Targeting Education Financing on the Marginalized: Lessons from Implementation of Sarva Shiksha Abhiyan and Right to Education in India

Transcription

1 2014/ED/EFA/MRT/PI/18 Background paper prepared for the Education for All Global Monitoring Report 2013/4 Teaching and learning: Achieving quality for all Targeting Education Financing on the Marginalized: Lessons from Implementation of Sarva Shiksha Abhiyan and Right to Education in India Anit N. Mukherjee 2013 This paper was commissioned by the Education for All Global Monitoring Report as background information to assist in drafting the 2013/4 report. It has not been edited by the team. The views and opinions expressed in this paper are those of the author(s) and should not be attributed to the EFA Global Monitoring Report or to UNESCO. The papers can be cited with the following reference: Paper commissioned for the EFA Global Monitoring Report 2013/4, Teaching and learning: Achieving quality for all For further information, please contact

2 Targeting Education Financing on the Marginalized: Lessons from Implementation of Sarva Shiksha Abhiyan and Right to Education in India Anit N. Mukherjee Associate Professor National Institute of Public Finance and Policy, New Delhi Background Paper for UNESCO Global Monitoring Report,

3 Targeting Education Financing on the Marginalized: Lessons from Implementation of Sarva Shiksha Abhiyan and Right to Education in India Anit N. Mukherjee Associate Professor, National Institute of Public Finance and Policy, New Delhi 1. Introduction India s flagship programme for universalisation of elementary education the Sarva Shiksha Abhiyan (SSA) is regarded as one of the largest such initiatives anywhere in the world. Started in , it has recorded impressive achievements in terms of mobilization and allocation of resources, creation of infrastructure, hiring and training of teachers and participation of community groups in delivering education. By 2011, over 350 thousand schools were constructed covering 99 percent of rural habitations with a school within a radius of 1 kilometer thereby significantly expanding access to education. Nearly 1.12 million teachers were recruited to bring down the pupil teacher ratio (PTR) to accepted norms. In terms of outcomes, the dropout rate declined by half from 40 to nearly 20 percent between and The gender parity index improved from 0.83 to 1 and 0.77 to 0.96 in primary and upper primary levels respectively during the same period. i According to independent nationwide surveys, there are only about 3 percent of children out of school at present. India is close to achieving MDG 3 as a result of this concerted effort to ensure education for all over the last decade. ii While there have been several initiatives in the past to increase school enrolments, such as Operation Blackboard (OB) and District Primary Education Programme (DPEP), the SSA is different in terms of both scale and structure. First, it is a country-wide programme and all states participate in it. Second, the SSA is financed through both earmarked taxes known as education cess and budgetary allocations from general revenues of the Government of India and the State governments. The cess is a tax-ontax introduced in 2004 on all Union taxes at the rate of 2 percent, which is kept in a separate fund called the Elementary Education Fund (Prarambhik Shiksha Kosh, PSK) 2

4 and can only be used for the purpose of funding SSA and the Mid-day Meal scheme (MDM). Third, the implementation of the SSA has elements of both vertical and horizontal administrative structure state and district implementation structures have been set up in parallel to the line departments of the State governments to make fund disbursal more efficient. Fourth, the SSA envisages strong community participation with the setting up of Village Education Committees (VECs) and School Management Committees (SMCs) in order to ensure accountability and provide oversight on fund utilization and school functioning. Fifth, a decentralised institutional structure has been set up for teacher training and academic support through Block Resource Centres (BRCs) and Cluster Resource Centres (CRCs) and strengthening of District Institutes for Education of Teachers (DIETs). With the success of the Sarva Shiksha Abhiyan in increasing enrolment and reducing dropout in elementary schools, the focus is now on expanding secondary education. The Rashtriya Madhyamik Shiksha Abhiyan (National Secondary Education Mission, RMSA) was initiated in with a mandate to provide universal secondary education by The Education Cess was raised by one percentage point from 2 to 3 percent in April 2009 to provide earmarked funds for RMSA. The program is yet to take off in a concerted manner due to delays in framing planning guidelines and approval of financial management rules. This commissioned paper intends to explore the mechanisms of financing of Sarva Shiksha Abhiyan in detail and delineate the lessons learnt from implementation over the last decade. Specifically, the paper will address four sets of issues: (i) Resource mobilization strategy and financing of SSA; (ii) Resource allocation and fund flows between Union and States; (iii) Planning and budgeting formulas for distribution of resources among districts; and (iv) Outcomes in terms of access and equity in resource needs at the State and district levels Due to the constraints of time and data availability, we limit the scope of our district level analysis to three states: Maharashtra, West Bengal and Bihar. These three states represent broadly the types of issues and challenges faced in the design and implementation of 3

5 SSA. Maharashtra represents a group of states that includes Gujarat and the four southern states of Andhra Pradesh, Tamil Nadu, Karnataka and Kerala which already had high access indicators at the inception of SSA in , which can be termed as non-focus states as far as SSA was concerned. West Bengal is representative of states which have high geographical diversity (hilly regions, plains, riverine areas and semi-arid locations), similar to states like Punjab, Himachal Pradesh, Assam and other North-eastern states. These states also had relatively good enrolment rates and low out-of-school children at the turn of the decade, but had to fill some gaps in access and human resources. Bihar is chosen for this paper since it represents those states which have high population density and out-of-school children, low levels of literacy, access and retention, and significant gap in infrastructure and human resources as a result of underinvestment in education by state governments over several decades. These are known as BIMAROU states: Bihar, Madhya Pradesh, Rajasthan, Orissa and Uttar Pradesh, representing nearly half of India s total population. It is these five large but poor states that the success or failure of SSA depended on. The scheme of the paper is as follows. In Section 2, we explain the mechanism for mobilizing revenues for SSA from various sources, and how those resources have been allocated among states as per the SSA (and subsequently RTE norms) in Section 3. In section 4, we present the latest evidence on planning, budgeting and fund flows, highlighting the major challenges and bottlenecks in efficient and effective resource utilization. In the following section, we analyse data on State and district level SSA allocations to determine whether they have been able to address the issues of access and equity especially for poorer regions. In section 6, we provide new evidence of correlation between per child SSA expenditure and outcomes in terms of Education Development Index (EDI) and learning achievement at the district level. We conclude with a summary of findings from this study. 2. Resource Mobilization and Distribution between Union and State governments The most significant departure from earlier efforts to achieve EFA has been the quantum of resources that has been invested in Sarva Shiksha Abhiyan since its inception in Education expenditure as a share of GDP (for Union and State governments combined) has increased from 3.57 percent to 3.80 percent between and

6 after declining during the earlier part of the decade. This has been largely due to the substantial rise in allocations through SSA. The increase in education expenditure as a percentage of GDP seems to be minor, but the rise from has been steady. More importantly, as Figure 1 shows, the trend from has reversed the decline in the share of State s expenditure on education in the early part of the decade from 4 percent of GDP in to 2.75 percent in The share of GDP contributed by the Union government has increased continuously, however, which has partially made up for the decline in State s expenditure. Figure 1: Expenditure on Education as percentage of GDP Source: MHRD (various years). Analysis of Budgeted Expenditure on Education in India Table 1 provides the comparison of the two years in terms of the allocation made by the Union and the State governments in elementary, secondary and tertiary education. It is clear that although the share of the Union government has increased overall, the State governments still shoulder the major expenditure burden especially for elementary and secondary education. 5

7 Within elementary education, overall SSA allocations have increased from Rs billion in to Rs billion in During this period, the sharing ratio between the Union and State governments has changed as well. As we shall explain later, the share of the State governments in total SSA allocations increased from 25 percent in to nearly 40 percent in , which has been instrumental in reversing the decline in the State share of education in GDP mentioned earlier. However, it is interesting to note from Table 1 that in terms of expenditure on elementary education by Union and State governments, the share of SSA increased for both. The share of SSA in total Union government expenditure on elementary education increased from 70 percent to 75 percent between and The proportion of SSA expenditure in total expenditure on elementary education by State governments also increased by 5 percentage points from 8.2 to 13.2 percent or an average of Rs.40 billion per year. It is therefore evident that the burden of increased SSA expenditure was shared between the Union and State governments. After the levy of the cess for secondary and higher education mentioned previously, the share of the Union government in these two sectors secondary education has gone up significantly. The increase in secondary education is expected to increase further as RMSA gathers momentum over the next few years. Table 1: Component-wise Education Expenditure - Centre and States (Rs.Billion) Union States Total % Union %State Elementary Of which SSA Secondary University+Higher Total Union States Total % Union %State Elementary Of which SSA Secondary University+Higher Total Source: MHRD (2008, 2012). Analysis of Budgeted Expenditure on Education in India. Author s calculations 6

8 It is in this context that the financing mechanism of SSA and RMSA assume significance. We break the issues down at three levels: (i) vertical imbalance in taxation powers between Union and State governments; (ii) horizontal imbalance in revenue and expenditure capacity among States; and (iii) the use of transfers from Union to State governments as a vehicle for equalization of per capita expenditure in public good provision such as the Education for All (EFA) objective. Vertical imbalance refers to the difference in taxation powers that is vested under the Union and State governments under the Constitution. Under the federal system enshrined in the Constitution, the Union government collects most of the major direct and indirect taxes as well as customs duties and service tax. The State governments collect local professional taxes, municipal taxes, entertainment, road and motor vehicles levies and user fees. This imbalance is sought to be bridged through statutory transfers from the Union to State governments to augment their revenues and meet expenditure responsibilities, most importantly in education, health and other social services. The sharing formula and quantum of transferable resources are determined by Finance Commissions which submit their recommendations every five years. Horizontal imbalance refers to the difference in revenue capacity and expenditure needs to provide equitable level of economic and social services across States. These capacities and needs vary due to several reasons most notably population and geography. Catering to a large population in need of services requires greater revenue mobilization which vary widely across states. While Maharashtra and Madhya Pradesh have similar population, the former is an advanced commercial, manufacturing and export hub whereas the latter is largely agricultural and few localized heavy industrial zones. Moreover, hilly regions such as Himachal Pradesh, Uttarakhand and northern part of West Bengal need greater resources due to the terrain and the dispersed habitations implying higher per capita cost of delivering services such as education. Their revenue capacity is often not enough to cover this difference. To achieve the national objective of universal elementary education, the SSA was conceived and implemented with the express objective of addressing the vertical and horizontal imbalances in education expenditure between States and across districts. It has two specific strategies: (a) consolidation of resources under one umbrella Centrally 7

9 Sponsored Scheme (CSS) which would pool resources by Union and State governments under an agreed sharing ratio; and (b) distribution of resources as per a unified set of norms which ensures access with equity. With the enactment of the Right to Free and Compulsory Education Act (RTE), 2009, the SSA norms have been harmonized with that of RTE and serves as the vehicle to implement the fundamental right to elementary education. The pool of SSA resources is made up of: (i) the Union government s budgetary allocation from its own revenues; (ii) part of the collection from education cess levied at 2 percent of all Union taxes which are deposited in an earmarked treasury account under PSK. The total allocation for SSA by the Union government is therefore a combination of the two revenue streams. It needs to be noted that the Development Partners (DPs) World Bank, UK Department for International Development (DFID) and European Union - also contribute to the SSA resources through pool funds transferred directly to the Union treasury. Therefore, the government s non-cess allocation (gross budgetary support) is funded in part through external sources of borrowing and aid. The DPs contributed around 30 percent of the total budgetary allocation through a sectorwide financing approach (SWAp) from 2004 to The World Bank and UK Aid together provided just over $ 1 billion between 2008 and 2012, and average of $250 million a year as their contribution to the pooled funds of the Union budget for the Ministry of Human Resource Development (MHRD). iii In addition to financial resources, the DPs contributed to SSA through reform and strengthening of governance systems, providing key technical assistance and supporting the development of comprehensive database for evidence-based planning and effective monitoring of implementation. The Table 2 provides the budgeted figures for all education sectors collected from the Union budget documents. Two points need to be noted regarding the way the Government of India has used the revenues raised through cess to finance SSA. First, 65 percent of total cess collection was allocated for SSA in (the rest of the cess goes to fund Mid-day meal Scheme), falling to 46 percent in before rising again to 53 percent in the current year s budget. As we shall see later, this is due to the change in the sharing ratio between Union and State governments and the implementation of RTE from onwards. 8

10 Second, the proportion of total allocation for SSA that is financed from cess does not follow a uniform pattern. It ranges from a high of 64 percent in to a low of 49 percent in with an average of 57 percent between and This indicates that cess allocations were used to bridge the revenue gap after accounting for the government s budgetary resources and pool funds from the Development Partners. This is a unique example of treasury management for earmarked taxes which holds lessons for countries trying to raise resources for social sector expenditure. Table 2: Expenditure on Sarva Shiksha Abhiyan and Contribution of Education Cess Rs. in Billion Expenditure on Sarva Shiksha Abhiyan Total Education Cess Collected Transfer to SSA from PSK % Cess Allocate for SSA % Expenditure on SSA met from PSK Source: Government of India, Union Budget (various years). Available at: The 12 th Finance Commission provided what are known as equalization grants grants which are intended to fill the gap in per capita expenditure on education and health across States. It awarded Rs billion to eight states from to , which is intended to cover 30 percent of the horizontal gap. In terms of absolute numbers, the two most populous states Uttar Pradesh and Bihar got nearly 60 percent of the grants but other states such as Rajasthan, Jharkhand and Madhya Pradesh also benefitted. The 13 th Finance Commission increased the transfer to Rs. 240 billion from and covering almost all states to facilitate the implementation of RTE. It did not use the equalization formula of the 12 th Finance Commission, but stipulated that the expenditure on elementary education by States should grow at 8 percent annually for the grant to be disbursed. Recent research has highlighted the problems created by multiple channels of transfers statutory transfers recommended by the Finance Commissions, revenue grants to bridge current expenditure, plan grants mediated by the Planning Commission and finally the 9

11 resources flowing through the CSS. They are often in conflict with each other, and consequently the impact on reducing horizontal imbalances in per capita expenditure on social services such as education is not significant (Chakraborty, Mukherjee and Amarnath, 2010). More importantly, the States often use the CSS funds to substitute for their expenditure out of their own tax collections in order to adhere to the revenue deficit targets set under the Fiscal Responsibility and Budget Management Act. This leads to what is known as crowding out of State s expenditure, and dependence on the Union for financing elementary education and other social services (Chakraborty, Mukherjee and Amarnath, 2009). However, this does not seem to have been the case for SSA as seen in Table 1. The shares of both the Union and the States have increased between and due to increased allocation of SSA at the Union level and increased co-funding commitments by the States. In the next section, we explore the sharing formula and fund flow mechanism under SSA to understand better how the resources raised for EFA were distributed across States. 3. Revenue Sharing and Distribution between Union and States under SSA In terms of disbursement, SSA created a fund flow mechanism that went outside the State treasury system by the design of the centrally sponsored scheme (CSS). The critical test was to adhere to disbursement conditionalities and ensure co-funding by States at the agreed sharing ratio, explained in detail below. The main rationale put forward by the Union government is that CSS provide a convenient vehicle for achieving multiple objectives: closing gaps in infrastructure and human resources in social service delivery through an overarching planning mechanism and budgeting system, ensuring efficient fund flows from Union and States to districts and below, and complementing State s resources to ensure a horizontal equity in per capita development expenditure across states. The most critical aspect of a CSS is its mechanism for revenue sharing between Union and State governments. Over the last decade, several such models have been tried out in India. As one of the earliest, most comprehensive program, SSA has led the way in innovative use of earmarked taxes and management of Union government s finances for achieving EFA. However, unlike the National Rural Health Mission (NRHM), SSA did 10

12 not distinguish between high focus and non-high focus states. This has led to concerns in the policy sphere on the effectiveness of SSA in ensuring equitable financing to regions and social groups across the country. The overall Union-State sharing formula has also been a subject of much debate. As Figure 2 shows, the initial Union-State sharing ratio was 85:15 during the first full year of SSA implementation, namely Thereafter, it was fixed at 75:25 during the Eleventh Five Year Plan between to During the Twelfth Plan, the share of the States was sought to be increased progressively by 5 percentage points each year between and , to finally arrive at an equal sharing responsibility in implementing SSA between the Union and State governments. Figure 2: SSA State Share (%) Source: SSA documents With RTE coming into force in April 2010, the situation changed significantly. SSA was designated as the vehicle to achieve RTE. Since the norms for infrastructure and teachers are now mandatory and more stringent than SSA targets, some states like Uttar Pradesh expressed their inability to allocate higher resources over what they were contributing already. iv Moreover, the calculations made by the poorer States differed from that of the Union, leading to demands that the Union government fund the whole cost of implementing RTE. v After protracted negotiations, it was decided that the sharing ratio 11

13 would be 65:35 for implementation of RTE, the same as it prevailed in when the Act was passed by Parliament. Resource distribution among states is contingent upon two processes: (i) approval of Annual Work Plan and Budget (AWPB) for all States and Union Territories; and (ii) compliance with financial management norms set out in the Financial Management and Procurement Manual agreed between the Union, States and the Development Partners. Figure 3: SSA Fund Flows from Central Government to implementation agencies The schematic flow of resources from the SSA pool to States, districts and schools is provided in Figure 3. The allocation of SSA resources for each state depends on the amount approved by MHRD on the basis of the request made through the State AWPB. The guidelines for AWPB are issued every year in December and the process is targeted to finish by the end of the March when the final approval is granted by MHRD. The 12

14 distribution of resources starts only after the approval of the AWPB and the passing of the Union budget by the Parliament towards the middle of March before the end of the financial year. The process flow diagram is provided in Figure 4. Figure 4: Work Plans, Fund Flow and Expenditure Process under SSA Annual Work Plan Approval of Allocation Release of Funds Expenditure and Utilization Spillover The approved AWPB allocation determines the quantum of transfers from Union and State government to the SSA State Implementation Society (SIS). This is a quasi-official body set up to route the funds outside the State budgetary system, ostensibly to avoid delays in fund flow and expedite expenditure. More importantly, the SIS can carry over the unspent amount from the funds transferred from Union and State governments, and can carry over this spillover for a maximum period of three years within the same budget line item. This is a major departure from treasury fund management system which would reappropriate any monies remaining unspent at the end of March 31. This system was designed to provide the necessary flexibility in resource utilization and enable better implementation of projects spilling over the annual work plan cycle, notably, infrastructure. To ensure compliance of the States with the sharing formula given in Figure 2, the transfers from the Union government is provided on a milestone basis: i) First tranche of 25 percent provided unconditionally by April 15 ii) Second tranche of 25 percent is transferred after the State government provides half of its matching share as per AWPB iii) Third tranche is contingent upon the State government providing evidence of at least 50 percent expenditure from the first tranche, utilization certificates of previous year s expenditure and audited expenditure reports of the year before. 13

15 Most SIS follow the same procedure for transferring funds from the State to the district level and below although some expenditure heads such as teacher salaries are essentially a pass-through to the district. Civil works such as school, additional classroom, Block and Cluster resource centre construction are handled primarily at the district level. It is also responsible for aggregating habitation, cluster and block level plans into the District AWPB which is an official document submitted to the Union government along with the accountability for its implementation. The district is therefore a critical node in SSA fund management and implementation. Moreover, as a departure from the earlier model of education administration, the SSA structure delegated significant support functions and oversight to block, cluster and school management committees. The Block Resource Centres provide teacher training and support (along with Cluster Resource Centres) in addition to facilitating fund flows and monitoring implementation of the AWPB. The RTE mandates School Management Committees to prepare School Development Plans, monitor civil works and teacher attendance, and spend school grants that are provided annually. Figure 5a: Activity Matrix Pre SSA Broad Function Responsibility Central Govt State Govt District Block Village GP SMC Standards Setting Planning Asset Creation School Functioning Teacher Functioning Monitoring 14

16 Figure 5b. Activity Matrix Post SSA/RTE Broad Function Responsibility Central Govt State Govt District Block Village GP SMC Standards Setting Planning Asset Creation School Functioning Teacher Functioning Monitoring Therefore, as the comparison of the activity matrices in Figure 5 indicates, there has been a significant shift in responsibilities towards more decentralized structures of governance and education administration. This also means that there are many more stakeholders with defined roles and responsibilities. Coordinating among these diverse set of agents has been one of the major challenges of SSA, which is often overlooked in policy evaluation. In the next section, we look at some of the issues in planning, allocation and utilization of SSA resources, and what policy inferences can be drawn from the data and analysis. Section 4: Issues in Allocation and Utilization of SSA Resources State level Analysis At the State level, there are several issues that have been highlighted during the implementation of SSA over the last decade. We shall address the following: (i) variability in the contribution to SSA; (ii) Efficiency of AWPBs and absorption capacity; and (iii) challenges in fund flow and expenditure management. We analyse these issues with reference to Table 3. 15

17 Table 3: Allocation and Utilization of SSA Resources State State Share in total Release Expenditure:AWP Allocation Expenditure:Funds Available (25%) (40%) Andhra Pradesh Assam Bihar* Chattisgarh Gujarat Haryana Himachal Pradesh Jharkhand Karnataka Kerala Madhya Pradesh Maharashtra Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh Uttaranchal West Bengal All-State Average Note: The figures in parenthesis are the States share agreed under the Framework of Implementation of SSA; Due to accounting error, the state share for Bihar for was transferred before March 31, 2006 (i) One of the challenges faced in resource management under SSA has been the unpredictability of contribution of state share. This is partly due to the change in the sharing formula especially from onwards presented in Figure 2. More importantly, the financial management norms for release of funds from the Union government are uniform across states without consideration of their revenue and administrative capacity. For example, the overall Union-State sharing ratio was fixed at 75:25 for However, as we can see from Table 3, this varied widely among major states. Kerala and Karnataka contributed nearly 37 percent while Maharashtra and Tamil Nadu contributed only 22 percent. The interesting story is that of Bihar, which mistakenly transferred the first tranche of state share for before the end of the financial year. This is the reason for its high 67 16

18 percent share. This also highlights the capacity of States for compliance with complex financial management norms. Comparing with , we find that the actual state share is much closer to the norm of 40 percent for most major states, with the exception of Punjab which provided only 23 percent. This also indicates that there has been some learning-by-doing on the part of the States where most of them are complying with the SSA norms. (ii) One of the main achievements of SSA has been to increase significantly the volume of transfers going to States through the CSS channel. Consequently, the size of AWPs of several states has increased three or four times compared over the last decade. Questions have been raised regarding the capacity of States to absorb this increase in resources and whether they have been able to effectively utilize the transfers. We calculate the proportion of unspent funds ( spillovers ) as a proportion of total funds available for SSA in the State. This gives us a proxy for efficiency in AWPB estimates and implementation capacity. We find that in , the overall spillover rate was close to 20 percent, which was reduced to around 12 percent in This trend is noticeable if we look at state-level data as well. None of the major states except Rajasthan and Tamil Nadu had unspent balances of less than 10 percent in In contrast, nine major states had a sub-10 percent spillover rate in with four other states between 10 and 15 percent. However, the situation was more or less the same for some lowperforming states, namely, Bihar, Jharkhand, Delhi and Gujarat, although the levels were somewhat lower. Overall, therefore, we can conclude that there has been significant improvement in absorption capacity over the last decade, but challenges remain in states such as Bihar and Jharkhand which have witnessed significant expansion in the size of their AWPs. (iii) To analyse the progress in fund flow and management, we calculated the simple indicator of proportion of expenditure out of funds available for the two years and Due to the onus of compliance by States with financial management norms, it is often seen that the total AWPB approval is not transferred during the year. This implies that funds available is lower than actual approval which provides an overall picture of the effectiveness of expenditure management in the state and hints at the existence of fund flow bottlenecks, if any. 17

19 We find that the overall ratio has increased significantly from 66 to 84 percent at the national level. Moreover, while only two states (Rajasthan and Uttar Pradesh) had a ratio of over 90 percent in , nine states did so in and six more had a ratio of over 80 percent. Among major states, only Bihar had an expenditure ratio of less than 70 percent. This highlights the improvement in expenditure management and lessons learnt from earlier implementation experiences. Independent resource tracking studies, however, indicates a mixed picture as far as transfers within the financial year are concerned. The expenditure out of available funds spent in the first two quarters has increased from 30 percent in to 44 percent in , implying greater efficiency of fund flows over the period. On the other hand, expenditure out of AWP allocations has declined from 70 to nearly 60 percent between and With RTE coming into effect, the States are under pressure to increase their plan size to comply with RTE norms without the requisite capacity to implement them. Analysis of program data reveals that this may be due to three major factors: (i) underutilization of infrastructure allocations; (ii) delay in teacher appointments; and (iii) vacancies at the Block and Cluster level. These relate to the three key provisions under RTE adequate classrooms, teachers and teacher training. While most states manage to spend about 70 percent of their infrastructure allocations, Bihar and Punjab managed only 30 and 50 percent respectively in In terms of teacher salary allocation under SSA (only for new appointments), Rajasthan, Madhya Pradesh and Jharkhand spent nearly 90 percent while Bihar and West Bengal just over 50 percent. Block level vacancies reached 60 percent for Bihar, but was just over 10 percent in West Bengal and Maharashtra. vi Overall, the data and analysis presented here suggests that some of the issues in resource allocation and utilization have been addressed over the last decade. Specifically, with the RTE coming into force, the sharing ratio between Union and State governments will be stable in the near term. This would enable States to undertake a realistic assessment of their revenue mobilization and absorptive capacity and enable them to better manage the planning and fund flow processes in the future. However, challenges in absorption of 18

20 increased resources allocated for RTE remain especially in states such as Bihar with large gaps in infrastructure and human resources. Section 5: Ensuring Equity in Financing A District and School-level Assessment Until now, our analysis has focused on the norms, processes and mechanisms of financing EFA in India through the vehicle of the Sarva Shiksha Abhiyan. As mentioned above, the principal objective of SSA financing is to provide adequate resources to States and districts most in need in order to close the gap in access and address social and geographical inequities in education. In this section we undertake an assessment of whether these objectives have been fulfilled by comparing two main indicators: per student expenditure (PSE) and Educational Development Index (EDI). It is clear that there has been a secular rise in PSE over the last decade as a result of implementation of SSA. At the State level, data compiled by Accountability Initiative for two years, 2007 and 2011, presented in Figure 6 shows that the per student expenditure has increased by a factor of between 3 and 6 in most major states, which is significant by any yardstick. Moreover, the highest PSE is in those states with the greatest deficit in education access at the inception of SSA. These are Chattisgarh, Bihar, Rajasthan, Odisha, Madhya Pradesh and Uttar Pradesh. Additionally, other relatively educationally advanced states such as Andhra Pradesh, Kerala, Karnataka, Tamil Nadu and Punjab have also witnessed significant increase in PSE over the last five years. Therefore, from an equity perspective, it seems that some of the horizontal imbalance in PSE has been corrected by SSA financing which is a positive outcome. State level figures on inputs budgeted in AWPB do not provide evidence on whether inter-district inequities within states have been addressed or not. In Figure 7, we disaggregate the AWPB for Bihar state and two districts, Nalanda and Purnia, for three years from to During this period, the total allocation for Bihar increased by 50 percent from Rs.34 billion to Rs.52 billion. The allocation for Nalanda increased by 60 percent from Rs.0.69 billion to Rs.1.14 billion, while that of Purnia increased from Rs.1.05 billion to Rs.1.46 billion an increase of 40 percent. Therefore, the increase in allocation at the State level is on average reflected in the districts, with some districts getting higher aggregate allocation than others. 19

21 Figure 6: Per Student SSA Allocation in Selected States Source: Accountability Initiative, Budget Brief on Education Sector,

22 The AWPB allocations are divided into five broad categories teacher salaries, civil works (infrastructure), grants to schools, management costs, interventions for out-ofschool children (including remedial education) and other inputs (text books, uniforms, interventions for children with special needs etc.). This gives us a picture of the relative shares of the inputs in the AWPB at the state and in of two districts, Nalanda and Purnia, depicted in Figure 7. We find that the share of infrastructure has increased for Bihar and Nalanda between and , while it has remained almost the same for Purnia. However, the share of infrastructure was unambiguously higher for all in , the year RTE came into force. Comparing among districts, it is interesting to note that the share of teacher salaries in Purnia increased substantially while it declined in Nalanda between and although the pupil-teacher ratio (PTR) was more or less the same. Moreover, the share of allocation going to out-of-school children interventions formed a much higher proportion in Nalanda than in Purnia. However, the percentage of out-of-school children in the 6-14 age group was 7.4 percent for Purnia and only 2.8 percent for Nalanda. vii This reflects the need for a multi-dimensional approach for targeting allocations under SSA through a categorization of districts on the basis of a set of criteria, known as Special Focus District. We undertake and assessment of its equity implications in terms of SSA financing for Bihar, West Bengal and Maharashtra below. 5.1 Analysis of Special Focus Districts (SFD) The mechanism to address these differences in levels of educational development under SSA is to classify some districts as Special Focus Districts (SFDs). These districts are identified based on indicators such as: (a) concentration of out-of-school children, (b) high gender gap, (c) low retention rate, (d) infrastructure gap and (e) concentration of Scheduled Castes, Scheduled Tribes and Minority population, districts affected by left wing extremist violence and border districts. The four categories of SFD are classified as follows: i. SFD-A: Primary to Upper Primary School ratio is greater than 3 ii. SFD-B: Shortfall in additional classroom required is greater than

23 iii. SFD-C: Out-of-school children more than 20,000; Gender gap more than 10 percent in Primary and/or more than 20 percent in Upper Primary; Retention rate below 60 percent iv. SFD-D: SC/ST/Muslim population more than 20 percent; Prime Minister s 121 minority focus district; Left wing extremist violence affected, border district In terms of determinants, Categories A and B relates to infrastructure gap, Category C relates to program outcome group and Category D to socio-economic characteristics of the district. It is often the case that a district may fall in more than one category, so for our purposes we have counted the higher category. For example, if a district falls in Category A due to its infrastructure deficit but also has retention rate below 60 percent and more than 20 percent Muslim population, it will still be counted as a Category A district. While this categorization of SFDs is necessary, it is also problematic as far as planning and policy implementation are concerned. The main critique of this approach comes from the fact that there is significant correlation between infrastructure, program outcome and social equity indicators. Therefore, it is likely that SFD-A also qualifies in other categories, especially C and D. The policy priority set by SSA is to close the infrastructure gap first to ensure compliance with RTE provisions. The civil works component of the district plan, therefore, can go up to 50 percent of total budget, as opposed to 33 percent in non-sfd-a and SFD-B districts. This has four important implications as far as financing for equity is concerned. First, for the SSA authorities, completion of civil works becomes a priority with adverse consequences for financial performance in other key areas such as teacher appointment and training, as well as focused interventions for educationally backward communities. Second, the national SFD qualifying guidelines are somewhat arbitrary and in favour of larger states especially for B and C categories. Third, due to the accent on civil works, the per child allocation in A and B categories is substantially higher, but there is little scope to increase allocations significantly for C and D categories and their per child allocations are not very different from non-sfd since they are already taken care of by the SSA intervention categories and budgeted accordingly. Finally, in educationally developed states, a more targeted approach is needed to ensure greater equity in financial 22

24 allocation going to districts and socio-economic groups that are comparatively lagging behind since the differences will not be captured adequately with the existing categorization of SFDs. This is clearly seen from our analysis below. We have compiled detailed SFD-wise data for Bihar and Maharashtra for , the latest year for which final enrolment figures are available. We then aggregated allocations for each category of SFDs from the list provided in by the AWPB guidelines for , calculating the allocation and enrolment shares. We also tabulate the per student expenditure using government school enrolment figures from DISE. We summarize the data on allocations, share of enrolment and PSE for each category of SFD in Bihar and Maharashtra for in Table 4. Bihar and Maharashtra provide a study in contrast. Out of 38 districts in Bihar, all are SFD except two - 27 are SFD-A, four each in B and C and one in D category. By comparison, only 15 districts out of 35 in Maharashtra qualify as SFD, but there are none in A and B. The detailed categorization of districts in Bihar and Maharashtra are provided in Annex I and Annex II. Table 4: Comparison of SFD Allocations Bihar and Maharashtra, Share in State Allocation Share in Enrolment Per Student Allocation Bihar Special Focus Districts Category A Total District:38 Special Focus Districts Category B SFD-36 Special Focus Districts Category C Special Focus Districts Category D Special Focus Districts Category -Total General Category Districts All Districts Maharashtra Special Focus Districts Category C Total District: 35 Special Focus Districts Category D SFD - 15 Special Focus Districts Category - Total General Category Districts All Districts Source: Author s Calculations from State Annual Work Plans, Available for download from 23

25 Comparison of allocation and enrolment shares shows a significant degree of convergence in the two states, especially Maharashtra. Nearly 90 percent of the total State allocations are directed towards SFD-A and B in Bihar, which have just over 80 percent of enrolment. In contrast, only one-third of the total resources are directed towards SFD-s in Maharashtra with a similar enrolment share. In terms of per student allocation, there is a wide divergence among districts in Bihar, especially between A and B - the two infrastructure categories. SFD-C and D have per student allocation just above that of the non-sfd, but not significantly higher. The four category B districts in Bihar get nearly seven times the per student allocation for the two districts which are not in any SFD category. The story for Maharashtra is very different: allocations for general category districts are in fact higher than the SFDs, although the difference is not very significant. This indicates that for the relatively educationally developed states, the SFD categorization does not lead to increased per child allocations under SSA. As noted above, states like Maharashtra need a different mechanism for targeting resources in order to ensure equity across regions and social groups. 5.2 Devolution of School Grants under SSA Funds going directly to schools to be utilized at the discretion of school authorities constitute less than 5 percent of total SSA allocation both at the state and district levels. There are three basic grants that are devolved to schools: (i) development grant, (ii) maintenance grant, and (iii) teaching-learning materials (TLM) grant. These grants are meant for expenditure on school supplies, upkeep of school premises and purchase of teaching and learning materials other than textbooks. They are provided every year to all government elementary schools in the country as per the criteria explained in Table 5. As seen from Table 5, the norms for devolution of school grants are based on three characteristics: type of school, number of classrooms and number of teachers. This normative framework is problematic for several reasons. First, budgeting is complex given the fact that many schools have added classrooms to their existing structure or have been upgraded from primary or upper primary to elementary schools. Moreover, teacher numbers vary significantly due to new appointments and transfers to other schools or to the academic support institutions such as BRC/CRCs. Second, there is no mechanism to 24

26 compensate increase in enrolment since the school grants are not based on per child norms. Third, the norms are inequitable as far as large schools are concerned which have to deal with higher operating costs without a mechanism for compensation from SSA. In some cases, the total grant per child is four times higher for smaller schools than larger ones, leading to misallocation of resources. viii Table 5: Devolution formula for School Grants under SSA Grant Amount per School Purpose of Utilization School Development Grant Rs.5000 per year per primary school Rs.7000 per year per upper primary school Rs per year if the school is primary+upper primary (Std. I-VIII) This grant can be used for buying school and office equipment such as blackboard, sitting mats, chalk, duster, registers and other essential supplies Note: Primary and Upper Primary schools The grant amount varies by type of are treated as separate schools even if they school, i.e., whether it is primary, upper are in the same premises primary or elementary School Maintenance Grant Rs per year if the school has upto 3 classrooms Rs per year if the school has more than 3 classrooms Note: Primary and Upper Primary schools are treated as separate schools even if they are in the same premises Rs.500 per teacher per year in primary and upper primary schools This grant can be used for whitewashing, beautification, repair of toilets, hand pump, playground, school building etc. The grant amount depends on the number of classrooms in the school and excludes Headmaster and office rooms Teaching-Learning Material (TLM) grant This grant can be used at the discretion of teachers to buy charts, posters and other teaching aids 6. Assessment of Outcomes of SSA Financing: Per Child Expenditure, EDI and Quality of Learning The equity analysis of SFDs presented in the previous sub-section is an assessment of program design which is intended to direct resources to the districts most in need. It is necessary to complement this analysis by a normative assessment of equity in distribution of resources. From a policy perspective, it is important to understand whether per child expenditures under SSA are greater in those districts which have a lower level of educational development which has been the main rationale for its implementation. Given the multiple objectives and interventions, this is not an easy task. 25

27 6.1 Per Child SSA Expenditure and EDI Jhingran and Sankar (2007) attempted to answer this question by developing an Education Development Index (EDI) which has four components: access, infrastructure, teachers and outcomes. The index for each component is calculated separately and the overall EDI is constructed by using the Principal Component Analysis (PCA). Table 6 provides the component-wise list of indicators and the detailed methodological note is provided in Appendix III. Our objective is to investigate whether districts with low EDI have higher per child allocation under SSA for Bihar, West Bengal and Maharashtra. The choice of the states has been explained in the introductory section. We calculate the per child allocation from the district AWPB publicly available from MHRD website and government school enrolment from DISE. The main difficulty in carrying out this analysis is that there is no consistent time series of district EDI available publicly. Using comparable methodology, EDIs were calculated only for for all districts, but discontinued thereafter. We have obtained the master dataset from MHRD for theurposes of this analysis. However, Maharashtra has recently published district EDI figures for using very similar methodology to that of MHRD although the figures are not strictly comparable due to difference in some of the indicators used. We undertake the analysis for Maharashtra for both and and provide some inferences below. The distribution of per child allocations for the three states is summarized in Figure 7. The box plot shows that overall, Bihar s districts have on average higher per child allocations than West Bengal and Maharashtra, with 95 percent of districts between Rs.1600 and just over Rs Comparable figures for Maharashtra are Rs.1250 and Rs West Bengal has a distribution similar to Bihar, but the average per child allocation is around Rs