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THE COSTED NORMS APPROACH AS APPLIED TO THE SOCIAL SECTOR In this section, prototype formulae are presented for the socialsector components of the provincial equitable share allocation,namely education, welfare, and health. It is necessary, over time, to define more precisely whatconstitutes “basic services” in education, welfare, and health. Asnoted in Section 4, in many instances national norms andstandards are not in place. It therefore becomes difficult to The key question is, how
assess the service level that is constitutionally guaranteed. For much does it cost each
example, the government must confront decisions on: province to achieve basic
levels of educational
whether South African children should be provided with an attainment, social welfare,
education that would allow them to achieve, say, a tenth- and health care?
grade reading level or some other benchmark; whether education of sufficient quality should be providedto allow every school to achieve a set minimum pass rate,such as 65 per cent, on the matriculation examination; whether in the health sector, basic services should bedefined to include pre-natal care for every pregnant womanin South Africa; and whether access to primary care within an hour of one’shome should be the standard. In order to overcome the absence of comprehensive norms andstandards regimes in the three key social sectors, the formulaeproposed here have been constructed with a significant degreeof flexibility. The allocation that each formula will deliver maybe varied by adjusting a series of policy/technical parameters. This Report will only show a single total allocation for each ofthe three social sector components. This “benchmark” allocationreflects the use, in the formulae, of policy/technical parametersthat are consistent with the FFC’s judgement of what is areasonable starting point. The particular parameters can beadjusted to produce equitable share allocations that moreclosely reflect the preferences of national and provincialgovernments.
Once decisions have been made about the appropriate publicservice outputs that will define basic services in the areas ofeducation, welfare, and health, the costed norms approachrequires that the financial resources needed to achieve thesebasic public output goals must be quantified for each province.
In other words, how much does it cost each province toachieve basic levels of educational attainment, social welfare,and health care? Preliminary Recommendations for 2001 The key consideration in calculating costs of delivering anypublic service is to include only those expenditures that reflectfactors that are beyond the influence of provincial authorities.
Thus economic and social conditions in a province, whichresult in higher rates of disease, will increase health care costs.
Provincial health authorities are unable (in anything but thevery long term) to influence these conditions. On the otherhand, actual provincial spending on health care may reflect notonly the underlying economic and social conditions, but also Provinces could choose to
inefficient government behaviour due to inadequate provide higher-than-basic
levels of services, but the
financing for these services
Cost estimates should not simply mirror past expenditure would have to come from
patterns. Historical patterns of spending may be higher in some provincial governments’
provinces than in others. This is often explained by the own-source revenues.
efficiency with which services are delivered. Spending may alsovary because some provinces provide higher than averagelevels of services. Finally, spending may vary because the costsof providing a given level of service are higher due touncontrollable outside factors. Under the costed normsapproach, only the uncontrollable factors should affect theequitable share. If instead allocations are based on historicalexpenditure patterns, each province’s share will be determinedby all of these factors. Provinces that are relatively inefficient inservice delivery will have little incentive to reduce inefficiencies;and funds will be directed towards provinces which exceedbasic service levels, at the expense of provinces that haveinsufficient revenues to meet their constitutionally prescribedbasic service goals. It is therefore important to use an objectivemeasure of the costs of providing basic services as the basis forthe horizontal allocation of the equitable share. It is important to emphasise that input standards are used in theallocation of the equitable share as proxies for public sectoroutput measures. Provincial governments must be informed thatinput standards are not to be interpreted as policy prescriptions.
Each provincial government must determine for itself, based onlocal conditions, the best way to achieve education, health care,and welfare service goals. For example, one province maydecide to reduce class sizes, while another province maychoose to have larger class sizes so as to free up funds for thecontinuing education and training of teachers. Only with thepassage of time and the careful assessment of studentperformance in each province will better information evolve onthe most cost-effective ways to improve the quality of educationin South Africa. Lastly, provinces could choose to provide higher-than-basic levelsof services, but the financing for these services would have tocome from provincial governments’ own-source revenues. FFC Consultation Document: February 2000 The goal of the costed norms approach as applied to educationis to determine the minimum amount of money a province mustspend in order to provide its students with a high-quality basiceducation. The definition of basic education must bedetermined by national government. National government mustagree on a national standard (or standards) of studentperformance as measured by student test scores, gradecompletion, or other criteria.
Obviously, the number of students to be educated by aprovince is the first and most important determinant of thatprovince’s education costs. Any given student population,however, can differ in its demographic or socio-economiccomposition. Such differences give rise to differences in averageneeds, which, in turn give rise to significant differences in thecost of education. These demographic factors are well outsidethe ability of any province to influence in the short andmedium term. In other words, the composition of a province’sstudent population must be examined in order to reflect thecosts that province inevitably incurs in meeting minimumstandards established by national government. Suchdemographic factors include: The proportion of special school learners (as opposed toordinary learners) in the student population. There issubstantial evidence that the cost per learner of specialschools for disabled students is much higher than the per-learner cost of ordinary schools. It is important to treatspecial school learners differently from ordinary schoollearners for two reasons. First, there are their uniquecharacteristics referred to implicitly in the Employment ofEducators Act of 1998 pertaining to the post-provisioning forthis group of learners. Second, although the cost ofeducating special learners is not insignificant, their actualnumbers as a percentage of the total learner population isvery small, except in Gauteng, Western Cape and KwaZulu-Natal. Most provinces thus have very little room to influence Children from poor
families require more
resources to achieve
The age structure of the pupil population (primary versus comparable educational
secondary school age). Provinces clearly cannot influence outcomes.
this factor. However, the question of whether costs arehigher in primary or secondary schools is controversial.
Preliminary Recommendations for 2001

Source: http://www.ffc.co.za/docs/2000/norms1.pdf