Indicator C4. What is the total public spending on education?

Countries differ in the share of total public expenditure they devote to education. In 2017, total public expenditure on primary to tertiary education as a percentage of total government expenditure for all services averaged 11% in OECD countries. However, this share varies across OECD and partner countries, ranging from around 7% in Greece to around 17% in Chile (Table C4.1and Figure C4.1).

Overall, significant government funding was devoted to non-tertiary levels of education in 2017. In most countries, and on average across OECD countries, roughly three-quarters of the total public expenditure on primary to tertiary education (about 8% of total government expenditure) was devoted to non-tertiary education (Table C4.1). This is largely explained by the near-universal enrolment rates at non-tertiary levels of education (see Indicator B1), the demographic structure of the population and the fact that in OECD countries, on average, the funding structure for tertiary education depends more on private funding sources than non-tertiary levels (primary, secondary and post-secondary non-tertiary levels).

In 2017, the share of total public expenditure devoted to tertiary education varied widely among countries. On average across OECD countries, total public expenditure on tertiary education amounted to 27% of the total public expenditure on primary to tertiary education. The share ranges from 15-20% in Greece, Israel, Latvia, Luxembourg and Portugal to over 35% in Austria, Denmark and Turkey (Table C4.1).

Total public expenditure on education includes direct expenditure on institutions (such as the operating costs of public schools), transfers to the non-educational private sector that are attributable to educational institutions, and public subsidies to households for living costs that are not spent in educational institutions. Public transfers and payments to the non-educational private sector for primary to tertiary education (such as public student loans, grants, scholarships and subsidies to private student loans) represent a small share of total government expenditure in OECD and partner countries, but significant differences are observed across countries (Figure C4.1). In 2017, on average across OECD countries, this public expenditure represented less than 1% of total government expenditure and 8% of public expenditure on education, with the remaining 92% corresponding to direct public expenditure on education. However, the percentage varies by country: public transfers and payments to the non-educational private sector represent 1.5-2.4% of total government expenditure in Australia, Chile, Denmark, Ireland, the Netherlands, New Zealand, Norway and the United Kingdom, and less than 0.3% in Argentina, the Czech Republic, Estonia, Greece, Luxembourg and the Russian Federation (Figure C4.1).

The relative size of public budgets must be taken into account when considering public spending on education as a share of total government expenditure. The share of total government expenditure as a proportion of gross domestic product (GDP) varies greatly among countries (Table C4.1 – web columns). In 2017, around 11% of countries with available data reported that total government expenditure on all services accounted for more than 50% of GDP. A high share of total government expenditure devoted to public expenditure on education does not necessarily translate into a high share relative to a country’s GDP. For example, Korea allocates 13% of its total government expenditure on primary to tertiary education (more than the OECD average of 11%), but total public expenditure on education as a share of GDP is relatively low (3.9% compared to the OECD average of 4.4%). This can be explained by Korea’s relatively low total government expenditure as a share of GDP (30%) (Table C4.1 – web columns).

The economic crisis associated with the spread of the COVID-19 pandemic is likely to affect the availability of public funding for education in OECD and partner countries, as emergency funds have been funnelled to support increasing healthcare and welfare costs. While the longer-term impact on education funding is still uncertain, some countries have implemented immediate financial measures to support students and education systems cope with the disruptions and economic impact of school and university closures (Box C4.1).

Total public spending on primary to tertiary education increased by 7.5% across OECD countries between 2012 and 2017 (Table C4.3), however this increase was less than the increase in total government expenditure (8.4%) over the same period. As a result, over this period, total government expenditure on primary to tertiary education as a share of total government expenditure increased by 0.1% on average across OECD countries (Table C4.3).

A similar trend is observed at country level (Table C4.3 and Figure C4.2). Despite the fact that public expenditure on primary to tertiary education increased over that period in a large number of countries, there were also large increases in total government expenditure. Over this five-year period, about 56% of countries with available data increased their public expenditure on education as a share of total government expenditure, with Greece and Spain showing the greatest increase (over 9%) while 81% of countries increased total government expenditure on all goods and services. However, in about half of OECD and partner countries, the increase in public expenditure on education was smaller than the increase in government spending overall. The most notable examples are Estonia and Latvia, where the relative increase in total government expenditure was more than 8 percentage points higher than the increase in public expenditure on education (Table C4.3).

The division of responsibility for education funding between levels of government (central, regional and local) is an important factor in education policy. Indeed, important decisions regarding education funding are made at both the initial level of government, where the funds originate, and the final level of government, where they are ultimately spent. At the initial level, decisions are made about how much funding should be allocated and any restrictions on how that money can be spent. At the final level of government, additional restrictions may be attached to the funds, or this level of government may even pay directly for educational resources (e.g. teachers’ salaries).

In some countries, education funding is centralised, while in others it is decentralised but with funds transferred between levels of government. Complete centralisation can cause delays in decision making. Decisions that are far removed from those affected can also fail to address changes in local needs and desired practices. Under complete decentralisation, however, units of government may differ in the level of educational resources they spend on students, either due to differences in priorities related to education, or to differences in their ability to raise funding for education. Wide variations in education standards and resources can also lead to inequality of educational opportunities and insufficient attention being paid to long-term national requirements.

In recent years, many schools have become more autonomous and decentralised, as well as more accountable to students, parents and the wider public for their outcomes. The results of the OECD Programme for International Student Assessment (PISA) suggest that when autonomy and accountability are intelligently combined, they tend to be associated with better student performance (OECD, 2016[14]).

The levels of government responsible for funding education differ at different levels of education. Typically, public funding is more centralised at the tertiary level than at lower levels of education. In 2017, on average across OECD countries, 59% of the public funds for non-tertiary education came from the central government before transfers to the various levels of government, compared to 88% of the funds for tertiary education (Table C4.2).

The division of responsibility for public funding in non-tertiary levels of education varies greatly among countries (Table C4.2 and Figure C4.3):

  • On average, central and regional governments are the main initial and final sources of funds in non-tertiary education. However, the central government is the only main initial source of funds and the only final purchaser of educational services in Costa Rica, Ireland and New Zealand. In countries such as Chile, Colombia, France, Greece, Hungary, Israel, Italy, Luxembourg, the Netherlands, Portugal, Slovenia, Turkey and the United Kingdom, the central government is the source of the majority of initial funds and the main final purchaser of educational goods and services.

  • In Austria, Estonia, Korea, Latvia, Lithuania, Mexico, Poland and the Slovak Republic, the central government is the main initial source of funds, but regional and local authorities are the main final purchasers of educational services in non-tertiary education.

  • Regional governments are both the main initial source and the main final spender of education funds in Australia, Belgium, the Czech Republic, Germany, the Russian Federation, Spain and Switzerland. In Canada and Japan, regional governments are the predominant source of initial funds, but local authorities are the main final purchasers of educational services.

  • In Denmark, Finland, Iceland, Norway and Sweden, local authorities are both the main initial source of funds and the main final purchasers of educational services. In the United States, both regional and local governments are the main initial sources of funds, but local governments are the main final purchasers.

On average across OECD countries, more funds are transferred from central to regional and local levels of government for non-tertiary education than for tertiary education. This extends the scope for decentralisation at non-tertiary levels of education. On average across OECD countries, the share of public funds for non-tertiary education provided by the central government falls from 59% to 44% after transfers to other levels of government have been accounted for, while the share of local funds rises as a result from 26% to 42%. There is a great deal of variation in the sources of funds before and after transfers from central to lower levels of government. In Korea, Lithuania, Mexico, Poland and the Slovak Republic, the difference is more than 50 percentage points after transfers to regional and local governments, while in Australia, Austria, Chile, Estonia and Finland, the difference is between 25 and 40 percentage points. In Canada and the United States, where the regional level is mostly responsible for transferring funds to schools, the share of regional funding falls by 40 percentage points or more after transfers to local levels of government (Table C4.2 and Figure C4.3).

Tertiary education is much more centralised than non-tertiary education, as the proportion of public funds coming from the central government is relatively large, both before and after transfers to lower levels of government (Table C4.2). On average across the OECD, the central government manages 88% of funds before transfers and this barely changes once intergovernmental transfers are taken into account. In most OECD and partner countries with data available, central government directly provides more than 60% of public funds in tertiary education; in 32 countries, the central government is the main source of initial funding and there are no or small transfers to regional or local governments. In contrast, countries such as Belgium, Germany and Spain source over 60% of tertiary-level funding from regional governments with little or nothing transferred down to local governments. Local authorities typically do not have an important role in financing tertiary education representing around 1% of public funds, with the exception of the United States, where it generates and spends 11% of the funds.

Intergovernmental transfers are transfers of funds designated for education from one level of government to another. They are defined as net transfers from a higher to a lower level of government. Initial funds refer to the funds before transfers between levels of government, while final funds refer to the funds after such transfers.

Public expenditure on education covers expenditure on educational institutions and expenditure outside educational institutions such as support for students’ living costs and other private expenditure outside institutions, in contrast to Indicators C1, C2 and C3, which focus only on spending on educational institutions. Public expenditure on education includes expenditure by all public entities, including the education ministry and other ministries, local and regional governments, and other public agencies. OECD countries differ in the ways in which they use public money for education. Public funds may flow directly to institutions or may be channelled to institutions via government programmes or via households. Public funds may be restricted to the purchase of educational services or may be used to support students’ living costs.

All government sources of expenditure on education, apart from international sources, can be classified under three levels of government: 1) central (national) government; 2) regional government (province, state, Bundesland, etc.); and 3) local government (municipality, district, commune, etc.). The terms “regional” and “local” apply to governments with responsibilities exercised within certain geographical subdivisions of a country. They do not apply to government bodies with roles defined in terms of responsibility for particular services, functions or categories of students that are not geographically circumscribed.

Total government expenditure corresponds to non-repayable current and capital expenditure on all functions (including education) of all levels of government (central, regional and local), including non-market producers (e.g. providing services and goods free of charge, or at prices that are not economically significant) that are controlled by government units, and social security funds. It does not include expenditure derived from public corporations, such as publicly owned banks, harbours and airports. It includes direct public expenditure on educational institutions (as defined above), as well as public support to households (e.g. scholarships and loans to students for tuition fees and student living costs) and to other private entities for education (e.g. subsidies to companies or labour organisations that operate apprenticeship programmes).

Figures for total government expenditure and GDP have been taken from the OECD National Accounts Database (see Annex 2).

Public expenditure on education is expressed as a percentage of a country’s total government expenditure. The statistical concept of total government expenditure by function is defined by the National Accounts’ Classification of the Functions of Government (COFOG). There are strong links between the COFOG classification and the UNESCO, OECD and Eurostat (UOE) data collection, although the underlying statistical concepts differ to some extent (Eurostat (European Commission), 2011[15]).

Expenditure on debt servicing (e.g. interest payments) is included in total government expenditure, but it is excluded from public expenditure on education, because some countries cannot separate interest payments for education from those for other services. This means that public expenditure on education as a percentage of total government expenditure may be underestimated in countries in which interest payments represent a large proportion of total government expenditure on all services.

For more information please see the OECD Handbook for Internationally Comparative Education Statistics 2018 (OECD, 2018[16]) and Annex 3 for country-specific notes (https://doi.org/10.1787/69096873-en).

Data refer to the financial year 2017 (unless otherwise specified) and are based on the UNESCO, OECD and Eurostat (UOE) data collection on education statistics administered by the OECD in 2019 (for details see Annex 3 at https://doi.org/10.1787/69096873-en). Data from Argentina, the People’s Republic of China, India, Indonesia, Saudi Arabia and South Africa are from the UNESCO Institute of Statistics (UIS).

The data on expenditure for 2005, 2012 to 2017 were updated based on a survey in 2019-20, and expenditure figures for 2005 to 2017 were adjusted to the methods and definitions used in the current UOE data collection.

References

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Table C4.1 Total public expenditure on education as a percentage of total government expenditure (2017)

Table C4.2 Distribution of sources of total public funds devoted to education, by level of government (2017)

Table C4.3 Index of change in total public expenditure on education as a percentage of total government expenditure (2005, 2012 and 2017)

StatLink: https://doi.org/10.1787/888934164712

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