More Money Matters: New work on financing education development

As the CTO at the Global Partnership for Education, I spent a lot of time working with the GPE Board to design GPE2020, the organization’s strategic plan.  Everyone hoped GPE would raise more money to reach the Sustainable Development Goal 4; but many also criticized the effectiveness of aid to education, and worried about how new funds could be better spent.

This month has seen the release of new research and recommendations about financing that bring the importance of more funding for SDG4 into sharper focus. In this blog I review new costing of the funding gap for Education 2030; an update on the International Financing Facility for Education; and new research on the role of educational financing in achieving learning and completion (raising questions about recent World Bank prescriptions). All highlight the importance of additional financing for equitable educational outcomes – particularly relevant to the sometimes neglected SDG 4 Target 5: “By 2030, eliminate gender disparities in education and ensure equal access to all levels of education and vocational training for the vulnerable, including persons with disabilities, indigenous peoples and children in vulnerable situations.

Costing the Education Sustainable Development Goal:

The UNESCO GEM Report team estimates that an annual education funding gap of at least US$39 billion per year in low and middle income countries will persist over 2015–2030, requiring international financing to achieve SDG4. Using a slightly different methodology the International Commission on Financing Global Educational Opportunity, estimates total financing for education in low and middle income countries will need to increase from USD $1.2 trillion to USD$3 trillion by 2030 to achieve SDG4. Allocations of external financing for education, now at $16 billion per year, would need to grow $89 billion per year by 2030. These funds would remain particularly critical for low-income countries, covering on average half of their education costs.

Last week a publication from the IMF provided a new way to look at the domestic and international financing needed to achieve the SDGs, this time modelling what is needed to close the gap in public and private financing for education, health, roads, electricity, water and sanitation by 2030. The report’s findings are revealing:  While approximately US$ 2.1 trillion is needed to close the SDG spending gap in these areas in emerging (middle income) countries, only US$ 0.5 trillion is needed in low income countries. However, as the report concludes, it will be much harder for low income countries to raise this sum, because it requires average additional spending representing an increase of 15 percentage points of GDP. In contrast, for emerging market economies, the spending gap is a more manageable 4 percentage points of GDP. This is why external resources are so important to low income countries.

What is perhaps most interesting in this new study is the remarkable heterogeneity in the financing gaps for education and health within low-income and middle income country categories.  Some countries have done much better in raising domestic education spending, but why and how? There are lessons in positive deviance here to learn from.

New Evidence that Financing Education Matters

For quite a while, the World Bank has argued that more money is not what is needed to reach the global goals for education. Key reports, including the Bank’s World Development Report 2004 and the World Development Report 2018showed little correlation between spending and access to school, and a similarly weak correlation between spending and learning outcomes.  

As a result the World Bank has tended to emphasize a greater focus on improving the efficiency of spending, and shies away from recommendations to increase per capita education spending in low-income countries. For example, the Bank’s new book on African education, “Facing Forward: Schooling for Learning in Africa,” the handful of major recommendations include only one focused on financing: “strengthening key budget processes.” (Watch for further detail in my forthcoming book review blog).

A refreshing blog last week from World Bank economist Dave Evans raises questions about Bank orthodoxy on education financing. In it he reviews a new paper by Kirabo Jackson (“Does School Spending Matter? The New Literature on an Old Question”) based on 13 studies in the US. As Evan’s notes, twelve of the studies in the synthesis show convincingly that improvements in school completion and learning outcomes over the last 20 years can be traced to sustained increases in financing – with particularly strong impacts for low SES students.  

Because these studies all come from the US, they also raise an important challenge for researchers who study education finance and education reform in the developing world. More money matters.  But Evans argues that while the impact of a marginal dollar in the developing world might produce even stronger effects than spending increases in the US, the effectiveness of education spending is likely lower in developing world – mainly because less reaches schools and the poorest children.

But we simply don’t know for sure.

We have remarkably little research or evaluation evidence like that reported by Jackson to help us to understand the causal impact of spending changes on learning and equity in the developing world.  

So: I’m wondering whether we can’t divert some of the our international research dollars to this type of question. We’ve gone whole hog using experimental methods to study discrete educational innovations – but are we spending too little on research on whole of system reforms, like how changes in financing levels effects equity? Love to hear your views.

And if we do such research, let’s continue to focus on positive deviance – how some low income countries have been able to increase their spending and achieve equity-focused improvements in completion rates and learning outcomes. A good example of this highlighted in “Facing Forward” is Burundi.  Lessons from such examples are essential if we want to spur future progress.  

More on Development Finance: 

Meanwhile, Nancy Lee highlights the challenge the world faces in providing the right mix and levels of public finance and commercial private finance for the SDGs (including education) on an OECD blog. As she notes, despite global commitments “four years later the hoped for trillions are no where in sight… In fact we have reached the stage where we need to decide whether to change the goals we set in 2015 or take a hard, critical look at the institutions we rely on to propel mobilization of private finance for sustainable development.”  The situation is most critical for low-income countries where 40% are in or at risk of debt distress, often for borrowing to fund investments in the social sectors and infrastructure.

It might appear that education has been quicker to address this problem than other sector, what with the new Education Finance Facility moving forward. But not so fast! As the 2019 updated prospectus and plans for the facility make clear, this facility is focused on filling the gap in financing for lower middle-income countries, with an expected USD$10 billion in additional finance. That’s important because approximately (according to the commission) 155 million out-of-school children live in this geography, including more than half of the total refugees and displaced persons globally.  

However, for education we need to look at demographic, economic and educational trends going forward, realizing that making investments now will only yield results decades into the future. Such trends suggest that the number of out of school or under-educated children in low-income countries is stubbornly expanding and likely to grow as a share of the total underserved population over the next 20 years. Furthermore, high levels of global geopolitical and economic volatility raise the risk that countries recently “graduated” to lower middle-income status will sink back into low-income status (see for example Zambia) or indebtedness (see for example Ghana). 

This brings us back to the need for sufficient external concessional financing for education.  Yet according to a GEM policy brief, international financing flows for education in low-income countries are declining: less than a quarter of basic education aid goes to low income countries, compared to 36% in 2002; and overall aid to sub-Saharan Africa, home to about half of all out of school children world-wide, has slipped down the donors priority list. 

Money matters! 

It’s clear from the above that we continue to need new educational financing solutions for children in low-income countries. While a large share of the financing gap could be filled if donors met the internationally agreed target of providing aid at the level of 0.7% of GNI  – a fact that the IMF paper emphasizes – this seems unlikely. 

Of course both domestic and international funding needs to be spent well, reaching the poorest children and most marginalized schools with good quality education. But spending funds more efficiently alone won’t get us where we need to go.

More money, not just money better spent, is essential if we want to improve equitable educational outcomes for all.  New research on educational financing also shows that more and better financing, especially through concessional flows, is essential, not incidental to achieving the global goals in education.

 ———————————————

Bashir, S., M. Lockheed, E. Ninan and Jee-Peng Tang. 2018.  Facing Forward: Schooling for Learning in Africa, Washington D.C.:  The World Bank.

Education Commission. 2016. The Learning Generation.  https://report.educationcommission.org/finance/

Gasper et al. 2019. Fiscal Policy for Development: Human Social and Physical Investment for the SDGs.  IMF Staff discussion Note # 1903. Washington: International Monetary Fund. 

Evans, D. 2019. Education Spending and Learning Outcomes. Development Impact Blog January 17, 2019.  

Jackson, C. Kiribo. 2018. Does School Spending Matter? The new literature on an old question.  

Lee, Nancy. 2019. Trillions for the SDGs?  Time for A Rethink. OECD Development Matters Blog

the Education Commission. 2019.  IFFED Prospectus Update. New York: the Education Commission 

UNESCO. 2018.  Policy Brief # 36:  Aid to Education: A return to growth?   Paris: UNESCO Global Education Monitoring Report. 


One thought on “More Money Matters: New work on financing education development

  1. More studies of whether more money matters will never resolve the question. For why, see http://www.paecon.net/PAEReview/issue74/Klees74.pdf
    And, of course, more money does matter – a lot. Ask any parent who works to send their children to a well-resourced school. Ask any parent whose child is stuck in very large classes with not well-educated teachers in a barely-adequate facility. And then there are the billions and trillions of dollars shortfall that UNESCO and others have estimated are needed just to run decent schools around the world. Let’s stop spending more money on more unproductive studies that ask silly questions!

    Steven Klees, University of Maryland

    Like

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