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close this bookPlanning and Financing Sustainable Education Systems in Sub-Saharan Africa - Education Research Paper No. 07 (DFID, 1993, 32 p.)
close this folderPart II: Approaches to reform
View the document(introduction...)
View the documentA. Issues in planning and budget reform
View the documentB. Implementing improved systems
View the documentC. Conclusions: Affordability and sustainability

A. Issues in planning and budget reform

The approaches discussed in this part of the paper arise directly out of the analysis of issues in Part I. They are concerned primarily with the question of how to achieve sustainable reform of education systems through better use of domestic resources combined with focused applications of foreign aid. I argue that a key reason for the whole or partial failure of many initiatives, whether they be related to financing education, to the introduction of curriculum reforms, to the improvement of teacher quality, or to the introduction of greater participation of communities in schooling, to name four common reform targets, has been the neglect of budgeting processes. This neglect has now become critical because of the inability of most budget systems to cope adequately with contraction.

The problems addressed in this paper are not new, as I have noted. It has long been recognised that available resources have been spread more and more thinly over more students at the expense of quality and effectiveness. In spite of this, answers to how plans and resources should be related have rarely been addressed in technical detail. While, for example, the first IIEP Fundamentals of Education Planning monograph published in 197049 specifically proposed reforms to budgeting and related techniques, training courses and technical literature did not take these proposals forward. Part of the reason was that during the 1970s economic and political conditions were such that in many countries, supported by foreign aid, there was little perceived need to make the necessary changes. In anglophone ax-colonies the same budget systems as were implanted in colonial times are still in use.

The Educational Budget. The budget is the most significant influence on sectoral planning and management, and is the most comprehensive policy document issued by Government. That budgeting needs to be improved is generally recognised in the aid literature, although there appears to have been little academic interest expressed in the subject in professional journals, but less well understood are the difficulties in altering significantly the structure of planning and budgeting in one sector only. It is necessary to take into account the changes needed in the entire system of which the education sector is a part. Otherwise fundamental incompatibilities will exist between sectoral and Treasury formats. The result of the failure to change the structures of planning and budgeting has meant that exhortations to achieve greater efficiency cannot be effectively translated into practice.

Furthermore, discussions of planning and budgeting cannot concentrate solely on recurrent budgeting alone, as has so often been the case. Capital budgets, in some countries replaced by 'development'50 budgets, is a crucial aspect of the planning process, as is the need to account effectively for the use of foreign aid. In some countries foreign aid represents a significant proportion of total government education expenditure in itself, while in others the volume may be low relative to total spending although its influence on policy may be significant. I outline below the different types of budgeting, followed by a consideration of the approaches to budgetary and planning reform which are, I suggest, necessary conditions for sectoral reform.

Types of Budgeting. Budget techniques and processes can be placed at different points on a continuum which ranges from incremental approaches at one end to programme and zero-based budgeting at the other. Incremental systems are used in public budgeting in most countries and take as their starting point the budget and sometimes the actual expenditure for the previous year. These systems tend to be departmental in their objectives. Rational51 systems relate budgets to objectives and take into account wider objectives which cut across departments and institutions. The problem is therefore to combine the ideal with the practical.

(a) Incremental Budgeting Systems

Most current systems are in an incremental bid format based on line items in the budget categories. Separate ministries, departments and institutions prepare the next year's estimates in isolation from each other, adopting as their base point the current year's volume of services and expenditure levels. These estimates take the form of bids, as in an auction, and when they are aggregated they inevitably exceed the amount available to finance them. In an efficient bid system departments then adopt a systematic approach to reducing their bids. In most African countries teacher salary budgets are largely inviolate, and last minute reductions in non-salary budgets are imposed by Ministries of Finance, often with no consultation with the bidders. Control of sorts is exerted over salaries merely by allowing them to decline in real terms, although if total budgets also decline in real terms the proportion of salaries in the budgets remains constant.52

Disadvantages of Incremental Budgeting. This system suffers from many disadvantages:

(a) It cannot cope with reviews of the base budget, and consequently bidders are unlikely to propose reductions. The objective for each bidder is to maximise the bid, and the strongest available argument is the volume of the base year's expenditures, which consequently must be maintained even if they are unnecessary, in the case of underspent allocations.

(b) It encourages a fragmented, departmental approach, in which public departments which have common objectives bid against each other, even when their aims are related. This fragmentation in its extreme forms is manifested by different departments bidding against each other for exactly the same purpose.53

(c) It takes no account of objectives, but emphasises financial control of inputs. The bureaucratic imperative is to keep within budget, but no attempt is made to evaluate the effectiveness of the expenditure in achieving agreed goals. A continuing and idealised relationship between inputs and outcomes is assumed: as long as the money is spent the desired outcome is assumed to be achieved.

(d) It encourages a short term view. Budgets are annual exercises. Where capital budgeting is concerned there is no room for estimating incremental recurrent budget implications, and the planning horizon is short.

Advantages of Incremental Systems. The principal advantage of the incremental systems, and the reason for their robustness in the face of their deficiencies, is that they are readily amenable to the political process of negotiation.54 The base is not challenged, and disputes can therefore be focused on the incremental proposals, which in the education sector can be conveniently divided between salary and non-salary expenditures, the former being politically more sensitive than the latter. Incremental budgeting encourages compromise and the mitigation of conflict. Sometimes the political process creates pressure for the increase of a line item precisely because of the fixed nature of the base: a common example of this is boarding costs for secondary school pupils. The final decisions on the budget, whether from the Ministries of Finance or from political sources, are invariably removed from the budget managers, who may be among the last to be notified, and hence there is little room for conflict.

The political dimension cannot be ignored. The failure of many budget reforms had its roots in the resistance of political authorities to reviewing and cutting programmes which in some way would threaten their positions or even government stability.55 The result has been, however, a progressive deterioration of education systems in times of financial stringency, as no means have been available to adapt services to available resources.

(b) 'Rational' Budgeting Systems

The combination of more or less fixed base budgets and concern with quantities of throughput rather than with quality and quantity of output must be characterised as an irrational combination for planning and budgeting purposes in the sense that the level and allocation of resources are not derived from a reasoned consideration of relative priorities. 'Rational' forms of budgeting require that the justification of each item of expenditure be related to a target output, itself related to an overall policy goal or set of goals for the education sector and for the economy as a whole.

Programme Budget Systems. At the other extreme from bid budgeting are Planning Programming Budgeting Systems (PPBS), referred to here generally as Programme Budgeting (PB).56 Although budgets are, in principle, plans expressed in financial terms, in practice, particularly in government budgeting, their construction may become divorced from specific objectives and targets and become driven by other criteria. Programme Budgeting is basically an approach to the formulation of plans and budgets where attention is focused on objectives, and activities are grouped into 'programmes' each one of which is concerned with a single objective.57 In a company this approach is an alternative to departmental budgeting where each department of the organisation makes a budget. Instead, planning and budgetary control may cut across departments where each department is concerned with a part of a programme. The application of the approach to government budgeting may or may not alter expenditure control mechanisms, but will affect how the budget is built up and how the activities on which the budget is based are monitored.

The mechanics of PB are broadly as follows:

(a) Establish sectoral policies with overall goals broken down into programmes with defined objectives, sub-objectives and activities;

(b) Analyse programmes in terms of

(i) identification and quantification of resources required to meet objectives

(ii) existing resource allocations

(iii) identification of alternative ways of achieving the objectives derived from needs analysis

(iv) comparative quantitative and qualitative evaluation of alternatives and their social and economic costs and benefits;

(c) Prepare budgets on the basis of the analysis, with narrative statements of output measures and justification;

(d) Feedback and review.

Zero-Based Budgeting. A form, which in some ways is less extreme and in others more, is Zero-Based Budgeting (ZBB), which requires that the total cost of every item included in a budget be justified and approved. No base or minimum expenditure for any activity or budget line is automatically acceptable. The approach forces an evaluation of all expenditures and their associated activities. ZBB seeks to expose functions and goals which may have exhausted their usefulness.

In its purest form PPBS is a limited technique because of its complexity. It was introduced into US and UK public budgeting58 in the 1960s and 70s, but its attractions began to fade. There are practical problems in allocating activities to programmes and developing accounting systems that cut across departments. There is considerable potential for conflict as base budgets are regularly reviewed. Within government structures it is difficult to encourage multi-disciplinary approaches, particularly if it means a reduction in the volume of activity in a department in order to rationalise. Finally, there is a danger of policy instability and frequent major changes, often occurring because planners were wrong in their initial assumptions and forecasts. They became replaced by systems which retained elements of PB, with enhanced capability for regular value for money surveys of programmes and improved virement systems.

As with PPBS, ZBB is impractical as a standard system. It is not in general physically possible to subject programmes and activities to annual reviews of their base assumptions. It is, however, possible to establish ad hoc mechanisms for scrutinising the base, such as value for money studies. These, together with elements of PB, form the basis of a system of practical budgeting which is feasible in its aims and techniques, and flexible in its mechanisms. Education planners will readily recognise the features of the system: they are the basis of effective planning. It is possible to develop approaches to budgeting which take account of the strengths and limitations of each system and of political and bureaucratic realities. In brief, the overall objective of any reform to budgeting must be to combine the planning function with the budgeting function, and to subject financial allocations to proper scrutiny of the activities which they support. New budgeting and planning procedures must retain the virtues of the traditional systems while at the same time they must reduce its defects.

Advantages of Programme Budgeting. There are two key advantages of the programme approach to the budgeting of public resources. First, it demands by its very nature participatory planning and policy making from the bottom up, and it hence makes the allocation of public resources more democratic. This is important when resources are inadequate: public dissatisfaction can be minimised if there is a broad consensus on their disposition, and enhanced transparency creates a better atmosphere for the introduction of cost-sharing. Secondly, plans can be monitored, and budget control ceases to be limited to ensuring that financial ceilings are not breached. It provides a means of short term monitoring of targets which can only be achieved if the resources allocated to them are realistic in the first place. In other words, plans are directly related to available resources.

Effective budgeting depends on good estimates of what resources are available. Under incremental budgeting, even if budget ceilings are given in advance, institutions within the system still benefit from trying to bargain higher shares, with the main arguments revolving around their previous allocations. The reduction of the volume of activities to be supported by the budget is rarely an option. Institutional planners may build up their budget bids on, for example, numbers of pupil places, books required, etc. but these bids are rarely derived from a conscious prioritisation of activities, but rather from maintaining or improving the status quo.

It is unlikely that a system which is based only on incremental budgeting can effectively incorporate a process of ranking activities in order of priority and costing them. This is made more difficult by the need to effect changes over periods of more than one year. For example, teachers' salaries have over the years in many countries become treated as fixed costs, and all other charges to the budgets are residual, yet everyone recognises the absurdity of employing people who cannot do their work because of inadequate facilities and equipment and who are inadequately paid. Education systems are major employers, and this makes restructuring difficult because of the human implications of reductions in the total system: it is difficult to plan a way out of the problem in the absence of immediately available and substantial additional resources.

Financial Planning Systems. In order to overcome this problem, systems which may be described as 'financial planning' or 'volume planning' systems are increasingly employed. These are concerned with longer planning horizons, usually of three years, and are characterised by the advance provision of expenditure guidelines, joint capital and recurrent budgets and a more relevant budget specification and classification than the line item budgets described above. However, their focus is still primarily incremental and they do not involve a priori justification of the base budget. The emphasis is still a departmental one, and the same criticisms relating to the measurement of outcomes may apply. However, when considered on a rolling basis with programme budgets, they become powerful tools for medium term planning.