Education System and Fiscal Policy in
Brazil
Pedro Jucá Maciel
Brazilian National Treasury – Ministry of Finance Visiting Scholar at Stanford Center for Latin American Studies
January, 25th 2010 The opinions expressed and arguments employed herein
do not necessarily reflect the official views of the Brazilian National Treasury – Ministry of Finance
2
Agenda
1.
Motivation 1: Education and Development
2.
Motivation 2: Education in the Government’s Fiscal Policy
Agenda
3.
Pre-School, Primary and Secondary Education Systems
3.Pre-School, Primary and Secondary Education Systems
4.
Tertiary Education System
Motivation 1: Education and
Development
4
Motivation 1: Why Education should be treated as a
(very important) public good [Taylor (1999)]?
1) Imperfection in capital markets to provide social desirable level of
educational investment.
2) Externalities:
• Friedman (1990): “a stable democratic society is impossible without a
minimum degree of literacy and knowledge…”.
• Increase tax base – increasing income and properties value.
.
• Increase tax base – increasing income and properties value.
• Reduce welfare, Medicaid, or unemployment compensation
expenditure [McMahon (1987)]
• Children tend to be healthier – reducing the use of public health
system [Grossmann and Kaesmer (1997)]
• Children are less likely to be teenage mothers, live in poverty, or
suffer from severe child abuse [Maynard and McGrath (1997)].
3) Education is an effective tool for income redistribution - breaking
5
How is the Educational Performance in Brazil?
Average Years of Schooling in Brazil - Population Age: 25 yrs or more (2007)
Average Years of Schooling vs GDP per Capita in LA (2000) URU CHL COS ARG SAL MEX PAR ECU GUY BRA COL PER HON PAN NIC BOL 4 4.5 5 5.5 6 6.5 7 7.5 8 8.5 9 Y e a rs o f S c h o o li n g
• Brazilian Education Sector has one of the worst social indicators compared to other LAC.
Educational Attainment comparison: Brazil vs. other LAC
.
Source: Barro-Lee Data
GUA 3 3.5 4 1500 2500 3500 4500 5500 6500 7500 8500 9500 USD $ PPP Source: IpeaData
• Average years of Schooling
differences between Brazilian states are huge:
Alagoas presents 50% of the years of education of Federal District.
6
Education and Inequality in Brazil
• What explains the excess of income inequality in Brazil
compared to United States? [World Bank 2004]
Excess of Income Inequality of Brazil Comparing to U.S. Public Transfers Less Progressive, 39% Higher Skills Premiums, 32% Unequal Distribution of Education, 29%
Source: World Bank (2004)
7
Education and Inequality in Brazil
School Attainment of The Working-Age Population (1999)
8
Education and Inequality in Brazil
9
Concentration Curves of Income per Capita and Public Social Expenditure (1997)
Progressive Programs:
Concentration Curves of Income per Capita and Public Social Expenditure (1997)
Regressive Programs:
It is shown that Basic Education Programs are also a
Progressive Transfer!
Education and Inequality in Brazil
10
Education and Distribution in Brazil
FGV “Pro-Pobre” Index estimates the distribution of each
monetary unit (transference) to the poor population.
–
Lower level educational programs are more progressive.
–
Each unit spent in the Primary Education has 22.5 times more
power to reach the poorer population than tertiary education.
Pre-School 1.46
Adult Literacy Program 1.73
"Pro-Pobre" Index
Source: CPS/FGV-RJ (2005)
Adult Literacy Program 1.73
Primary Education 1.53 Primary (Public) 1.68 Primary (Private) 0.27 Secondary Education 0.73 Secondary (Public) 0.83 Secondary (Private) 0.10 Tertiary Education 0.07 Tertiary (Public) 0.12 Tertiary (Private) 0.05 Graduate Studies 0.00
Motivation 2: Education and
Government’s Fiscal Policy
Government’s Fiscal Policy
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Who are the Players of the Educational System?
Primary and Secondary Student Enrollment per Administrative Level 2009
Private
Tertiary Student Enrollment per Administrative Level 2008
Public
Different players require different policies:
–
Primary and Secondary: improve efficiency, reallocation,
teachers salaries, efficiency, Bolsa Familia, etc.
–
Tertiary: regulation, loans, subsidies, fiscal incentives, etc.
Public Sector, 86% Sector, 14% Public Sector, 20% Private Sector, 80% Source: INEP (2009)
Brazilian Public Sector Expenditure (By Sectors) Social Security, 30.9% Transportation, Social Assistance, 3.7% Urbanism, 3.4% Labor/Work, 2.4% Defense, 2.2% Others, 8.7%
Public Expenditure: Importance of Education (Year 2008)
Education, 14.3% Health, 14.0% Administrative, 6.4% Judiciary, 4.9% Public Security, 4.0% Transportation, 3.9%
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States Expenditure (By Sectors)
Education, 22% Social Security, 15% Health, 15% Public Administrativ e, 8% Judiciary, 9% Transportatio n, 6% Legislative, 3% Others, 10% Municipals Expenditure (By Sectors)
Education, 26% Health, 23% Urbanism, 13% Social Security, 6% Transport., 3% Social Assistance, 3% Sanitation, 3% Legislative, 3% Others, 6%
Public Expenditure: Importance of Education (Year 2008)
Health, 15% Public
Security, 11% Federal Expenditure (By Sectors)
Social Security, 51.1% Health, 9.8% Social Assistance, 5.7% Education, 5.0% Labor/Work, 4.5% Defense, 4.4% Administrat., 2.6% Judiciary, 4.1% Others, 9.1% Transport., 2.6% Administrat., 13%
Source: Secretariat of the National Treasury (2009)
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Who is Responsible for Educational Funding?
Public Expenditure in Education All
Levels 2008 (% GDP)
Municipalities, 1.9% Federal, 0.9% 1.9% State, 2.3%Total = 5.1% GDP
16
Who are the Beneficiaries of Educational Programs?
Brazilian Demography
• Education has the potential to serve far more beneficiaries than Social Security, however the Public Sector spends twice as much on the Social Security system.
17
Investment in Education: Where is the money going?
Total Direct Public Investment per Educational Level (% GDP)
• Even though Tertiary Education is managed by the Private Sector
(80% in 2008), Brazilian Public Sector spends more in this area
than in secondary school.
• Argument of R&D subsidy at public universities is used to justify
this profile (it increases the cost of the system).
Year Basic Education Average Pre-school (0 - 6 yrs old) From 1st to 4th Grades From 5st to 8th Grades Secondary School 2000 3.9 3.2 0.3 1.3 1.1 0.5 0.7 2001 4 3.3 0.3 1.3 1.1 0.6 0.7 2002 4.1 3.3 0.3 1.5 1.1 0.4 0.8 2003 3.9 3.2 0.3 1.3 1 0.5 0.7 2004 3.9 3.2 0.3 1.3 1.1 0.5 0.7 2005 3.9 3.2 0.3 1.4 1.1 0.4 0.7 2006 4.4 3.7 0.3 1.4 1.4 0.6 0.7 2007 4.6 3.9 0.4 1.5 1.4 0.6 0.7
Source: INEP / MEC
Total
Basic Education
Terciary Education
18 Year Basic Education Average Pre-school (0 - 6 yrs old) From 1st to 4th Grades From 5st to 8th Grades Secondary School 2000 1,574 1,310 1,499 1,289 1,315 1,250 14,485 11.1 2001 1,630 1,359 1,353 1,274 1,433 1,422 14,317 10.5 2002 1,626 1,346 1,274 1,488 1,382 1,001 13,573 10.1 2003 1,585 1,323 1,467 1,441 1,369 902 11,892 9 2004 1,723 1,462 1,563 1,547 1,564 1,069 12,039 8.2 2005 1,831 1,551 1,479 1,731 1,648 1,082 12,243 7.9
Direct Public Investment Per Student (R$)
Ratio Terciary/Bas ic Education Terciary Education Basic Education Total
Investment in Education: Where the money is going to?
2005 1,831 1,551 1,479 1,731 1,648 1,082 12,243 7.9
2006 2,133 1,852 1,601 1,906 2,093 1,480 12,347 6.7
2007 2,335 2,005 1,647 2,166 2,317 1,572 12,322 6.1
Source: INEP / MEC
Table prepared by DTDIE / INEP.
• Previous allocation profile does not imply that there are more
students in public universities than in high schools.
•This allocation is justified by the huge difference in investment per
student per educational level.
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International Comparison of Education Allocation
Primary and Secondary Public Investment per Student.
International Evidence [OECD (2009)]:
20
Tertiary Public Investment per Student.
International Evidence [OECD (2009)]:
International Comparative of Education Allocation
It seems that Brazil under invests in primary and secondary
education relative to tertiary education.
Brazilian Investment per Student in Tertiary Education is higher
than in Korean.
Pre-School, Primary and
Secondary
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What Matters for Students’ Success?
1. Appropriate school facilities.
2. High-quality school personnel.
3. Supportive families.
4. Family networks
5. Social Networks (beyond families) that reinforce the notion
of doing well in schools and understand the best strategies
of doing well in schools and understand the best strategies
for that.
6. Academic curriculum…
• This work does not aim to discuss all educational problems
or pedagogical issues about the Brazilian System. It limits
itself to issues (programs) that will possibly need public
financial support (becoming part of the fiscal policy
Some Problems/Symptoms of the Brazilian System
1. Universalization: Pre-school and Secondary
2. Little Time at School.
3. High Held Backs Rates.
4. Secondary Student dropouts due to lack of motivation.
4. Secondary Student dropouts due to lack of motivation.
5. Poor student performance on international standardized
tests (e.g., PISA).
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Problem 1: Universalization of Education
School Attendance: Population with 0 to 17 years old from 1997 - 2007
• Increase school attendance on pre-school and secondary level.
• Policy Implemented: Since 2007, FUNDEB covers students in
pre-school and secondary level.
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Problem 1: Universalization of Education
• Secondary level attendance is highly correlated to income distribution.
• Policy Implemented: Since 2008, Bolsa Familia expanded its coverage
for teenagers between 16 and 17 years old.
Net School Attendance*: 15 to 17 years old students from 1997 – 2007 according to income distribution
Source: IBGE 2008
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Education: Comparison between OECD and Brazil (Secondary Attainment)
Problem 1: Universalization of Education
27
Problem 2: Time at School
Percentage of 15 – 17 years old Students who attempt school more
than 4 hours/day
Time at School - more than 4 hours vs. ENEM Test Score
• Federal Law requires minimum 4 hours/day per student at school.
• Average Data among Brazilian States = 37% • Time at school has a significant positive
correlation with ENEM Score.
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Problem 2: Time at School
School Attendance Index
• School Attendance Index measures is composed of: (i) student’s
enrolment; (ii) Student’s presence and (iii) length of classes [base (1) = 5 hours].
• Motivation of the index: being enrolled doesn’t mean that the student is at school. We need to verify student’s average absences and for how long classes take.
Source: Tempo de Permancencia na Escola. CPS/FGV 2009
29
Problem 3: High Held Back Rates
Student’s Held Back: Percentage of Students who are 2 or more years older than the recommended age for their grades.
• Held Back Rates are declining, but It is still very high compared to international levels.
• First Grade Held Back is 18%! It could be the consequence of a poor pre-school performance or lack of pre-school attendance or preparation.
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Demand
Income/Jobs
27,1%
Problem 4: Lack of Motivation (Secondary School)
• Major Cause of School Dropouts is the student’s lack of interest.
• Policy Recommendation: How to design a more attractive school?
Reasons for
School
Dropout
Supply
School Shortage
10,9%
Others
21,7%
Demand
Lack of Interest
40,3%
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Results of Secondary Education Test by Income Distribution and Race (2005)
Problem 5: Low Performance on Tests
32
Education Quality: PISA 2006
Problem 5: Low Performance on Tests
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Education Efficiency: PISA 2006 vs. Public Spending per pupil
Problem 5: Low Performance on Tests
34
Problem 6: Teacher’s Salaries
Monthly Salary by Worker’s Categories in 2001 (Real Currency)
• Primary and Secondary Teacher’s presents one of the worst remunerations among jobs placements.
35
What Policies Have Been Implemented?
2007 - FUDEB (FUNDO DE DESENVOLVIMENTO DO ENSINO BASICO):
• Public Trust Fund funded by a share of State and Municipalities Tax + Transfers from the Federal Government.
• FUNDEB provides funding to be applied to educational sector for States and Municipalities based on the number of students enrolled in their school system.
• FUNDEB is an expansion of FUNDEF to cover also pre-school and secondary system + adults and special needs students education.
2008 - EXPANSION OF BOLSA FAMILIA COVERAGE:
• Coverage Expansion of the program to students within 16 and 17 years old. 2008 - EXPANSION OF THE TECHNICAL SCHOOLS
• Build 214 new technical schools hiring more teachers and administrative staff. 2009 - ELIMINATION OF DRU FOR EDUCATION:
• Elimination of the federal 20% taxation from the earmarked resources of Education. It means a potential increase in BRL $ 8 bi for the educational funding.
2009 – ESTABLISHMENT OF A MINIMUM WAGE FOR TEACHERS: BRL $ 950 PER MONTH (USD $530).
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Tertiary Education
Tertiary Education
Tertiary Education: Who are the Players?
Tertiary Student Enrollment per Sector 2008
Public Sector; 20%
Private Sector; 80%
38
Recent Trend of the Tertiary Education Market
Numbers of Admissions in Undergraduate Programs 2002 - 2008
1) In 2008, Public Sector (fed + state + mun) hosted 20% of the admissions. 2) Federal System represents only 10% of the market.
3) We can see a downward trend in admissions among states and municipals universities.
4) Since 2006, the number of admissions to the Federal system has increased at a higher rate than the private sector. This growth is explained by the REUNI (Programa de Apoio a Planos de Reestruturação e Expansão das Universidades Federais).
Source: INEP 2009
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Competition and Market (Excess) Supply
Ratio Numbers of Applicants / Numbers of Placements 2002 - 2008
Numbers Idle Placements at Tertiary Education 2002 - 2008
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What is the Main Impediment to the Tertiary Education
Growth?
Net Secondary School Attendance*: 15 to 17 Years Old Population
1) Net Secondary School Attendance considers student enrolment at appropriate grade and age.
2) Brazilian data reveals a low stable trend at 50%.
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Completion Rate
Percentage of Numbers of Graduates (t) relative to Numbers of Admissions (t-4)
1) In general, completion rate is low in Brazil (57,3%).
2) Public Universities presents better performance than Private Sector.
3) Delays or Dropouts increases the costs per student and the
inefficiency of the system. In case of public sector (free universities),
government will finance it with no penalty for the student ($).
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Tertiary Educational Policy and Distribution
1) Tertiary Education Programs is still an elite privilege in Brazil.
2) Public expenditure over the tertiary education still presents a regressive impact over the income distribution.
Tertiary Education Students per Income Distribution - 2007
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Quality of Tertiary Education: Students’ National Exam
(ENADE)
• Grades ranges from 1 – 5. Most part of the tertiary courses had no score (SC) caused by lack of data.
• ENADE evaluates student’s knowledge improvement from the beginning to the end of the program.
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Quality of Tertiary Education: Professional Associations
Exams (Medicine)
• Sao Paulo Regional Medical Association Exam declined 61% of the graduate test takers.
• Failure rate increased almost 100% in the last 4 years.
Failure Rate – Sao Paulo Regional Medical Association Exam - 2008
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Administrat. Test Takers Approved % Approval Centro Universitário de Brasília Private 681 265 38.9% Centro Universitário do Distrito Federal Private 286 122 42.7%
Ordem dos Advogados do Brasil Exam Result 2009 (1st in 3)
Quality of Tertiary Education: Professional Associations
Exams (Law)
• Distrito Federal - DF (which presents the highest per capita income and the best secondary educational system) has only 29% of approval rate.
• Average Brazilian Failure Rate is 80.5%!
Centro Universitário do Distrito Federal Private 286 122 42.7% Centro Universitário Euro-Americano Private 640 120 18.8% Centro Universitário Planalto do Distrito Private 77 7 9.1% Faculdade de Ciências Jurídicas do Planalto Private 84 16 19.0% Faculdade de Ciências Sociais e Tecnológicas Private 27 1 3.7% Faculdade Projeção Private 54 14 25.9% Faculdades Integradas da Upis Private 80 22 27.5% Instituto de Educação Superior de Brasília - Private 231 86 37.2% Instituto de Ensino Superior Planalto Private 13 2 15.4% Universidade Católica de Brasília Private 211 84 39.8%
Universidade de Brasília Public 36 31 86.1%
Universidade Paulista Private 417 52 12.5% Total Distrito Federal (DF) 2,837 822 29.0%
TOTAL BRAZIL 58,761 11,444 19.5%
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Implemented Policies: ProUni (Programa Universidade
para Todos)
Tertiary Education Cost per Student (in BRL$)
1) Objective: Distribution of undergraduate scholarships (full or partial) for low income students to be used in private universities.
2) Private universities (who enroll in the program) will receive federal tax
exemptions. There is no public financial transference to students or universities. 3) In 2005, this tax exemption achieved R$ 107 mi for 112k students (R$
970/student). In 2007 the cost per student was R$ 769 (much less than public universities cost per student).
12,234 12,322 970 769 -2,000 4,000 6,000 8,000 10,000 12,000 14,000 2005 2007 Public System ProUni
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Implemented Policies: FIES and REUNI
FIES (Programa de Financiamento Estudantil)
• Objective: Provide subsidized credit for low income students in order to pay their undergraduate or graduate program.
• Funding can achieve 100% of the tuition. Since 1999, program provided R$ 4.5 bi.
• Students can not lay-off more than 1 year of the university program and must pass at least 75% of their program courses.
• Problems: high default rate 15% (2006). • Problems: high default rate 15% (2006).
REUNI (Reestruturacao e Expansao das Universidade Federais)
• Objective: expansion of student placements (mostly increasing number of night courses) and build new campuses in the countryside of Brazil (medium cities). • The idea is improve efficiency of the universities by better management of universities’ facilities and human resources.
• Federal Universities who attempt to the program has a target to increase gradually the completion rate to 90% and increase the ratio student/professor to 18 in 5 years. • As a result, the Program creates incentives to decrease student costs in the Public Tertiary Sector.
48
Policies Recommendations
Policies Recommendations
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Policy Recommendations: Pre-School Education
1. This is the educational level that needs more investment due to historical lack of public support in this area.
• Informal market for “creches” has already developed (with no regulation by the State).
• 18% of kids start the 1st grade of primary school at an age two years older than the recommended age!
2. Increase the coverage of the pre-school system (from 44% to universalization).
• Many studies have shown the high rate of return for investments at this level. E.g. Heckman and Masterov (2008) and Barros e Mendonca (2005).
• It costs less invest in the beginning of kid’s cognitive and non-cognitive skills • It costs less invest in the beginning of kid’s cognitive and non-cognitive skills
development (before 3 yrs old).
• It gives equality of opportunities among the population. • It improves nutritional standards for the children.
• It reduces drop out rates (and the cost of it) at primary and secondary education. • It increases the children’s final educational level attainment.
3. Federal support for low income municipalities to invest in the “creches” and Pre-School system.
• FUNDEB coverage will help, however, given the size of the expansion, there is a extra need for Federal financial support.
4. Other Issues that increase the quality of the System.
• Teaches Professional Career / Infrastructure / Transportation and Alimentation / Social and Family Supportive Networks.
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Policy Recommendations: Primary and Secondary
1. Universalization of the Secondary Education.
• Expansion of Bolsa Familia coverage to 16 and 17 years old students and FUNDEB help.
• How to provide incentives to students to continue school? (create a more attractive school?)
2. Increase Time at School (only 37% of students attempt more than 4 hrs/day).
• Studies reveal a positive relationship between time at school and educational performance.
3. Improve Teacher’s Professional Career. 3. Improve Teacher’s Professional Career.
• Minimum Wage for Teachers Law was a first step.
• But international good experiences (E.g. Taiwan) show that teachers should receive a competitive salary in relation to other careers to attract good professionals.
5. Better School Management [Carnoy’s et al (2008) Experience]:
• Better management of classroom time; • Improve teaching skills;
• Need of teaching supervision (curriculum and didactics).
6. Other issues that increase the quality of the System.
• Infrastructure/ Transportation and Alimentation/ Social and Family Supportive Networks.
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Policy Recommendations: Tertiary Education
1. Tertiary System can be one source for budgetary reallocation to the pre-school or basic education system.
2. Selective Expansion of the Public Tertiary System.
• Data show private sector not only has interest in providing this service, but also present an excess of supply (placements).
• Most of students are still from higher income class and can pay for the service. The main restriction for the expansion of the system is in the basic education system.
• Expansion of the public system should be linked to: (i) development strategies over selected regions and their production/business chain or (ii) with the
over selected regions and their production/business chain or (ii) with the expansion of technology (R&D) for strategic economic sectors.
3. Accountability for general education (individuals return) and R&D (public return) at the public system.
• Individuals returns from education should be paid by those beneficiaries. The word public doesn’t mean free.
• Carnoy’s Suggestion: “Students should pay for the tuition what they were paying at the secondary level”. If a student comes from a public secondary school, he doesn’t need to pay the tuition.
• R&D (public interest) should receive government’s subsidies.
4. Expansion of ProUni or FIES (It costs less for the Government) 5. Strong Regulation over the Quality of Private Sector System.
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Expenditure per Student (Total)
54
Demographics Brazil: Recent Data and Trend
56
