Financial Challenges in Compulsory Education and Intergovernmental Education Grants

Abstract

The financial reform of compulsory education in China since 1985 was characterized by fiscal decentralization and resource diversification. It has brought important benefits but did contribute to growing disparities in the quality of education across regions and to inadequate public financing of education in poor areas. This suggests that in the future, more effort needs to be put into the establishment and development of a substantial and regularized scheme of intergovernmental grants. This study, based on 1997 and 1999 county level data, attempts to document the utilization of education resources and disparities in per student spending in late 1990s. Then the study goes further to review the international experience regarding the role of intergovernmental grants in a decentralized system of financing, and finally examines the issues involved in establishing a regularized and substantial system of intergovernmental grants in compulsory education in China.