Although most funding for primary education comes originally from central governments, how it is spent varies widely from country to country. In a few countries (Costa Rica, Ireland and New Zealand), all of the expenditure comes direct from central government, without transfers to lower governments. In other countries (e.g. Korea and Mexico) funding involves large transfers from central to lower levels of government. However there are other countries (e.g. Iceland, Germany and Switzerland) where local or regional governments are the main funding sources for primary education.
Regional and local governments play a key role in spending on schools in many countries: on average, after transfers, 63% of government funds dedicated to primary education in OECD countries are spent by subnational governments.
On average, the share of government expenditure OECD countries dedicated to education fell between 2015 and 2021. This is due to increased public spending on other functions: in most countries, public spending on education increased in real terms over this period, but more slowly than overall government spending.
Education at a Glance 2024
Governments are key sources of funding for primary and secondary schools. Countries vary widely in the roles played by different levels of government, ranging from fully centralised funding arrangements to countries where regional or local governments are the only sources of public funding for schools. In addition, countries may also transfer funding between levels of government for spending on schools, with some making extensive use of transfers – typically from central to regional or local levels. The different roles of subnational governments and transfer arrangements have important implications for equity. Greater responsibility at subnational level may be associated with greater local autonomy, which is desirable, but this needs to be balanced with tools to address inequalities as some localities or regions will have less capacity to raise revenue than others.
Education is one of the main functions on which governments spend money, alongside other key areas like health and social protection. In the context of competing pressures on government budgets, it is important to look at the choices different countries make in allocating budgets to different functions.
This chapter sets out the role of different levels of government in spending on primary schools (data for other levels of education are available in Table C4.1). This is followed by an analysis of transfers between levels of government, showing at which level of government funds originate and at which level they are ultimately spent. Finally, the analysis looks at how the share of government spending allocated to education has changed in recent years, a clear demonstration of the priority given to education in relation to other areas of public expenditure.
Early childhood education receives a large share of government expenditure in some countries (over 3% of total government expenditure in Iceland and Sweden). On average across OECD countries, 1.7% of government expenditure is dedicated to this level of education.
On average, 10% of government expenditure is dedicated to education from primary to tertiary levels (or 9.1% when spending on R&D is excluded). At least 13% of government expenditure goes to education in Israel and Mexico.
When non-formal learning is included, 12% of government expenditure is dedicated to education. This makes education one of the largest areas of expenditure after social protection and health, and on a level with economic affairs and general public services.
A variety of actors may raise and spend funds for education. Figure C4.1. shows how expenditure on primary education is shared between different levels of governments, after inter-governmental transfers (final funds). It shows the substantial role played by regional and local governments: on average almost two-thirds of funds are spent by subnational governments. This major role reflects a broader trend among OECD countries towards decentralisation of spending in various areas, including education, in particular in the 1990s and early 2000s (OECD, 2021[1]).
In a few countries, the funding of primary education is fully centralised (Costa Rica, Ireland and New Zealand), with central government the sole source of public funding (Figure C4.1.). Funding is also highly centralised in Greece, Italy, Hungary, Romania and Croatia, with over 85% of public expenditure spent directly by central governments. At the other end of the spectrum, the figure shows the key role played by federal states in Germany and autonomous communities in Spain (where 73% and 81% of government expenditure is at regional level, respectively), the sharing of responsibilities in Switzerland between regional cantons (46%) and local municipalities (54%), and the predominant role of local school districts in the United States (98% of expenditure is at local level). While not measured here, there is also considerable variation across countries in the kind of roles and decision-making powers regional and local authorities have. For example, subnational authorities may have different responsibilities depending on the type of expenditure (e.g. capital versus current) or the level of education considered (OECD, 2017[2])
The evidence suggests that, on its own, the distribution of spending across different levels of government is not associated with differences in key outcomes. A cross-country study of decentralisation and educational performance (Lastra-Anadón and Mukherjee, 2019[3]) found no significant relationship between the share of education spent subnationally and Programme for International Student Assessment (PISA) results. What seems to matter is how resources are raised and managed.
On average, over half of public funding for primary education comes originally from central government, with much of it transferred to regional or local authorities to spend (Figure C4.2). Lower levels of government often supplement this central government funding from their own revenues. This reflects a broader pattern across OECD countries: government spending (across different sectors, not just education) tends to be more decentralised than revenue (OECD, 2021[1]).
When subnational sources play a major role in education funding, this can create an equity challenge: ensuring that underprivileged areas, with less capacity to raise revenue, are not left behind. At the same time, some spending differences may also be due to factors that do not raise equity issues. For example, geographic location and population density may vary considerably across regions and shape spending patterns (e.g. when teacher salaries are adjusted to reflect the cost of living, spending per student will be higher in costly urban areas). Figure C1.5. in Chapter C1 illustrates the disparities that can exist in spending per student in different regions. In the United States, for example, where the federal government plays only a minor role in funding schools, spending per student in primary and secondary education is three times higher in the District of Columbia than it is in Idaho. In Canada, where the federal government also plays a minor role in funding schools, over twice as much is spent per student in the Northwest Territories as in British Columbia.
Transfers from central to regional or local levels are one of the tools used to share responsibility for funding and, if necessary, provide supplementary funding to areas in need. However, transfer mechanisms designed to equalise expenditure can raise other issues. For example, they might have the unintended effect of reduced tax effort or overspending at subnational level, while fluctuations in transfers may make planning at regional or local level difficult (OECD, 2017[2]).
Figure C4.2. shows the role of central governments in funding primary education. Initial funds refer to expenditure that originates from central government and which might be spent directly on education or transferred in turn to lower levels of government. Final funds refer to funding that ends up being spent directly by the individual levels of government, after transfers have been taken into account.
In several countries, the bulk of the money that comes from central government is channelled to schools via regional or local governments. For example, in Korea 80% of funding for primary education comes from central government, but only 1% is spent directly at central level, as regional governments are responsible for 22% of final expenditure and local governments for 77%. Similarly, in Mexico 83% of funding originates from central government, but the money is predominantly spent by state governments, at the regional level. In Chile, on the other hand, all of the funding transferred from central government level goes directly to the local municipalities. Most of their expenditure comes from central government sources, only supplemented by a small extent (2% of expenditure) from local funds (Table C4.2).
In some education systems, funding is highly decentralised and transfers between government levels are relatively small. The funding of primary education is highly decentralised in Iceland, Germany and Switzerland, for example (Figure C4.2). Transfers are also uncommon in some countries where responsibility for financing primary education is shared between central and lower level governments. For example, in France two-thirds of the funding comes from and is spent by central government, while the rest is directly raised and spent by municipalities. Similarly, in the United Kingdom, funding involves a mix of sources and spending at the level of local authorities and central governments (with each of the four nations being responsible for financing primary education).
Governments face competing pressures on tight public budgets. How government funds are shared across different functions matters. Education is one of the key areas of investment for long-term growth and a more equitable distribution of incomes. Various cross-national studies focusing on OECD countries have shown that allocating an increasing share of spending on education, even while keeping overall public expenditure the same, has a positive impact on long-term economic growth and can help increase income levels ( (Barbiero and Cournède, 2013[4]), (Fournier and Johansson, 2016[5]), (Gemmell, Kneller and Sanz, 2016[6])).
Yet the average share of government expenditure dedicated to education has fallen slightly since 2015 across OECD countries (Table C4.3.). This holds for both primary to post-secondary non-tertiary education, with an average annual change of -1.3%, and for tertiary education, where the decrease was 1.8%. The drop was particularly significant in Costa Rica (average annual change of -7.5%), Latvia (-6.1%) and Mexico (-2.2%), where education expenditure (from primary to tertiary) fell between 2015 and 2021 not just as a share of overall government expenditure but also in real terms. In most other countries, the amount of public expenditure dedicated to education remained stable or increased over the period, even if its share of public expenditure fell. This is consistent with analysis of longer-term trends (since 2000), which found that on average government expenditure on educational institutions has been growing, but government expenditure on all services has grown even faster, particularly since 2019 (OECD, 2023, p. 290[7]).
These results should be interpreted in the context of broader evidence on changes in the mix of public spending. Although reallocating funds to different functions might be desirable, it may not happen because such decisions are politically hard to negotiate and implement. A recent OECD study (Barnes, Cournède and Pascal, 2023[8]) found that the propensity of countries to change their mix of public spending varies considerably, and there is more active reallocation in countries with better governance. The study also found that governments tend to avoid nominal cuts in many functions, especially health and social protection, so the room for reallocation depends on inflation rates. In this context, one question to be explored in the coming years is whether the downward trend in the share of public spending dedicated to education has continued, stopped or been reversed during the recent period of high inflation.
The share of government expenditure allocated to education varies considerably across countries. On average, 10% of government spending goes to education provided at primary to tertiary levels (9.1% when R&D is excluded). Some countries devote a particularly high share of government spending to education: the figure is 13% or more in Israel and Mexico. The availability of data on early childhood education and care is sometimes quite limited, even though investment at this level is widely seen as key for creating strong foundations for further learning. On average across OECD countries, 1.7% of government expenditure is dedicated to this level of education. Some countries (Iceland and Sweden) direct over 3% of government spending to early childhood educational development and/or pre-primary education (Table C4.1).
Figure C4.3. shows education expenditure in the context of government spending on other functions. On average, 12% of government expenditure is dedicated to education (which here includes non-formal learning, hence the higher figure than in Table C4.1.). Education is one of the largest areas of expenditure after social protection and health, and on par with economic affairs and general public services. There is much variation across countries, ranging from Costa Rica, Israel and Switzerland, which dedicate over 15% of government expenditure to education, to Italy and Greece, which dedicate only around 7%. In almost all countries, social protection receives the largest share of government expenditure, with much variation in its size across countries (ranging from less than 25% in Korea and the United States to over 40% in Chile, Denmark, Finland, France, Germany and Luxembourg). Health receives the second largest share (16% on average across OECD countries), with again much variation across countries: ranging from less than 10% in Hungary and Switzerland, to 26% in the United States.
Intergovernmental transfers are transfers of funds designated for education from one level of government to another. They are defined as net transfers from a higher to a lower level of government. Initial funds refer to the funds before transfers between levels of government, while final funds refer to the funds after such transfers.
Government expenditure on education covers expenditure on educational institutions and expenditure outside educational institutions such as support for students’ living costs and other private expenditure outside institutions, in contrast to chapters C1, C2 and C3, which focus only on spending on educational institutions. Government expenditure on education includes expenditure by all government entities, including the education ministry and other ministries, local and regional governments, and other public agencies. OECD countries differ in the ways in which they use government money for education. Government funds may flow directly to institutions or may be channeled to institutions via government programmes or via households. Government funds may be restricted to the purchase of educational services or may be used to support students’ living costs.
All government sources of expenditure on education, apart from international sources, can be classified under three levels of government: 1) central (national) government; 2) regional government (province, state, Bundesland, etc.); and 3) local government (municipality, district, commune, etc.). The terms “regional” and “local” apply to governments with responsibilities exercised within certain geographical subdivisions of a country. They do not apply to government bodies with roles defined in terms of responsibility for particular services, functions or categories of students that are not geographically circumscribed.
Total government expenditure corresponds to non-repayable current and capital expenditure on all functions (including education) of all levels of government (central, regional and local), including non-market producers (e.g. providing goods and services free of charge, or at prices that are not economically significant) that are controlled by government units, and social security funds. It does not include expenditure derived from public corporations, such as publicly owned banks, harbours or airports. It includes direct government expenditure on educational institutions (as defined above), as well as government support to households (e.g. scholarships and loans to students for tuition fees and student living costs) and to other private entities for education (e.g. subsidies to companies or labour organisations that operate apprenticeship programmes).
Figures for total government expenditure and GDP are based on data from the OECD National Accounts Statistics Database (see Annex X.2.).
Government expenditure on education is expressed as a percentage of a country’s total government expenditure. The statistical concept of total government expenditure by function is defined by the National Accounts’ Classification of the Functions of Government (COFOG). There are strong links between the COFOG classification and the UNESCO, OECD and Eurostat (UOE) data collection, although the underlying statistical concepts differ to some extent (Eurostat, 2019[9]).
Expenditure on debt servicing (e.g. interest payments) is included in total government expenditure, but it is excluded from government expenditure on education, because some countries cannot separate interest payments for education from those for other services. This means that government expenditure on education as a percentage of total government expenditure may be underestimated in countries in which interest payments represent a large proportion of total government expenditure on all services.
Data from Table X2.1. are used for the computation of expenditure on education as a share of total government expenditure on all services. Data from Table X2.2. are used to transform expenditure in constant 2015 prices and in equivalent USD converted using PPPs.
For more information, please see the OECD Handbook for Internationally Comparative Education Statistics 2018 (OECD, 2018[10]) and Education at a Glance 2024 Sources, Methodologies and Technical Notes, (https://doi.org/10.1787/d7f76adc-en).
Data refer to the financial year 2021 (unless otherwise specified) and are based on the UNESCO, OECD and Eurostat (UOE) data collection on education statistics administered by the OECD in 2022 (for details see Education at a Glance 2024 Sources, Methodologies and Technical Notes, https://doi.org/10.1787/d7f76adc-en.
Data from Argentina, China, India, Indonesia, Peru, Saudi Arabia and South Africa are from the UNESCO Institute of Statistics (UIS).
References
[4] Barbiero, O. and B. Cournède (2013), “New Econometric Estimates of Long-term Growth Effects of Different Areas of Public Spending”, OECD Economics Department Working Papers, No. 1100, OECD Publishing, Paris, https://doi.org/10.1787/5k3txn15b59t-en.
[8] Barnes, S., B. Cournède and J. Pascal (2023), “Do governments re-prioritise spending? : First insights from COFOG data on public spending reallocation in OECD countries”, OECD Economics Department Working Papers, No. 1785, OECD Publishing, Paris, https://doi.org/10.1787/56dda017-en (accessed on 6 May 2024).
[9] Eurostat (2019), Manual on Sources and Methods for the Compilation of COFOG Statistics: Classification of the Functions of Government, Publications Office of the European Union, Luxembourg, https://doi.org/10.2785/498446.
[5] Fournier, J. and Å. Johansson (2016), “The Effect of the Size and the Mix of Public Spending on Growth and Inequality”, OECD Economics Department Working Papers, No. 1344, OECD Publishing, Paris, https://doi.org/10.1787/f99f6b36-en.
[6] Gemmell, N., R. Kneller and I. Sanz (2016), “Does the composition of government expenditure matter for long-run GDP levels?”, Oxford Bulletin of Economics and Statistics, Vol. 78/4, pp. 522-547, https://doi.org/10.1111/OBES.12121.
[3] Lastra-Anadón, C. and S. Mukherjee (2019), “Cross-country evidence on the impact of decentralisation and school autonomy on educational performance”, OECD Working Papers on Fiscal Federalism, No. 26, OECD Publishing, Paris, https://doi.org/10.1787/c3d9b314-en.
[7] OECD (2023), Education at a Glance 2023: OECD Indicators, OECD Publishing, Paris, https://doi.org/10.1787/e13bef63-en.
[1] OECD (2021), Fiscal Federalism 2022: Making Decentralisation Work, OECD Publishing, Paris, https://doi.org/10.1787/201c75b6-en.
[10] OECD (2018), OECD Handbook for Internationally Comparative Education Statistics 2018: Concepts, Standards, Definitions and Classifications, OECD Publishing, Paris, https://doi.org/10.1787/9789264304444-en.
[2] OECD (2017), The Funding of School Education: Connecting Resources and Learning, OECD Reviews of School Resources, OECD Publishing, Paris, https://doi.org/10.1787/9789264276147-en.
Cut-off date for the data: 14 June 2024. Any updates on data and more breakdowns can be found on the OECD Data Explorer (http://data-explorer.oecd.org/s/4s).
Initial sources of funds, by level of education
Note: See under Chapter C4 Tables for StatLink and Box C4.1 for the notes related to this Table.
Percentage of total government expenditure, before and after transfers, by level of education
Note: See under Chapter C4 Tables for StatLink and Box C4.1. for the notes related to this Table.
Note: See under Chapter C4 Tables for StatLink and Box C4.1 for the notes related to this Table.
Table C4.1. Government expenditure on education as a percentage of total government expenditure (2021)
Note: The government expenditure presented in this table includes both government transfers and payments to the non-educational private sector which are attributable to educational institutions, and those to households for living costs, which are not spent on educational institutions. Therefore, the figures presented here (before transfers) exceed those for government spending on institutions found in Chapters C1, C2 and C3. Data on early childhood education refer to ISCED programmes only (ISCED level 01 for early childhood educational development, ISCED level 02 for pre-primary education and ISCED 0 for all programmes). Data on R&D are included in tertiary education, unless otherwise specified.
1. Primary education includes pre-primary programmes.
2. Post-secondary non-tertiary figures are treated as negligible.
3. Upper secondary vocational programmes include lower secondary vocational programmes.
4. Year of reference 2020.
5. Data do not cover day care centres and integrated centres for early childhood education.
Table C4.2. Distribution of sources of total government funds devoted to education, by level of government (2021)
Note: Columns showing the distribution for early childhood education are available for consultation on line (see StatLink). Data on R&D are included in tertiary education, unless otherwise specified.
1. Primary education includes pre-primary and lower secondary programmes.
2. Year of reference 2020.
3. Data do not cover day care centres and integrated centres for early childhood education. Data on tertiary education include some expenditure on ISCED 3 and ISCED 4.
Table C4.3. Change in government expenditure on education as a percentage of total government expenditure between 2015 and 2021
Note: The government expenditure presented in this table includes both government transfers and payments to the non-educational private sector which are attributable to educational institutions, and those to households for living costs, which are not spent in educational institutions. Therefore, the figures presented here (before transfers) exceed those for government spending on institutions found in Chapters C1, C2 and C3 Data on R&D are included in tertiary education, unless otherwise specified. Some levels of education are included in others. Refer to “x” and “d” codes in Table C4.1 for details.
1. Primary education includes pre-primary programmes.
See Definitions and Methodology sections and Education at a Glance 2024 Sources Methodologies and Technical Notes (https://doi.org/10.1787/e7d20315-en) for more information.
Data and more breakdowns are available on the OECD Data Explorer (http://data-explorer.oecd.org/s/4s).
Please refer to the Reader's Guide for information concerning symbols for missing data and abbreviations.