47031 Ukraine Education Reform Policy Note Human Development Sector Unit Europe and Central Asia Region Peter Darvas TABLE OF CONTENTS TABLE OF CONTENTS............................................................................................................................I ACKNOWLEDGEMENTS.........................................................................................................................I EXECUTIVE SUMMARY........................................................................................................................II 1. INTRODUCTION ......................................................................................................................1 2. THE POLITICAL, ECONOMIC AND SOCIAL ENVIRONMENT ...................................2 3. STRENGTHS IN UKRAINE'S EDUCATION SYSTEM ......................................................4 4. CROSS-CUTTING ISSUES AND POLICY CHALLENGES IN EDUCATION ................7 EQUITY ISSUES IN EDUCATION.............................................................................................................7 RELEVANCE AND QUALITY OFEDUCATION.......................................................................................9 EFFECTIVENESS AND ACCOUNTABILITY OF EDUCATION ADMINISTRATION AND FINANCE......................12 THE EFFICIENCY OF EDUCATION........................................................................................................13 5. EDUCATION REFORM PRIORITIES ................................................................................16 FIRST PRIORITY: IMPROVINGTHE RELEVANCE OF EDUCATION.......................................................16 SECOND PRIORITY: IMPROVINGTHE FINANCIAL FRAMEWORK OF EDUCATION...............................18 THIRD PRIORITY: REFORMING EDUCATION ADMINISTRATION TO IMPROVE ACCOUNTABILITY, TRANSPARENCY AND EFFICIENCY...................................................................................................21 6. CONSTRAINTS AND RISKS OF REFORM.......................................................................23 ANNEXES .........................................................................................................................................25 ANNEX 1. OVERVIEW OFTHE EDUCATION SYSTEM........................................................................26 The Education System of Ukraine: schematic view....................................................................26 Key Features of Education in Ukraine.......................................................................................27 ANNEX 2: STATISTICS...................................................................................................................31 i ACKNOWLEDGEMENTS The task leader and the author of the policy note is Peter Darvas. Key partners in the sector dialogue were Vassyl Kremen, Minister of Education and Science, Oleg Bohomolov, State Secretary of the Ministry of Education and Science, Yevhen Bystrycki, Director, Grigorii Kasianov and Olena Bekh of the International Renaissance Foundation, Roman Shylyan, Alla Seletska of the United Nations Development Program and Natalia Shablya and Thomas Timar of the Institute of Education Policy of the Open Society Institute. Olena Moyseyenko helped collect statistical data and organize them into tables, macroeconomic data was provided by Mark Davis, poverty data by Emily Andrews. Jenepher Mooseley and Peter Bocock helped in editing. Special thanks for peer reviewers: Chris Thomas, Peter Buckland and Sue Berryman. Ernesto Cuadra and Philip O'Keefe have read through the drafts line by line and provided detailed advice on how to improve the paper. Ana Maria Jeria, Galina Sotirova, Mary Canning, Isaac Froumin gave extensive comments and feedback at different stages of the work. The Director of the Human Development Department, Annette Dixon and the Ukraine Country Director Luca Barbone provided valuable guidance for carrying out the task and improving the paper. Jim Socknat, Sector Manager until May 2002, and Galina Sotirova PTL for the Ukraine human development program provided guidance through the sector dialogue with the Government and donors from the inception of the program in 2000. Maria Koreniako, Yelena Fadeyeva and Katerina Petrina in Kiev gave critical support, advice and feedback both on the sector dialogue and on the drafting of the policy note. Sidonie Joctaine and, from July 2002, Ian Conachy, Team Assistants provided valuable help in arranging meetings, missions, filing, correspondence, etc. This paper could not have been completed without the support of these individuals and organizations but all the mistakes and shortcomings in the note are those of the author. A draft version of this policy note was presented in Ukraine between November 4 and 7, 2002 in several workshops to the Government officials and to stakeholders in Kiev, local and regional education administrators and stakeholders in Dnipropetrovsk and in Lviv. These workshops provided to the World Bank valuable feedback, recommendations and suggestions for further revisions. The task leader is grateful to the Minister of Education, Vassyl Kremen, who chaired the Governmental workshop, other Governmental staff and to all stakeholders for the organization of the workshops and for the comments. i EXECUTIVE SUMMARY Ukraine's size, population, location and natural endowments, together with economic and political reforms undertaken since 1999, offer the prospect of economic growth and international competitiveness, provided it can continue to improve its macroeconomic performance, institutional conditions, and human capital endowments. The government has recently initiated an education reform strategy that includes redefined priorities for the sector and improved service delivery from preschool through tertiary education.1 The reform process reflects both important strengths and opportunities and persistent and emerging challenges in Ukraine's education system. · Ukraine has inherited an education system that played a critical societal and economic role during Soviet times. The organization and functions of the system were designed to meet the needs of a centrally planned economy. While market pricing was absent, funding for education was exceptionally high and pedagogical innovation was supported and praised at the highest political levels. The results included high literacy, a majority of graduates with solid basic knowledge, a large core of skilled workers available for the industrial sector, and outstanding scientific and technological achievements. · Since independence, there has been a significant commitment to maintain quality, to extend compulsory schooling and to expand tertiary education in terms of both enrollments and the diversity of programs. The Government has issued new laws and regulations to improve the system, along with the recent reform strategy which targets lifelong learning and equal access to quality education. · The commitment to reform education is shared by central and local Government agencies, stakeholders, teachers, parents and students. Respect for education is reflected in citizens' aspirations, students' efforts to achieve, and parents' willingness to send their children to school and pay for out-of-pocket expenses despite severe economic difficulties. But education in Ukraine also faces formidable challenges. · Following independence in 1991, the country went through eight years of severe structural and institutional crisis, culminating in 1998 in the most dramatic economic collapse in Eastern Europe. The crisis was accompanied by a severe decline in social services, and the quality of education was jeopardized by deteriorating funding, salaries, and infrastructure. The quality of services provided declined while the structure of the system remained unchanged. · Meanwhile,education administration and finance has been out of alignment with budgetary realities, in terms of planning, allocation, execution, and financial management. · The education system has not adjusted to a falling student-age population, resulting in low capacity utilization and declining efficiency in, e.g., the use of physical facilities and the number and allocation of teachers. · As overall expenditures fell sharply, spending on non-compulsory services (preschools, post- compulsory vocational programs and higher education) has increased as a share of the total education budget, threatening the sustainability of compulsory schooling. 1"National Doctrine for Development of Education in Ukraine In the XXIst Century" ii · As a consequence of economic pressure unaccompanied by adjustment, the sector is facing increasing enrollment and attainment problems. Enrollments are falling at the primary level, and are low at the upper secondary level.2 · The sector as a whole has not yet made the transition to programs, curricula and teaching practices that are appropriate to the needs of a new economy and a more volatile labor market. Vocational education has lost its relevance and general education has remained focused on the elite. System structure seems increasingly to favor the better off urban population in the more affluent parts of the country who are able to access higher quality upper secondary general education and enroll at tertiary institutions. · The result is a bifurcation of the system between the better-off who continue to progress through elite secondary programs and move on to higher education and a less fortunate group of students who are dropping out of school with incomplete secondary education or less. This trend will exacerbate socioeconomic inequality, given the universal pattern of increasing private returns to education and the correlation between limited education and poverty. The draft government strategy has prompted an emerging consensus between government representatives, key stakeholders, local experts and international organizations about three broad objectives: · To improve the relevance and quality of education at different levels, and especially to move towards lifelong learning; · To develop a new financing policy that supports redefined public education priorities, including above all equal access to quality education; · To improve education administration to make it more transparent, accountable and efficient. Improving the relevance and quality of education: The Government strategy targets lifelong learning as the core principle on which reforms directed at improving the relevance and quality of education should be based. In the new knowledge economy, the ability to adapt quickly to change will profoundly affect productivity and economic welfare. Hence, formal education and training must be geared to enabling citizens to acquire new skills rapidly throughout their lives. This objective has several implications for education system standards, quality and relevance: · The government and stakeholders need to agree on the skills and competencies that the education system should provide to citizens as a basis for developing new curriculum standards. · Ukraine needs to develop a new policy for teachers that includes new professional standards and regulations for career development and salary scales, together with strengthened pre- and in-service training. This should be accompanied by better provision of new instructional materials and equipment. · The education sector needs to develop effective monitoring capacity, and to plan and implement regular standardized assessments. 2 Data on enrolment at different levels was gathered at the Ministry of Education and Science, the Central Statistical Agency, and at partner international organizations including UNICEF and UNESCO. iii · The system should provide more open and achievable standards for transfers between grades and school levels, and introduce standardized completion examinations at the end of compulsory education. iv Achieving Equal Access to Quality Education Through a New Financial Framework: The education strategy needs to conform to fiscal realities. Since public finances will remain constrained over the medium term, the government will need to define a limited number of policy priorities that it can finance and sustain. · Currently, not all children receive schooling of equal quality. Judging from the quality of inputs, those living in rural or mountainous areas or poorer regions may be inadequately served. Public financing should give priority to providing quality compulsory education for all, regardless of children's or their families' socioeconomic status or geographic location, and to paying special attention to the needs of at-risk communities and poor rural areas. · Financing the proposed extension of compulsory education to 12 years will require additional facilities, teachers, training, curriculum, equipment, textbooks and scholarships. It should be preceded by ensuring adequate and equal provision of existing compulsory programs. Ukraine needs to make every effort that the country meets the Millenium Development Goals and assures that all children will be able to complete a full course of primary schooling. For this purpose, more reliable data provisions and monitoring are needed. · Modernizing vocational education, which has lost its relevance and attractiveness, will also be expensive in terms of investment, retraining, new equipments and curricula. It should be undertaken with the participation of beneficiaries and users, including the private sector. · A possible introduction of the "0" or introductory year for all eligible children, so that a good head start is not limited to those coming from urban and affluent families, will also create a new fiscal burden. It should be offset by cutting public subsidies for additional preschool years and targeting support to the poorest. Once consensus is reached on these priorities, developing a financial framework will require (i) an honest appraisal of trends in public finance, (ii) sound costing of the new priorities, and (iii) careful study of possible savings and efficiency gains. Reforming Education Administration: The key challenge for education administration is to redefine the respective roles of central, regional and local authorities, with the objective of establishing well integrated institutional responsibilities that will ensure high educational quality, adequate financing, and effic ient management. The Ministry of Education should shift its focus away from legal and fiduciary issues and towards development, monitoring and professional advisory functions. The challenge for regional and local governments is to develop region- and locality-tailored policies, align financing with them, and establish regional monitoring capacity. · The government should ease input standards and delegate appropriate authority and responsibility to local levels to assure that quality inputs are financed and equally and fairly provided to all schools. · The Ministry, together with its partner governmental agencies, should define medium term education policy objectives and participate in the definition of financial allocation procedures and priorities. The single most important financial tool should be the allocation formula, which should be based on education policy priorities as well as user numbers. · The Ministry should also be responsible for establishing adequate central and regional monitoring, management information, and reporting capacities. New output and outcome measures will require the development of reliable testing capacities. In other areas, including teacher policy, staff training, v or textbook policy, the Ministry's focus should be on monitoring and professional advisory functions. · The Government should develop incentives that encourage education management at all levels to develop timely plans, stay within budget, achieve educational attainment and quality targets, improve institutional effectiveness and involve stakeholders in local planning, decision making and monitoring. · Local educational authorities under rayon and city administration should be given sufficient responsibility and flexibility to allow them to fine-tune the distribution of public resources to schools, monitor the performance of local school administrators, and provide specialized, professional support (including advisory services and in-service training) to local schools. · Local agencies and schools should be granted the authority to use budget resources to hire staff and purchase material inputs, define the detailed curriculum, select and implement teaching strategies, and monitor and report on the educational progress of students to government and to stakeholders. · School boards and parental organizations should be strengthened, especially with respect to oversight of school management, school development planning, and the use of school funds and non-state resources. They could also be enlisted to promote the mix of public/private financing and participate directly in school activities. In conclusion, while there is broad-based recognition of the need to reform education in Ukraine on the part of the government and stakeholders, reformers should also take account of potential risks inherent in the process. Education reform takes a long time, and political instability or even the regular governmental cycle can result in setbacks. Reform is also costly; economic difficulties can constrain the availability of the resources necessary for adequate implementation. Some reform objectives or instruments may attract criticism or result in possible social conflicts. Serving a diversity of interests may hamper the government's ability to focus on key priorities. And the forces of inertia, in politics or in central public administration, may hinder efforts to reduce the role of government in managing education reform and service delivery. Therefore, the Government needs to prepare risk mitigation strategies, including the involvement of stakeholders and representatives of civil society in planning, monitoring and implementing reform policies. vi 1. INTRODUCTION 1.1 This Note identifies major challenges facing the Ukrainian education system and suggests policy options for addressing them. It is intended to contribute to the ongoing policy dialogue between the Ukrainian Government and the World Bank about the key issues identified in government education policy development and implementation planning to date, and to offer the Bank's views on these issues for the Government to consider as it elaborates its reform program. 1.2 The Government of Ukraine outlined its education strategy in October 2001.3 The strategy was designed to define basic objectives for education and the changes needed to achieve them. It was prepared under the supervision of the Minister of Education and Science and supported by technical assistance from the Bank and other donor organizations.4 It is hoped that this cooperation will provide the basis for future Bank support for the education sector in Ukraine. 1.3 The Note's structure broadly follows that of the government's policy document. Section 2 outlines the political, economic, and social environment. Section 3 identifies some of Ukraine's strengths and comparative advantages in education, on which future reform policy can build. Section 4 discusses cross-cutting issues and challenges, including equity, relevance, efficiency, and accountability. In section 5, the Note provides recommendations for reform priorities and some policy options for realizing them. Section 6 identifies potential risks and threats that could hinder the reform process and suggests way to mitigate them. Annex 1 offers a brief overview of the education system, including quantitative trends and some international comparisons. Annex 2 provides a set of economic, demographic and educational data. 3 "National Doctrine for Development of Education in Ukraine In the XXIst Century" or Draft Education Policy and a Draft Implementation Plan ("Program of Government's Actions Aimed at Implementation of the Doctrine ...") produced for the Ukrainian Government in June and August 2001 and discussed at a Teachers Congress in October 2001. 4 There has been significant donor assistance for Ukraine's initiative to develop its education policy. A technical assistance program is being spearheaded by the International Renaissance Foundation and the Institute of Education Policy, both agencies within the Soros Foundations network, and by UNDP. The first background studies for the policy are being undertaken by local and international consultants; they cover issues related to quality, access, monitoring, management, and training, together with, separately, issues in higher education. 1 2. THE POLITICAL, ECONOMIC AND SOCIAL ENVIRONMENT Ukraine's size, population, geographic situation, and physical and human endowments promise to make the country competitive but only if macroeconomic conditions, the institutional regime and human capital resources are improved. Halfhearted reforms in the early 1990s helped to perpetuate a deep economic crisis through most of the decade, causing general deterioration in the public sector, serious funding problems for education, and erosion of human capital. In the late 1990s, the Government began to undertake reforms which are now extending to addressing enduring and new challenges in the field of education. 2.1 Ukraine is the second largest country in Europe, and is strategically located between Russia and the West. Its population has fallen from about 51.5 million in 1989 to 49.1 million in 2001, with the number of live births declining sharply between 1989 and 1999 (from 691,000 to 389,200 a year). During the same period, the share of the population aged 0 to17 ? which defines current and future schooling needs ? decreased from 26 to 23 percent.5 About 72 percent of the population is Ukrainian, 22 percent is Russian, and the remainder is divided among a number of smaller several ethnic groups.6 About 70 percent of Ukrainians live in urban areas: Kiev, the capital, is the largest city, with about 3 million inhabitants. Four other cities have more than 1 million inhabitants. 2.2 Ukraine has the natural and human resources needed to play a significant role in the world economy. It has productive land, a developed industrial base, highly trained labor, and a quantitatively impressive education system relative to its national income. But the decade since independence has seen the most dramatic economic collapse in the Eastern European region. The reasons for the economic collapse of the 1990s are manifold. Structural reforms and economic liberalization were slow and half-hearted. Both the economy and public administration were inert and disorganized, while extensive rent seeking blocked the emergence of efficient governance and transparent market conditions. 2.3 Between 1990 and 1998, per capita GDP in terms of purchasing power parity (ppp) halved, falling from US$6,725 to US$3,370; official output fell to about a third of its 1990 value. Current per capita GDP (ppp) is around US$4,000, significantly lower than most of Ukraine's neighbors (with most of whom the country stood at par prior to the crisis), reflecting, e.g., a fall in wages of more than 60 percent between 1992 and 1999. 2.4 Poor economic performance has left a legacy of rising poverty and falling standards of living for most citizens.7 Social problems have worsened, and social capital has deteriorated, with rising crime, alcoholism and homelessness, and falling life expectancy.8 The most vulnerable 5 The rate of natural population increase (birth rate minus death rate per 1,000 of population, excluding changes due to migration) fell from plus 1.8 in 1989 to minus 7.0 in 1999 (A Decade of Transition. The Monee Project CEE/CIS/Baltics. UNICEF, Regional Monitoring Report No. 8, 2001) 6 Ukraine's ethnic minorities include Russian, Jewish, Romanian, Belo Russian, Bulgarian, Polish, Hungarian, Tatar, Greek, Roma, and Armenian groups. 7 Between 1999 and 2001, when the country moved onto a growth track, the Gini coefficient rose slightly from 31 to 33. While only 6.4 percent of the population lived on less than the international comparator standard of $4.30 PPP, 68 percent lived less than the official subsistent minimum of 311 UAH. Meanwhile, the poverty rate rose to around 31 percent, an increase of 2 percent in three years. 8 A Decade of Transition. The Monee Project CEE/CIS/Baltics Regional Monitoring Report No. 8 2001 United Nations Children's Fund Innocenti Research Center Florence, Italy. 2 members of society--the elderly, handicapped, widowed, and orphaned--have been especially hard hit.9 2.5 The collapse of the formal economy between 1991 and 1998 has had a predictably negative impact on public finances. Tax revenues have fallen by over 70 percent in real terms; while public spending has been cut sharply in response, large budget deficits have persisted throughout the period. Public expenditures have exceeded public revenues by 6 to 12 percent of GDP every year since Ukraine became independent. By the end of 1998, the value of accumulated public debt had reached nearly 50 percent of GDP. Revenue losses have forced the education system to operate with greatly reduced funding. Building and equipment maintenance has been deferred and the continuing education of teachers and school administrators has been under-funded. Efforts to innovate and to improve programs have been starved of resources. 2.6 Over the past three years, Ukraine has begun to undertake significant economic reforms, which have begun to deliver sharply improved economic performance since 1999. A new Government, appointed in 1999 introduced a more transparent decision-making process and reform efforts in the areas of fiscal, energy, and land policies, together with new anticorruption measures.10 Further, the state has eliminated tax offset operations and barter in the economy has fallen to about 4% of registered economic activity. The reform measures and improved governance, supported by a favorable exchange rate for exports and a positive external environment, have resulted in an improved macroeconomic framework and increased public trust in market institutions.. 2.7 Positive economic growth was achieved in 2000 for the first time since independence; official data record GDP growth, of 5.8 percent in that year and 9.1 percent in 2001. The increase was mainly the result of strong industrial output growth, a surge in retail trade, and good agricultural performance. In particular, agriculture prospered (growing by 6% in 2000 and 11% in 2001) following the swift elimination of the collective farm system. Total GDP growth is expected to be about 4.5% for 2002. Also, households and businesses are holding more domestic currency and domestically denominated deposits, which are increasing rapidly. The Government has maintained a tight fiscal deficit of under 2% of GDP; it has held its modest stock of domestic debt steady. and is reducing its stock of public external debt from 30.5 percent of GDP in 2000 to an estimated 23.8 percent by year-end 2002. 2.8 Notwithstanding the recent economic upturn, the economic collapse of the 1990s has had substantial long term adverse effects on Ukraine's education system which, together with the implications of current economic reforms, have created new challenges to reform the sector. The government is seeking effective education policy responses to these challenges. Some reform efforts have begun, but most of them are still at various stages in the legislative process and are as yet inadequately supported by needed enhancements in resource allocation and institutional and incentive structures. 9 Illustrative data for children and adolescents are telling: Between 1989 and 1999, the percentage of children in orphanages doubled, the gross adoption rate for 0-3 years old grew by 80 percent, the adolescent suicide rate increased by 20 percent, and registered juvenile crime rose by 25 percent (UNICEF). 10As Aslund argues, Ukraine took a path from a rent-seeking society to one that is economically more competitive and more transparent. (Åslund, Anders. Ukraine's return to economic growth. Post-Soviet geography and economics [Columbia] Vol. 42. No. 5. July-August 2001. p. 313-328.) 3 3. STRENGTHS IN UKRAINE'S EDUCATION SYSTEM Ukraine inherited an education system that played a critical socioeconomic role during Soviet times. The country has made considerable efforts to sustain this system despite economic hardship, and also to transform the curriculum in line with the needs of an independent Ukraine. Since the 1990s, tertiary education has expanded, with increased enrollments and more diversified programs and degrees. There are strong commitments to, and expectations for, high academic standards on the part of all stakeholders, including, parents, teachers, administrators, and students themselves. 3.1 Education has played a significant role in Ukraine's economic and social development, both during Soviet times and since independence. The Soviet government strongly promoted education at all levels, from preschool to higher education, in a system designed to meet the needs of a centrally planned economy. Although true market pricing was absent, funding for the system was exceptionally high and pedagogical innovation was supported and praised at the highest political levels. The outcomes included high literacy rates and solid basic knowledge (especially in the sciences)11 among the majority of graduates, a large core of skilled workers that fed into the industrial sector, and outstanding scientific and technological achievements. 3.2 Since independence, Ukraine has been able to sustain some of its comparative advantages in terms of excellence in education. But independence also created challenges. Instruction ­ standards, curriculum, teaching materials and methods ­ now had to be provided in Ukrainian. Substantial changes in curriculum were needed in order to remove previous ideological content and establish a context compatible with national values and the principles of a democratic and open society. Despite hard economic times, the education community rose resolutely to these challenges. 3.3 Ukraine is in a relatively strong position to further extend the scope of the education system. Its participation rates for formal education put it in the upper third among lower middle income countries with comparable per capita GDP. Upper secondary general schooling (10th and 11th grades of compulsory education) and tertiary education expanded during the crisis years. The upper secondary school curriculum is based on high academic standards and a relatively wide variety of programs. Positive changes since 1991 also include the emergence of a diverse structure of higher education with a wide range of degrees and programs offered by private and public institutions. Enrollment to tertiary education, at 30 percent, is substantial by international standards. 3.4 Ukraine's sustained commitment to preserving the quality of education bodes well for the future competitiveness of the country's human capital. Expectations of standards to be achieved by students and graduates are high, and students are motivated to work hard in order to succeed during their school career, so as to get better grades and gain admission to better programs. Teachers, administrators, and families are fully committed to excellence in education. Parents spend time, money and other resources to support their children's studies, even outside formal schooling. Students who meet high standards provide a well-trained, well-educated core of professionals and intellectuals for the country. 11In the few international tests of representative samples of children in which the Soviet Union participated prior to 1991, students achieved scores in mathematics and science that compared favorably with those of their western counterparts. 4 3.5 The government and the political leadership have remained committed to improving education, even during times of economic crisis. A government program to reform education was enacted by the Parliament as early as 1993, and several subsequent efforts have been made to implement existing reforms and plan new ones. A recent law increased compulsory education by one year to a total of twelve, to the potential benefit of overall educational attainment and the country's human capital stock.12 Both central and local governments are also committed to improving efficiency, by optimizing education services and improving access through a busing program to ensure that children from remote areas can receive quality schooling. 3.6 In November 2000, the Minister of Education and Science appointed a working group to prepare a strategy with redefined priorities for education reform and improved service delivery from preschool through tertiary education13. The draft strategy, issued in May 2001, sets Ukraine's long term priorities and objectives for the sector. Its guiding principles are: (1) to focus on the individual student's needs and future professional career options; and (2) to serve key social values related to national identity, tolerance and solidarity in inter-ethnic relations, democracy, the rule of law, and market principles. The main objectives are to provide equal access to quality education and to establish a system that lays the foundation for lifelong learning. 3.7 The strategy also puts strong emphasis on management, finance and staffing issues, and recognizes that access is primarily a financing problem. Limited public funds need to be better targeted to at-risk population groups. This will require a more realistic overall public finance envelope for education, an assessment of what it can cover, and decisions on the role of non- public funding in helping to make the system more equitable. 3.8 Based on the strategy, the Ministry of Education and Science drafted an implementation plan designed to cover the short and medium term actions needed to achieve the strategic objectives.14 The implementation plan assigns 155 mostly legal tasks to different government agencies and ministry departments, including issuing new decrees and orders or drafting new "concepts" and decisions with respect to new standards and plans for different levels of education. The planned measures cover preschool, general secondary15, out-of-school, vocational and higher education, quality of education services, salary, social protection and assistance to staff and students, provision of equipment, materials and infrastructure, and terms of international cooperation. In its latest form, the implementation plan does not discuss objectives, costs, or the specifics of implementation (limiting itself to identifying those is in charge of issuing the respective decrees). The plan is also tight in terms of timing but extensive in terms of coverage. Together, the government strategy and the implementation plan highlight the need for continued government effort to set clear reform directions and to specify concrete changes and their objectives, priorities and costs. 12 The extra year is part of the current reform program, but has not yet been implemented. The organization and feasibility of this proposal will be assessed in chapter 5. 13"National Doctrine for Development of Education in Ukra ine In the XXIst Century" 14 "Program of Government's Actions Aimed at Implementation of the Doctrine for Development of Education in Ukraine in XXI Century for the Period of 2001-2004" 15 In Ukrainian educational terminology, general secondary education covers the first nine years of compulsory education for all plus the 10th and 11th years of schooling for those who remain in the general secondary schools (rather than moving to vocational programs). In this Note, therefore, general secondary education will refer to all general education programs from 1st to 11th grade. When the Note refers to international comparisons, it will use the term upper secondary education referring to the last two years of general secondary education. 5 3.9 Several stakeholders participated in the elaboration of the document, including managers of educational establishments, teachers, pedagogues, and parents. The government strategy was presented in the Fall of 2001 to a Teachers Congress and was also thoroughly debated internally by stakeholders and externally by international donor and expert organizations. 3.10 Finally, various successful initiatives have recently been undertaken in the areas of reforming secondary vocational education (with support from the European Union ­ European Training Foundation); upgrading teaching methods (under the International Renaissance Foundation's Step by Step program); undertaking reforms in local education administration and finance (with British, Canadian and Dutch assistance) and higher education reform (supported by the Swedish government.) 6 4. CROSS-CUTTING ISSUES AND POLICY CHALLENGES IN EDUCATION EQUITY ISSUES IN EDUCATION Educational levels of households have a significant effect on the incidence of poverty, and disparities in poverty rates by educational status are increasing over time. Among individuals, however, only those with college degrees seem to be at significantly reduced risk of experiencing poverty. Meanwhile, a number of factors in the education system contribute to social inequalities. These include declining enrollments and lack of access to services, disparities in provision, early selection, and the predominance of informal payments. 4.1 Growing poverty, unemployment and income inequality have put a premium on education for Ukrainian households, as evidenced by recent World Bank analytical work (see Chart 1.1 and Table 1.3 in Annex 2).16 Poverty rates differ dramatically for those who have completed some higher education and those who have only primary or secondary schooling. As many as 44 percent of those completing primary education or less are poor, and about 24 percent of this group are extremely poor17. Of those finishing basic, upper secondary or vocational school 35 to 37 percent are poor, whereas "only" 14 to 16 percent of those completing college are poor. Extreme poverty rates for those with higher education are 3.3 percent, while rates for those with only a secondary education are around 20 percent. Poverty has increased among those completing basic education or less and has stagnated among those with upper secondary schooling or similar qualifications, but has fallen in just three years for those with college or higher education. Education is becoming more and more important in an increasingly competitive society. 4.2 The correlation between education status and poverty and the increasing private returns to education make it essential to address the embedded inequalities in the content and structure of the education system. Relevant issues include: · Declining enrollment and access: Enrollment and access are falling in both preschool education (see Table 2.1 in Annex 2) and (to a lesser extent) in subsequent compulsory schooling (see Table 2.3 in Annex 2). In general, those who have access to preschooling for more than a year enter primary education with a significant head start. With high unemployment, however, only relatively few families can afford preschool programs. Households in poor areas tend to be less likely to have two wage earners and may not be able to finance preschool tuition; the consequent benefits are thus unavailable to those who need them most. In the decentralized system, no adequate central or local capacities have been developed to monitor year by year enrollment, attendance and completion trends at compulsory level. However, there are indications of a slow but persistent decline in primary and upper secondary enrollments due to falling enrollments in the vocational sector.18 16Ukraine: Social Safety Nets and Poverty, World Bank, December 2000 17 Individuals are considered poor if their consumption is less than 75 percent of the median level; Individuals are considered extremely poor if their consumption is less than 60 percent of the median level. 18. For the general trend, we use the UNICEF Trans-Monee project data, given that census information is not available and that incompatibilities in the structure of schooling do not allow direct comparison between official Ukrainian statistics and international trends. Ukrainian education data used in the UNICEF project and referred to in this Note was provided to UNICEF by the Ministry of Education and Science. A report provided to the World Bank in December 2002 had identical information about enrollments at pre- primary, primary, secondary, upper secondary and tertiary levels to the data used by UNICEF, although the 7 · Disparities in provision: Disparities in provision (measured by unit costs) can be observed between oblasts and rayons, between rural and urban areas, and even between schools within individual rayons. Some schools or school districts can afford to spend significantly more than others on teachers on a per capita basis, suggesting that they can attract more experienced or better qualified staff (See Table 2.29 and 2.30 in Annex 2). School-based education plans show some disparities between schools and by region in terms of weekly class hours provided, split classes for specific subjects, extracurricular activities, and spending on wages and on non-wage inputs19. Meanwhile, extracurricular services that mainly help poor families with school meals or after-school provision decreased sharply in the 1990s; the number of pupils benefiting from after-school provision fell from 63 percent to 15 percent between 1989 and 1999. · Early selection and strong focus on elite programs in general secondary education: General education has traditionally focused on nurturing excellence, by and large supporting the elite. The ruling pedagogical approach, use of resources, and range of services all reflect this focus and can create equity problems, inasmuch as late bloomers may be left behind, have fewer learning opportunities, or be directed to less academic tracks. Ukraine has new forms of specialized basic and upper secondary education where the focus on the elite is explicitly spelled out, and admission is based on entrance examinations. Examinations for early selection perpetuate social inequalities, because affluent families can afford to coach their children to perform well in them, and can lead to the creation of a socio-economically homogeneous intake, magnifying the effects of socio-economic status on learning outcomes. Poorer students tend to select, or be selected by, less demanding programs. Meanwhile unequal financing compromises fairness. Both comprehensive and elite upper secondary programs are financed via state funds, but financial allocations are higher for elite programs. · Private and informal payments: Private and informal payments for schooling are both pervasive and inequitable. Since education is generally under-budgeted (as discussed later), parents are often forced to provide supplementary funds. Because the new elite schools are better funded, families sending their children to regular general secondary schools often feel this pressure more intensely than better off households whose children attend elite schools.20 Formal private payments include fees paid for private education services in the handful of private secondary schools and in both public and private higher education institutions. They also include payments for textbooks, uniforms, and other supplies. Some of the inequalities caused by these fees and required purchases could be offset by targeted support to poor families to purchase supplies necessary for schooling. latest year of the Ministry provided data was 1996. A few diagrams for the Education For All 2000 Assessment (Kyiv, 1999) provide some tracer information on primary school students for a few years in the mid-1990s. 19 See Levitas and Herczynski: Education Policy and Finance in Lviv: Strategic Proposals. LARGIS Program, June 2001. 20 This observation was made by a city superintendent, although information on private school funds is not officially available in Ukraine. 8 Informal payments include private contributions to school funds to make up for insufficient budgets, informal private purchases of education services (tutorials, equipment, extra programs, etc.) to compensate for the declining quality of public provisions, and manipulation of selection processes via undisclosed payments. While some of the first two types of payment may help to improve the sustainability and quality of programs, they evidently penalize poor parents who cannot afford to pay their children's way towards entering the best schools, receiving better year-end grades, doing well in selective examinations, or gaining admission to higher education. RELEVANCE AND QUALITYOF EDUCATION Education in Ukraine has not made the transition to programs, curricula, and teaching practices needed to meet the challenges of a new economy and a more volatile labor market. Vocational education has lost its relevance and general education has remained focused on the elite. While a tertiary education diploma has become critically important, the content of tertiary education has only changed marginally and quality control is bureaucratic. The quality of education is not measured, but indirect assessment based on the standards and quality of inputs suggests persistent problems, especially in teacher policy. As teachers' salaries have lost their value, the profession cannot attract or retain well trained young teachers. Teaching and learning resources are lacking, suggesting inadequate quality of inputs. A. Relevance Issues 4.3 The reliability of labor market indicators is limited in Ukraine, given the large estimated size of the informal economy. But the fact that 22 percent of the unemployed come from the 15- 24 age group (1997 data) suggests that new entrants to the labor market face significant problems in getting work. Data on earnings differentials by education level are lacking, but the experiences of other countries of the region suggests that these differentials are likely to have increased significantly over the last decade. While wages in Ukraine halved in the 1990s, the distribution of earnings among different income quintiles became less equal, suggesting that more education, especially higher education, assures higher earnings. Although Ukraine has little capacity for monitoring graduates as they progress through their working careers, international trends suggest that demand is increasing for workers with higher levels of competence, a broader skill base, and better problem-solving and knowledge acquisition capacity.21 4.4 Vocational education and training (VET): The VET system has experienced special difficulty in adjusting to post-Soviet realities and needs. When the economy and the labor market were state-controlled, VET organization, structure, and student flow had been centrally managed but divided among various industrial sectors. Without this feature, demand has decreased; meanwhile, falling student numbers (see Table 2.10 in Annex 2) were not accompanied by adjustments in the system needed to make it relevant to employers' needs. Consequently, efficiency and sustainability have declined. Most VET programs still provide specific occupation- based training, rather than adopting more general competency-based approaches; the state 21 This point will be discussed further in the context of reform opportunities for Ukraine. 9 regulated classification of training programs still distinguishes 492 specializations22 or occupational categories.23 4.5 General Education: Other than establishing a national context for education (i.e., with respect to language and culture), Ukraine has not altered the pedagogical nature of the schooling system since Soviet times. Curriculum changes have focused on removing ideological material and "Ukrainization" of the humanities and social sciences. General secondary curricula have not been adapted to lifelong learning, as a consensus on the definition of basic skills and general competencies has not been reached. While norms and standards in upper secondary education are high, only the elite schools, gymnasia and lyceums have adequate provision to achieve them. Daily marking and competitive year-end grading contribute to a competitive classroom environment that focuses on high academic performance. But changes to reflect persistent or newly emerging social problems (such as poverty, substance dependency, AIDS) have so far been addressed sporadically. 4.6 The overall workload for students is significant, with the weekly number of compulsory classes rising from twenty-four in the primary grades to thirty-two to thirty-six at grades 5 to 9. The curriculum is relatively theoretical, and pedagogy is skewed towards memorization of factual knowledge. Basic schools have seventeen different compulsory subjects, and subject-based knowledge is often taught and measured at the expense of developing learning skills and broad competencies (including management, teamwork, and skills application). 4.7 Tertiary Education: For Ukrainian students and their families, a tertiary education diploma is important for avoiding unemployment and finding reasonably well-paying jobs. Both program quality and type of specialization take second place to the priority of obtaining a diploma "at any price." A fragmented structure, lack of quality control, and the high economic stakes involved have created problems in controlling outputs. The many small, specialized, higher education institutions lack the staff and other resources to adjust programs to meet changing market demand: many of them serve simply as "degree mills." Meanwhile, the large established institutions do not have a strong incentive to innovate, because student demand is so high. Some have moved away from the previously predominant specialization in science and technology toward less specialized degrees and new studies in management, economics, and international relations. But in the absence of an explicit government policy, these changes are taking place randomly on an institution-by-institution basis. 4.8 Accreditation of all higher educational institutions (private and public alike) is the responsibility of the Ministry of Education, which determines official knowledge standards for each subject and minimum material, technical, and financial requirements.24 The accreditation and licensing process suffers from top-down bureaucratic control and lack of transparency.25 Because there is no standard entrance examination and admission system, institutions vary widely in the way they select students. Admissions, grading, and even the learning processes are often 22This is a significant reduction from an earlier system of classification with some 1,300 specializations. 23 For example, the ministry-issued list includes training fields such as vegetable growing, dough making, four types of shoemaking (upper, sole, inner sole, and repair), seven types of jeweller, and two types of woodcutting or "baggage casher." 24In most European countries, professional accreditation organizations carry out independent peer reviews of institutions and programs. 25 See "Higher Education in Ukraine: Attitudes of the Academic Community", mimeo, Laboratory for Social Research and Political Analysis at the Chair of Political Sciences, Donetsk National University, Kipen et al., 2001 10 riddled with bribery. Quality assurance and monitoring in higher education are by and large absent. B. Quality Issues 4.9 Learning outcomes and quality inputs: Ukraine has not yet taken part in international assessments of educational achievements.26 The education system lacks the outcome standards that could influence central or local education policies and financing or inform students, parents, teachers, and other stakeholders about performance and quality. In the absence of reliable information on quality outcomes, it is only possible to make indirect estimations based on trends and disparities in inputs and processes. 4.10 Qualification of teachers: Having a qualified and motivated teaching force is perhaps the most essential determinant of education quality. Teacher qualifications have improved through the 1990s as a result of the expansion of higher education. Nevertheless, a substantial 30 percent of teachers in primary and basic schools had only a secondary education in 1998 (although this percentage had improved from 39 percent in 1992: see Table 2.9 in Annex 2). 4.11 Wages and motivation: Meanwhile, both the relative and the absolute value of teachers' salaries have declined significantly. Since 1998, the average wage of teachers has fallen from 84 percent of the national average to less than 60 percent. (See Table 2.32 in Annex 2) In Western European countries, teachers earn as much as 120-150 percent of the average wage. In 2000, teachers in Ukraine earned about UAH140 or US$25 per month on average, forcing them to seek second and third jobs. The best-trained and most dynamic teachers often choose or feel compelled to leave the service. 4.12 Non-salary inputs: In Ukraine, recurrent costs typically account for most education expenditure, so spending on instructional materials and on adequate infrastructure is severely limited. Nevertheless, such spending is essential to ensure quality learning.27 This problem is especially challenging in rural regions, where per capita spending on wages is relatively higher, but is prevalent in poor communities in general, where inadequacies are not offset by private contributions. Consequently, Ukraine is facing significant problems with respect to both the shortage and the low quality of textbooks, lack of instructional materials and equipment (including computers), and out-of-date, inefficient, and ineffective school facilities. 26Recent international assessments such as the Third International Mathematics and Science Study-Repeat and OECD's Programme for International Student Assessment (PISA) show that other countries in the region do well in international assessments testing awareness of a known class of scientific problems or of facts that are part of the prescribed curriculum; however, their skills in applying their knowledge to the interpretation of verbal or quantitative information, or to choosing techniques for solving new problems, are weaker. See for instance Knowledge and Skills for Life - First results from PISA 2000, OECD, Paris, 2000. 27This issue is discussed further in the next chapter. 11 EFFECTIVENESS AND ACCOUNTABILITY OF EDUCATION ADMINISTRATION AND FINANCE The system of education administration and finance has consistently been unable to keep up with budgetary realities in terms of either optimal planning and transparent allocation, or effective budget execution and financial management. The administrative structure of education relies heavily on central directives and norms, while lacking the capacity to monitor adherence to them. There are no institutional linkages between educational norms and those driving financial allocations. Setting and enforcing standards are responsibilities of the Ministry and regional (city) departments of education, whereas financing is the responsibility of the Ministry and regional (city) departments of finance. Consequently, those who allocate funds are not fully responsive to policy objectives, and those who define policies are not fully aware of financial constraints and tend to contribute to the accumulation of deficits and arrears. Meanwhile, local administrative agencies use a variety of strategies to fill financial gaps, reallocate between sectors, and follow local priorities. As public funding is disconnected from policy purpose, accountability is undermined. 4.13 The Ukrainian administration inherited from Soviet times features a central control apparatus that focuses on meeting input and procedural requirements rather than monitoring performance and measuring outputs and outcomes.28 The Ministry of Education manages the system through a large volume of laws, decrees, and directives defining specific procedures or (mostly input) standards and norms, requiring local and school authorities to focus on compliance. Meanwhile, the ministry lacks the policy making capacity to develop, implement and account for government priorities and medium-term goals. Consequently, the de-facto power of the Ministry is limited: as long as financial allocations do not reflect educational norms, the Ministry's influence on service delivery is limited. 4.14 Over the years, a mixture of conflicting norms and expectations, along with disincentives and a complex distribution of authority, has led to inertia and lack of strategic focus or managerial efficiency. There are no institutional links between the allocation of resources and government priorities. The latter are often expressed in terms of abstract concepts while decisions on expenditures are taken outside the line ministry ­ typically by the Ministry of Finance (or, in the case of investments, by the Ministry of Economy). Consequently, the Ministry of Education has not responded with a coherent education budget framework or development policy. It has tended to rely on historical norms and standards and to seek full financing of them, rather than defining limited but achievable priorities. 4.15 While Ukraine has implemented a budget reform, it has not undertaken a parallel process of reforming educational standards and input norms, which have a major impact on how the sector is being financed. Current standards and norms (weekly class hours, curriculum, number of teachers per class, teacher qualifications and wages, along with other organizational rules) exceed what public allocations can finance. Nevertheless, schools develop their annual program and budgetary requirements by using the central line ministry's input norms. This procedure inflates estimates, but reflects schools' interest in maintaining spending and reducing the risk of, e.g., being forced to reduce staff or to close facilities; it also improves their bargaining power. School 28There are central norms and regulations for input and process measures, including staff salary, full-time workloads for teachers and their number per class, normal classroom size, curriculum, teaching and grading methods, textbooks and instructional materials, extracurricular activities, food and material norms, standards for school level administration and for maintenance, etc.. Most physical norms have not changed since the collapse of the Soviet Union, although some have become inoperative in the absence of adequate resources. Curriculum has changed to the extent that Ukrainian national perspectives (language, history, culture) have replaced Soviet ones. 12 directors have the option to gain control over their budgets; doing so, however, entails significant risks given the under-funding of education.29 If additional funds are not provided, schools could threaten to shut down at the end of the budget year, between October and December. 4.16 In most regions, rayon education officials work and report separately from rayon finance officers and they may make staffing and other commitments without regard to how they will be paid for. Current procedures and incentives motivate rayon decision-makers and city managers to focus on maintaining the status quo: adjusting budget allocations to retain teachers and make sure they are employed full-time, or to maintain school infrastructure and somehow pay (but not always in cash) for utility expenses.30 They are less motivated to produce balanced budgets, to reduce expenses or to improve efficiency. Instead, they tend to inflate deficits and bargain for additional support.31 4.17 Regional and local management styles vary widely, ranging from innovative practices (e.g., in Lviv or in Vinnitsa ) to less transparent and accountable arrangements, or to sustained dependence on bailouts from the center. In a few cases, rayon or city agencies have the local mandate and capacity to develop a clearly articulated education policy with well-defined standards and financial norms. These agencies sometimes have the capacity to provide additional funding for education to supplement often inadequate central funding, increasing the city's scope for policy action. Innovative practices are more widespread in larger cities, which are under direct subordination to oblasts. The variations in management practices and the availability of additional funds create substantial variations in the scope and quality of education service delivery. 4.18 Most schools in Ukraine have set up school funds. Contributions to these funds are virtually obligatory in the better urban schools, and they can represent as much as 20-30 percent of school budgets. Funds are separately accounted for by schools, which usually use them to buy office supplies, instructional materials, extra support for teachers, and physical plant repairs, maintenance, or improvement. If used transparently, they can also promote active parental participation in school management. By contrast, schools in poor neighborhoods have limited access to such resources and the state needs to consider providing compensatory funds for them. THEEFFICIENCY OF EDUCATION A sharp overall decline in expenditures has created short-term spending priorities (i.e., retaining staff and maintaining infrastructure) that are disconnected from long-term goals, and has made adjustment difficult. Secondary education in Ukraine is under-funded compared with preschool. Preschooling has increased its share of the education sector budget, as has vocational education, even though its unit costs have declined relative to general secondary education. Among budget categories, salaries, social contributions, and utilities have crowded out other expenditure. Although financial planning is based on central norms and per capita- based allocations, there are still significant disparities in per pupil allocations across schools. Many schools, especially at the secondary level and in rural areas, are unable to provide the required instructional hours. 29 Under reformed public administration regulations, school directors may opt for fiscal independence, and take ownership of accounting and budgeting. This option typically works in cities and rayons where the authorities are also experimenting with innovative education policy. In traditional rayons, school directors tried fiscal independence and quickly learned to dislike it. Lucan A. Way: Issues in the decentralization of social services delivered by local governments in Ukraine (manuscript) 30 See Way. Ibid. 31 See on these issues: Levitas and Herczynski:. Ibid. 13 4.19 Allocative efficiency:32 Changes in unit costs in the 1990s suggest that expenditures for different levels of education do not follow an explicit sector policy. Data on unit costs show that general secondary education in Ukraine is seriously under-funded compared with preschool. Preschool education has increased its share within the education sector budget and so has vocational education, even though its unit costs have declined relative to general secondary education. The largest increases in unit costs were in preschool and short-cycle higher education programs. Preschools in particular receive significantly more funding on per student relative to per capita GDP than in other countries (see Table 2.25 in Annex 2). Meanwhile, the unit cost of 11 years of general secondary education relative to per capita GDP is less than what OECD countries spend for the first four years of primary education (relative to per capita GDP). 4.20 The pattern of per capita allocations suggests that Ukraine gives priority to specialized institutions for those who are considered outstanding in terms of their skills, interests, and academic or artistic performance. These institutions include the gymnasia, lyceums, colleges and other bodies that cater to the elite. The allocation pattern also suggests that priority is given to special programs for children with "deficiencies," children in boarding schools and orphanages. These programs perform partly educational and partly social welfare functions, although their pedagogical adequacy is ambiguous. Most of these programs and institutions are either represented strongly at central budget discussions or are under the supervision of state, oblast, or higher authorities, thereby having primary access to public resources. Priority is also given to programs that are organized outside school hours but are considered, educational. 4.21 Overall, a combination of inertia and vested interests (e.g. in specialized institutions and programs) has led to allocative distortions that favor programs with limited access (preschools, upper secondary education) and are biased against compulsory programs. If the Government intends to adequately finance an extended general secondary education system and to make preschool education more equitable, it will need to reallocate between levels and introduce some efficiency measures. 4.22 Technical efficiency:33 Not surprisingly, salaries, social contributions, and utilities have crowded out other expenses. Spending on salaries and social contributions reflects the primary interest of managers, which is to retain staff. (See Table 2.26 in Annex 2) Low student teacher ratios mean that the number of teachers offsets the low salary rates with respect to the size of the overall wage bill. (See Annex Tables 2.6 and 2.7 for student teacher ratios and Annex Table 2.32 for wages) Since the proportion of wage related expenditures is not higher than elsewhere in the world, efficiency gains through optimization, outsourcing of non-teaching activities, and flexible employment arrangements could be used to help improve salaries and better motivate teachers. 4.23 Preschools and general education schools also employ a large number of non-teaching staff (custodians, medical personnel, etc.) and provide special education services (to arts, music, extra science, sports extramural activities, etc.) employing extra staff. The ratio of teaching personnel to non-teachers is about 0.5, meaning that for every teacher there are two non-teaching staff members.34 This ratio puts Ukraine among the least efficient countries, by international standards. 32 Allocative efficiency means the extent to which resources are assigned and spent according to policy priorities. 33 Technical efficiency means the extent to which resources are allocated adequately between budget categories to maximize outputs. 34This ratio does not show full-time-equivalent staff either for teachers or for non-teachers. 14 4.24 Adjusting expenditures is difficult given the strong political pressure to keep teachers employed. In the case of secondary vocational schools, enrollments have fallen but the number of staff employed has actually risen slightly over time.. Staffing policy is especially challenging with respect to vocational school teachers, because their skills are narrowly focused on specific occupational standards and it is difficult retrain them or to find them alternative employment. While their number has fluctuated over the past decade, the figure for 1999 is 5 percent higher that that for 1991. (See Table 2.10 in Annex 2). 4.25 Rayons and cities have limited capacity and authority to improve technical efficiency and make sure adequate investments are made in areas of the education system such as infrastructure, capital repairs, instructional materials, and in-service training. Utility costs have typically remained high, because even minor repairs that could save energy have not been carried out in schools.35 Investments into rehabilitation and new construction and equipment were quite significant at the beginning of the 1990s but became largely insignificant by the end of the decade. 4.26 Operational efficiency:36 Operational efficiency is compromised by the fact that education managers are not accountable, and do not have incentives for ensuring that education programs are managed and delivered in a cost-effective manner. 4.27 Although planning is based on central norms and per capita-based allocations, there are still significant disparities in per pupil allocations across schools (especially by different types), and among rayons, and oblasts. (See Tables 2.28- 2.30 in Annex 2). In recent years, centrally projected allocations of funds have been less than half or two-thirds of the needs estimated locally. Therefore, the available budget has been allocated notionally to each level of government in proportion to projected need. The situation arising out of the original unrealistic estimations has led to cash rationing, budgetary arrears, in-kind payments for services,37 and deferred capital repairs or capital improvements. Given the cascading approach to transfers, it is not surprising that most arrears accumulate at local levels, especially in unpaid utility bills and wages. Many schools, especially at the secondary level and in rural areas, are unable to provide the required instructional hours. There is rarely funding, for instance, for optional classes. 4.28 Schools and local authorities can be ingenious in manipulating central norms in efforts to adjust them to local goals and interests. They often inflate estimates with the objective of providing full employment for the teaching staff while also preserving existing school facilities despite dropping student numbers. They do so by defining program hours at high levels, class sizes at low levels (increasing the facility need) and increasing the split hours (i.e., splitting the classroom into two, wherever the regulation allows this).38 35 According to a pilot in a school in Lviv, simple actions, like repairing broken windows and installing thermostats resulted in as much as 43 percent savings in heating 36Operational efficiency means the extent to which spending programs are managed and delivered in a cost effective manner. 37Public utility companies may write off debt by providing services to schools that, in turn, do not pay for the services. Thus, neither the companies nor the schools are interested in efficiency savings, i.e. making the schools energy efficient. See: Way: ibid. 38 Levitas and Herczynski: ibid. 15 5. EDUCATION REFORM PRIORITIES 5.1 The Ukrainian Government, other political leaders, and stakeholders generally agree on the critical importance of education and on the need to reform both the content and the organization of the sector. In particular, it is recognized that significant problems need to be overcome in terms of equity, relevance, efficiency and accountability, with an emerging consensus among government representatives, important stakeholders, local experts and international organizations on three general priority areas for reform, as follows: · To improve the relevance and quality of educational programs at different levels, and to promote lifelong learning; · To develop a new finance policy that supports redefined state education priorities, above all with respect to equal access to quality education; · To improve education administration to make it more transparent, accountable and efficient. Defining and implementing adequate policies within these priority areas can only be envisioned in the course of a long-term reform of 10 to 12 years. However, once the framework of a long- term reform is The following sections summarize Bank recommendations to address these three priority areas, offering policy options as proposed steps needed to achieve the stated objectives. FIRST PRIORITY: IMPROVING THE RELEVANCEOF EDUCATION The government's strategy targets lifelong learning as the basic principle underlying reforms in the relevance and quality of education. This requires actions at all levels of education from preschools to tertiary education and adult learning. Curriculum reform should start by building consensus about skills and competencies needed for the fight against poverty and success in global markets. A national consensus should drive the establishment of standards for curriculum and teaching and the strengthening of services to education, including teacher training and provision of educational materials and teaching and learning resources. New standards and curriculum also require strengthened monitoring capacities and new examination standards and procedures. 5.2 In the new knowledge economy, the ability to adapt quickly to change will profoundly affect a country's productivity and economic welfare. Formal education and training must lay the foundation for enabling citizens to acquire new skills rapidly throughout their lives. The application of knowledge to complex problems demands the use of not only facts and formulae but also conceptual frameworks that enable people to manage and apply knowledge. In the new economic environment of a knowledge society, creativity and imagination are critical traits. Thus, the assessment of education should include an examination of the extent to which students can analyze, think independently and creatively, and use logic and intuition in assessing issues. 5.3 Ukraine needs to build a system of education that lays the foundations for lifelong learning and develops curiosity and capacity for innovative thinking. Many of the skills needed to meet these requirements are grounded in the behavioral and social sciences--disciplines in which Ukraine has not been strong in the past. Within the sciences, where Ukraine has had a strong educational tradition, new fields like computer engineering and biotechnology are likely to be 16 particularly important to the development of new products and services. In addition, new skills will be needed even in these technological areas: for instance, nurturing communications skills and team-based approaches to the development of research-based products will be especially important. Marketing experts, production engineers, and research and development staff will increasingly have to work together to develop products that will meet the demands of discriminating buyers and can be produced at a cost buyers are prepared to pay. 5.4 These challenges imply a number of major reforms for Ukrainian education. While the necessary full curriculum reform will take at least 10 years, it is not too soon to undertake a broad sector dialogue with stakeholders to help refine the foci and the order of priorities of the reform effort, concentrating on the following areas: · The government and stakeholders need to reach consensus on the skills and competencies that the education system should provide to citizens, and to develop new standards for curriculum. · Ukraine needs to develop a new teacher policy embodying professional standards, new regulations for career development and salary scales, and strengthened pre- and in-service training, together with a commitment to develop and improve provision of new instructional materials and equipment. · The education system needs to design and implement effective monitoring capacities, and to put in place regular, standardized educational assessment systems: and · It needs to introduce new, more open and achievable standards for transfers between grades and school levels and standardized completion examinations at the end of compulsory education. 5.5 The Government's strategy recognizes that lifelong learning requires harmonized actions and sets a legislative action plan for each levels of education. This helps to set a specific agenda for preschooling, compulsory schooling, and vocational and higher education. 5.6 At the preschool level: International experience shows that lifelong learning depends on certain foundation skills that need to be introduced and initially developed in early childhood.39 In Ukraine, only a minority of children can currently access the preschool education that introduces them to these foundation skills. To rectify this situation, once primary school age is redefined (via the extension of general education to twelve years), the government should also introduce a uniform one year-program (a "0" year or kindergarten year) for all children. This would be a preferable alternative to publicly financing a longer period of preschooling for a few. 5.7 At the compulsory level: Curriculum reform at the compulsory level designed to support lifelong learning should start with definition of basic skills and general competencies. Norms and standards should be realistic and achievable at most schools, not only at elite gymnasia and lyceums. Daily marking and competitive year-end grading could be gradually phased out and replaced by standardized performance assessments and regular monitoring of student and teacher performance and school effectiveness. Regional monitoring centers need to be developed to carry out sample-based tests for measuring student outcomes, providing feedback for standard setting, 39 OECD's analyses of skills necessary for lifelong learning and of the objectives of lifelong learning policies show that building strong foundations through early childhood education is critical (See: "Starting Strong: Early Childhood Education and Care" and "Knowledge of Skills for Life" OECD). 17 and providing databank-type information services to improve the quality of examinations. Given the importance of tertiary education, the government needs to set up a standardized exam at the end of general secondary schooling to make tertiary entrance requirements more transparent. 5.8 In vocational education: Ukraine will need to restructure the vocational system by merging multiple specializations into broad clusters and changing the content of vocational curricula and teaching methods: Narrow occupational training, schools should be replaced by general competency based approaches that ensure that students are equipped not only to enter the workforce but also to keep up with new technology and changes in the organization of work. The vocational training and adult learning systems require professional quality assurance, incentives and clear guidelines for users -- on, for example, how to engage in training, retraining activities and on the post-training career options. An advanced and accountable training system cannot be developed without the active participation of the private sector in both financing and providing services. 5.9 In higher education: The government needs to help establish and sustain a professional system of quality assurance and accreditation that is sector neutral and technically independent of government regulation. Accreditation should focus on institutions and programs alike. Regulation of degrees and diplomas should promote a diversified nationwide structure, based on a transparent credit-transfer system and a sharply limited number of specializations that will support uniformity among the credentials issued by different institutions. The government could also facilitate the creation of peer review systems for scientific and academic activities. SECOND PRIORITY: IMPROVING THE FINANCIAL FRAMEWORKOF EDUCATION The government's education strategy needs to conform to fiscal realities. Since public finances are unlikely to improve significantly in the medium term, it will be important to define a limited number of policy priorities that can be financed and sustained. Once these priorities are identified, the government needs an honest appraisal of the costs of present education activities, inputs and outputs; of the implications of demographic, economic and social trends; and of the potential impact of factors such as informal funding, deficit budgeting and sector arrears. The new priorities then need to be costed, and possible efficiency gains and other savings considered. Finally, incentives for efficient management and service delivery as well as for equitable service usage need to be introduced. 5.10 Redefine new priority objectives: Some of the priorities for financing education stem from assessments of current trends and commitments: · As the government strategy correctly indicates, education is not currently provided equally or at the same quality to all school aged children. Judging from the quality of inputs, this problem applies especially to students living in rural or mountainous areas or poorer regions. Supporting them by improving services in targeted areas or by measures directly targeting poor families should be a top priority · Financing the proposed extension of compulsory education to 12 years will require more facilities, teachers, training, curriculum, equipment, textbooks and scholarships. · Modernizing vocational education, which had lost its relevance and attractiveness, will be costly in terms of investments, retraining, and new curricula and equipment. 18 · The possible introduction of the "0" or introductory year for all eligible children, not only those coming from urban and affluent families, will also increase the fiscal burden. 5.11 The first among these priorities should be the equal provision of quality education to all children, regardless of socioeconomic status or geographical location. The slowly declining enrollment trends suggest that in some parts of Ukraine, even the minimum expectation that all children complete full compulsory education is at risk. 5.12 Only after this is assured can realistic estimates be made for the extension of compulsory education. With respect to other priorities, modernizing the vocational sector should involve greater participation of beneficiaries and users, including the private sector. Finally, the introduction of a "0" year would require cutting public subsidies for other preschool years and targeting them only to the poorest. 5.13 Once decisions are made on these priorities, the development of a financial framework will entail (i) an honest appraisal of current trends in finances; (ii) costing out the new priorities and (iii) calculating possible savings and efficiency gains. A comprehensive reform of education finance, based on these actions will take three to five years. (i) Appraisal of present trends in education finance: · This should include a comprehensive assessment of real per capita costs, based on surveys of access, attainment, inputs (including class hours provided), teacher training, and class sizes, as well as of informal payments to school accounts. · It would be necessary to take into account demographic, social and economic trends as well as efficiency and equity indicators, including the implications of the changing number of students for the utilization of facilities, staff and services; the estimated financial capacities of families; labor market trends by regions; and the ways in which different social groups benefit from state financing of education. · In recent years, initiatives to radically improve education finances at local levels have included reallocation of budgets based on student numbers, optimizing facilities and using savings to improve learning conditions, and incentives for school directors to balance their budgets and retain savings (or extra-budgetary funds) at their schools. These innovations should be appraised and the government should promote them via financial incentives and professional advisory activities. (ii) Estimate the financial implications of new priorities: The government should use financial modeling to clarify the costs of new programs and calculate trade-offs. For example: · Consolidation and rehabilitation of schools, combined with transporting rural children to consolidated schools, can improve access. · Building new capacity, developing new curriculum and textbooks, financing additional technical inputs including better equipment and instructional materials, and retraining teachers are all necessary for the planned extension of compulsory education. · Opening 0 year classes in public schools, where preschools are either not available or cannot be efficiently run, would be both feasible and contribute to efficient utilization of existing public school facilities. Such classes should not attempt to start the first 19 compulsory year only a year earlier. Instead, they should help children to be better prepared for the primary education programs. · Effective social targeting can dramatically improve access, either through equalization grants to compensate for disparities in services provided or through targeted fee exemptions and cash transfers to families. Especially at the preschool and higher education levels ­ but also in specialized upper secondary schools ­ existing funding fails to discriminate in favor of those who need public assistance most. (iii) Explore possible savings and efficiency gains: Some of the costs of upgrading the education system could be recovered through savings and efficiency gains that are in line with the principles of fairness and equity. Innovations already introduced in some regions (i.e. Lviv and Vinnitsa) should be carefully evaluated and considered for possible nationwide roll-out. For example: · School closures where demographic trends suggest declining student population can help save recurrent costs. But this is a sensitive issue, requiring not only (i) a careful political approach involving the active participation of the local community, but also (ii) consideration of new pedagogical methods (such as distance learning, multi-grade teaching, use of new technologies, etc), (iii) recommendations for new, or limited use of school facilities, (iv) social assessment of the implications of closure, and (v) careful planning of access (transportation) to consolidated school facilities elsewhere. · Energy savings at schools can help save as much as 30 to 40 percent of current utility expenditures. · Block grants and managerial incentives are among the most effective ways of stimulating savings if they adequately address the negative implications of deficit budgeting and accumulating arrears so as to preserve the status quo in facilities and staffing. · There is scope for rationalizing social welfare functions within the education system. Some are necessary to assure that education services are provided equally, but others clearly overburden the system's finances. These include over-subsidizing of services, that have extra-educational functions (i.e. preschools or certain types of special schools), or maintaining high staffing levels so that pensioned teachers can receive small incomes to supplement their meager pensions. While these may be socially desirable functions, they represent undue burdens for the already seriously under-financed education sector. · User fees cannot and should not be introduced for core educational activities at the level of compulsory education. Every citizen should be given the right to complete compulsory education without paying fees. Having said that, there are significant out-of-pocket payments that already burden families in forms of fees for extracurricular activities, services, textbooks, educational materials and informal payments. The public policy should help minimize some of the out-of-pocket payments that are connected with the core educational activities. In the mean time, post-compulsory programs and non-core activities at the compulsory stage should increasingly be financed by beneficiaries. Non- state financing from local revenues and user fees can be introduced if and when the government finds fair and equitable ways of collecting or charging them. · In higher education the financing formula should factor in incentives that encourage institutions to conform to national policy objectives--for example, reducing institutional fragmentation by rewarding merger initiatives between and within institutions. Among 20 the tools to finance tertiary education, an extended student loan system could be considered as a fair and feasible option that offers some delayed cost-recovery.40 THIRD PRIORITY: REFORMING EDUCATION ADMINISTRATION TO IMPROVE ACCOUNTABILITY, TRANSPARENCY AND EFFICIENCY The major challenge for education administration is to redefine the roles of central, regional and local authorities, with the objective of creating a system of well integrated institutional responsibilities for ensuring high educational quality, adequate financing, and efficient management. Reform of education administration should ensure that centrally defined standards are focused on outputs and outcomes, that policies are realized through transparent finances and management incentives, and that there are adequate monitoring and professional advisory services at both central and regional levels. 5.14 For the Ministry of Education, the main challenge is to move from a legal and fiduciary role towards undertaking development, monitoring and professional advisory functions. With most funding and education service delivery decentralized, the central government's responsibility should include the following: · New standards: The government should ease input standards and delegate adequate authority and responsibility to local levels to assure that quality inputs are financed and equally and fairly provided to all schools. Meanwhile, the ministry needs to develop outcome-based standards for student attainment, skills and competencies, and indicators of school effectiveness in terms of both educational policy goals and management. · Policy and financing The ministry together with its partner governmental agencies should define medium term education policy objectives and participate in the definition of financial allocation procedures and priorities. The single most important financial tool should be the allocation formula, which should be based on education policy priorities as well as the number of users of education services.. · Monitoring: The ministry is responsible for setting up adequate central and regional monitoring, management information and reporting capacities. In this context, the very first priority is to monitor enrollment, attendance and completion trends. While Ukraine may already be close to achieving universal primary education ­ which is part of the Millenium Development Goals, which are expected to be achieved by all countries --, it doesn't have an adequate information system to monitor these trends and to initiate targeted interventions in regions and locations where universal primary or compulsory education is at risk. Introduction of new output and outcome measures will require the development of reliable testing systems. Consequently, government policymaking on testing will need to be reoriented to move towards employing assessors who use information to inform, assist, and motivate (via financing) those who deliver educational services. Their goal would be to support provision of better quality services more efficiently and effectively. 40The government introduced a pilot student loan system in 2000, which currently covers only 5,000 students. 21 A management information system should be established to monitor budgeting and track allocations and the redistribution and spending of public resources, so as to provide regular updates on system performance to stakeholders. · Management incentives: The government should develop incentives for education management at all levels to develop timely plans, stay within budget, achieve attainment and quality targets, improve institutional effectiveness and involve stakeholders in local planning, decision making and monitoring. · Professional advisory services: A new teacher policy requires that the ministry switch from a control function to providing professional services. It also requires transforming the inspectorate to become a professional advisory service, and strengthening school management by promoting best practices. · Competitive services to education: Finally, the government needs to set standards and accreditation procedures to make sure that textbooks, civil works, maintenance, and in- service training and other inputs are provided competitively. The quality assurance process should be financed but not controlled by the government. 5.15 Role of regional and local governments: The challenge for regional and local governments is to develop their own education policies, align financing with these policies, and establish monitoring capacities. Local educational authorities under rayon administration should be given enough responsibility and flexibility to allow them to fine-tune the distribution of public resources to schools, monitor the performance of local school administrators, and provide specialized, professional support (including advisory services and in-service training) to schools. Local agencies and schools should have the authority to use budget resources to hire staff and buy material inputs, define the detailed curriculum, select and implement teaching strategies, and monitor and report on the educational progress of students to government and to stakeholders. 5.16 Administering non-state funds: It may not be realistic to curb informal payments; rather, they should be dealt with by appropriate regulation of public/private financing. Mixed financing could support special programs (but not core compulsory education), and promote a degree of flexibility in allocating funding. Incentives for efficient and transparent financial management could help to enhance equity, accountability, and efficiency in the provision of non-state funds to education. With a legally clearer and more transparent system is in place, public funding could be better targeted at equity issues. Schools in poor areas, which have limited access to non-state funds, could be made eligible for special grants to improve their effectiveness. 5.17 Participatory management of schools: School boards and parental organizations should be strengthened, especially in the areas of school management oversight, development planning, and the use of school funds and other non-state resources. They could be enlisted to participate in school activities, to promote the mix of public/private financing, and to authorize the routine charging of user-fees for special artistic or extracurricular programs so that public resources could be concentrated on core activities. Meanwhile, participatory management that involves parental organizations, together with improved access to core academic programs and reduced reliance on daily individual ratings and grading, may be more effective than legalistic approaches in dealing with abuses such as buying admission to elite programs, better grades, or semi-legal tutorials. 22 6. CONSTRAINTS AND RISKS OF REFORM The government and major stakeholders recognize the need for education reform in Ukraine. Nevertheless, champions of reform need to take account of some of the risk factors involved. Reform is a slow process, and political instability or even the regular political cycle can result in setbacks. Reform is also costly; economic difficulties can dissipate resources needed for implementation. Some reform objectives or instruments may lead to social conflict. Serving a diversity of interests may hamper the government's ability to focus on key priorities. And political or administrative inertia may hinder efforts to reduce the role of government from managing service deliver to managing education reform and implement policies. 6.1 Political stability and consensus: International experience shows that comprehensive education reform take a long time, and needs to be pursued over several government cycles. Therefore, consistent implementation requires a widely shared consensus about the reform agenda and broad-based participation that includes social partners in both execution and monitoring. The education reform process needs to draw on citizen commitment, participation, and priorities. Among the key partners, the Government needs to work more closely with the key beneficiaries of education, including the business community and other employers, the students and the parents. 6.2 Economic viability: The reform initiative comes at a time of improved economic performance and medium term growth prospects. But education is only one of the sectors deprived of resources during the years of economic crisis, and cannot expect a significant budget increase. Additional investment may not attract sufficient political support, especially given current inefficiencies and lack of trust that additional funding will yield substantial positive results. Therefore, in addition to making the education system more transparent, the reform should identify efficiency gains and savings within the sector that would be earmarked for reinvestment in education. 6.3 Social concerns: Ukraine is suffering from increasing deprivation, poverty, and social inequality. There is a risk that limited public funds may be used to try to maintain services catering to special interests, and/or that extension of compulsory education could exhaust available resources, especially if proper feasibility analysis is not undertaken. Given its core education priority--equal access to quality education--the government needs to concentrate its financing effort on reform actions that help the poor. Another risk with social implications is that legitimate concerns about the small size of schools could lead to inadequately planned school closings or program reductions, with potentially severe effects on local community cohesion, especially in poor rural areas. Such actions will therefore need to carefully consider all alternatives, and involve the participation of local communities in choosing the least socially divisive options. 6.4 Clear priorities: Even if the reform is appropriately planned for the long-term, planners cannot afford to focus on too many issues or to operate without clear priorities. There is a risk that representatives of different sub-sectors of the education system and special interests will impose their individual agendas on the program, leading to dilution of both resources and focus. The implementation effort should clearly identify key objectives and measurable outcomes, together with their implications for the system as a whole. Otherwise, paper proposals may not get translated into real results on the ground. 6.5 Role of government: Finally, the government needs to redefine its own role in policymaking and implementation. The risk is that it could focus narrowly on issuing laws and 23 decrees and setting new norms, without relating reform proposals to changes in the way education is administered, managed, and financed. The problem of inertia could also lead to perpetuation of strong governmental roles when the original objective might have been to reduce them. To deal with these risks, the government should regularly monitor, evaluate and report to the public on reform outcomes, and review its own efficiency in line with previously set standards. 24 ANNEXES 25 ANNEX 1. OVERVIEW OF THE EDUCATION SYSTEM The Education System of Ukraine: schematic view OECD Institutions with III-IV level accreditation (institutes, universities, academies) 28 27 T Doctor of Science 7 26 E 25 Candidate of Institutions with I-II level R Science 24 accreditation T 23 Master 1-2 years (colleges, technicums, vocational Vocational 6 schools) 22 I Education Bachelor 21 A Specialist 1 year 1-1,5 years Junior Junior 20 R Bachelor Specialist Specialist 3-4 years Qualified 5 19 4 years Junior 1-2 years worker Y Specialist 3-4 years 18 2-3 years Qualified 17 10-11 G L Complete Secondary worker Y Y 1 ­ 1,5 16 9-10 M C Education years 3 N I 15 8-9 A U S M 14 7-8 I BASIC SCHOOL (5 years) U 13 6-7 (basic secondary education) M 12 5-6 11 4-5 2 10 3-4 9 2-3 PRIMARY SCHOOL (3-4 years) 8 1-2 7 1 1 6 (1) 5 4 PRESCHOOL EDUCATION (3/4, 5 years) (kindergartens, nurseries) 3 2 1 0 26 Key Features of Education in Ukraine 1. The education systemin Ukraine includes preschool education for 3 to 5 years, so-called general secondary education for 9 to 11 years,41 a range of vocational training options of varying durations and with differing diplomas, and four levels of higher education. Other than a significant private higher education sector, most education services are dominantly public. 2. In the preschool sector, both the number of children and the number of institutions have fallen dramatically over the past decade (see Table 2.1 in Annex 2). In 2000, there were about 16 thousand preschools serving 980 thousand children (an average of 60 children per institution). This represented a decline of 60 percent in the number of preschool students since 1990; over the same period, enrollments fell from 57 percent to 40 percent of the relevant age group, the lowest proportion in Central and Eastern Europe outside South East Europe. During the same period, the number of operational institutions halved, and the utilization rate went down from 106 percent to 66 percent in 1997; it rose to 88 percent in 2000 after the closure of a large number of preschools. 3. Parents contribute about 20-25 percent of the total costs of preschool education, which are estimated at around UAH 400 per year per child. Access and utilization are highly unequal by geographic area and by the socioeconomic status of parents. The average number of children per pre-school establishments has declined from 101 to 61, while the teacher/child ratio has risen from 1:6 to 1:4.7. 4. In 2000 there were about 22 thousand general secondary schools and 577 thousand teachers educating less then 6.8 million students (implying a student/teacher ratio of 11.7:1) and an average school size of 300 students: see Table 2.3 in Annex 2). General secondary education was compulsory for 10 years until 1999 but was then extended to 11 years, except for students choosing the vocational track for later grades who leave general secondary education after the 9th grade. 5. A law passed in 2000 began the process of extending general secondary education to 12 years, to be completed by 2010. In the new system, general secondary education includes four years of primary education, five years of basic (middle school) education and three years of upper secondary education for about two-thirds of the student population, with the other one-third attending vocational schools upon completing the basic level. 6. There is a pervasive lack of clarity about admission rules and procedures for entry into different grades, and about how different grade programs in schools build upon one another. Children may transfer to different upper secondary schools ­ including lyceums, gymnasia, colleges, or other special schools for the gifted ­ after grades 4, 5, 9, or 10, depending on the requirements of the school they transfer to. Schools may use formal selection methods; the most competitive ones usually have entrance examinations. 7. Since official statistics are based on the Ukrainian definition of general secondary education that combines together the commonly separated primary and secondary levels, and since the starting year for first grade in Ukraine varies between ages 6 and 8, internationally comparable enrollment and completion rates are difficult to calculate. UNICEF analysis puts Ukraine's 1999 gross enrollment rate in "basic education" for 7 to 15 year-olds at 89.9 percent-- 41 As noted in the main text, the term, "general secondary education" is used in Ukraine to cover the combined total of what is elsewhere generally called primary and secondary education. 27 almost 3 percentage point lower than the 1989 rate, and significantly lower than similar indicators for Central and Eastern European countries (see Table 2.4 in Annex 2). 8. At around 60 percent, the overall enrollment to upper secondary education is one of the lowest in the region. The gross enrollment rate in upper secondary general education(for the age group 15 to 18) was 31.1 percent in 1999, an improvement of almost 6 percentage points since 1989. This rate is comparable to other Central Eastern European countries (see Table 2.5 in Annex 2). But between 1990 and 2000, the number of students in vocational education has declined by 20 percent for 1 to 2 year programs and by 40 percent for 3 to 5 year programs. 9. Ukraine has a higher education system, recently diversified into four types. Of the almost 1,000 institutions, two-thirds provide short training programs (I-II level accreditation) and one-third provides full university programs (III-IV level accreditation). In 2000, about 1.9 million student were enrolled in higher education, more than 500 thousand in short programs and 1.4 million in full programs (see Table 2.12 in Annex.2.). 10. Between 1991 and 1999 ­ as a result of the newly diversified system ­ the enrollment rate for students in higher education institutions with long programs has grown from 15.3 to 22.1 percent of the 18-22 age group. Altogether (for short and long programs), gross enrollment was 29.7 in 1999, an improvement of 8 percentage points since 1990 (see Table 2.13 in Annex 2). 11. At present, higher education specializations number around 500, despite having halved since Soviet times. The average number of students at institutions with short programs is about 700; attendance at those with full programs averages 4,000, but the latter number conceals wide variations and includes some large universities in major cities. The great majority of universities in Ukraine have less then 1,000 students "on campus." 12. Over 40 percent of the higher education institutions accredited for short programs and about 12 percent of institutions accredited for long programs are private. About one fifth of the students in private and public higher education institutions pay fees. 13. The share of education spending in GDP is around 3.8 percent; its share of total public expenditure is 11.1 percent (see Table 2.18 in Annex 2). Both indicators show a decline since the mid 1990s, and are lower than those in most other countries in transition or countries at similar level of economic development. When both GDP and public spending contracted substantially in the1990s, public expenditure on education fell by about 60 percent. 14. About 75 percent of total education expenditure is decentralizedto different regional and local levels, from oblasts to villages. More than 70 percent of decentralized expenditures are budgeted at the level of rayons and cities that are directly under oblast control; they are in charge of all non-special, non-vocational and non-higher education programs, while responsibility for special, vocational and higher education spending is shared between different local and regional levels as well as the central government. Only Russia and Ukraine have this degree of decentralization in the Central and Eastern European region. 15. Between 1998 and 2000, arrears to teachers and suppliers fell sharply, from 29 percent to 21 and 7 percent of the total education budget. In 2000, 71 percent of all arrears were accumulated at local levels. 16. With respect to budget shares for different education levels, the largest proportion, 47.6 percent, went to general secondary education, 21 percent to higher education, 13.3 percent to preschools, 6.2 percent to vocational/technical programs, and 7.2 percent to various special 28 education programs (see Table 2.22 in Annex 2). Since general secondary education in Ukraine covers most of what is considered compulsory schooling, the fact it accounts for less than half of the education budget is spent on it is atypical. 17. Per child public expenditure on preschool education in 1999 was about 80 percent higher than the per student public expenditure to general secondary education and was equal to the per capita allocation in higher education (see Table 2.23 in Annex 2). A comparison with OECD data on per student expenditure relative to per capita GDP shows that Ukraine spends much more on preschools (29 percent in Ukraine compared to 18 percent in OECD countries) and much less on general secondary schooling (15 percent versus 24 percent) and tertiary education (27 percent versus 44 percent: see Table 2.25 in Annex 2). Overall, in 1998 Ukraine spent almost twice as much on preschools as on general secondary education, and slightly more on preschools than on tertiary education, whereas OECD countries spent one third less on preschools than on lower secondary education, and 60 percent less than on tertiary education. 18. In terms of budget categories, 65 percent is spent on personnel and social contributions, 16 percent on utilities, 7 percent on equipment, and the rest on student welfare, maintenance and rehabilitation (see Table 2.26 in Annex 2). The average salary in general secondary schools was around 140 UAH in 2000; this was about 60 percent of the national average. 19. Since 2001, central budget planning has been based on a per capita formula for each school and program type instead of the previous system's reliance on category based standards such as average class size or full time teacher needs. Accordingly, unit costs are defined for schools in cities (400 UAH), villages (640 UAH) mountainous areas and different types of special and boarding schools (reaching as much as 5000 UAH for pupils in orphanages). Wide disparities remain in per student allocations and expenditures among regions, cities and even among schools in the same categories and same regions (see tables 2.28 to 2.30 in Annex 2). 20. Since 1990, Ukraine's total population has fallen by 5 percent and the share of the 0-17 age group within the total population has fallen even more, by about 10 percent. During the same period, live births have declined by 44 percent. 21. Population trends have started to impact the demand for, and efficiency of education services. Between 1990 and 2000, average school sizes decreased by 34 percent in preschools, by 5 percent in general secondary schools and by 40 percent in vocational schools, which have also become increasingly irrelevant to market needs. Student/teacher ratios fell to an extremely low 4.7:1 in preschools, 11.7:1 in general secondary schools and 12.3:1 in vocational schools (see Tables 2.1, 2.3 and 2.10 respectively in Annex 2). These ratios are among the lowest in the Central and Eastern Europe and are 80 to 100 percent lower than OECD averages. 22. The above summary data suggests several conclusions about the state of education in Ukraine: · Overall enrollment trends suggest increasing attainment problems (in terms of number of years of schooling completed) with declining primary enrollments and low overall upper secondary enrollments. · The current education system structure increasingly favors the better off urban population in the more affluent parts of the country who can access higher quality upper secondary general education and enroll at the tertiary level. 29 · The education system needs to adjust to the population decline, with its implications for falling capacity utilization and efficiency. · As overall expenditures have declined sharply, the share of non-compulsory services (preschools, post-compulsory vocational programs and higher education) have become excessive, threatening the sustainability of compulsory education. 23. The combination of enrollment trends and inertia in the structure and financing of the system suggests a bifurcation between those who remain in the system and continue into elite secondary programs and higher education, and others who are dropping out of the system with incomplete secondary education or less. Given the universal pattern of increasing private returns to education and the correlation between low education levels and poverty, this trend will inevitably increase socioeconomic inequality. 30 ANNEX 2: STATISTICS 31