Reorienting education spending  better outcomes

1. Reorienting education spending  better outcomes

2. Education Spending: The extremely fragmented education system in BiH is expensive in terms of unit costs and inequitable in terms of who benefits from funding. High costs are leading to system breakdown (teacher strikes) and mounting arrears. Despite high spending, educational outcomes (the relevancy of what children learn) are thought to be poor.

3. Public education expenditures are high • Education spending as a share of GDP is high in BiH, especially in the Federation of BiH, compared with average spending in transition CEECs and in EU countries

4. Unsustainable spending is driven by high unit costs High spending reflects high unit costs at all education levels relative to per capita GDP, which is twice as high in BiH as in Europe—unit costs at secondary and higher levels are especially high

5. The System is Characterized by Extreme Inefficiency • Higher Education is highly fragmented and poorly managed • the cost per graduate in all higher education institutions is unsustainable —reportedly, only 15-20 percent of university students graduate on time – far below European standards • the fact that universities operate as loose associations of independent faculties leads to redundancy, inefficiency, and ultimately low quality • the creation of separate universities for political reasons also creates redundancy and inefficiency, and is a major contributor to low quality programs • managing higher education institutions at the canton level is inherently inefficient and ultimately unsustainable if quality is deemed more important than political ownership

6. The System is Characterized by Extreme Inefficiency • Expensive Secondary technical and vocational education is externally and internally inefficient • External inefficiency: over 50% of secondary children are locked into learning specific occupations for which there are no jobs; rather than being given flexible skills for a modern economy • Internal inefficiency: occupational courses are expensive due to low student:teacher ratios and the need for specialized equipment

7. The System is Characterized by Extreme Inefficiency Input-based funding (focusing only on teachers, books and materials) encourages inefficiency A focus on teachers has lead to salaries crowding out all other spending and low student teacher ratios The focus on inputs detracts from what is really important: what students are learning A per student formula approach is needed to provide an incentive to use resources (teachers, school buildings, etc.) more efficiently

8. Public Education Expenditures are inequitable • Wide disparities in per capita and per pupil education spending reflect differences between economic development and fiscal capacities • Public spending for higher education benefits almost exclusively higher socioeconomic levels and people who will find the best jobs; this inequitable situation is exacerbated by the fact that the best students–who are strongly correlated with higher socioeconomic levels--are given free admission to university • There are also wide disparities in the availability of academic or general secondary education; the fact that over 50% of secondary students are enrolled in three year occupational programs which offer inflexible skills and limited potential for employment creates a vicious circle of poverty and unemployment

9. Public Education Outcomes and Quality are Reported to be Low • Curriculum and the structure of education are increasingly out-of-date • The emphasis is on transmission of factual information rather than building skills and competencies and teach children how to learn • As mentioned, the secondary vocational curriculum is excessively specialized and inflexible • Students are tracked into academic and vocational streams at age 15 while European countries are rapidly moving away from such practice

10. Public Education Outcomes and Quality are Reported to be Low • Enrollment rates in secondary are dramatically low—enrollment is about 57% at secondary in the Federation of BiH and much lower in RS, compared to well over 90% throughout Europe • Little evidence-based information exists on the quality of programs: a Standards and Assessment Agency has only recently been established to measure quality in general education, and accreditation and quality assurance is almost totally lacking in higher education

11. The Financial Dilemma According to the macroeconomic framework agreed with the IMF, recurrent spending in Bosnia will not increase over the next 3-4 years, and will only increase after that depending on future economic growth. Therefore, current levels of public spending on education in Bosnia will not grow in the medium term. At the same time enrollment rates for secondary and higher education must increase and quality must improve. Consequently, there are two options open to policy makers: • increase efficiency in secondary and higher education; and • increase non-public funding for education.

12. Increasing Efficiency Efficiency must be increased in three priority areas: expensive specialized secondary vocational programs must be gradually eliminated and replaced with general programs for which student:teacher ratios can be increased; higher education must be funded at the State or Entity level, universities must be quickly consolidated under a European standard central management and the number of redundant programs reduced, and students must complete degrees faster; the introduction of per student funding formulas at all levels must provide incentives for efficiency at all levels

13. Message If politicians in BiH do not overcome their political differences and cooperate to reduce redundancy and increase efficiency, participation rates in secondary and higher education will continue to be below European standards and the quality of education will continue to be low for the foreseeable future.

14. Non-Public Funding for Education Increasing non-public funding for education can be achieved by introducing fees for higher education FOR ALL STUDENTS WHO CAN PAY and introducing a loan scheme and scholarships for the poor, as well as encouraging both secondary and higher education institutions to find ways to supplement their revenue, which they are already in part doing

15. Message Establishing universal fees for higher education and gradually increasing them over time is a necessity in BiH if the quality of higher education is to improve. There is simply no additional public funding with which to improve quality and increase enrollments. As nearly 50% of students in the most prestigious faculties pay significant fees already, the political difficulty of such a policy change may not be as great as expected.

16. The Reform Agenda The following policy actions are necessary in the short term: • Adopt State or Entity level management of higher education • Transfer legal authority for university management from the faculties to the university • Establish universal fees for higher education and increase them over time (together with a scholarship and loan scheme) • Introduce per student formula funding mechanisms at all levels of the system • Transform the 3-year occupational programs in secondary to 4-year broad-based programs • On the basis of increased efficiency from the above reforms, increase enrollment in secondary and higher education and measure improvements in quality over time