Preschool Education Finance Reform in Albania: A Formula-based grant to municipalities

Elton Stafa, NALAS – Network of Associations of Local Authorities of South-East Europe & USAID’s PLGP

Policy Analysis Laboratory: The Future of the Welfare State in the Western Balkans Montenegro, Bečići, October 24, 2019 Background

• Education: • No. of preschool • 23% located in urban areas pupils: 74.000 – 3.2% of GDP • hosting 50% of pupils; preschool pupils – 11.1% of public (3-6 yo), 14% of • 11% of preschools offer a spending pupils population; hot meal and charge a service fee (of c. 1 Euro • Preschools: • Preschool per day); enrollment rates – 0.5% of GDP between 55% and • 89% do not charge 70%; anything; Background

• In 2016, local governments were transferred the responsibility to regulate and administer preschools as an exclusive local function; • Money was allocated to LGs on the basis of the number of teachers inherited from Ministry of Education; • The system did not reflect social and demographic developments producing/amplifying serious inequities in teacher/pupil ratios Inequities in Pupil Teacher ratios

35 33

30

24 24 23 24 24 25 22 23 22 22 22 21 20 21 21 19 20 19 20 20 20 19 19 19 19 20 18 18 18 18 18 18 18 17 17 17 17 17 17 17 17 16 16 17 16 16 16 15 15 15 14 14 15 13 13 12 12 10 11 26 9 10 10 23 25 22 23 10 21 21 21 21 22 7 18 18 18 19 19 19 19 16 16 16 16 17 17 17 17 17 18 14 15 15 15 15 15 15 15 16 16 16 16 16 13 13 13 14 14 14 11 11 11 5 9 9 9 9 9 10 10 10 8 9 6 3 - Mat Has Fier Klos Finiq Pukë Vorë Belsh Berat Patos Peqin Krujë Vlorë Shijak Dibër Lezhë Maliq Kukës Korçë Bulqize Tiranë Kavajë Pustec Devoll Cërrik Kamez Kurbin Poliçan Durrës Mirditë Elbasan Përmet Divjakë Himarë Kuçovë Lushnje Skrapar Delvinë Këlcyre Dropull Kolonjë Sarandë Gramsh Selenicë Tropojë Prrenjas Shkodër Librazhd Memaliaj Konispol Libohovë Pogradec Tepelenë Roskovec Vau Dejës Mallakastër Gjirokastër Rrogozhinë Fushë-arres Ure Vajgurore Malësi E Madhe

Average Class Size (Pupils per Teacher) Average Class Size (Pupils per Group)

Source: Ministry of Education, Sport and Youth Background

• Money for preschool teachers’ wages in 2019 must be freely disposable – exclusive local functions cannot be financed by conditional grants. • Inequitable pupil/teacher ratios and the freely disposable nature of revenues for ‘new’ own functions creates financial, technical, and legal challenges. • The most pressing questions: – How much money is needed to allow those LGs with high pupil/teacher ratio’s to lower them? – How should it allocated to LGs? – What happens if freely disposable funding is spent on other functions? Moving to a formula-based grant for preschool education

• “Specific Transfers” to be replaced by freely disposable “Sectorally Unconditional Transfers”; • The size of the transfer for preschool teachers increased by 10% to equalize conditions across municipalities; • A formula for the allocation of funding: 60% on enrollment, and 40% on teacher employment. Projected Impact of Preschool Teacher Financing in 2019

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25 26 25 23 23 20 21 22 22 21 21 21 19 19 19 19 18 18 18 18 18 17 17 17 18 18 18 15 16 16 17 17 17 17 17 17 17 17 17 16 16 16 16 16 16 17 17 17 17 15 15 16 16 16 16 16 16 16 16 16 16 16 16 16 14 15 15 15 15 15 15 15 15 15 16 14 14 13 13 13 13 10 11 11 11 10 10 9 9 10 9 9 9 9 8 5 6

3 - Has Mat Fier Klos Finiq Pukë Vorë Maliq Belsh Berat Patos Peqin Krujë Vlorë Shijak Dibër Lezhë Kukës Korçë Tiranë Pustec Kavajë Devoll Cërrik Kamëz Kurbin Poliçan Bulqizë Durrës Mirditë Elbasan Përmet Divjakë Himarë Kuçovë Lushnje Skrapar Delvinë Këlcyrë Dropull Kolonjë Sarandë Gramsh Selenicë Tropojë Prrenjas Shkodër Librazhd Memaliaj Konispol Libohovë Pogradec Tepelenë Roskovec Mallakastër Vau i Dejës Gjirokastër Rrogozhinë Fushë Arrëz Ura Vajgurore MalësiMadhe E Current Avg. Class Size New Avg. Class Size Projected Impact of Preschool Teacher Financing in 2019 Both small and large, urban and rural, mountainous and non mountainous municipalities benefit from the new system

AVERAGE CLASS SIZE VS. POPULATION AVERAGE CLASS SIZE VS. SIZE OF MUNICIPALITY AVERAGE CLASS SIZE VS. GEOGRAPHY OF DENSITY 30 30 30.0 THE TERRITORY

25 25 25.0

20 20 20.0

15 15 15.0

10 10 10.0 Average Average Class Size Average Average Class Size Average Average Class Size

5 5 5.0

- - - 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 0 200 400 600 800 1000 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% Percent of the country's population living Population density (inhab per sq. Km) Percent of mountanous territory in the in each municipality municipality Current Averege Clas Size (pupils to teacher ratio) Current Average Preschool Class Size Current Averege Clas Size (pupils to teacher ratio) New Pupil/Teacher Ratio New Pupil/Teacher Ratio Linear (New Pupil/Teacher Ratio) New Average Preschool Class Size Avg. Class Size is reduced in Avg. Class Size is reduced in Avg. Class Size is reduced in both both mountainous and non- both small and large municipalities sparsely populated and dense municipalities mountainous municipalities The Transitional Situation of Preschool Finance

• Funding came in the middle of the school year! • Can they hire all new teachers immediately? • Does this reflect the most pressing needs of municipalities? • Is funding guaranteed for future years? The Transitional Situation of Preschool Finance

Municipal Own Spending on Education • What do local governments want?: 2010-18 4,500 – reduce class sizes; 4,000 – provide meals in at least some 3,500 1,292 preschools; 3,000 737 2,500 750 – improve the maintenance, safety and 382 404 2,000 413 240 216 224 1,280 1,730 cleanliness of school facilities. 1,500 1,331 1,235 1,231 1,223 1,169 1,252 1,510 1,000 1,275 500 1,069 591 618 624 646 671 657 537 - 2010 2011 2012 2013 2014 2015 2016 2017 2018

Salaries Operational Investments NEXT STEPS • The financing system should be made more stable and predictable; • Increase the funding to include the indicative costs of support services, material costs and/or school meals into the formula, as is done elsewhere. • Funding to be allocated primarily on a per pupil basis; • Municipalities should be free to spend these monies as they see fit --so long as they do not do so in ways that undermine the objectives of improving access and quality. • While the national government will decrease its direct control over the function, its ability to monitor and support municipal actions should be strengthened – and change the organization culture t Upcoming events

• June 2020: Regional Conference on Best Practices in Financing Local Government Responsibilities in education, health and social protection. • Joint effort of:

08-Nov-19 12 Thank you!

Elton Stafa, [email protected]; www.nalas.eu NALAS’s Fiscal Decentralization Report Financing of the Social Sector in South East Europe

100% 90% 80% 70% 60% 50% 40%

30% 60% 56% 20% 40% 38% 28% 27% 10% 23% 23% 19% 17% 10% 0% 5%

Education Economic affairs General Public Adm. Services*** Health Social protection Other Local Services ****

Source: NALAS Report: Fiscal Decentralization Indicators in South East Europe

14 NALAS’s Fiscal Decentralization Report: The Financing of Local Governments - Local revenues as a share of Public Revenues & GDP in SEE

12.0%

EU 28 10.0%

8.0% RUO MDA HRV RKS RS (BiH) BGR 6.0% SRB SEE MNE WB6 BIH SVN NMK TUR In percent In percent of GDP 4.0% FBiH (BiH) ALB

2.0%

0.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% In percent of Public Revenue

Source: NALAS Report: Fiscal Decentralization Indicators in South East Europe

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