The high demand for education naturally raises the problem of financing and provision of education which are crucial for economics of education nowadays. In actuality, the financing of education is a serious problem because the costs of modern education are extremely high and people cannot afford education without an external financial support. in such a context, the problem of financing and, therefore, provision of education raises another problem, the problem of availability of education. In this respect, it should be said that the poor financing of education limits its availability and, what is more, it decreases the quality of education, which naturally puts a country into a disadvantageous position since it cannot improve the productiveness of its people due to low educational level of employees. Hence, the financing of education is crucial.
In general, there are two major sources of funding of education: private capital and state funding. Today, both sources of funding are applied to the modern educational system. However, it is worth mentioning the fact that the role of state funding of education is steadily increases and the modern educational system in many countries of the world is practically unthinkable without the state support of education. In actuality, the state the main player which can influence consistently the development of educational market since, being deprived of the state support, the educational system will be unable to prepare and train well-qualified specialists.
On analyzing the existing sources of financing of education, it should be said that private capital can be divided into two categories: the funding of training and educational programs by companies and investments of people in their own education or in education of their children (Hoxby, 1999). In fact, both these categories have consistent limitations in financing of education. First of all, individuals can hardly afford their own education or education of their children because costs of the modern education are extremely high and practically unaffordable for an average family. This means that people cannot ensure that their children will be able to get education starting from pre-school education to the higher education. Secondly, the funding of training and educational programs by companies is also imperfect and insufficient. To put it more precisely, companies are mainly oriented on specific educational or training programs which train specialists for specific needs of companies. Anyway, normally, companies are not financing education of their employees starting from school. Instead, they are mainly oriented on the higher education which can provide them with essential human capital.
However, in such a situation, it is obvious that neither individuals nor companies can maintain the existing educational system and meet the existing demand for education. In fact, without the state support, education would still remain a kind of privilege available to a few, while the majority of the population would remain ignorant, if not to say illiterate. In this respect, the state funding of education is crucial. It is important to understand the fact that a good education is a life time education. This means that education of an individual starts from the early childhood and the educational basis an individual gets in his/her childhood is not less important than the higher education of an individual. However, the school education is the most vulnerable to the lack of financial resources because companies do not support school education, since they need professionals but not simply prospective students. In such a situation, the state needs and does support the modern educational system developing the system of public education and focusing its attention on school education, in particular.
Thus, the state funding closes the gap between scarce financial resources of individuals and companies and the existing demand for education. However, the state funding of education is based on pragmatic interests of the state because without the financial support of education the state is likely to face permanent economic problems. In this respect, it should be said that without the constant increase of productivity and effectiveness of work, a country will be unable to maintain a highly competitive position in the contemporary international market. Taking into consideration the impact of globalization on national economies, it becomes obvious that the state financing of education is the matter of the future wealth of a country, but not only the matter of its cultural or technological development.