Analysts reject proposed bigger education budget
Urip Hudiono, The Jakarta Post/Jakarta
While welcoming the Constitutional Court's ruling that mandates an increase in the education budget, economists are saying that full implementation would not be fiscally viable at present due to the state budget's many limitations.
Economist Faisal Basri said a 20 percent allocation for the education sector -- as stipulated in the Constitution and recently upheld by the Court -- would mean the government would have to provide up to Rp 110 trillion (some US$11 billion) in funds, assuming next year's expenditures at some Rp 550 trillion -- an amount that would be difficult to work into the current budget structure.
"Of course the government can reallocate its spending for this, but what use would it be if more goes to education, but we take away from infrastructure and health, for example," the economist from the University of Indonesia (UI) said.
"Reducing fuel subsidies and debt payments, meanwhile, also have their own economic and political complications."
Sri Adiningsih from Gadjah Mada University mentioned how swapping fuel subsidies for more education funds -- by allowing another fuel price hike -- could hurt the economy, referring to how the recent rise in inflation and interest rates from the latest hike would likely stifle growth and push up the jobless numbers.
Meanwhile, concerning the option of meeting the requirement simply by raising expenditures for education at the expense of a wider budget deficit, both Faisal and Sri Adiningsih said that it too had its fiscal risks.
"With allocations for education now standing at some Rp 40 trillion, an additional Rp 70 trillion would translate into a deficit of some 3 percent of the gross domestic product (GDP), which is not good in terms of fiscal sustainability, particularly if the government fails to finance it," he said.
The best that the government could do, Faisal said, is to gradually increase the allocation as it had planned to do -- citing a 50 percent budget increase next year to Rp 60 trillion with a tolerable 1.5-percent deficit.
The government had said it would only be able to increase the education budget by an average of 3 percent each year until it reaches 20.1 percent in 2009.
While the options are limited on the spending side, Chatib Basri, who is also from UI and an advisor at the Office of the Coordinating Minister for the Economy, said the government had at present few options to increase revenue, other than boosting tax collection and proceeding with the privatization of state-owned enterprises.
"Taxing too much could, however, hurt businesses and the whole economy, while I don't think proceeds from the selling of state assets would amount to that much, apart from likely objections the public," he said, adding that the government's planned allocation of between 12 and 14 percent for next year would still be feasible.
Nevertheless, Faisal, Chatib and Sri Adiningsih, were all of the opinion that the education budget must indeed be increased further if this country wants to improve its human resources.
"The Court's ruling should be seen as a wake-up call for the government to change its paradigm and priorities in drafting the state budget and providing more for human-resource development," Sri said.
Faisal, meanwhile, suggested a more output-oriented paradigm -- rather than an input-oriented one -- for the educational sector, linking its financial support to what is actually needed.
"Why provide so much money in advance, if we are actually not prepared in the way we will spend it wisely for the betterment of our nation's education system?" he said.