Appendix 5: Percentage of Boarding Students Receiving Living
5.3 Rural Compulsory Education Finance Evaluation System
It is a harder and more complicated job to design an evaluation system for rural compulsory education finance. In this report, it is possible to evaluate the urgent problems focused on by the central government. One problem close to the new Table 5.7 Monitoring indicators for teachers’salaries
Monitoring indicators Year× ×
The number of staff Total
Full-time teacher Substitute teacher The total rural teachers’salaries (in ten thousand
Yuan)
Total
Primary school teacher Junior secondary school teacher
Average salary (Yuan per teacher per month) Urban primary school Town primary school Rural primary school Urban junior secondary school
Town junior secondary school
Rural junior secondary school
Average allowances (Yuan per teacher per month) Urban primary school Town primary school Rural primary school Urban junior secondary school
Town junior secondary school
Rural junior secondary school
Average“Three Insurances, One Fund”(Yuan per teacher per month)
Urban primary school Town primary school Rural primary school Urban junior secondary school
Town junior secondary school
Rural junior secondary school
mechanism is that the change happens in the input into rural compulsory education.
The change shows two characteristics:
1. The government has provided more and more inputs for rural compulsory education. In 1997, budgetary appropriation for rural compulsory education was 43 billion Yuan, accounting for 54.8 % of the total input of rural compulsory education; in 2002, it was 99 billion Yuan, or 78.2 % (Xin2003); in 2006, it reached 188.05 billion Yuan, or 86.4 %.
2. Responsibilities between the central and local governments are clarified more clearly. The central government and provincial governments have undertaken more financial responsibility. The more underdeveloped the province is, the more responsibility the central government has taken. Before 2003, the funds inputted into rural compulsory education by the central government mainly consisted of transfer payments for teachers’ salary and tax-fee reform and specialfiscal appropriation. In 2002, the central government inputted 35.9 bil- lion Yuan into rural compulsory education, which accounted for 36.3 % of the total budgetary expenditure for rural compulsory education. In 2004, the central government required governments at all levels to input yearly increased edu- cational expenditures into rural education in the future. The central government spent 70.4 billion Yuan on rural compulsory education, occupying 43.7 % of the total budgetary inputs.
After the new mechanism, the central government increased the fiscal appro- priation for rural compulsory education year by year. However, the total budgetary expenditure did not increase significantly. Did the local government reduce expenditures for rural compulsory education? Did a“crowding-out”effect emerge?
It is necessary to evaluate the degree of efforts made by local governments to develop rural compulsory education, especiallyfiscal input.
This section focuses on the degree of efforts made by local governments and the crowding-out effect. If we want to evaluate the two issues, it is necessary to clarify the responsibilities of the local government at each level under the new mechanism.
This is our starting point to design an evaluation system for compulsory education finance. Our evaluation system embodies an executive body, evaluation content, and evaluation indicators.
5.3.1 Executive Body
The executive body of a compulsory educationfinance evaluation system mainly includes the NPCs, government, and agencies:
1. NPCs.According to the Education Law, the central government and other levels of government should report to NPC or Standing Committee at the same level on the budget andfinal accounting of educational expenditure. This law endows the NPC at various levels with the power to monitor and evaluate.
2. The government at various levels. The government has the responsibility of monitoring and evaluation of educational inputs of lower level governments.
The education department, financial department, and bureau of statistics are mainly responsible for the monitoring and evaluation of the education input.
These departments of the government are the core executive bodies of the evaluation system.
3. Agencies.When the departments of the government evaluate the government’s behaviors or their own behaviors, objectivity and justness may be ignored.
Therefore, the agencies, like non-government organizations, should participate in the evaluation system as the executive body.
5.3.2 Evaluation Contents and Indicators
After the implementation of the Fund Guarantee Mechanism for Rural Compulsory Education, the two characteristics of rural compulsory education financing were presented. Thefirst one is that the government takes all responsibility for funding rural compulsory education; the second one is that thefinancial responsibility for rural compulsory education between the central and local government has been clarified. This shows that China has made huge progress in developing compulsory education. However, one urgent problem exists in the new mechanism: how to clarify the local responsibility of funding rural compulsory education among local governments at different levels. Under the situation that the local responsibility cannot be clarified clearly, provincial governments and county governments will shift their responsibility to others. Now, the objectives of the evaluation system for compulsory educationfinance are tofind out whether the local government com- pletes its responsibility and whether the crowding-out effect emerges at the county level.
To introduce the evaluation system in detail, we designed the evaluation content and indicators for provincial and county governments. We introduce the relation- ship among the governments at different levels under the current finance system, explain the responsibility of education input after the new mechanism, design the indicators to evaluate efforts made by the government, and finally define and explain the crowding-out effect at last.
5.3.2.1 Evaluation Contents and Indicators for Provincial Governments
1. Current Finance System
Since tax sharing reform, which was the shift from a decentralized financial system to a centralized one in 1994, the financial ability of the central gov- ernment has been intensified increasingly. On the contrary, the local government
has been weakened. Under the tax sharing reform, the central government expanded its resources offiscal revenue. From 1994, the value-added tax, as a main resource offiscal revenue, has been defined as a sharing tax with 75 % for the central government and 25 % for the local government. In 2002, 50 % of the increment of enterprise income tax and individual income tax was submitted to the central government from the local government, which used to be the resource of fiscal revenue for local governments. In 2003, that proportion became 60 %. Currently, except for business tax, other resources offiscal rev- enues for local governments feature unstable and high collection costs.
Although the revenues from these two taxes have been increased significantly, the local governments do not increase theirfiscal revenues accordingly.
The central government’s financial ability increased for 13 consecutive years from 1993 to 2006, and the proportion of itsfiscal revenues in the national total fiscal revenues increased to 52.8 % from 22 %. While the central government centralized the financial power, it transferred more responsibilities to local governments. In 1993, the fiscal revenue of local governments accounted for 78 % in total revenue and decreased to 44.3 % after 1994. Meanwhile, the proportion of the fiscal expenditures in the national total spent by local gov- ernments was growing, from 67.4 % in 1990 to 75.3 %1in 2006.
It is obvious that after tax sharing reform, the central government has increased fiscal revenue, occupying about 50–60 % of the national total fiscal revenue.
However, this did not necessarily mean that thefiscal expenditure of the central government was expended. Actually, 60–70 % of thefiscal revenue as transfer payment was transferred to the local government. The local government’sfiscal revenue accounts for 40 % of the national total revenue, while its fiscal expenditure exceeded 70 % of the national total expenditure. The gap between fiscal revenue and expenditure was settled by transfer payment from the central government. Therefore, the transfer payment began to play an increasingly important role in thefinancial system.
Under the tax sharing system, the provincial government also strengthened its financial ability. Because there was no distinct provision forfinancial relation- ships among local governments in the tax sharing reform, the provincial gov- ernment prefers to share more fiscal revenue in order to meet the fiscal expenditure. There is a common phenomenon that the government at the upper level chooses to share morefiscal revenue from the lower government. Under the drive of benefit, the concentration offiscal revenue made by the provincial government was growing at an annual average rate of 2 % (16.8 % in 1994 and 28.8 % in 2000). The municipal governments also were trying to share more fiscal revenue from county governments. In 2000, the net surplus of local governments was 13.4 billion Yuan, while the fiscal deficit of county and township governments increased. This situation actually demonstrated the fact
1National Bureau of Statistics of China. Statistics Yearbook (2007). Beijing: China Statistics Press.
2007.