127In December 2005, the state council issued the “Notification on Deepening
the Reform of Fund Management of Rural Compulsory Education”. This consoli-
dated and refined the principles of shared accountability between different levels.
It thus required governments at different levels to “divide responsibilities clearly
at all levels, central and local governments were to share responsibility together,
enhance the level of guarantee, and organize and implement (universal access) step
by step”. It aimed at ensuring financial security to rural education under a system
of clear rules and responsibilities, fully integrating rural compulsory education
into public fiscal security gradually. It also tried to achieve new balances in invest-
ment and transfers at different levels of development and clarify needs in central,
eastern and western regions. The central state focused on supporting mid and
western parts of China, and giving due support to the difficult areas in the eastern
part.
In June 2006, the Revised Compulsory Education Act was issued. The main
reason for the revision was to solve the problem of lack of funding for rural com-
pulsory education, the relationship between administrative power and financial
power, changing the situation so that those who did the jobs had the money and
vice versa. The “revenue was planned and pooled as a whole by provincial govern-
ments and managed by the county”. It was believed that the pooling at the provin-
cial level could balance the needs between different areas of the province.
The “New Mechanism” has greatly enhanced the financial responsibilities
of the central state for rural compulsory education. In April 2006, the Ministry
of Finance and Ministry of Education issued the “Provisional Management
Methods on Special Allocation Payment of the Central State in the Fiscal Security
Mechanism for Rural Compulsory Education” which clarified that the free text-
books fee, free tuition fee, recurrent funds support, and the construction and main-
tenance of school premises shared by the central government were included in the
national budget. The funds now flow down to the county and the county financial
department allocates funds to the schools based on the school budget.
6.2.4.1 Main Content of the New Mechanism Reforms
There are four main elements to these reforms. Firstly, rural students in basic
education are exempted from tuition and other fees and are provided with free
textbooks. Students from poor families receive living allowances if residing in
boarding schools. The finance for tuition waiver was shared by central and local
governments. In the western region the ratio was 8:2, and in middle region 6:4. In
the eastern region the ratio varies by Province. Free textbooks are funded by the
state in central and western areas, but in the in eastern region, they are the respon-
sibility of local government. Expenditure on living allowances to poor students
lies with local government which determines eligibility, and the amount.
Secondly, the guarantee level of public funds in primary and secondary schools
was determined and published. This means it is clear what the entitlement is to the
average amount of funds per student for public use. The funds needed are shared
6.2 Reform of Management and Fund Guarantee System