Local governments slow in disbursing pre-school education subsidies amid fiscal strain

Local governments are again proving to be a bottleneck in Beijing's efforts to ease households' financial burdens.

Quick recap: In August, the State Council announced that starting September, the government would fully subsidize student fees for children in their final year of kindergarten.

• The plan is for the central government to cover 50-80% of the funding (depending on the region), with local governments covering the rest.

According to a recent survey by think tank Yiyang Education, of 300 cities nationwide, nearly two-thirds have not issued any subsidies, or have only issued subsidies in certain districts.

• As a result, schools that have not yet received subsidies have had to either collect fees from parents and promise to return them later or cover the fees with their own funds.

Tight local government finances are likely the main reason for the subsidy no-show:

• According to a Shandong official, the central subsidies have been allocated, but some city-, district-, and county-level governments have not yet marshaled their co-funding.
• Officials in an unnamed Jiangsu city reported a similar situation.

Get smart: Local implementation gaps risk neutralizing the policy’s intended impact, limiting both the relief to households and the hoped-for boost to consumption.

The upshot: If local governments can’t execute even modest matching-fund programs, the center’s efforts to ease household burdens will keep stalling at the point of delivery.

• That raises the risk that future social policy initiatives will underperform unless Beijing either shoulders more of the fiscal load or finds a way to repair local balance sheets.