Innovations in the Financing of Education: The Case of Chile

Type Report
Title Innovations in the Financing of Education: The Case of Chile
Author(s)
Volume EDT35
Publication (Day/Month/Year) 1986
Publisher Education and Training Department, Operations Policy Staff, World Bank
URL http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/1986/07/01/000009265_39806240​90916/Rendered/PDF/multi_page.pdf
Abstract
The purpose of this paper is to document recent reforms in the administration and financing of education in Chile and to describe how they have been implemented. In primary and secondary education, the reforms consisted of decentralizing public schools by transferring them to municipalities and by encouraging the private sector to operate subsidized tuition-free schools. A per-student payment system was introduced to transfer funds from the government to municipal and private subsidized schools. In higher education, the reforms consisted of allowing the private sector to create higher education institutions, raising tuition fees in public and private subsidized universities, introduction of student loans to needy students and a per-student payment for transferring public funds to universities. Although it is too early to say whether or not the reforms have succeeded, the paper concludes that these well conceived and planned reforms have faced several implementation problems. Some of these problems, however, resulted from the deep 1982-1983 economic recession and subsequent tightening of public sector expenditures that forced education authorities to suspend the transfer of schools to municipalities in 1982. This meant that not all teachers could be transferred to municipalities. In addition, the paper concludes that although the per-student payment system has worked well in primary and secondary schools, it has not done so well at the university level because universities expanded primarily the highest "paid" studies, an unintended outcome of the reform. The paper also concludes that the private sector has responded rapidly to open subsidized tuition-free schools and higher education institutions; that tuition in public and private subsidized universities has increased; and that the amount of allocated student loans now constitutes a substantial part of university financing. Student loans, however, could be better administered and less subsidized to eliminate excess demand and accelerate collection.

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