FORMALISATION OF SECONDARY EDUCATION FINANCING IN THE CONTEXT OF DECENTRALISATION AND THE ROLE OF LOCAL COMMUNITIES IN FINANCING SCHOOLS

Abstract

This article is a review of formula funding. It addresses two basic questions: 1) What formula funding schemes for schools exist and how they are used; and 2) How formula funding methods for schools meet the standards. Formula funding for schools, as opposed to administrative funding – relies on a mathematical formula, contains a number of variables (e.g., number of students), each of which has a monetary amount tied to it to determine school budgets. There are two main groups of variables in such formulas: 1) based on number of students and grade level success; and 2) based on need. The effectiveness of formula funding compared to alternative funding regimes depends on the details of the formula and on educational policy. Formula funding systems typically promote transparency and accountability at low administrative costs, and when combined with appropriate additional policy tools, they can also promote equity and efficiency. There are several debates going on right now: first, there is a tradeoff between transparency/ease and local sensitivity/complexity. Second, determining how much it costs to teach to a certain standard is problematic and controversial. The main reason for this is that the relationship between education costs and student achievement is largely unknown, and the impact identified is relatively small. Because of the proliferation of formula funding, an extensive academic literature has developed over the past two decades. While much of the literature is specific to national contexts and contributes to the domestic issues of specific countries, there are a small number of studies for general application. The latter, however, remain largely descriptive and only cover evaluation issues very briefly or address specific issues such as corruption. As a consequence, there is very little comparative work on how formula financing methods are evaluated according to different standards. For the most part, the issue has been studied only in EU member states. Much attention is given to countries with extensive experience in evaluating formula finance regimes, such as the US, the UK, Australia, and New Zealand. But unfortunately, developing countries do not take up the issue of the study, which provides difficulties in their educational development.