Decentralization in education: Has the promise of autonomy addressed disparity?
Challenges in education policy implementation under regional autonomy
In our last edition, we discussed SD Inpres, a reform on education policy under a centralized system, instructed by former President Soeharto. After Soeharto stepped down, his successor B.J. Habibie instigated a different large-scale reform: decentralization.
Under Habibie’s rule, Indonesia saw a number of independence movements across the archipelago, causing the then-president to view increased regional autonomy as a tool for maintaining state integrity. Thus started the Reformasi era that ushered in a string of social, political, and economic reforms, all with the foundational goal of establishing a functional democracy.
This piqued our curiosity: how has decentralization impacted our education policymaking? We thought it would be interesting to zoom in on this – in contrast to our last discussion on the centralized SD Inpres approach.
Despite its laudable goal to promote regional autonomy for democratic fairness, Indonesia’s large-scale education decentralization created significant implementation challenges in the education sector.
In this edition of The Reformist, we are taking a closer look at these challenges: from legislative overlap and unequal financial burden on local governments, to the overall inconsistent quality of education.
Reformasi-era regional autonomy
Before we examine education policy in a decentralized policymaking environment, let’s first understand the legal basis of regional autonomy.
There are two main laws relevant to how regional autonomy was adopted: the Regional Autonomy Law (No. 22/1999), and the Fiscal Balance Law (No. 25/1999).
The first law transferred substantial administered authority from the central government to kabupaten (regency)-level governments, granting the local authorities control over public services such as healthcare, education, infrastructure, and local governance.
The Fiscal Balance Law complemented this by allocating regions with a larger share of national revenues, particularly from natural resources, so that local governments could finance their new responsibilities.
Note that these laws transfer power to regencies rather than provinces, which might have seemed to make more sense logistically. This was done perhaps due to fears that provincial-level authorities could use the capital to encourage independence movements.
Provinces only have de facto power under Article 9(2), which means they can only exercise power if a certain regency has yet to do so. Other than that, provincial authorities are responsible for “the powers in government sectors that cross the borders of regencies and cities along with the powers in other specific government sectors” (not expanded upon).
In this sense, although the legislation set a foundation for increased legislation to support regional autonomy, the delineation of power between regional and central authorities was blurry at best.
Under Article 7(1) of the Regional Autonomy Law, central government figures should be responsible for “foreign affairs, defense and security, the administration of justice, monetary and fiscal matters, religion and responsibilities in other sectors,” – of which Article 7(2) expands upon.
Regardless, there is a distinct lack of specificity that limits the understanding of institutional overlap in regional matters.
At its core, the reform followed a residual powers principle, wherein any public task not explicitly reserved for the central government (as outlined in Article 7 above) is left to local governments. It’s hard to argue that this doesn’t lead to some programmatic tensions between national-level and regional-level policies.
Think of Government Regulation on the Division of Affairs between Governments (No. 38/2007), which supports regional autonomy by dividing state responsibilities.
This policy stated that the central government is responsible for setting national policy, guidelines, standards, and criteria for running education at all levels, including the general management of higher education. Concurrently, regional governments are responsible for setting up operational plans, managing pre-schools, and non-formal education.
The vague division of affairs in education policy
The education-specific implementation policy was Government Regulation (Peraturan Pemerintah) No. 20/2003, which established a national education system that sought to “empower societal participation in the provision of education based on regional autonomy” throughout Indonesia, based on the Regional Autonomy Law and the Fiscal Balance Law. However, implementation guidance remained vague.
In Article 4(11), there is a reference to “shared responsibilities” between the central and local government to guarantee education for citizens aged 7 through 15 years old. These “shared rights” include directing, guiding, assisting, and controlling the education provisions according to the existing regulations, but without pointing to any specific pieces of regulation.
This was later complemented by the Regional Authority Law (No. 23/2014), which ensured a clearer division of responsibilities. The curriculum for the elementary and middle school would be set at the regency/city level; for high school and vocational school at the provincial level, and for higher education at the national (central government) level.
Perhaps a more tangible aspect of foundational Regional Autonomy Law can be found in Article 49, which mandates that the allocation to education must be a minimum of 20 percent of the budget from both central and local authorities.
However, this does not always turn out in the ideal way. Let’s illustrate.
The unclear distribution of financial burden
In a 2020 study, the World Bank found that 22 percent (112 of 508) of regencies/cities, and 35 percent (12 of 34) provinces did not fulfill the minimum budget allocation. Of the areas that did meet the minimum allocation, only 70 percent (270 of 388) regencies/cities have more than 95 percent realization rates.
This is echoed on the national level. The realization of the education budget was 18 percent in 2007, dropped to 15.6 percent in 2008, and stayed at around 15-17 percent between 2022 and 2024. In 2025, the education budget was set at Rp724,3 trillion or about 22 percent of the state budget, but the realized figure is expected to remain at 17 percent of the budget.
To make matters worse, the money that does end up being spent doesn’t always reach its target. For example, sekolah kedinasan (government-affiliated academies) falls under education spending. It takes up about 39 percent of the educational budget (Rp104.5 trillion) each year, even though only 13,000 people directly benefited from this budget.
Meanwhile, formal education from elementary to high school—which should be for 62 million students—only takes up 22 percent of the budget (Rp91.2 trillion). So, even though 20 percent of the national budget goes to education, perhaps this isn’t fully realized. And, the money that does make it to the ground… might not even be properly distributed to children in fundamental schooling years.
Did decentralization make the quality of education inconsistent across the country?
Data from shortly after the Reformasi era showed that literacy and enrollment rates did improve on average. However, one must note that they rose at a faster rate before decentralization. Some studies even found average student test scores to decline in the 2000s despite larger local budgets. This is chalked up to a few reasons, including the fact that, quite simply, this education system was already building upon an existing one. But perhaps, most fundamentally, it boils down to technical inconsistencies and deep quality disparities.
Observers note that coordination between the different layers of government (the central, provincial, city, and regency governments) remain weak and “poorly synchronized” to this day.
This weakness has inevitably led to inconsistent quality across regions, particularly between well-resourced and under-resourced regencies. In fact, research has shown that rural areas and less-developed regions lag behind their wealthier counterparts significantly.
Although differences in educational attainment between provinces decreased, the gap on a local level (between cities/regencies) grew larger. This indicates that while the bigger picture of education across provinces is more equal, significant disparities exist between neighboring cities or districts.
Strikingly, the same paper notes that fiscal capacity does not automatically translate to better educational outcomes. Instead, factors relating to economic development and urban infrastructure are significantly important for improving education. The World Bank complements this finding by suggesting that stronger education governance allows for more qualified teachers to work, leading to better student achievement.
The elephant in the room: Corruption in the education sector
The local governments receive the School Operational Assistance Fund (Bantuan Operasional Sekolah, or BOS) from the state budget under a decentralised framework. But weak regional oversight makes it easier for misuse of funds to happen before the money even reaches the classroom. This is evident, given the fact that corruption cases in the education sector are one of the most frequently-identified and frequently-prosecuted cases by the KPK.
A 2024 report by the KPK notes that 13.39 percent of the sampled schools receiving BOS funds admitted that their use of BOS funds did not align with the designated purposes. Misuse of BOS funds in primary and secondary educational institutions included:
extortion, deductions, or levies reported in 8.74 percent of schools;
nepotism in procurement processes affecting 20.52 percent of schools;
inflated costs of fund utilization in 30.83 percent of schools; and
other forms of misuse in 39.91 percent of schools
In this sense, despite a hypothetical 20 percent budget allocation, there is still a clear disconnect between the money being theoretically committed to education versus the money that reaches students.
Decentralization in education: Empowerment vs. unaddressed disparities
Decentralization has facilitated the regional autonomy that perhaps defines Indonesian democracy. There is no doubt that it has contributed to empowering local-first governance solutions. However, it has also produced a financially chaotic approach to education policy, which also leads to significant disparities in the resulting quality of educational outcomes.
Among other things, there are several key policy approaches that can be applied:
First, there needs to be a clearer reassessment of local capacities to deliver education service. This would allow for a better distribution of resources, as well as precise targeting of curriculum strengthening.
Second, target money where children actually are. Make a minimum allocation for students from elementary through high school, rather than sekolah kedinasan.
Last of all, the government could entertain strengthening accountability through a variety of technological (or non-technological) solutions.
Ultimately, the impact of decentralization on education is a double-edged sword. It has allowed for higher literacy and enrollment rates, yet faces challenges in corruption, financial fragmentation, and inequality in educational outcomes. The challenge for future governments is clear: maintaining regional autonomy while enforcing clear coordination with other layers of government, so that schools can be of more consistent quality throughout the archipelago.
Finally, the long-awaited piece you guys mentioned earlier. If I may, let me add some points and discussions to enrich this post, related to decentralization.
Actually, I am not a fan of treating local government capacity as an umbrella theory for all the problems of policy implementation at the regional level. Sure, it is true that the devolution of authority happened abruptly without much consideration for the ability, condition, and constraints faced by the regions. Some regions also struggle with internal issues such as collective corruption, mob mentality, and a tendency to play the victim instead of maximizing the authority they already have.
But we also need to be proportional in noting that education policy is one of the most frequently shifting policies, full of innovations that do not take root on local context, and rely heavily on trial and error approach, yet never followed by proper facilitation or strong guidance for teachers. Within the span of a single child’s school years, how many times does education policy change? Not to mention the habits, understanding, and "dispositions" of teachers themselves. How can a teacher carry out the mandate of education policy if that mandate itself is filled with uncertainty?
I see a trend within the decentralization framework where the central government tends to assume that information is transmitted perfectly. Worse, the central government often thinks that local governments are supposed to share the same perspective as the center. As a result, when a local government agency such as the education office questions or seeks clarification on a policy, they are often labeled as failing to implement the regulation and end up being antagonized.
Yet many regulations do not touch some grass at all, and fail to consider the regional or local perspective. A good example is the question of budget availability. Central regulations often impose budgeting requirements onto the regional budget (APBD) without caring about the fiscal space and constraints that regions actually face.
There are also many regulations that are poorly translated, leaving no room for discussion or clarification at the local government level, let alone among teachers. Dissemination of education policy is usually aimed at heads of Dinas Pendidikan, or at mostly at the headmaster level. Meanwhile, training and dissemination to teachers are now often done through online learning platforms, which are highly vulnerable to multiple interpretations and prone to lack of enforcement.
In short, the transmission of information from the central government, to local governments, then to individual schools, and finally to teachers, each with different capacities, experiences, and levels of dedication, becomes a crucial factor in the effectiveness of decentralization in education. The longer the chain of command, the greater the transaction costs and the distortion of information.
Anw, thank you for keep providing thought-provoking content for fellow policy makers. It's a good exercise, at least for me personally.