For discussion FCR(96-97)10
on 10 May 1996
ITEM FOR FINANCE COMMITTEE
HEAD 40 - EDUCATION DEPARTMENT
Subhead 326 Kindergarten Subsidy Scheme
Members are invited to approve -
- an increase in the rate of subsidy to eligible kindergartens under the Kindergarten Subsidy Scheme from $695 per pupil per annum for the 1995-96 school year to $790 per pupil per annum starting from September 1996; and
- the delegation of authority to the Secretary for the Treasury to approve annually in future revision of the rate of the subsidy in accordance with the movement of the Consumer Price Index (A) plus a factor of 5% to take account of teachers annual salary increment.
The current rate of the Kindergarten Subsidy Scheme (KSS) is not sufficiently attractive to kindergartens (KGs) and requires improvement.
2. The Secretary for Education and Manpower (SEM) proposes, with effect from September 1996, to -
- increase the rate of subsidy under the KSS from $695 per pupil per annum (pppa) to $790 pppa; and
- delegate to the Secretary for the Treasury (S for Tsy) the authority to approve annually the future revision of the rate of the subsidy in accordance with the movement of the Consumer Price Index (A) (CPI(A)) plus a factor of 5% to take account of teachers annual salary increment.
3. We introduced the KSS in September 1995. Under the Scheme, we pay a direct subsidy to KGs meeting certain specified conditions at the rate of $695 pppa. This rate of subsidy is set at 10% of the weighted average fee of non-profit making (NPM) KGs in the preceding school year. A total of 236 KGs joined the KSS in the 1995-96 school year. This falls short of our original estimate that 400 (74%) eligible KGs might join the Scheme.
4. The Education Department has recently completed a review of the Scheme. As part of the review, it carried out an opinion survey amongst all KGs. The review findings showed that KG operators were concerned that adjusting the rate of subsidy solely to reflect CPI(A) movements would provide no real increase in financial support to meet essential operating requirements such as salary increments for staff according to the Government recommended salary scales.
5. Having considered carefully the views and suggestions obtained from the review, we consider it reasonable that the annual adjustment to the rate of subsidy should take account of the annual salary increment for teachers. We therefore recommend to adjust the subsidy for the 1996-97 school year by an increase in CPI(A)1 plus a factor of 5% to take account of the annual salary increment of trained KG teachers. SEM considers it necessary to make an allowance for teachers salary increment in initial years as KGs joining the KSS are required to recruit trained teachers and pay them in accordance with a recommended pay scale. Given that the Scheme is relatively new and most teachers are joining at the bottom of the recommended salary scale, the KGs would have to give salary increments to their trained teachers and would incur a higher expenditure. The adjustment factor of 5% represents an average rate of increase in personnel expenditure arising from annual increments taking into account anticipated wastage rates. However, we shall have to review this adjustment factor in future when many KG teachers are at or approaching the maximum point of the salary scale.
6. Based on the new formula, SEM proposes that the rate of subsidy pppa for the 1996-97 school year should be revised to $790 worked out as
$695 x (1 + 8.9% + 5%) = $792 say $790
This represents a 14% increase over the current rate.
7. At the meeting of the Finance Committee on 16 June 1995, Members delegated to S for Tsy the authority to revise the rate of the subsidy under the KSS in accordance with the movement of the CPI(A) vide FCR(95-96)26. Subject to Members approval of the proposed improvement to take account of teachers salary increment in the annual revision of the rate of the subsidy, we propose that S for Tsy be delegated the authority to approve the annual revision of the rate of the subsidy in accordance with the movement of the CPI(A) plus the 5% salary increment factor. The delegation is limited to annual adjustments in accordance with this formula. We shall seek Members approval of any future changes to the adjustment formula.
8. For the 1995-96 school year, under the present Scheme, the cut-off point of eligibility for KGs to join the KSS is $8,300 pppa2 . This represents 1.2 times the weighted average school fee of NPM KGs in the 1994-95 school year. For KGs which have joined the KSS, the increase in staff costs for meeting the minimum 40% trained teacher requirement and paying teachers in accordance with the recommended salary scales could create pressure for some KGs to increase school fees at a rate higher than inflation. Consequently, these KGs may fall outside the eligibility net if the cut-off point is only revised according to inflation.
9. To enable more KGs to benefit from the KSS, we propose to raise the cut-off point to 1.5 times the weighted average school fee of NPM KGs for the preceding school year ($7,788 for the 1995-96 school year). The cut-off point for the 1996-97 school year will therefore be set at $11,700. This represents a 41% increase over the existing cut-off point.
10. We estimate that about 90% of KGs (comprising 95% of NPM KGs and 79% of profit-making (PM) KGs) will be eligible for the KSS in the coming school year under this proposal. The remaining 10% of KGs are likely to be charging comparatively higher school fees, and they should be able to absorb through their school fee income the additional expenses arising from improvements to the trained teacher ratio. We therefore do not intend to direct our limited resources to this group.
11. To streamline the operation of the Scheme, we shall also make various other improvements to the administrative arrangements. These include the setting up of a Vetting Committee to decide on special and appeal cases, and an advancement in the timing for the second payment of the subsidy from May to April each year.
12. We intend to conduct a comprehensive review in the 1998-99 school year, i.e. after we have implemented the Scheme for three years to take stock of how well the Scheme has been operating. We shall also review the formula for the annual revision of the rate of subsidy, including the 5% adjustment factor for salary increments.
13. Based on the opinion survey as mentioned in paragraph 4, and taking into account the improvement to the Scheme as set out in paragraphs 6 and 9 and the more favourable response expected from eligible KGs, the Director of Education anticipates that 75% of eligible NPM KGs and 20% of eligible PM KGs would apply for the subsidy. We estimate the full year expenditure for the Scheme to be $73.5 million and the requirement for the 1996-97 financial year to be $61.05 million as follows -
Subsidy to NPM KGs
Subsidy to PM KGs
We have included sufficient provision in the 1996-97 Estimates under Head 40 Education Department Subhead 326 Kindergarten Subsidy Scheme to finance the improved Scheme.
14. In order to improve the quality of KG education, the Government has implemented in 1995 a new regulatory requirement that at least 40% of the teachers in each KG should have completed the basic training course (Qualified Assistant Kindergarten Teacher Course) by September 1995 and the advanced training course (Qualified Kindergarten Teacher Course) by September 1997. We introduced he KSS in September 1995 to provide a direct subsidy to KGs to enable them to employ trained teachers and to pay them the recommended salaries without raising school fees substantially.
15. As at September 1995, there were 731 KGs, of which 425 (58%) were NPM and 306 (42%) were PM. The total enrolment was 180 317 pupils, representing 80% of children aged three to five in Hong Kong. The remaining 20% of the age group either attended child care centres or were cared for at home.
Education and Manpower Branch
1 -- The average CPI(A) for the period September 1994 to August 1995 has increased by 8.9% as compared with the period September 1993 to August 1994.
2 -- To be eligible for Government subsidy under the Scheme in the 1995-96 school year, a kindergarten must be charging school fee at a level not higher than $8,300 per pupil per annum for a half-day session in the 1994-95 school year.
Last Updated on 2 December 1998