**Table 10** District Expenditures <u>on Education Per Poverty Quintile</u>

|**District Quintile**|**Per Capita To**<br>**Expendi**<br>|**tal District**<br>**ture**<br>|**Education E**<br>**per Public Sch**<br>|**xpenditure**<br>**ool Student**<br>|**Education**<br>**Overa**<br>**Expendi**<br>|**as % of**<br>**ll**<br>**tures**<br>|**Non-pers**<br>**Ed. As %**<br>**Expend**<br>|**onnel**<br>**Total**<br>**iture**<br>|
|---|---|---|---|---|---|---|---|---|
||**2001 **|**2004 **|**2001 **|**2004 **|**2001 **|**2004 **|**2001 **|**2004 **|
|Poorest|362,803|483,267|971,317|1,352,035|40.2|36.7|4.2|3.0|
|2|453,519|691,846|823,586|1,211,916|39.7|37.7|4.5|4.9|
|3|526,457|579,376|880,106|1,144,265|40.6|34.5|6.5|3.1|
|4|537,909|655,543|991,885|1,382,091|37.0|34.0|4.6|6.3|
|Richest|1,060,905|899,397|953,344|1,551,652|32.0|32.1|4.8|3.4|
|**All**|**551,528**|**658,103**|**923,330**|**1,323,301 **|**37.9**|**35.0**|**4.9**|**4.1 **|

_Source_ : World Bank district expenditure data, 2001-2004 Education spending patterns at the district level indicate that rich districts have not only higher per-capita expenditure on education but also higher per-student expenditure. The latter can in part be explained by the fact that richer districts have more students in higher levels of education where unit costs tend to be higher. An overview of expenditure by poverty quintile at the district level reveals that rich districts (particularly quintiles 4 and 5) tend to spend more on education per student, but the poorest districts are not too far behind (Table 10).

Poorer districts tend to exert a greater fiscal effort as they allocate a higher proportion of their budgets to the sector (34 percent in poorest districts vs. 31 percent in richest districts). The 40 percent poorest districts spend, on average, 35.4 percent of their budget in education, while the richer districts spend 31.5 percent. The distribution of each district’s budget share in education aggregated by quintiles (based on poverty rates and household consumption) depicts that a greater number of districts in the lower quintiles have education spending shares above the national average of 34 percent (Figure 7).

Figure 7 Percent of District Expenditure on Education by District Poverty Quintile <!-- Start of picture text --> 70%<br>60% Average 33.7%<br>50%<br>40%<br>30%<br>20%<br>10%<br>0%<br>Poorest 2 3 4 Richest<br><!-- End of picture text --> _Source:_ World Bank district expenditure data. _Note:_ based on data of 350 districts; newer districts tend to not have data. Quintiles based on 2004 BPS poverty quintiles 77 Hence, poorer districts are not necessarily lagging behind due to insufficient spending as a share of their budgets. Rather, inequalities likely result from lower overall allocations to the sector. Thus, an increase in their overall budget levels might be desirable. This increase could be combined with a continued effort to spend reasonable budget shares on the education sector.

# **4. Education Public Expenditures, Efficiency, and Outcomes**

Although education budgets are increasing, Indonesia’s extremely low student-teacher ratios (STR) suggest inefficiencies in sector spending. While low STRs provide the potential quality 17