Inspection teams have been dispatched to six provinces in an attempt to stamp out abuse as action against misuse of funds is stepped up.
"It is a common phenomenon that local authorities have money for economic construction, massive infrastructure projects and new cars for senior cadres but no money to pay the teachers' wages," said Shao Jinrong, director of education for the NPC.
Unpaid teachers' salaries now amount to in the region of 290 million yuan (Pounds 25m) with only three cities, Beijing, Tianjin and Shanghai, along with the two provinces of Yunnan and Jiangxi, paying teachers' wages regularly. The situation in other parts of the country remained critical, Shao said.
Provincial education budgets are part of the budget for science, culture and public health which opens the system to abuse as officials divert funds from one budget to another.
The NPC's standing committee has ordered all provincial legislatures to separate the education budget.
Meanwhile, only 80 per cent of education tax revenue due from cities and 70 per cent from rural areas has been collected, and measures are to be stepped up to collect these taxes.
The government provides only 80 per cent of education funding, with the remainder being collected from local taxes and contributions from state-run enterprises.