Public resources allocated to education have been persistently low and declining as a share of total government budget and GDP

7. 
   In response to the challenges in basic education, the government commissioned a variety of studies, pilots, and reform plans. It introduced policy actions to mitigate input shortages (such as textbooks and school buildings), and has revised the basic education curriculum, teacher training, and instructional policies. Yet, these policy actions have not produced sustained and system-wide improvements in outcomes. Reform measures were often fragmented and isolated, and failed to strengthen performance accountability and incentives, or to build a strong constituency for change.
   

8. 
   In 2005, the government developed the Basic Education Sector Reform Agenda (BESRA), which is a sector-wide program that seeks to improve the quality of schools in a decentralized environment. The program is based on lessons from international research and draws from local experiences with successful pilots of school-based management (SBM), especially the Third Elementary Education Project (TEEP) and the Basic Education Assistance for Mindanao (BEAM) Project.
   

2. 
   Where the Philippines Could Be: Policy Options
   

9. 
   The Philippines has the potential to attain much better education outcomes. In particular, the objectives of (i) achieving universal primary education, (ii) significantly improving the quality of basic education, and (iii) reducing education inequality are not out of reach. This potential is evident from the faster rates of progress in education attainment achieved by developing countries that once lagged behind the Philippines. To achieve these higher outcomes, however, the government administration will need to be selective in focusing its basic education reform agenda on several strategically critical issues.
   

10. 
    Programs that address the special education needs of these groups need to be fortified. Important actions to support these programs are the (i) implementation of a six-year basic education strategic plan that puts in place reforms, but relevant to the socio-cultural context of ARMM, (ii) adoption of alternative modes of education delivery to address the needs of congested schools, out-of-school youth, disaster and conflict-prone areas, and, (iii) innovations for improving adult literacy and entrepreneurial skills and opportunities.
    

11. 
    Drawing on the lessons learned from international experience and evaluation of similar programs in different countries, the CCT/4Ps program has been designed to simultaneously improve the consumption, education, and health of extremely poor families. This program is being progressively expanded with the aim of covering all extremely poor families. In planning the deployment of teachers, construction of classrooms and provision of educational materials and other assistance, the DepED needs to prioritize the CCT/4Ps communities to ensure that the increased demand for education generated by the CCT/4Ps program is complemented by an adequate supply of education services.
    

12. 
    An important option for educating children that cannot be accommodated by the existing public schools is to private schooling in return for an agreed price per student (capitation) to be paid by the government. The Philippine experience shows the Education Service Contracting (ESC) Program improves school quality, relieves congestion in public high schools, maintains the financial viability of private secondary schools (more than one-third of private secondary school enrollments are supported by the program), keeps the overall costs of public secondary education in check, and encourages households to invest in education. (Patrinos et al, forthcoming). The experience in some countries, like Colombia (Angrist et al, 2002), shows that voucher schemes can also be highly cost-effective, provided they are appropriately designed and regulated. Expansion of the current Philippine voucher program, however, is not recommended due to design and governance issues.
    

13. 
    In areas where there are no private schools, schools can be built using community-driven and/or principal-led construction, as both schemes have produced good quality classrooms at reasonable cost, while promoting transparency, accountability and community participation.
    

14. 
    The current reforms to improve teaching and learning practices addresses a wide range of issues through a package of interventions.⁵ Despite delays in its implementation, it is steadily, albeit slowly, making progress and gaining widespread acceptance among influential advocacy groups and stakeholders. Consolidating and advancing these critical and highly promising reforms is preferable to introducing completely new programs that do not take advantage of ongoing reform efforts. The history of repeated education reforms in the Philippines shows that they have had little cumulative transformational impact, because few have been given enough time to take root, scale-up and mature.
    

15. 
    The National Achievement Test (NAT) system is an expensive exercise whose main objective is not clear. The NAT scores are not being used for promoting students to the next grade. Instead, it appears that their main purpose is to assess learning achievement outcomes. If this is the main purpose, however, it can be achieved at much lower cost through sample-based testing, and the resulting savings could be used to help fund training of teachers and school heads. It is important, therefore, to review the methodology and objectives of the NAT by an independent board or task-force.
    

16. 
    The basic education curriculum needs to be reformed, but such a reform is best carried out as part of the broader discussion on the extension of the Philippine education cycle. Advocates of extension argue that the Philippine education cycle is too short compared to that of other countries, resulting in curriculum congestion and low student learning achievement. An examination of international practice reveals that the Philippines needs to add two more years of equivalent senior secondary education⁶ to align itself with the 6+3+3+4 international education cycle. Critics of such an extension point out that a longer education cycle does not automatically lead to greater student learning achievement, as shown by a statistical analysis of TIMSS data (Felipe and Porio 2010). For an extended education cycle to yield the desired benefit, it is necessary to ensure that the education system is effective and efficient in producing student learning. Given the current underfunding of education in the Philippines, however, there is a high risk that the introduction of an additional two years of education could come at the expense of deteriorating education opportunities for the poor, as scarce resources and attention may be shifted away from the implementation of the basic education reform. Adding two more years of high school to establish a 3-year senior secondary level of education into the country’s education cycle, therefore, only makes sense if it is accompanied by a commensurate increase in the education budget.
    

17. 
    The current curriculum is overcrowded and spreads school time too thinly over too wide a variety of subjects and other activities. Proponents of education cycle extension argue that students need more time to learn basic subjects like mathematics, science, reading, and social studies in sufficient depth. An analysis of the current curriculum to identify gaps in basic subjects and assess the implications for additional inputs and outputs including teacher training, educational materials, infrastructure, laboratories and equipment needs should be undertaken. It is critically important to review the core curriculum with a view to identifying the main items of instruction that should be the focus of attention for the eventual two additional years of education. Another option that also deserves consideration is to explore alternatives to increase the actual time on task either by reducing the number of school holidays, or increasing the number of school days or reducing teachers’ absenteeism.
    

18. 
    A phased and flexible strategy based on public-private partnership may help the authorities address the efficiency and equity concerns arising from a desire to expand education opportunities in spite of tight budgetary constraints. One such strategy to consider is to finance upper secondary education with user (enrollment) fees, while providing an increasing number of scholarships and student loans for deserving poor students. Recipients of scholarships and student loan programs should be free to enroll in a private or a public school.⁷
    

19. 
    Recently, the DepED has tried linking student achievement scores to teachers’ pay and promotion. Though the incentive involved is quite small, it provides a good opening for developing a more powerful outcome-performance bonus scheme. The details of the design of such a scheme need to be carefully thought through, however, and its impact on outcomes on teaching practices and student learning needs to be rigorously tested and evaluated. The empirical evidence on the impact of teacher performance incentive schemes is very mixed. Badly designed schemes, for example, lead to unintended consequences such as greater cheating. Another example of unintended perverse consequences is the policy of financing end-of-the year bonuses through the “savings” achieved by individual work units. This practice has encouraged work units to delay and withhold funding of expenditures on priority education activities. The Administration should consider eliminating or modifying this practice.
    

20. 
    Given the rapidly growing school-age population, persistently low public spending on education and magnitude of the education reform challenges, additional resources for the basic education sector are needed. Meeting the MDG and Education-for-All (EFA) goals in basic education would roughly require some PhP2,113 billion over the period 2011-2015. (See preliminary estimates in Table 3). The necessary budgetary increases to achieve this spending target must come from both the central and local governments. This requires, among others, motivating the LGUs to invest more of their own resources in local education improvements and supporting the empowerment of schools and communities. Examples of actions that can be taken to mobilize additional resources for the basic education sector include:
    

• 
  Increasing the obligations-to-allocations ratio to 99 percent during the first two years of the new administration;
  
• 
  Raising the national government appropriations for basic education as a percentage of GDP to between 4.0 to 5.0 percent of GDP by 2015. This would elevate national government funding to a level comparable to international practices for middle income countries;
  
• 
  Require matching grants from LGUs for national government (NG) assistance to minimize “substitution,” while developing a performance-based formula for allocating a part of the education budget increase.
  

(in PhP millions at current prices; 2011-2015)

21. 
    An improved utilization of education resources is critical for translating more inputs into greater outputs and outcomes. Several actions are needed here, beginning with the allocation of additional resources to high priority activities. These priority activities include:
    

• 
  increasing the availability of classrooms, teachers and educational materials to meet supply gaps through the use of effective targeting system, principal-led construction and rehabilitation of schools/classrooms, and expanded capitation scheme for enrolling school-aged children that cannot be accommodated in public schools in private schools,
  
• 
  full implementation of the SBM policy, including the provision of flexible school grants and performance bonuses for schools, teachers and local school boards,
  
• 
  full implementation of the new equity-based School Maintenance and other Operating Expenses (MOOE) formula developed by Boncodin et al. (2009) to allow schools to adequately respond to the needs at their level and provide fiscal space to implement their school improvement plans,
  
• 
  expanding the CCT and other cost-effective interventions to stimulate schooling demand among poor households, and
  
• 
  instituting an independent and credible system for the regular monitoring, assessment and public dissemination of the performance of schools, teachers, and local school boards.⁸
  

22. 
    Specifically, funding of these activities will strengthen the decision-making authority and capacity of School Governing Councils (SGCs), improve incentives for better teacher and school performance, and increase school accountability.⁹ It is equally important to ensure that the allocated resources are spent for the intended purposes with minimum delay and leakages. The recent Basic Education Public Expenditure Review (World Bank, forthcoming) reveals that the budget utilization rate, measured in terms of obligations relative to total allotment releases, has fallen from 97 percent in 2004 to 92 percent in 2008. Some education budget items have utilization rates that are even lower. For example, the Maintenance and Other Operating Expenses (MOOE) utilization rate was only 72 percent in 2006-2008. These observations point to inadequate absorptive capacity.
    

23. 
    The successful implementation of a reform agenda critically depends on good sequencing. Early victories in the implementation of the reform agenda create goodwill and excitement among education stakeholders. The resulting political capital creates momentum for the passage of more difficult reforms later.
    

24. 
    There are several strategically important actions that can be taken immediately to launch the reform programs in the three policy areas addressed above. These actions are:
    

• 
  Issuing an Executive Order mandating the achievement of universal primary enrolment and increased secondary net enrolment as official target, while assigning the budget needed to carry it out (as per Table 3), and taking measures to improve education budget execution,
  
• 
  Providing block grants directly transferred to schools with clear and transparent guidelines for accountability as well as full implementation of the new equity-based school MOOE allocation formula,
  
• 
  Reducing the number of school holidays and teachers’ classroom absences,
  
• 
  Strengthening the decision-making authority and capacity of the School Governing Councils (SGCs) and promoting regular school “performance accountability meetings” with the public,
  
• 
  Providing adequate budget for educational materials and training of teachers supporting the mother tongue language policy and those teaching in multi-grade classes, and
  
• 
  Developing and pilot-testing more powerful performance bonus schemes for teachers and schools.
  

25. 
    These actions are expected to have an immediate positive impact on basic enrollment and other education outcomes. Together with the other actions proposed earlier, they could usher in a more rapid and sustained pace of education progress. As the Philippine Human Development Report 2008/2009 (Human Development Network 2009: 72) points out, school performance rises significantly when ‘in addition to greater autonomy, schools are provided with local capacity building, have established rigorous external accountability through close relations between schools and communities, and have been stimulated to innovate.’ The experience in the Philippines’ Third Elementary Education Project, in particular, strongly indicates that the impact of school-based management on student learning is positive and remains substantial even after completion of the project. This impact is expected to be further raised in the long run with the development of a stronger culture of accountability for performance and the establishment of incentives to encourage improved education. It is critical, however, that the basic education reforms be allowed to mature and take root. Successful reforms in other countries normally take years, if not decades, of sustained and cumulative implementation of incremental and, sometimes, more radical reforms.
    

Angrist, Joshua, Eric Bettinger, Erik Bloom, Elizabeth King and Michael Kremer (2002). “Vouchers for Private Schooling in Colombia: Evidence from a Randomized Natural Experiment.” American Economic Review 92, No. 5: 1535-1558.