19 OCTOBER 2005

Province of the Eastern Cape


DEPARTMENT OF EDUCATION


PUBLIC HEARING ON PROVINCIAL BUDGETS AND EXPENDITURE REVIEW 2001/02- 2007/08


PROVINCIAL BUDGETS AND EXPENDITURE REVIEW 2001102-2007108


BACKGROUND


A review of education spending found that the Department had been able to devote increased funding to school education. This comparative study of education expenditure in schools conducts a more detailed analysis examining the main factors driving and affecting spending, especially personnel expenditure. Findings from the study are set out in a number of areas.


Proportion of expenditure on education


The 1998/99 Medium Term Expenditure Review (MTER) review process between national and provincial government concluded that the proportion of provincial spending on education was likely to stabilise in the medium term at 40%. In the same year a number of financial management conditions were set for the Eastern Cape by national Treasury as part of the programme to stabilise provincial finance and eliminate debt. One of these conditions was that the province should allocate funds in its three core service delivery areas of education, health and social development in the ratio 40:20:20. The recent proportions of provincial expenditure on education, health and social development is shown for all provinces in the table below.


The figures show that relative allocations to education were close to 40% in many provinces in 2001/02 and the Eastern Cape met this target. Since then however relative allocations to education and health have fallen significantly in almost all provinces, with equally significant increases in the relative proportion going to social development.


Table 7: education, Health and Social Development as a proportion of total expenditure by province 2001/02 to 2003/04

 

Education

Health

Social Development

 

2001/02

2002/03

2003/04

2001/02

2002/03

2003/04

2001/02

2002/03

2003/04

Province

%

%

%

%

%

%

%

%

%

Eastern Cape

40.6%

37.5%

34.7%

19.4%

17.7%

17.1%

23.8%

26.0%

28.5%

Free State

38.9%

36.7%

35.3%

23.4%

22.4%

21.8%

18.0%

21.7%

25.2%

Gauteng

36.0%

33.2%

33.6%

33.5%

31.2%

28.7%

14.9%

16.2%

18.8%

Kwazulu-Natal

37.3%

36.4%

35.5%

27.4%

25.5%

23.6%

20.0%

23.7%

26.8%

Limpopo

43.0%

39.7%

37.9%

16.6%

16.3%

16.6%

19.0%

22.8%

25.0%

Mpumalanga

39.9%

40.1%

39.2%

16.9%

16.9%

16.9%

18.1%

20.9%

23.3%

Northern Cape

34.7%

34.0%

31.4%

17.1%

17.3%

19.7%

23.5%

26.3%

27.6%

North West

40.4%

38.3%

36.6%

16.9%

17.1%

16.5%

20.6%

23.2%

26.4%

Western Cape

35.2%

33.2%

32.3%

29.6%

27.3%

27.9%

19.0%

21.6%

23.1%

SOUTH AFRICA

38.6%

36.5%

35.3%

23.9%

22.5%

21.6%

19.4%

22.2%

24.8%

 

A series of points need to be made from these trends:

· There was a particularly steep fall in education expenditure as a proportion of the total in the Eastern Cape, in fact a greater relative reduction than in any other province. While the Eastern Cape devoted 40% of its expenditure to education in 2001/02 in 2003/04 it had the lowest proportion devoted to education in the ex-homeland provinces.


Provincial funding for education


Provinces are responsible for their own budget allocations and can priontise funds where they wish. Factors such as lack of access to own revenue, inherited large establishments of personnel and the persistence of large infrastructure backlogs however effectively limit the flexibility of poorer provinces to prioritise funds.


Expenditure increased rapidly in real terms from 2000/01 onwards enabling the province to recover from the crisis of the late 1990s and to increase the share of its budget devoted to non-personnel. There is however pressure on the education budget from:

· Growth in expenditure on social grants has been even higher than in education over the same period. This trend will continue for the medium term and is limiting the scope of the province to continue the growth in allocations to education of recent years.

· Even allowing for this factor, the province has responded with a sharp reduction in the relative allocation to education over the last three years, greater than in any other province.

· While education expenditure has grown in all provinces at rates significantly higher than inflation in recent years, this rate of growth is not expected to continue. The Eastern Cape is projecting only small real increases in the education budget over the current MTEF period 2006/07 to 2007/08.


High real growth in education expenditure since 2000/01 has enabled release of funding for non-personnel items vital to education. This growth is however relatively recent and follows a period of financial crisis from 1997/98 to 2000/01 when non-personnel funding was virtually non-existent. The crucial area of non-personnel non-capital (NPNC) expenditure that is used for learner materials and school services is still below average and well below the draft national per learner target of R500 per learner, although NPNC funding has been increasing in recent years. The province however faces the challenge of keeping and developing these gains in an environment of far greater funding pressures, currently and over the next few years.


PUBLIC SCHOOL EDUCATION IN THE EASTERN CAPE


The Eastern Cape has inherited different schooling systems from the apartheid era education departments. Many of the challenges created by these systems have still to be effectively addressed. Specific issues that need to be highlighted are:

· Combined schools and associated secondary schools form the largest single subsystem in the province. One of the defining features of this sub-system is mismatched levels of provisioning. While educator provisioning is adequate in most districts, with the possible exception of Pondoland, classroom backlogs are pervasive in the former Transkei.

· The greatest numbers of educators in small schools is, in declining order of size, in combined schools, full primary schools, senior secondary schools, junior primary schools and farm schools. Large numbers of small schools in these types of schools create pressure for a large establishment through the prevalent low learner:educator ratios.

· There is a wide variation in educator provisioning between small and large schools. Small schools typically show LERs in the range 20 to 25. The province needs to find ways to increase the average LER in small schools to avoid pressure to increase the educator establishment.

· Out-of age enrolment and repetition is very high, especially in the former Transkei. Out of age enrolment has a detrimental effect on national funding through the ESF. High repetition is also a waste of scarce resources and inhibits teaching and learning in the classroom through large class sizes.


The province has chosen to target a relatively favourable LER in its educator provisioning over the last few years. The 2005 declared educator establishment is 65,625, which would give an LER of 33:1 if implemented, significantly below many other provinces. A number of points need to be made in relation to educator provisioning:

· Educator provisioning has improved greatly in many districts and is at broadly acceptable levels in most of the province.

· At the same time many districts in the former Transkei continue to have significant classroom backlogs with LCRs greater than 40 in most districts.

· Non-personnel non-capital (NPNC) in the Eastern Cape is below average and well below the draft national target of R500 per capita.


The Eastern Cape has attached a lower priority to addressing the classroom backlog or to providing learner materials in the classroom and school services, in comparison to relatively favourable levels of educator provisioning. Most of the districts in the former Transkei have a more favourable learner:educator ratio than the Western Cape. With relative cuts in the provincial allocation to education and the current and future funding pressures, there is a clear case for reprioritising resources.


PERSONNEL EXPENDITURE AND THE POST DISTRIBUTION MODEL


The educator establishment is distributed using a computerised model, which calculates the number of weighted learners' in each school. The report sets out how weighted learner numbers are calculated. A number of the characteristics of the Eastern Cape schooling system combine to increase the number of weighted learners calculated by the model:

· The large number of small schools in the province each of which receives additional weighted learners.

· The high number of grades covered by many schools, which endows a school with further additional weighted learners, and;

· The prevalence of combined schools, which are given a further allocation of weighted learners.

· Small secondary schools offering a large number of subjects produce a high weighted enrolment in comparison to actual enrolment. This characteristic is exacerbated in senior secondary schools, which are more likely to be small and which only cover grades 10 to 12 where the number of learning areas is important in determining the calculation of weighted learners. Simply put, small secondary schools have a small number of learners taking a large number of subjects producing a high weighted learner enrolment.


It is important to realise that although the schooling system in the province produces a large number of weighted learners, this does not automatically lead to declaration of a large establishment. The size of the educator post establishment is driven by both budget and the target for the overall LER. The characteristics of the schooling system do however lead to redistribution of posts towards small schools, combined schools and senior secondary schools.


It must also be noted that a combination of significant post redistribution towards small schools and a post allocation often driven by a target LER means that the LER in large schools will always be above the average LER for the province as a whole.


The combination of a relatively favourable LER for the province overall, the features of the post distribution model, and the special characteristics of the Eastern Cape schooling system have clearly led to significant redistribution of educator posts in favour of small schools and the poorer ex-homeland areas. The operation of the post distribution model has therefore led to greater equity in educator allocation in the province. The time has come however to ask if the manner in which educator post provisioning has been applied in practice is not now impeding the allocation of limited resources to equally vital priorities.


Proportion of education expenditure on personnel


The 1998/99 Medium Term Expenditure Review (MTER) process also established the goal of limiting the proportion of provincial education expenditure on personnel to 85% in order to release funding for learner materials and equipment and school infrastructure. The table below shows trends in this proportion in recent years.


Table 8: Personnel as a proportion of education expenditure by province 2001/02 to 2003/04

 

2001/02

2002/03

2003/04

Province

%

%

%

Eastern Cape

90.2%

86.7%

85.0%

Free State

87.0%

85.15

83.0%

Gauteng

83.9%

81.9%

75.15

Kwazulu-Natal

87.9%

87.3%

83.2%

Limpopo

90.9%

88.7%

85.9%

Mpumalanga

88.0%

82.7%

78.8%

Northern Cape

83.1%

77.5%

77.6%

North West

90.3%

88.9%

86.5%

Western Cape

84.4%

82.3%

81.6%

SOUTH AFRICA

87.3%

84.6%

81.8%


A 2003 review by the National Department of Education of the resourcing of education in public schools has highlighted the importance of non-personnel expenditure in ensuring quality education by providing learning resources in the classroom. The review argued that poorer provinces which spend less per learner, are particularly susceptible to the crowding out of non-personnel expenditure by personnel, and particularly educator, expenditure. This is a serious problem, with serious consequences for efficiency.


NON-PERSONNEL NON-CAPITAL EXPENDITURE (NPNC)


Learner support materials (LSM) are one of the most vital components of educational resourcing in the classroom, and often one of the most neglected areas. The Eastern Cape is however still not meeting the norm of R516 per learner for the norms and standards allocation for school funding per learner. In the 2005/06 financial year the Eastern Cape is only funding learners at R214 per learner more than 50% below the benchmark allocation.


Performance is less favourable when turning to other items of recurrent support to schools. The province has prioritised most NPNC expenditure on LSM provision. Other expenditure has been directed, in order of priority, to maintenance and adaptation of buildings, water and electricity, catering services and school furniture, which received significant funding in 2003/04 for the first time in recent years. Very little was spent on learning and teaching equipment, a vital area in the classroom.


There are wide variations between provinces in school allocations under the NSSF, with far lower allocations in the poorer provinces. The Department of Education has proposed a single national school allocation for each quintile of schools, ranked by poverty. The Eastern Cape, and probably many provinces, is well below the required targets. NPNC expenditure per capita in 2003/04 was R224. With a learner enrolment of close to two million the province will need to target a NPNC budget of close to R1 billion in the next few years to provide adequate recurrent school funding. The province will also need to move beyond LSM to target other recurrent support to schools.


SCHOOL INFRASTRUCTURE


The Physical Planning Directorate are targeting the elimination of all backlogs by 2010 and have recently drafted a five year Infrastructure Implementation Plan 2005-10 to meet this target. The plan targets total capital expenditure in all education institutions of between R600 to R650 million a year from 2006/07 to 2009/10, as backlogs are eliminated.


The estimate of the cost of eliminating the backlogs at current prices, totalling R2,443 million This does not include the cost of building laboratories and media centres. Eliminating the backlog over a longer ten year period would therefore cost perhaps R300 million a year at current prices.


Expenditure on school infrastructure has risen rapidly in recent years to exceed these levels, from R187 million in 2001/02 to R277million in 2003/04. The Eastern Cape has access to further off-budget funding from donors that supplements these resources. A maintenance and adaptation budget has reached significant levels for the first time with expenditure rising from R11 million in 2001/02 to R37 million in 2003/04, and projected to r[se to R53 million by 2006/07.


It is vital to have clearly defined criteria for school infrastructure and strong processes for school opening, closure and amalgamation. Communities understandably want a school close by, preferably in their immediate locality. In the context of the former homeland areas, with large numbers of small villages, the tendency for each community to have a school is one of the main pressures in the province creating small schools.


IMPROVING QUALITY IN EASTERN CAPE SCHOOLS


There is a strong case for realigning the public school system to improve quality by implementing a full primary (grades R to 7) and full secondary (grades 8 to 12) system throughout the province. A number of educational benefits would result from this realignment of the schooling system.


Realignment of the schooling system along these lines would also greatly reduce the pressures towards a large establishment with the following results:


The classroom backlog would increase in the proposed realigned schooling system, due to the need to build classrooms in the expanded full secondary schools. There would also be an associated though smaller infrastructure requirement for hostels, toilets and other buildings. This would however be a once off construction cost whereas post savings would be larger and would continue to accrue in each year. The additional cost of classroom construction would also be spread over multiple years and accommodated by reprioritising funding towards high schools within the existing rising capital budget.


EMIS has recently prepared a study on the reorganisation of very small schools with enrolment less than 100, finding that 57% of schools had an adjacent school within 5km that could provide a place to transfer learners. Clearly there is significant scope for better use of resources by the realignment of small schools. The study suggests a series of criteria for realignment of small schools:

· Can the community afford not to have a school?


The information base is increasingly in place in the Department for a systematic review of school location, size, infrastructure and educator provision that would prioritise scarce resources in viable schools to build up quality education.


CHALLENGES AROUND THE 2004105-2006107 FINANCIAL YEARS


An analysis of the budget over this period indicates that there is minimal real growth in Education in the Eastern Cape.


Due to previous years over-expenditure, which was not appropriately dealt with in the Province, the Province found itself in a projected bank overdraft position which is not allowed in terms of the PFMA.


All Department's were then required to reprioritize their budgets and contribute to Provincial deficit. In the 2004/05 financial year, this resulted in R2O4million of the Education budget being surrendered to the Provincial Treasury. Over the MTEF period the effect was also a top slicing of the budget by R500million over the 2005/06 and 2006/07. These budget cuts were mainly effected the non-personnel budget of the Department. The allocations to infrastructure and norms and standards for school funding were mainly affected.


CONCLUSION


The Eastern Cape needs to take a stronger and more proactive role in discussions over the national funding framework and the equitable share formula, or face a steadily declining relative allocation of national resources to the province. This requires developing fiscal planning and negotiation capacity in both the provincial Treasury and the Department of Education.


Under the pressure of increasing expenditure on social grants the province has sharply reduced relative allocations to education over the last three years, more rapidly than in any other province. The province needs to find ways to increase the proportion of expenditure on education over the next MTEF period.


The Eastern Cape Department of Education needs to target a better balance of funding between personnel capital and non-personnel non-capital funding of learning materials and school services. Over the next MTEF period should progressively implement the third scenario set out in this report, which would result by the end of this period 2007/08 in:


In the current climate of overdrafts and limited financial resources this requires significant reprioritisation of funds within the province or access to new sources of funding.


This concludes the oral submission on Provincial Budgets and Expenditure review 2001/02 -2007/08.


I THANK YOU!