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THESES OF PHD DISSERTATION ATTILA MADARAS UNIVERSITY OF KAPOSVÁR FACULTY OF ECONOMICS KAPOSVÁR 2015 THESES OF PHD DISSERTATION UNIVERSITY OF KAPOSVÁR FACULTY OF ECONOMICS PhD Program for Economic and Organizational Science Head of PhD program: DR. SÁNDOR KEREKES Professor, doctor of MTA Supervisor: Dr. habil. JÓZSEF VARGA Associate professor THE CONNECTIONS OF THE EFFICIENCY OF PUBLIC EDUCATION FUNDING Author: ATTILA MADARAS KAPOSVÁR 2015. Table of Contents 1. ANTECEDENTS AND GOALS OF RESEARCH MATERIALS AND METHODS RESULTS CONCLUSIONS NEW RESEARCH FINDINGS SUGGESTIONS PUBLICATIONS ON THE TOPIC OF MY DISSERTATION 1. ANTECEDENTS AND GOALS OF RESEARCH Education is a very important strategic area in most countries. To support this statement, I will review the conditions of education funding in several countries. The changes necessary to reach an optimum level (technological development, teacher training, introduction of new teaching methods) require significant financial investment. The primary focus of my analysis is to find out whether Hungary is providing sufficient resources for a high quality public education. I am looking at this question from multiple aspects. I analyze education funding in itself, and in comparison with international trends. I attempt to determine the level of funding taking the results of international competency tests into consideration. I also analyse the competetiveness evaluations of several international institutes. My goal, as previously mentioned, is to determine the optimum level of public education funding, which makes it possible to provide a high quality education that improves the economic performance and competitiveness of Hungary in the long run. To accomplish this research goal, I endeavor to analyse and compare the level of education funding and the quality of education both nationally and internationally, from multiple aspects. Considering the state of Hungarian public education and the research goals, I have set up the following hipotheses to be verified in the course of the research: 4 Hypothesis nr 1: The results of international competency assessments, showing the quality of Hungarian public education, lag behind in international comparison and also compared to our country s own expectations. Experts had set their expectations regarding international competency tests based on previous IEA 1 results, in which Hungary was among the best in the world. On PISA tests, however, Hungary only ranked in the lower-middle range. My goal is to examine: to what extent the quality of education depends on the level of funding, and to what extent on the pedagogic quality of our education system. Hypothesis nr 2: Education funding is a vital factor in the quality of education, but over a certain amount it does not have a significant affect on assessment results any more. The quality of education, even at the international level, is determined based on the results of competency assessments. PISA assessments show that the best results are not always reached by the countries spending the most on education. In the course of my research I would like to determine the amount up to which the results of competency assessment and the level of funding are significantly related. Hypothesis nr 3: The economic performance and competitiveness of a country is setermined by the quality and efficiency of education. Beside the level of funding, the quality of education is also influenced by the pedagogical work. As a result of my research, I would like to define those competitiveness indicators that are most likely to influence a country s economic 1 (International Association for the Evaulation of Education Achievement 5 performance, and examine how significant pedagogical work is as an influencing factor. Hypothesis nr 4: In the last decade, based on statistical reports, the level of education funding has been stagnant, while schools report a decrease in financial support. I would like to find out what the trends in the direct funding of educational institutions have been in the past ten years. I also examine how the changes in the amount of normative per capita grants affect the financial management of schools, and how this impacts the operation of the schools. Hypothesis nr 5: The economic operation of Hungarian schools greatly depended on the financial situation of the local governments as their proprietors. To eliminate these differences, it was a rational decision for the central government to take over the ownership of public schools (KLIK). One of the most important elements of the 2013 reform was the centralization of school proprietorship under the Klebelsberg Institution Maintenance Centre. I will examine whether there is an economic rationale for the centralization. 6 2. MATERIALS AND METHODS Examining the relationship between education funding and the economic performace of the country, the analysis and evaluation was carried out based on primary and secondary data. Primary data was obtained from in-depth interviews and a survey conducted among public school proprietors. Secondary data was obtained from domestic and international professional literature and the analysis of these. In choosing the research theme and methods, my work experience of over 14 years in public education played a key role. I have been in almost every kind of position during this period. I was a teacher and administratior in the field of education, and I was a finance manager in the field of economics. As a board chair of a foundation maintaining a school, I even represented the proprietor s side. These positions have provided me with a broad insight on secondary schools. Besides my work-related experience, I also wrote my thesis on this topic for my teacher of economics and master of education degrees. This means that I have over ten years of theoretical and practical background in following the trends and changes of education funding. The economic performance of a country can only increase if workforce of sufficient quality is available. Chapters 2.1 and 5.5 of my dissertation present my research findings regarding this issue. Training workforce is the task of education, including both public and higher education. Based on the theme of my dissertation, I only concentrate on public education but in my opinion, public education not only has to provide workforce directly via vocational training, but also effectively prepare students for higher education, giving them a solid base of knowledge. 7 To determine the expected performance of a country s education system, it is best to look at international practice primarily focusing on assessments that rise above the differences in the systems of education and are able to measure the skills and competences of students as future workforce. OECD started the tri-annual PISA assessments from 2000 in several countries, including Hungary, for this very purpose. OECD gives a detailed analysis based on the PISA results, and also issues a yearly report on OECD countries, titled Education at a Glance, which provides detailed information on the quality, funding and problems of education in member countries. The presenttion of the Hungarian education system is based on my own experience and knowledge. Numeric data was obtained from statistical yearbooks, informational materials and analyses issued by the State Secretariat for Education and OECD (Education at a Glance, OECD), with references given at the appropriate places. The analysis in the international outlook has been put together from international professional literature. The experiences of countries that have a highly developed culture of education have been extremely useful in formulating my suggestions regarding the Hungarian education system. (e.g. Education System in Finland, MEC). After assessing the quality and state of development of the Hungarian education system, I analysed the economic environment. I examined, at an international level, how much Hungary and other countries spend on education more specifically, public education in the proportion of GDP and per capita. For international comparison, I used OECD data (Education at a Glance). From these pieces of data I could draw 8 conclusions about the level of education funding and the importance of this area in a country. As I previously mentioned, PISA assessments are carried out among 15- year-old students. This age group is usually equivalent to 9th grade, so I linked the results with the average amounts of education funding in the 9 years preceding the assessment, calculating the correlation coefficients based on these values. To measure the level of education funding in Hungary, I have set up a school model. After setting the sizes of classes, I calculated the normative per capita support the model school would have received each year, based on the annual Budget Act. Besides presenting the scale and tendencies of funding, I also present the changes and variations and the ways these have been carried out. The performance of countries can be shown well by competitiveness indicators and rankings. For this reason, my goal was to connect Hungary s education funding with its competitiveness. When analysing the cometitiveness assessments, I found that it was difficult to deduce competitiveness from the quality of public education. On one hand, the quality of public education is only partly responsible for competitiveness results, and on the other hand, almost half of the assessments on education are connected to higher education. Taking this into account, although I do look at the connection between education and competitiveness in my paper, it is not top priority. For this reason, I mainly used secondary data to determine the link between education and competitiveness. My primary focus were the evaluations regarding Hungary, so I used domestic analyses (e.g. analyses of PISA assessments). 9 When collecting primary data, conducting interviews and surveys proved to be difficult because of the change in school ownership. In a situation not completely clear to them, the directors of KLIK-owned schools refused to be interviewed or answer survey questions. I managed to make in-depth interviews with the leaders of two government offices (Hideg, Polner), but they were only able to tell me about current problems. I also had a lengthy conversation with the financial executive of KLIK (Oláh Gáborné), but she could only outline the new opportunities, she could not inform me about the regulations that were not yet in place. The head of an educational district (Mayerné) gave me information about the structure of KLIK-owned schools, but she was not authorized to share details about financing. I could only carry out truly informative interviews and surveys among the leaders of church-owned schools. I contacted representatives of historic churches. I managed to make three in-depth interviews: one with a leader in the Lutheran church who is familiar with education and education funding within the church (Kolarovszki), the second one with a representative from the school owner s side from a Catholic religious order, who previously worked as a director in one of their schools (Hortobágyi). The third interview was with a nun who represented the Catholic church during the negotiations with the government regarding financing (Németh), but she could only share about plans, as there was no final agreement in place at that time. Survey questionnaires were sent out to proprietors from the Catholic, Lutheran and Reformed churches. A little less than half of the questionnaires were returned to me, but this means I had answers from the proprietors of 165 schools. This represents 2,5% of the total number of Hungarian schools and 27.6% of church schools. This means the 10 survey does not provide a representative sample, but I considered the number of answers sufficient for my analysis. When establishing the education model, where my purpose was to determine the quality of education, I used the competitiveness data from Chapter of my paper, as well as the data from national statistical yearbooks (Information Yearbook of Educational Statistics Statisztikai Tájékoztató Oktatási Évkönyv 2012/2013.). Based on these, I set up a linear regression model, where the result variable was the quality of education, and I used the records from the period between 2003 and 2009 found in the National Report on the 2009 National Competency Assessment (Országos Kompetencia Mérés Országos Jelentése, OH, 2009.) as data source. The values of the dependent variable were the average competency assessment scores in reading comprehension and mathematics for 6th, 8th and 10th graders representing 6 observations because of the lack of competency assessments and the changes in assessment methodology. 17 factors were considered as explanatory variables, including economic indicators, as well as data regarding teachers, students and the availability of information technology in schools. The resource for these data was the annually issued Information Yearbook of Educational Statistics (Statisztikai Tájékoztató Oktatási Évkönyv). By rule of thumb, the number of components being six called for two explanatory variables. In addition to that, my purpose was to choose logical variables that expain result variables in a significant way so I aimed to choose the two explanatory variables from the 17 that would best match these expectations. 11 For this, I first conducted the partial t-tests for each explanatory variable to see which one is most significant in explaining the result variable. Then, if the relation made sense logically, and there were no other variables that would explain the quality of education more directly, I expanded the model with another variable. When adding the second explanatory variable, I took into consideration the empirical p-value of the partial t-tests and the global F-test, 3 information criteria (Schwarz, Akaike and Hannan-Quinn) and the VIF index measuring multicollinearity. The specification of the model best matching the above mentioned conditions was tested by Ramsey s RESET test, then I examined whether the applicability conditions of linear regression were met. I measured multicollinearity using the VIF index, homoskedasticity 2 was measured graphically and with the Breusch-Pagan and White tests, and in the end I examined the normality of residuals, using a Q-Q plot and the Shapiro- Wilk test (Hunyadi, Vita, 2008). 2 The condition of homoskedasticity is that the variance of the error term is costant at different levels of ýi 12 3. RESULTS The purpose of the dissertation was to examine the impact of government expenditures on the quality of education. Based on national and international data, I aimed to investigate the extent to which the amount of government funding influences the quality of education, and whether an optimum level of funding can be determined, which would increase the economic performance of Hungary in the long run. International examples have revealed that economic performance is high in countries where education is considered an important investment in the future, and governments have dedicated significant funds to it for several decades. From this we can conclude that the economic performance of a country is greatly influenced by the quality of public education. On one hand, public education prepares gifted students for higher education, and on the other hand, it provides well-trained workforce for the labour market through high quality vocational schools and training. An effectively operating education system tries to even out the irregularities of the labour market. This goal, however, can only be accomplished if the students become able to catch up with the development and changes of technology, finding out about new opportunities and acquiring the new skills needed. This ability or skill of the learner is called competence. Students not only need to have the knowledge necessary for their profession, but also the appropriate competences to meet the changing demands and challenges of the labour market. This is what OECD discovered after analysing a large number of developed economies that have a high-quality education system. This discovery birthed the idea of an international competence test carried out every third year, beginning in The PISA test examines the quality of the participating 13 countries public education by assessing the skills and competences of 15-year-old students. For this reason, I used the results of these competence tests to express the quality of education in respective countries. According to the PISA results, Hungary s performance is in the lower mid-range in international comparison. Based on the PISA assessment, in addition to the international testing, Hungary launched domestic competence testing in Looking at the results of the past ten years, we can see stagnation. During my research, I first looked at Hungary s education funding. I set up a school model to measure the real values of direct per capita (normative) funding received by schools between 2003 and My calculations show a sometimes increasing, sometimes decreasing tendency regarding overall education funding. The economic crisis had an effect on education spending as well, leading to a major decrease in 2010, and only a slow increase since then. The tendencies seen in financing are mirrored back in the tendencies of competence test results. The tendencies of direct per capita funding for my model school were similar to the tendencies in the data presented by the statistical yearbooks on education. The tendencies shown indicate that for the past ten years, Hungary has determined the level of education funding based on its current economical performance. I tried to analyse the financial management of Hungarian schools based on the answers I had received from church proprietors, because as I mentioned earlier this was the only group where I was able to successfully conduct a survey. According to church proprietors, an increase in funding would be necessary to reach the desirable quality of 14 education. The survey reveals there would be a need to increase funding by 50% for personnel expenditures, 20% for material expenditures and 50% for investment and renovation costs. It would be essential to raise teacher salaries in order to increase the quality of education, but there is a need to increase funds in all areas: personnel, material and investment expenditures alike. On the whole, it would be necessary to increase funding for all types of expenditures personnel, material and investment as well. With the introduction of the teacher carreer model, government support for personnel expenditures has increased significantly, but at the same time there are less funds remaining for material costs and investment. Raising teacher salaries is necessary, but it will not be sufficient in itself to improve the quality of education. At the international level, I examined the link between the countries PISA results and their spending on education. We also have to take into consideration the fact that besides education funding, PISA results are also impacted by the education system itself. There are no two countries where the education system would be identical, but it can obviously be shown that countries spending more on education in the long run will have a more advanced education system and usually better results on competence tests. Analysing the 2009 PISA scores of 39 countries and their correlation with education funding 3, I have found a relatively strong link between these two factors. The explanation for this could be that most non-european countries spend little on education, and they also have low PISA scores. I also discovered that increasing the amount of educational spending does not necessarily result in better PISA scores. 3 For education funding between , I took the av
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