Effects of the decentralized finance system on subnational spending and education outcomes

process and the publicity around it contributed strong incentives to improve management performance. more fundamentally, there is need to strengthen the links between measured LG management performance and the obstacles to student learning examined earlier in this chapter. This has been acknowledged by the government, and a refocus of the performance indicators, combined with the introduction of a school-level performance improvement framework, was underway in late 2020.

Notwithstanding the need to improve the measures in the performance assessment and the importance of maintaining a credible assessment, the Uganda case points to the potential for a combination of nonfinancial and financial incentives delivered through performance grants to play a positive role in improving results.

Central government systems to support local service delivery The moFPED is a key actor in the current round of IGFT reforms. These reforms include shifting financing toward critical service delivery areas, including primary education, which has been deemphasized in recent years. An important question is the extent to which increasing formula-based financing and providing performance incentives can improve learning. It is likely that significant learning gains will require the full attention of the moES, particularly regarding teacher management and training.

A principle underlying the current round of reforms is that the formulas are based on objective and independent data that cannot be directly influenced by LGs, including survey data from the Uganda Bureau of Statistics. Although the Bureau is the source of the majority of data for LG grant formula allocations in other sectors, in the education sector, the most valuable information on enrollment counts, which determine the lion’s share of formula-allocated spending, is collected by the LGs with moES oversight.

Uganda’s current education management information system (EmIS) is not regularly updated. Primary school enrollment data is collected by moES for calculating grant allocations, but not by the EmIS section.

EFFECTS OF THE DECENTRALIZED FINANCE SYSTEM ON SUBNATIONAL SPENDING AND EDUCATION OUTCOMES

How has Uganda’s lengthy experience with education decentralization affected the sector? Has it changed spending, increased access, reduced inequity, or improved quality over time? Clearly, the central government’s provision of fiscal transfers to LGs to support their provision of basic education has contributed to high if not universal enrollment. However, Uganda’s population is growing rapidly, and this will require more classrooms and more teachers, particularly in urban areas (World Bank 2020). Such an expansion in enrollment has yet to be achieved in lower secondary education.

Evidence regarding improved learning outcomes or conditions for learning is less clear. What is clear is that, throughout Uganda, students start and exit primary school late, and many do not complete it. In this section, we review the available evidence and report the findings of our analysis of decentralized financing on education spending and outcomes. We focus on primary education

for reasons of space and availability of data and because control over primary education is more decentralized than that over secondary.

Effect of transfers on subnational and household spending

Because local governments raise so little of their own revenue, LGs could not fund public education without central government support. It is, therefore, tautological to inquire whether transfers affect subnational spending.

Household expenditure shares for education rose from 5.0 percent in 2012–13 to 7.8 percent in 2016–17, which coincided with a fall in real levels of government spending. Combining various survey data from 2014 to 2019 suggests that, overall, households outspend the government on P1 to S4 education.61

Effect of transfers on education outcomes

In principle, fiscal decentralization has the potential to result in a number of positive education outcomes, including increasing access, equity, and efficiency, all of which should improve learning. Evidence of the effects of Uganda’s recent reforms is scarce and geographically incomplete, and the data may have quality limitations; but it is clear from multiple sources that the potential educational benefits of fiscal decentralization have not yet been realized.

The Service Delivery Indicator survey conducted in 2013 showed a clear link between the availability of resources and improved learning at the school level (Wane and martin 2016). However, we have used more recent LG-level data in our analysis and have found a less definite link. The panel and dynamic panel data analyses that we used show that increased financing has a positive association with increased access—a 1.0 percent increase in primary education grant financing is associated with increases in the primary GER of roughly 0.5 percent at the LG level (World Bank 2021). However, we were unable to demonstrate any association between government financing and improved performance on primary level exams. Further analysis at the school level might shed more light. In this section, we look at changes in access (enrollment and service delivery), equity (variations among districts in enrollment and service delivery), efficiency (early grade repetition, primary school completion, and teacher deployment) and learning (exam and test results).

Decentralization and access to education Access to schooling involves both the availability of schools and the availability of actual instruction.

The adoption of the UPE policy resulted in a large increase in primary enrollment after 1996, with steadily increasing total enrollment numbers since then. The USE policy, which is controlled to a greater extent by the central government, was introduced at a time when there was less enthusiasm for decentralization. It resulted in slightly increased secondary enrollment but enrollment has stagnated since 2009 (see figure 5.21, panel a).

GERs, however, tell a different story. Primary GERs have been sustained at over 115 percent, while secondary GERs have declined in recent years (see figure 5.21, panel b).

The high primary GERs reflect the presence of a large number of underage and over-age children, particularly in P1. Regression analyses undertaken for