Republic of Montenegro: Public Expenditure and ... - Vlada Crne Gore

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Chapter 2: Composition of Public Expenditure and
Key Sources of Fiscal Pressure
2.53 While data are not available to quantify the costs, such a shift towards general
education is likely to be cost-saving for Montenegro. In all countries for which there is data,
vocational education is more expensive than general education because of the additional material
costs, more expensive equipment, and lower pupil-teacher ratios. Unfortunately, the data is not
available in Montenegro to quantify the additional cost of vocational education; in other
countries, the costs are typically more than twice as much per student. Such a shift would also
put Montenegro in a better position to use EU funds for reform of vocational education more
effectively.
Scaling Back on the School Reform
2.54 Although not the preferred option, the government could also meet the fiscal costs of
reform schools by slowing down the rate at which new schools join the reform process and/
or reducing the level of inputs provided to each school. Annex 3 shows an alternative
scenario, where the pace of reform is slowed and whereby the last set of schools is brought in
2011 rather than in 2009. This would reduce spending in 2007 and 2008 to €4.6m and €4.5m
respectively (rather than €6.0m and €5.5m). A second choice, though with adverse equity
implications, is to reduce the level of inputs for the reform, in particular renovation and
computers, which are the big drivers of costs. Given that considerable renovation costs have
already been spent, a reduction in the purchase of computers would make the reform
significantly more affordable and continue the other interventions which will improve the quality
of education. Reducing the money spent on computers by half would save €1.48 m in 2007 and
€1.35m in 2008 (€6.1m over the Plan period and €7.3m overall up to 2012), also this would also
result in a significant reduction overall in the number of pupils per computer. If both
approaches—slowing the pace of reform and reducing computers—were adopted, the total
savings in 2007 and 2008 would be €2.9m and €2.3m respectively and these would be more than
enough to cover the gap between expected budget allocations and the costs of reform (see Table
2.13 above). Yet, it should be underlined that the costs are only those associated with the reform
schools. To meet the larger costs associated with the priorities in the Strategic Plan, it is even
more important the Government pursues the school network consolidation and vocational
reforms discussed above.
Implementing the Cost Saving Measures
2.55 Montenegro faces some painful choices in the short and medium term. Its school
reform agenda, which is modeled on good practice in other countries in terms of approaches and
sequencing, is threatened by salary increases for staff. As shown above, there are potentially
significant savings to be made in the sector, which could be achieved without reducing
educational quality and in some cases, such as closing small schools, improve it. While it is
theoretically possible to reduce the number of staff and the number of schools without leading to
a significant deterioration in access to or the quality of schooling, the way that these efficiency
gains would be achieved does, however, have an important impact on the success of the changes.
2.56 Offering voluntary redundancies to teachers and other staff as is currently done
may not be sustainable as student numbers fall. There are several issues. First, the current
scheme, with payments of €2,000 per person, significantly reduces the fiscal savings. Second, it
is likely that, under a voluntary scheme, those with most skills to offer (and therefore likely to be