GEORGIA | PUBLIC EXPENDITURE REVIEW
CHAPTER 2. EDUCATION EXPENDITURES A. INTRODUCTION Poor performance of the Georgian students in international assessments points to the inefficiencies in the education sector. Georgia’s performance on the reading scale of PISA 2009 was below what would be expected given its income level. The gap between Georgia and the OECD countries on the reading scale is approximately three years of schooling (each year accounts for 40 points). In addition, only between 30 percent and 40 percent (depending on the subject) of Georgian 15 year-olds scored Level II or above, which is a threshold usually referred to as functional literacy.
Government spending on education in Georgia is low – compared to countries with similar per-capita incomes and relative to both the shortage of human capital and the country’s ambitions. Despite a real increase of nearly 47 percent in education expenditures since 2006, Georgia’s education budget amounted to 2.9 percent of GDP in 2012, below all but a few countries in Europe and Central Asia and lower than comparators at a similar level of income per capita. And even though teacher salaries are one of the lowest among public employees in Georgia, teacher and administrator pay accounts for more than 70 percent of the education sector budget, leaving little space for expenditures directed at curriculum improvements, trainings for teachers, grants for research and development, scholarships for needy students and capital investments to enhance school facilities. The per-capita financing system in the education sector is transparent and leads to an efficient allocation of resources. Schools receive direct transfers of funds from the Ministry of Education and Science (MES) based on the number of students for a given year. These transfers cover salaries, utilities and routine maintenance costs. The allocation formula was adjusted over time to address the problem of underfunded schools which required additional transfers on top of the per capita financing. The system is functioning well currently and is used to determine the education sector budget, including vocational education.
An efficient distribution of resources cannot offset substantial sector inefficiencies, such as poor teacher quality, and excess number of teachers from the pre-school through the secondary level. Teaching is not a sought after occupation in Georgia because of the very low pay scale and this has impacted the quality of teachers. At 8.7, the student teacher ratio of preschools in Georgia is considerably lower than the OECD or EU 21 countries (at 12.2 and 11.8, respectively). As a consequence, several regions in Georgia run very high costs per student. With an aging population, there has been a decline in the number of students and a consolidation in the number of schools in Georgia. However, at 241 students per school, the average school size in general education remains small and drives up costs. There are too many teachers teaching too few hours suggesting that there is a glut in the education system. Based on an academic year of 40 weeks, the average yearly teaching hours are less than 600 while the average teacher in an OECD country teaches 790 hours in primary, 709 hours in lower-secondary, and 664 hours in the upper-secondary level. In countries such as the US and Chile, these figures go beyond 1000 hours per year.
The vocational education and training program has been completely overhauled but only a fourth of the VET graduates are able to find jobs in their mainstream education disciplines. The VET system underwent significant changes with the adoption of the Law on Vocational Education in 2007. The VET strategy which was developed resulted in a consolidation and subsequent expansion of VET institutions, introduction of a voucher system for VET institutions and significant public investments in the VET sector. The government has also eased the admission requirements for certain VET programs to make them more accessible. However, the system is plagued with high drop-out rates which lead to a wastage of resources. In addition, surveys indicate that only one-fourth of the graduates from VET institutions are able to find a job in the area in which they have educational qualifications. Therefore, there is room to make substantial improvements in the curriculum and the quality of teachers. This chapter reviews the fiscal implications of the education sector in Georgia, with an emphasis on preschool and general education and vocational education and training. The analysis in this chapter leads to the following measures for the government to consider: 24