# **5 The Fiscal Cost of Weak Governance**

# **5.1 The Fiscal Cost of Teacher Absence**

High levels of teacher absence translate into considerable waste of public funds since teacher salaries are the largest component of education spending in most countries, including India.<sup>26</sup> Calculating these fiscal costs requires us to estimate and exclude the extent of legitimate absence from our calculations. As part of the institutional background work for this project, we obtained teacher policy documents from several states across India. Analysis of these documents indicates that the annual allowance for personal and sick leave is 5 percent on average across states. This is close to the survey estimate of 5.9 percent (Table 3), but we use the official data since the stated reasons may be over-reported. Estimating the extent of legitimate absence due to ‘official duty’ (outside the school) is more difficult because there are no standard figures for the ‘expected’ level of teacher absence for official duties. Policy norms prescribe minimal disruption to teachers during the school day and stipulate that meetings and trainings be carried out on non-school days or outside school hours. Since we are not able to verify the claim that teachers were on official duty, and there is evidence that head teachers try to cover up for teacher absences by claiming that these are due to ‘official duties’, our default estimate treats half of these cases as legitimate. This gives us a base case of legitimate absence of 8 percent (5 percent authorized leave, and 3 percent official duty). We also consider a more conservative case where the legitimate rate of absence is 10 percent. This 8-10 percent range of legitimate absence also makes sense because the fraction of teacher observations that are classified as either ‘authorized leave’ or ‘official duty’ is in this range for the five states with the lowest overall absence rates - even treating the stated reasons for absence as being fully true (tables available on request).

To estimate the cost of teacher absence, we use teacher salary data from our surveys and use administrative (DISE) data on the number of primary school teachers by state (Table 9 - columns 1 and 2).<sup>27</sup> We provide three estimates of the fiscal cost of teacher absence in columns 3 to 5 of Table 9 (based on assuming the rate of legitimate teacher absence to be 8, 9, and 10 percent respectively), and these calculations suggest that the annual fiscal cost of teacher absence is around Rs.81-93 billion (US$1.4-1.6 billion/year at 2010 exchange rates).

> 26This waste is especially costly in low-income countries because they typically have low tax/GDP ratios and hence face greater fiscal constraints on mobilizing resources for public investment.

> 27The salary figures in our surveys do not include the fiscal cost of the benefits provided to civil service teachers. Imputing the value of these benefits is difficult for the majority of teachers who are on a defined benefits pension program. However, newer cohorts of government employees are covered by a (less generous) defined contribution retirement program where the government contributes 10% of pay to a retirement account. We use this conservative estimate and add 10% to the average salary figures. No adjustment is made for medical

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