A Study On The Reform Of Basic Education Financial System Under The Context Of Fiscal Decentralization

The fiscal system reform has being an important part of economic reform,as well as a core element of central-local relationship.Since the reform and opening up,a decentralized fiscal system has gradually formed in China,simultaneously the local government has being playing an important role in economic growth,social development and livelihood security,and the local government behavior has a significant influence on economic society.As an important component of fiscal system,basic education financial system would be restricted by the former,on the other hand,would be influenced by local government behavior.Especially under the basic education financial system,in which local government taking the education expenditure responsibility,it’s financial situation,expenditure behavior,and preference for education expenditure have a direct effect on the outcome of basic education financial system.Many problems in basic education financial system,in some extent,are the epitomes of fiscal system and government behavior in educational area.Therefore,in the framework of fiscal decentralization,exploring basic education financial system in the perspective of local government behavior has important significance.Based on the fiscal decentralization theory and principal-agent theory,this dissertation analyzes the relationship between fiscal system and education financial system,and explores education expenditure behavior of government in different level though empirical method.This research mainly uses two dataset(province-level and city-level),which contains information about local finance,education,economy,population,and geography.The province-level dataset contains the data of 27 provinces(1995-2007),and the city-level dataset contains the data of 282 cities(2007-2012).In terms of empirical method,this dissertation mainly uses regression analysis and Vector autoregression(based on panal-data).The major findings of this study include:1.Financial system,economic development and the transfer payment has important influence on the educational finance system.Specifically,(1)Provinces that have a decentralized fiscal system tend to choose a decentralized basic education financial system and vice versa;(2)Economically developed provinces tend to choose a decentralized basic education financial system;(3)Provinces that get more transfers funds tend to choose centralized basic education financial system.2.Provincial government has a weak preference for education equity.This finding is an opposite conclusion to theoretical predictions of finance theory,as well as a contract of equity effect of state government’s action in USA.Without changing this weak preference,in this condition,it is difficult to achieve a more equitable situation if only rely on provincial governments to promote basic education.To improve the education equity,changing provincial government’s preference is an essential step.And,the policy that promoting education equity though raise the expenditure level should be treated prudentially.3.Less developed provinces tend to intercept’ grants transferred from central government and transfer less matching funds to lower levels of government,but their basic education equity status is worse than developed provinces.This shows that the grants intercepted’ by provincial governments are likely not be used in the areas need these funds most.This phenomenon is possible linked with provincial governments’behavior model of allocate funds to lower levels of government.In addition,there is’upwards-imitating behaviors’ in the county-level governments,which means if higher levels of governments reduce education expenditure,county-level governments will reduce too.4.City-level expenditures not only have strong preference for expenditures on ’basic infrastructure’,but also have week preference for education.City-level expenditures prefer health expenditure most,followed by social security and education expenditure when financial increment is made.This phenomenon is possible linked with central government’s policy guidance and population structure,and to some extent,it also shows that basic education financial system has a limited extractive capacity.5.In city-level expenditures there are significant ’competitive effects’ and ’cooperative effect’between education,health and social security expenditures.In the ’competition of expenditures’ there are two trends exist:(1)in a short-term,three categories of livelihood expenditures show a crowding-out effect,but in a long-term they shift to promote each other.(2)Three categories of livelihood expenditures show trends of ’alternating growth’and ’advance side by side’.These trends show that local governments have a tradeoff-behavior in livelihood expenditures.And,in the ’competition of expenditures-ratios’,there is a phenomenon of ’social security expenditures crowds out education expenditures,and education expenditures crowds out health expenditures’.Based on these conclusions,this study suggests that,to promote the adequacy,efficiency and equity of basic education finance,solely making reform in education system may be difficult to achieve the desired results.Simultaneously reform the external environment and the internal mechanism of basic education finance system is the inevitable choice of promoting the development of basic education.Policy Recommendations mainly include:Firstly,improving local government fiscal capacity through enforcing central government’s livelihood expenditure responsibilities and perfecting transfer payment system.Secondly,establishing the docking-mechanism between education expenditure and popular will,and improving incentive of local government education expenditure.Thirdly,grasping juncture of ’provincial level plan’ reform,reforming fiscal capacity-responsibility,basic education transfer payment system,and promoting the preference for education equity of provincial level government Fourthly,we should promote the legalization of public expenditure on basic education,as well as,accelerate the establishment of expenditure standards for basic education,and perfect the supervision mechanism of the public expenditure on education.