1. Potter and Diamond (2000) , . 13 . ( 215, 216) . , , .. « ». 23. , 1998 ., : · ; · , ; · ( ); 24. . ( ), . , ( ) , . . 25. 2001 . , . 43 « », - , . 161 ( 6) , . 26. « » , . , , . , , , . 14 155 156 , . 27. , , . . , , , « » . , . 28. , , . (, ), . 233 234. , - . 29. , , , - . () . . 30. « », , . , , , , . - . 15 , , « ». 31. , - . · , , , . · «» , . · . 32. - « ». « ». , «» , ( ). , . , , , . 33. . . 16 , . 34. 1992 « ». , , , - . . , 10 « » - . , , , , . , , , « » 10 % . 35. « » , , , , . , . , , 1992 , , ­ . . , , . « », . 36. , , , . 2003 , « ». , . , , , . , . , , . 17 , , . 37. , , . -, , . -, , . , , - , «» , , . 38. , , , , , . 39. , . « » , . , , . 40. , , « ». , . , , « ». ( ) , . , , , , . 41. , , . , , . 18 , , . , , , , , , 2. , , ( , .). - . 42. , , , . 1999 . (Ross and Levaci 1999), (, , , ). « » , . , , ( ), . , , . , 1 , 1988 . , . 1: 1988 . 2, . , . « » ( ), . , , «», «». 19 : : : - - ; - - , ; - . . : ( ; - ): - ; - , ; - (1) , - . ; , - , : - ; , - "", (2) . : ; - ; - . - : ; , - - ; , , - . : , . - - : ­ - , , , .. . : : , - - - , ; - , ; - ; . . - : . - 20 . : Levaci 1999: 8.1. 43. 1, - ( ) , , "-" . , , , . 44. , , (, , - , 3). , ( , ) , . . , , ( ), 6 , . , . 4 , ( ). , 3. BBC (2003). 4 . , , , . 21 , , , . . 45. , (2001 .) (2002 .)5, , , - , 6. , . "" ( ) , , , , , . , , - , . , , , , , , . , , , , . , , , . , ( ), . , , , , , - , . , . , Krátký et al. (2002) , , , , , , , , , .. 46. , : 300 , . ­ 5 , , , , ; , , . 6. : Hendrichova et al. (2001) Krátký et al. (2002). 22 . , . , . , . 47. , , ( ), . , , , . , : ­ 1 ­ , , , . . , , - . 48. : i. , ; ii. , , - . I. 49. , , , 7. 7. Ross and Levaci (. 252) . 23 - , , . - , , , , : - , , , : , . - . , ( , , , , , ). - . "" "". , . - . , . . - . : ­ ; ­ ; ­ , . 50. . , . , , . , , ; , . ( ). 51. , ( ), , 24 , . , . , , . . , , 1997 . II. 52. 2003 . , , , : - ; - , ; - / . 53. , , : - , 2005 . ; - 8; - , ; 8 . . 25 - ; - , 9; - , , , " " ; - " " , ; - . 54. . , , , . ( ) , , , , , . , , . I. , 55. : (a) , , , , 9.. . 26 . , , , . , . . 10 , , . , , 3 % 2000 . 4,5 % 2006 . (b) "-" . , , , . , , , . , . , , , , , . . (c) , , , / , , . , . . , , . , . (d) , . , « » ( ), . , , 27 . , -, . (e) , , , , , . , . , - . 56. 2001 . 10 , 2. 2: 10 1. 2. (, ) 3. / 4. 5. 6. 7. 8. 9. 10. / : (2001 .). , , , . 57. (1, 2, 3, 4 6) , - / (5, 7 8), ­ / (9 10). 58. , , , , . 28 59. , . II. 60. , . ­ / , . , . , , , . 61. ( ). , . , , ( ), . 2003 , , ­ . . 62. . , . , 2005 ., , , , , , , ( ). , . . , ( 29 ), . , , . 30 BBC, 2003, How Schools Get their Money, www.http://news.bbc.co.uk/go/pr/fr/-/2/hi/uk_news/education/2996679.stm Canning, Mary, Peter Moock and Timothy Heleniak, 1999, Reforming Education in the Regions of Russia, World Bank Technical Paper No. 457, Washington D.C., World Bank. Davey, Kenneth (ed.), 2002, Balancing National and Local Responsibilities: Education Management and Finance in Four Central European Countries, Budapest, Local Government and Public Service Reform Initiative, Open Society Institute. Diamond, Jack, 2002, The New Russian Budget System: a Critical Assessment and Future Reform Agenda, Working Paper 02/21, Washington D.C., IMF. 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Potter, Barry H., and Jack Diamond, 2000, Building Treasury Systems, Finance and Development, September. Ross, Kenneth N., and Rosalind Levaci (ed.), 1999, Needs-based Resource Allocation in Education via Formula Funding of Schools, Paris, UNESCO, International Institute for Educational Planning. 31 World Bank, 2001, Project Appraisal Document on a Proposed Loan in the Amount of US$50 million to the Russian Federation for an Education Reform Project, Report No. 21782-RU, Washington D.C., the World Bank. World Bank, 2002, Project Appraisal Document on a Proposed Adaptable Program Loan in the Amount of US$231 million to the Russian Federation for a Treasury Development Project in Support of the First Phase of the US$400 million Treasury Development Program, Report No. 23718-RU, Washington D.C., the World Bank. 32 1: . , , . , , . - , 50 . , 1997 2003 . , 17 . 6 , 9 , , . 14 %, 16 %, . , . , . 2002 12 % 2 % 2000 . (16 %), (51 %), (4 %), (19 %) (10 %). . . , , . , . . : 50 , - 33 . , ­ , , . 1997-2000 . , . : , , . , 1998 . 32 % 1997 2002 . 60 %, , , 1999 . . , . , ( , ). , , , . . , : , , . , , . 40 % 2003 , , , . . 2002 . , - , , ( ). 34 2: , : 2003 , , , : o ( ), . o , . o . o . o , . , , , . o , . , . o «» . , , , . o , : , , . . , , , , : 35 o . o , . o , , . ( , ) , , , 1-5 . o . , . , , , . . , . . , 2003 . ( ) , , , . . : , (, ). «» , . , , . , : , . , , : o : ; o : ( ), ; 36 o , , ; o , ; o . 37