Local Government’s Financing for Education in Federalism: An Empirical Study in Nepal.[Unpublished MPhil Dissertation]

Abstract

The financing of education by local government in a federal system is a crucial, emerging, and most discussed issue in Nepal's present context. In the restructured governance system after adopting federalism, the authority and responsibility of secondary-level education were assigned to the local-level government; however, the financing for secondary-level education has still relied on the federation. The local-level government units, such as the Rural Municipality and the Urban Municipalities, do not have adequate funds or revenue-raising resources to finance public education independently; besides that, there is a variance in government budgets and spending on school education at the local level. The variance and disparity in financing education at the local level and local education budgets heavily rely on the federal government’s fiscal transfers, which are considered a central problem of this study. Despite the constitutional commitment to free and quality education for all, the local governments still face challenges in mobilizing sufficient financial resources for education. Therefore, this study was carried out within the theoretical framework of fiscal federalism to examine: (a) the overall education financing trend and status in Nepal, (b) the relationship among the variables related to financing for education of local government in federalism, (c) the contribution of intergovernmental fiscal transfer to the local government’s education budget, (d) the variances and disparities within Nepal’s public education financing of local government units based on the type of local government, geographical region, and provincial territories under the federal system. This study was conducted by applying a quantitative research method from the perspective of the post-positivist paradigm. The fiscal data of 753 municipal units of Nepal were used in this study. The data related to descriptive analysis of education financing were collected from the Ministry of Finance and published reports of the Nepal government, and data for inferential analysis of this study were collected from the public finance management system (PFMS) of Nepal. The PFMS, particularly for local government, is also known as the Subnational Treasury Regulatory Application (SuTRA). The collected data were analyzed in two parts: descriptive analysis and inferential analysis. In the descriptive analysis, the tables, diagrams, and graphs (Figures) were used, and in the inferential analysis, the statistical tools such as Bivariate Correlation, Multiple Regression, and ANOVA were used. The findings of this study reveal that the education budgets and expenditure increased, indicating the Nepalese government has a growing commitment to promoting the education sector to achieve its educational goals. The local government makes a higher contribution to education than the other tiers of government in terms of financing education spending; however, the source of the education budget heavily depends on the federal government. The study also identified a strong correlation between fiscal transfers, revenue sharing, internal revenue of the local level, and education financing among municipalities. This study also found that federal conditional grant transfers are the most influential factor for the education budget of local government compared to nonconditional grants. The findings reveal significant disparity in education financing across local governments of Nepal regarding variances in education budget, intergovernmental fiscal transfer, and revenue generation capacity. The findings of this study can be helpful to policymakers and practitioners involved in the policy formulation of education financing at the local level and the other tiers of government. It contributes to the policy discussion and decision on intergovernmental fiscal transfer and revenue sharing. Similarly, this study also has implications for future researchers who want to study the local government’s financing for education using a quantitative research method.