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THE ROLE OF THE FFC IN THE BUDGET PROCESS WITH SPECIAL REFERENCE TO EDUCATION

THE ROLE OF THE FFC IN THE BUDGET PROCESS WITH SPECIAL REFERENCE TO EDUCATION ---------------------------------------------------------------- PRESENTATION TO THE PORTFOLIO COMMETTEE O3 APRIL 2001. WHAT IS THE FINANCIAL AND FISCAL COMMISSION?.

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THE ROLE OF THE FFC IN THE BUDGET PROCESS WITH SPECIAL REFERENCE TO EDUCATION

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  1. THE ROLE OF THE FFC IN THE BUDGET PROCESS WITH SPECIAL REFERENCE TO EDUCATION ---------------------------------------------------------------- PRESENTATION TO THE PORTFOLIO COMMETTEE O3 APRIL 2001 FOR AN EQUITABLE SHARING OF NATIONAL REVENUE

  2. WHAT IS THE FINANCIAL AND FISCAL COMMISSION? The Financial and Fiscal Commission is established in terms of the 1996 Constitution through the Financial and Fiscal Commission Act. The role, function and powers of the Commission are determined by: • The Constitution, • The Financial and Fiscal Commission Act, and • The Intergovernmental Fiscal Relations Act. FOR AN EQUITABLE SHARING OF NATIONAL REVENUE

  3. WHAT IS THE COMMISSION’S KEY FUNCTION? The Commission must consider: • The annual vertical division of revenue between the national, provincial and local spheres. • The horizontal division of revenue between the provinces, and • Any other - Conditional or - unconditional allocations to provinces or Local Government. FOR AN EQUITABLE SHARING OF NATIONAL REVENUE

  4. FFC 2001 REC0MMENDATION’S:Response from Government • The provincial equitable share should provide forconstitutionally mandated basic levels of social service provision and provinces should be held accountable forthe delivery of such services; • The FFC suggested that basic services be defined in terms of cost per beneficiary with allowances made for variations in the cost of delivery for different target groups and the inclusion of national (or provincial) policy parameters. FOR AN EQUITABLE SHARING OF NATIONAL REVENUE

  5. Towards an Equitable share of National Revenue • FFC approach to Equitable share (MATRIX) • The provincial equitable share: - With a particular emphasis on basic education, primary health care and social security = (S) - The Basic Element (B), • The Institutional Element (I). FOR AN EQUITABLE SHARING OF NATIONAL REVENUE

  6. UTILIZATION OF NATIONALLY RAISED REVENUE NATIONAL SPHERE (current / capital) PROVIN- CIAL SPHERE (current / capital) LOCAL SPHERE (current / capital) TOTAL (current/ capital) EQUITABLE SHARE NES + PES + LES = ES Debt Servicing ContingencyReserve S-Element Constitutionally Mandated Obligations (including Basic Services) I-Element Institutional & Administrative B-Element Other Constitutional Functions CONDITIONAL GRANTS n/a PCG (+) LCG (=) CG Infrastructure Capacity Building TOTAL NES (+) PES+PCG (+) LES+LCG (=) TNR+NB FOR AN EQUITABLE SHARING OF NATIONAL REVENUE

  7. - The Costed Norms approach: An Analytical Tool for the PES • For the next three-year MTEF cycle, starting in 2001, the FFC proposes that constitutionally mandated basic social services be provided and be explicitly budgeted for. • The FFC uses the costed norms approach as a method for recommending the indicative resources for the provision of CMBS. The rights of citizens to these CMBS are to be progressively realised. FOR AN EQUITABLE SHARING OF NATIONAL REVENUE

  8. DEFINITION “The costed norms approach is a formula based method for calculating the financial resources necessary for the provision of constitutionally mandated basic service levels, given nationally mandated norms and standards.” FOR AN EQUITABLE SHARING OF NATIONAL REVENUE

  9. THREE BROAD IMPLEMENTATION STEPS • Constitutionally mandated basic level of social services should be determined nationally and should be expressed in terms of norms and standards for each programme area. • Fiscal requirements should be determined by taking account of factors affecting provincial conditions and the macro-economic framework. • Total costs of providing basic education may then be calculated for each province. FOR AN EQUITABLE SHARING OF NATIONAL REVENUE

  10. THE FFC APPROACH AS APPLIED TO EDUCATION FOR AN EQUITABLE SHARING OF NATIONAL REVENUE

  11. THE CURRENT FFC ALLOCATION FORMULA • Is based on the distribution among the provinces of children between the ages of 7 and 18 and the current enrolment in primary and secondary education • Each school age learner is counted as one learner and each over-and-under aged learner is considered the equivalent of ¾ of an appropriate age learner FOR AN EQUITABLE SHARING OF NATIONAL REVENUE

  12. THE CURRENT FFC ALLOCATION FORMULA CONTINUED …….. • Aims to determine the minimum amount of money a province should spend in order to provide its learners with basic education • Where: • Basic education is defined in terms of providing primary and secondary education to learners in ordinary and special schools FOR AN EQUITABLE SHARING OF NATIONAL REVENUE

  13. TARGETING POOR LEARNERS • Evidence has shown that the amount of money necessary to meet any given educational standard will vary both across and within provinces • Learners with various disadvantages require extra resources to achieve any given educational standard. • Costs are highest for poor, rural learners and lowest for non-poor urban learners • Basic education = Ordinary and Special school, rest in Basic (B)i.e. ABET, ECDP FOR AN EQUITABLE SHARING OF NATIONAL REVENUE

  14. TARGETING POOR LEARNERS CONTINUED… • Cost per learner in a group is estimated using a series of weights multiplied by an average cost per province - taking account of differences. • Total cost to a province is average cost per learner multiplied by the number of learners enrolled. • A parameter is introduced to distinguish between funding “appropriate” and “inappropriate” age learners • Learners divided into9 groups distinguished by characteristics FOR AN EQUITABLE SHARING OF NATIONAL REVENUE

  15. LEARNER GROUPS FOR AN EQUITABLE SHARING OF NATIONAL REVENUE

  16. LEARNER WEIGHTS • Non-poor urban 1.00 • Non-poor rural 1.06 • Poor urban 1.23 • Poor rural 1.29 • Inappropriate age 0.75 • Special learners 2.30 FOR AN EQUITABLE SHARING OF NATIONAL REVENUE

  17. RECENT RESEARCH FINDINGS BY THE FFC • Indicators used to identify target groups differ from one province to another • Wide variation in per capita non-personnel expenditure is noted • Provinces differentiate per capita spending by income group more finely than the FFC but place less emphasis on the urban-rural distinction FOR AN EQUITABLE SHARING OF NATIONAL REVENUE

  18. FFC RECOMMENDATION PROPOSAL FOR 2002With Regard to education • To work with stakeholders to establish norms and standards that will be common to all provinces. This will help produce a common definition of basic education that will be acceptable to all provinces • To include Early Childhood Development Programme and ABET in the PES model as a Constitutional Basic Mandated Service FOR AN EQUITABLE SHARING OF NATIONAL REVENUE

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