The Latvian school funding formula

Box 1.2. Latvia’s per-student school funding system (continued)

The basic calculation of workload is widely known as “money follows the student”. The number of students in a school forms the starting point for the calculation of the number of teacher workloads. The formula accounts for the education level with a student coefficient that differs according to whether the student is in Grades 1 to 4, Grades 5 to 9 or Grades 10 to 12.

The formula is not entirely driven by numbers of students. it has additional indices intended to promote equity in the face of differences in perceived need. it accounts for the differences in cost of programmes and favours small schools with fewer than 100 students which have a higher per-student coefficient. There is an ideal student-teacher ratio, which is different for schools in small municipalities and those in the nine republican cities. Taking into account all these factors, the calculation produces the number of “workloads” to which a school is entitled. A full-time workload implies 21 hours of teaching.

The second step involves converting the number of workloads into a budgetary amount. The minimum teacher salary per workload (EuR 420 in 2014) is determined by the government through annual cabinet regulations. This amount is multiplied by a number of coefficients. A coefficient of 1.2359 covers social security costs, and a further factor of 1.15 is applied for administration. This is intended to promote more efficient planning by including non-teaching staff salaries as a percentage of the teacher salary grant. Every school can use up to 15% of the total amount for hiring non-teaching staff such as heads, deputy heads and special educational needs teachers who perform administrative tasks.

A factor of 1.4 is added to the budget calculation to account for numerous “additional duties” such as preparing lessons, correcting homework, grading tests and participating in meetings. in other oECD countries many of these additional duties are considered to be part of a teacher’s core duties. school leaders can decide how to provide for additional duties. For example, one teacher might receive several hours of extra work per week for additional duties while another might be allocated none. Thus teachers doing the same work in different municipalities might receive different salaries.

Source: OECD (2014a), Teacher Remuneration in Latvia: An OECD Perspective, OECD Publishing, Paris, www.oecd.org/edu/0ECD%20Review%20of%20Teacher%20Remuneration%20in%20Latvia_ QPS_FINAL.pdf.

Moreover, the financial autonomy provided to municipalities has enabled some to reallocate funds to small schools that are no longer viable. Research evidence has also shown there are considerable spending differences between municipalities. Grivins (2012) for example reported that 13 municipalities spent more than 40% than the national average per student, whilst 21 municipalities spent between 20% and 60% less.

MoES is currently piloting a revised model for school funding and teacher remuneration responding to several of these issues. For example funds will be distributed to schools directly, and there are stronger incentives to increase class sizes. in addition, as mentioned, there is the intention to make teachers’ pay competitive with other professions. Raising teacher salaries to nationally comparable standards without raising class sizes and student-teacher ratios considerably seems unlikely considering the socio-economic and political context. Maintaining a relatively large teaching workforce for a small and shrinking student population is not sustainable or desirable from a quality perspective.

If endorsed, the new model is expected to bring about greater efficiencies while improving quality and equity. MoES should carefully monitor the implementation of the new model, make adjustments where needed (OECD, 2014a) and ensure that the freed-up resources are invested in the quality of teaching.

For tertiary education, efficiency gains in the long run will depend on the success of a planned new funding model to reward quality, strengthen links with labour market needs and research institutions, and avoid fragmentation of budget resources (OECD, 2015a). This new tertiary education funding model will be discussed in greater depth in Chapter 5 but it is expected to lead to efficiency gains as well as a better match of skills to labour market requirements. This reform may prove difficult to implement however as reform attempts undertaken between 2011 and 2013 have met substantial resistance from educational institutions themselves.