A theme that has been emerging on this blog in the past month has been the curious case of the School Management Committees (SMCs) – the last but crucial leg of the quality education marathon. Laina Emmanuel and Yamini Aiyar(1) have discussed both problems and solutions to the problems that the SMCs face, namely those of understanding responsibilities and roles, and of implementing plans. Here, we can see two types of issues- one is empowering the SMCs, and Yamini Aiyar suggests a few interventions to aid capacity building. Additionally, the other problem relates to increasing the accountability of these SMCs towards the community and the children, and to incentivising their proper functioning. If we want a truly decentralised system, as the RTE mandate suggests(2), we require decentralized accountability as well as better incentives which would push SMCs to perform better. The decentralised accountability would be in addition to the centralized monitoring (say, through real-time management information systems, as Yamini Aiyar suggests), and would involve the communities keeping SMCs in check. This would create a more holistic form of accountability with pressures from both top and bottom. Along with accountability, incentivising better SMC functioning would be also critical.

Some interesting solutions to SMC functioning problemswere suggested by a World Bank paper, which was shared last week(3). This paper detailed a set of experiments that were carried out in Indonesia regarding forms of community participation in School Committees (the equivalent of SMCs), and its impact on quality education. The researchers conducted two unique interventions. Firstly, they tried to increase the legitimacy of school committee members by conducting elections for these posts. Secondly, a planning process, which linked the school committee members and democratically elected village council members, was promoted. These two measures were found to be positively related to learning levels, compared to other common forms of engagement, like grants and training. These measures sought to form a bridge between the community and the school committee. Perhaps such interventions hold some answers for us as they have made the SMCs stronger and improved their functioning.

The challenge of empowering SMCs, mirrored the challenges in empowering Gram Panchayats, a crucial last step in another decentralised chain. Gram Panchayats were given constitutional status in 1992 with the 73^rd Constitutional Amendment Act. Following this, the eleventh schedule of the Constitution listed 29 subjects appropriate for devolution to Panchayats, and directed all states to develop their own Panchayat legislations that decentralise planning and devolve powers to these local self governments.

The 3Fs (Functions, Finances, Functionaries) of decentralisation are extremely important in the Panchayat devolution process. The Ministry of Panchayati Raj uses a devolution index to rank and reward states in terms of how well they have devolved powers to the Panchayats(4) . The overall averages show that financial devolution lags far behind functional devolution.

Let me explain financial devolution in more detail

According to the Act, finances could be made available to Panchayats in the following ways-

1. Assigned and devolved revenues are accessible to them through the state government.

1. The assigned revenues are those that are directly due to them from the State Government through tax collection carried out by the State Government.
2. Devolved revenues are direct grants by the state, based on State Finance Commission’s (SFC) recommendations.

1. Scheme based funds (like those for the National Rural Employment Guarantee Programme)
2. Other funds can also be generated through tax and fees collection from the villages. These Own Source Revenues (OSR) can then be utilised in any form by the Panchayats, based on their given functions.

So the devolution index shows that while the roles of Panchayats have been defined well, the independence in receipts and expenditure is not as strong. The Panchayats still receive mostly tied grants from the centre and the state (tied grants are those grants which have a preset purpose and the Panchayats do not have the power to use them independently). This is similar to the case of SMCs, where usage of less than 10% of the funds is decided by the SMCs. Similarities between SMCs and Gram Panchayats made me wonder if there might be some lessons for SMCs from Gram Panchayats.

Published earlier this year, a paper(5) discusses the financial devolution to Panchayats in Tamil Nadu (specifically in 3 districts). The paper finds that these taxes, for OSR, are not seriously imposed by the Panchayats. Flat rates for house tax have been followed, irrespective of size (despite the fact that the act recommends plinth area and house type be used), and these rates have remained constant over a period of time. Even the collections do not seem to be efficient (lack of man power and operational difficulties hamper the process reduce the total possible collection),and under-collection is quite common.

As the funding of the Panchayats is not contingent on performance, they do not have enough incentive to focus on local infrastructure and services. They receive their devolved funds irrespective of the quality of services provided. The authors argue that accountability is compromised as the Panchayats look to the Sate and Centre for funds and neglect local residents needs. Thus, a perverse incentive structure is formed, where the community suffers due to lack of development and the Panchayat is incentivised to continue along this path. The authors also find that the tied funds tend to be spent more than the untied ones (a finding that AI’s paper on Gram Panchayat fund usage corroborates(6)). The local officials know that they will be better served spending the scheme based funds from higher-ups, as this usage ensures a constant supply of money for them. If they do decide to tax the locals more, they run the risk of a political backlash. So, they choose to use the tied funds more. Further, the local residents, also, prefer this structure to more taxes and fees.

We see that there is less accountability for Gram Panchayats as the community does not contribute much directly through taxes or fees, so they are less concerned with their operation. Hence, development work which is not directly tied to orders from higher bodies is neglected and this is reflected in the status of basic infrastructure. The authors suggest two reforms which might help in overcoming the problem;

Firstly, they acknowledge the need for positive incentive for improved performance and suggest a form of ranking of Panchayats to generate competition amongst them. The rankings would then be disseminated amongst the community so that a village can judge how well their Panchayat is performing in comparison to others; this would increase accountability and bring in greater transparency.

Secondly, the SFC can suggest tax bands which the Panchayats must use; this would ensure at least a minimum supply of funds for the Panchayats.

There are largely tied funds which flow down to the SMC, even with these funds, the accountability is mainly about whether they are being spent or not and rarely about how well they are being used. To gauge how well they are being used and to create a system where negligence is overcome, the community needs to be more active and the school committee needs to have more legitimacy. If we look at some of the solutions suggested for Gram Panchayats – a ranking of the SMCs and their performance (possibly prepared by State rural development departments and research institutes), followed by dissemination of this information, through NGOs, might bring about greater accountability. The community would be able to see where their SMC is falling short in comparison to other SMCs and demand a certain level of functioning. Along with this, some monetary incentives for better performing SMCs would serve to foster competition for improved performance.

Another way could possibly be to give the community a larger stake in this process (say through cash contributions or contributions in kind, similar to OSRs but on a smaller scale). They already participate in terms of monitoring and in some cases, they also contribute in kind and cash, although such contributions are not compulsory.

So the question is – would communities which have such a stake in the process be more inclined to hold SMCs accountable, with regard to delivering better quality education, thereby improving SMC performance? We would need to corroborate such a theory with data on whether community contributions improve the functioning of SMCs. In fact, we have collected data on community contributions in our PAISA survey. It would be interesting to see if there exists a correlation between these contributions and functioning of SMCs. The only variable which can currently be used (from the PAISA survey) to assess the functioning of SMCs is how regularly they meet. This variable will not give us a full picture of how well an SMC functions, but it would be an interesting starting point to test out this theory. A correlation between these variables would provide us with an initial indication of how strong this relation is (if, at all, there exists one). We can also study what would be a better dataset to analyse such a theory. This is what I intend to explore in part 2.