Case Study of Per Student
Financing: Macedonia
Session 11
Education Policy Reform Course
Kiev, March 26, 2008
Jan Herczyński
Structure of the presentation
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Political decentralization: Ohrid agreements
Phases of fiscal decentralization
Education decentralization strategy
Allocation formulas
Impact on municipalities
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Macedonia case study
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Political decentralization
• Ohrid agreements of 2001 defined
decentralization as an instrument to preserve
unity of the country and accomodate ethnic
tensions
• Significant powers promised to municipalities
• Altogether, 31 laws have been adapted by
Macedonian parliament to implement
decentralization
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Macedonia case study
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Political decentralization 2
Main laws:
• Law on Local Governments (defined which
sectors will de decentralized)
• Law on Financing of Local Governments
(defined new financial mechanism and phases
of fiscal decentralization)
• Law on Territorial Organization
(consolidated 123 municipalities into 83)
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Macedonia case study
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Fiscal decentralization
Phases of fiscal decentralization:
• First Phase: transfer of properties, of
management responsibilities, and of
financial responsibility for maintenance of
institutions
• Second Phase: transfer of responsibility for
employment and for salaries
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Macedonia case study
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Fiscal decentralization 2:
• Types of grants for two phases:
• First Phase: categorical grants for the
financing of specific programs, without the
salaries,
• Second Phase: block grants for the
financing of sectors, including the salaries
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Macedonia case study
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Fiscal decentralization 3
During Phase 1 fragmentation of public finance:
• Maintenance expenditures from local budgets,
using the categorical grants,
• Salaries directly from the central budget,
• Fragmentation is temporary but lasts from July
2005 until now
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Macedonia case study
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Fiscal decentralization 4
• First Phase started on July 1, 2005
• Selected 42 out of 83 municipalities begun
Second Phase on September 1, 2007
• 9 more municipalities entered Second Phase
on Janury 1, 2008
• It is expected that all municipalities will
enter the Second Phase in 2009 or 2010
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Macedonia case study
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Decentralization of education
• In 2005 Ministry of Education adopted an
Education Decentralization Strategy, for the
First Phase of fiscal decentralization
• The strategy discussed a number of functions
not specified in decentralization laws
(student transportation, dormitories)
• On the basis of the strategy laws on primary
and secondary education were ammended
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Macedonia case study
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Decentralization of education 2
• Student transportation was decentralized
immediately to local governments in 2005
• Decentralization of dormitories was delayed
until 2007
• Transfer of ownership of school properties
is a long process and is still not completed
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Macedonia case study
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Decentralization of education 3
• Principles of per student financing were
defined in the education laws
• The responsibility for defining the
allocation formula rests with the Ministry of
Education
• Allocation formula is adopted each year by
the Government of Macedonia
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Macedonia case study
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Decentralization of education 4
• Important part of decentralization is the
transfer of responsibilities for appointment of
school directors
• The ammended laws define specific
professional selection procedure
• Mayor of municipality must appoint the
selected candidate
• Depoliticized appointment process
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Macedonia case study
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Allocation formulas
• It was legally necessary to have separate
allocation formulas for primary and
secondary schools
• In 2005 and 2006 a separate formula for
student transportation,
• Since September 2007 also separate
formulas for the categorical and block
grants
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Macedonia case study
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Education grants 2
July 2005 to
December
2006
January to
August 2007
Categorical grant for primary
Categorical for secondary
Categorical grant for student transport
Categorical grant for primary
Categorical grant for secondary
Since
September
2007
Categorical grant for primary
Categorical grant for secondary
Block grant for primary
Block grant for secondary
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Macedonia case study
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Allocation formulas 3
• Allocation formulas for education grants
were developed by Ministry of Education
• It was decided to use population density as
the main criterion of allocation
• Since this is not a characteristics of local
education systems, initially there was
opposition to this idea
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Macedonia case study
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Allocation formulas 4
• Twice allocation formulas were used for
incomplete fiscal year (in 2005 and 2007)
• The Ministry decided it is not possible to
use a per student formula in this situation
• Instead, allocation proportional to historical
costs was used
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Macedonia case study
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Allocation formulas 5
Categorical grants for primary education:
• Lump sum for all municipalities
• Additional weights for students in sparcely
populated municipalities:
below 25 pers./sq. km.: 0.6
25 to 40 pers./sq. km.: 0.4
40 to 70 pers./sq. km.: 0.2
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Macedonia case study
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Allocation formulas 6
Block grants for primary education:
• Lump sum for all municipalities
• Additional weights for population density:
below 20 pers./sq. km.: 1.4
20 to 35 pers./sq. km.: 0.8
35 to 70 pers./sq. km.: 0.6
• Weight 1 for special needs students, 0.2 for
subject teaching
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Macedonia case study
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Allocation formulas 7
Categorical grants for secondary education:
• Weight if population density is less 40 per.
per sq. km. : 0.1
• Weight for general academic schools: 1
Block grants for secondary education:
• Lump sum for all relevant municipalities
• Weight for general academic schools: 0.1
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Macedonia case study
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Allocation formulas 8
Block grants for secondary education:
• Lump sum for all relevant municipalities
• Weight for general academic schools: 0.1
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Macedonia case study
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Impact on municipalities
• Local education strategies
• New budgeting procedures for schools
• Review and reorganization of student
transportation
• Network planning and consolidation
• Functional reorganization of municipal
education departments
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Macedonia case study
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