of the budget would need to be reallocated to the education sector in order for the budget is to reach the 20 percent benchmark.

**Figure 4** Central and Sub-National Budget Allocations to the Education Sector (2006)

<!-- Start of picture text --> 25 60%<br>Education Routine Additional required to Overal education<br>20 Salaries and development spending Excluding Salaries reach 20% excluding salaries = share if mandate is fulfilled<br>40%<br>15 Additional<br>required to<br>reach 20% 20%<br>10<br>0%<br>5 1 2 3 4<br>Others SalariesOther Routine<br>Capital Spending<br>-<br>% of central expenditures<br><!-- End of picture text --> <!-- Start of picture text --> World Bank staff estimates<br><!-- End of picture text --> _Source:_ World Bank staff estimates _Note_ : The estimation for central government includes all components if of the functional classification, that is, sub-functions 10.0110.90. The personnel spending part of the bar aggregates personnel spending from each one of the education sub-functions.

Implementing the 20 percent rule within the current definition is unrealistic and problematic at the same time. Although the education 20 percent “rule” is still open for interpretation, various ways of computing the ratio have been examined. Most of them indicate that allocating 20 percent at the central or sub-national level, excluding salary expenditures appears unfeasible (see annex 8 for a simulation of education spending ratios under alternative definitions).

- At the central level, the 2006 budget allocates an estimated 9.4 percent of the budget in education (Rp. 44.1 trillion). Excluding personnel spending, this share declines to approximately 6.7 percent (Table 8).

- At the sub-national level, in 2005, education expenditures accounted for 26 percent of the sub-national total expenditures (Rp. 46 Tr. from a total sub-national spending––APBD I + APBD II––of Rp. 172 trillion). Yet, as much as 78 percent of this amount was absorbed by personnel expenses. Excluding personnel spending, education sub-national spending accounts for only 6.1 percent of total sub-national expenditures (Table 8).

- If the education programs from all levels of government, all line ministries, and other government institutions, as well as spending on salaries were counted as education expenditures, the share of national education spending in the national budget (APBN + APBD I + APBD II) was 16.5 percent in 2006 (Table 8).

Excluding personnel expenditures, national and sub-national education spending is significantly lower than the target stipulated by the Education Law. Note, however, that since decentralization of education service delivery, which became effective in 2001, teachers’ salaries constitute the major share of sub-national expenditures on education. If local governments would allocate the additional Rp. 21 trillion necessary to reach the 20 percent target, excluding teachers’ salaries, the overall share of education spending at the sub-national level would account for as much as 45 percent of the total APBD. To increase the share of education spending in APBD net of salaries, districts and provinces would need to make significant reductions in the shares of other sectors. Doing so may not be politically possible or desirable on several grounds.

13