Quality and quantity of government spending: Education and public health

Government spending on social and economic services is important to economic development. The question is, how has the government performed on this front? A recent economic analysis of public expenditure by the World Bank provides a good answer to these questions. The study pays particular attention to government spending on education, public health, and infrastructure investments. These classes of spending sustain the country’s forward thrust toward economic growth, development, and social progress.A democracy has to spend well for public education to keep the population literate and well informed. By choice, a democracy that supports universal education must make public education especially at the elementary level a “public good.” A public good is one that is available to all free. When the children of better off and poor people study and play together, there is a good chance of creating a society that enjoys shared common values. This will firm up the development of democratic values and social cohesion. Further, a democracy must spend for public health in order to erase from the hazards of disease that mothers and their infants face to reduce infant mortality. Thus, young people grow to good health, free from the ravages of the most common diseases that afflict especially the poor.

The World Bank study offers both a historical and current review of this subject. What makes it easier to understand is that it compares this performance with immediate neighbors that happen to be middle income economies like the Philippines. This helps to make us understand whether we are doing well or not.

What are the general findings of the study?

First, look at the big picture. From 1996-2000 (Fidel Ramos’s presidency), public spending as a proportion to the country’s total output (GDP) was 15.6 percent. Between 2002-2008 (Gloria Macapagal Arroyo’s time), the same proportion to output fell to 13.3 percent. A slight improvement in the latter ratio happened in 2009. But the decline resumed in the year 2010, the last year of the last government.

This decline in the “effort” reflects a falling ability of the government to deliver properly on essential public services. As this was happening in the country, neighboring countries were achieving their own efforts just as well as before or improving them. For those countries that have surpassed our performance (in the past) by raising their relative expenditure levels, we compare even farther behind their pace.

The purpose of such expenditure reviews is to make governments understand more properly the way they perform their own public expenditure function. If major problems are perceived or detected, then the expenditure review suggests measures that lead toward a better performance.

Public educational spending. What is spent on education today provides a measure of the quality and preparedness of the labor force several years later. Expenditure that is inadequate or poorly made penalizes the future of the country.

However, expenditure has to be afforded by the country’s fiscal means or it cannot be sustained. But a country’s ability to afford depends on how it raises its resources and how it uses them to achieve the best results. This is a subject of great importance for policy makers in government.

Under our system of government, spending on public elementary education is the responsibility of the national government. Otherwise, the aim of universal education for citizens becomes meaningless. Local governments are responsible for the secondary education. And the state takes care of only a small segment of tertiary education.

Families have the choice of sending their children to school on the basis of their preferences and incomes. Well to do families however are able to finance the education of their children from the lowest level to the highest. So they have the option of choosing better private schools for their children.

When the public educational system weakens, a more unequal society in terms of future economic, social and other opportunities becomes a consequence. This is because the well to do send their children to better schools. Rich and poor are therefore set more apart at the seams of economic class.

The average levels of expenditure tell a disturbing story. The per pupil enrolment arising from public expenditure on education from 1997 to 2008 is like a laundry line. It is high at the beginning and ending period but low in between. The high outcome for the ending year reflects a sign of effort and optimism. But challenges in financing continually make it difficult to sustain the effort.

In the school-year 2002-2003, such public school enrollment was 83.8 percent of all school age. Another seven percent of pupils are enrolled in private schools. But in the school-year 2008-2009, the same ratio fell to 77.1 percent (with private enrollment staying roughly the same). In short, there are thousands of school age children who are out of school.

In spite of this dreary picture, there is another dimension that is important to bear in mind. Richer communities – because of the benefits derived from the local government code – are able to support their communities more than the poorer communities.

There is a high degree of regional inequality in the country. Communities that are mired in poverty suffer more as a result. Even though on surface, spending by the national government tends to be more evenly distributed in respect of public elementary education, the poorer communities have even less support for educational spending because they have little resources to help themselves, unlike the more well to do local governments.

Moreover, richer local governments have a higher level of support for the second level of education – high school. They have a higher share of income from national taxes resulting from the national-local tax sharing formula of the local government code. With little income, the poorer provinces have little by way of improving their secondary schools.

Public health expenditure. Expenditure for public health had fallen from the 2000 level to 2006, from 1.6 percent of total output to 1.3 percent. A consequence of this fall in public health spending per capita is the rise of infant mortality and in the prevalence of malnutrition among young children.

In a sense, the public expenditure on health is even worse off than that on education. The poorer regions of the country suffer from a higher degree of deprivation in terms of health expenditure costs than the better off regions. The local government code has favored the better off regions than the poorer regions, by virtue of the tax sharing formula.

For the same period of time, the countries in Southeast Asia spent more on health care than our effort. Health care spending of government have experienced increases as a percent of output ranging. In the case of Indonesia and Vietnam, public spending on health rose by 0.2 percentage points higher during this period. The expenditure of Malaysia and Thailand, the effort was a little higher, by 0.05 percentage points over their previous levels.

The quality differences in these apparently small percentage differences are hard to quantify. But because these numbers are on a per capita basis, the obvious conclusion that they convey is that our government lags behind those of other neighboring countries in a very important way that needs correction.

Why, why? Why has this problem become serious in the country? One important reason is that Congress and the President have not worked as one government. The gridlock manifested itself in the inability of Congress to support the needs proposed by the President.

The gridlock mentality of political conflict between the legislature and the presidency was especially acute during the time of Gloria Macapagal Arroyo. The proof is in this poor statistical picture. Would it improve in this new government? –Gerardo P. Sicat (The Philippine Star)

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