Despite the enactment of a number of public finance management reforms since the 1990s, misappropriation of public funds in Uganda remains a challenge. For example, scandals in the Office of the Prime Minister where UGX 60 billion was stolen and UGX 340 billion was lost to ghost pensioners in the Ministry of Public Services prompted several donor governments to suspend budget support to Uganda in 2012. In response to this and other challenges, the government took advantage of provisions in existing laws and regulations to initiate a number of new reforms and measures to further strengthen public financial management and improve public service delivery. This report examines the progress and impact of these on-going public finance management reforms undertaken by the MFPED since 2012/13. These reforms include the implementation of the Treasury Single Account (TSA); upgrading the Integrated Financial Management System (IFMS) and the Integrated Personnel and Payroll System (IPPS); improving wage and payroll management, improving budget formulation, implementation, monitoring and reporting; and strengthening budget transparency. The study employed different but complimentary approaches to gather the relevant data and information. These included an extensive review of government documents and reports relating to the reforms to obtain a clear understanding of the existing public finance management system, consultations with key ministries and government departments who were driving and implementing the reforms to capture their perspectives on the progress of the reforms in terms of achievement and challenges, and the collection of qualitative data from local governments (districts and municipalities) as well as service delivery units (schools and health centers) using a multi-stage purposive sampling procedure. The study findings show that despite some challenges, the reforms are so far yielding positive results in terms of improved accountability, reporting and service delivery. A summary of the outcomes of the key reforms is as follows. The key reforms contributed to improved public finance management at different levels of government. These areas include improved public expenditure management through the (TSA), improved accountability and public expenditure use through the IFMS, reduction in ghost workers and the overall wage bill at MDAs and local governments through the IPPS and the decentralization of the wage and payroll management system. A major milestone of these reforms in particular is the decentralization of payroll management that has so far reduced the incidence of ghost workers and reduced the governmentâs total wage bill. However, despite the noted improvements, there are still challenges with the implementation of some of these reforms. The challenges include limited coverage of the IFMS; limited interfacing between the IFMS and IPPS; limited internet infrastructure to support the IFMS and IPPS; and inadequate technical capacity to operate the IFMS, IPPS and OBT systems. There is also limited printing and display of the payroll at local government units.
Cinzia Di Novi, Massimiliano Piacenza, Silvana Robone, Gilberto Turati
This paper aims at investigating empirically the impact of fiscal decentralization reforms on inequality in well-being. In particular, we look at the effects on health inequalities following the assignment of larger tax power to the Italian Regions for financing their health expenditure, starting from the end of the Nineties. Exploiting large differences in the size of the tax base across Regions, we find that fiscal decentralization processes that attribute a greater tax power to lower government tiers, besides reducing inefficiencies of healthcare policies, seem to be effective in reducing also within-regional disparities in health outcomes. However, the degree of economic development � on which depends the actual fiscal autonomy from Central government � significantly affects the effectiveness of these reforms and highlights the importance to take properly into account the specific features of the context where the decentralization of power is implemented.
Recent theoretical research suggests that financing sub-national governmentsâ expenditure out of own revenue sources is linked to more responsible budgeting, because the financial implications of spending decisions then are internalized within a jurisdiction. We test this proposition empirically on a sample of 23 OECD countries over the 1975-2000 period, and find evidence in line with the hypothesis that greater revenue decentralization (measured as sub-national governmentsâ share of own source tax revenues in general government tax revenue) is associated with improved sub-national government budget deficits/surpluses. This finding is cross-validated with a novel, independent dataset consisting of all 34 OECD member states from 2002 to 2008.
We study the optimal degree of fiscal decentralization in a federation. Regional governments are characterized by their abilities to deliver public goods (administrative capacity) and to raise tax revenues (fiscal capacity). Two regimes are compared on efficiency grounds. Under partial decentralization, regional governments rely on central bailouts to complete local projects in financing needs. Under full decentralization, marginal financing is achieved via local capital taxes. We show that the presence of sufficiently low levels of administrative capacity is a necessary condition for full decentralization dominance. This condition may also be sufficient, depending on the projects' characteristics. Some extensions are presented.
The Malaysian state is usually portrayed as centralized, top-heavy, and far-reaching. Bureaucrats in the powerful Prime Minister 's Office or Economic Planning Unit design ambitious programmes for the country, then government agencies headquartered in the nation's capital implement them in all corners of Malaysia, from Perlis to Sabah. While true to a certain extent, this depiction overlooks the fact that Malaysia has a federal government structure. In addition to a central government centred in Putrajaya, the country has thirteen state governments that are responsible for particular jurisdictions; receive revenue from specific sources; and have constitutionally-stipulated responsibilities. They are important providers of goods and services, and can play a role in creating an enabling environment for business. However, Malaysia's governance structure is heavily weighted towards the federal government, which receives the bulk of revenue and is responsible for most public services. In fact, the country is one of the world's most centralized federations, with the centre receiving almost 90 per cent of all government revenue. And, above and beyond duties for fiscal, monetary, and trade policy, the federal government is responsible for most types of infrastructure, science and technology policy, and all levels of education. While the image of a strong central state may hold appeal, an excessive concentration of responsibilities may not always be optimal. Public finance literature holds that an appropriate attribution of responsibilities and revenue sources between levels of government can enhance welfare. For example, while some services benefit from economies of scale and are best provided nationally, others require detailed knowledge of local conditions and are best supplied locally. Over the past thirty years, a âSilent Revolutionâ of decentralization has swept the globe, as sub-national governments have been empowered with additional responsibilities, autonomy, and revenue. However, Malaysia constitutes an important exception. Unlike neighbouring Philippines or Indonesia, that had to construct new levels of government to decentralize, it already has an established federal system. Despite this, Malaysia has continued to centralize responsibilities at the national level. If it continues, this trend will stifle the vital role that state governments can play in creating an enabling environment for business and leveraging local-level knowledge to foster economic growth.
This paper reviews the waves of democratization and the development of the public administration and public finances in Hungary, with special attention municipalities caused by the changes in sub-national finance regulation since 2010. During the transition yeas, Hungary was very forward looking and the first among CEE countries to end central planning and to introduce market rules into the economy. Everybody expected the decentralization to be a success story. 25 years later, Hungary not only failed to meet the expectations, but also undergone though a situation in 2008 to start a massive recentralization process. This paper puts fiscal decentralization in Hungary in a historical context while critically investigating the findings of recent literatures on decentralization process in Hungary. The critical investigation of past experiences and reform steps of the current government suggest possible reform measures to solve the financial problems of Hungarian municipalities.
Open access
Local Government Finance and Decentralization
Regional Development and Policy
Hungarian Social, Economic and Educational Studies
One of the main indicators to measure the performance of regional economic development is the growth rate. Economic growth is the increase in Gross Domestic Product (GDP) of real continuous sourced from within the region. Local Government authorities to leverage the potential of local finance in local revenue as a form of decentralization. In addition to local revenue, the expenditure also affect economic growth. Spending the area in question in this research is capital expenditure. This research was conducted to determine whether the independent variable is local revenues have an impact on Gross Domestic Product (GDP) and capital expenditures. The data use in this research is a secondary data that obtained from the Central Statistics Agency of Bali, which is and then analyzed with multiple linear analysis method of intervening variables.The results showed a positive and significant effect of local revenue on capital expenditures and (GDP), capital expenditures no significant effect on GDP, and local revenue has no significant effect on GDP through capital expenditures.
On March 1950, the Government Administrative Council promulgated the "Decision on Unifying the State's Fiscal and Economic Work." Apart from local surcharges, all revenues and expenditures were consolidated in the national budget. This highly centralized fiscal management system of "unified revenues and outlays" transformed the long-term situation of overdispersed management, balanced fiscal revenues and outlays, stabilized market prices, guaranteed the military funds to exterminate remnant enemy forces, and met the need to restore key economic installations. In 1953, following changes to and the abolition of the organs of the Greater Administrative Regions, the state budgetary system changed to a three-tier system involving the center, provinces, municipalities, and counties. Local public finance was under a unified system where above-budget and revenues and savings were retained by the locality for it to disburse. In 1958, fiscal power was decentralized and the fiscal management system was changed to one of "revenues determining outlays, fixed for five years."
The changes in the system of intergovernmental fiscal relations in Bulgaria commenced at the beginning of the 1990s with the enactment of legislation on local self-governance and the first timid attempts at an expenditure and revenue assignment between the levels of government. The process began to gather momentum in 2002 when the government adopted a Concept paper on fiscal decentralization and an action plan on its implementation. A number of key reforms were legislated with the aim of broadening the municipal own-sources revenue base and increasing local government revenue autonomy. Dedicated action to set a decentralized public finance system in place resulted in a visible improvement of financial self-sufficiency of local authorities. Although still low in a European context, the values of fiscal decentralization indicators have gradually risen over the years, which is indicative of the success of the reform. The purpose of this paper is to overview the development of the process of fiscal decentralization in Bulgaria in the period 2003-2012 through examining its key aspects â expenditure responsibilities, revenue assignment and intergovernmental transfers â and to assess the policy options for addressing the current problems of local finance system. DOI: 10.5901/mjss.2014.v5n23p342
This study was conducted examine the effect of fiscal decentralization and fiscal stress economic growth in the province of Bali, either directly or through a local financial performance. The research data is secondary data taken from publications of Ministry of Finance, BPS and Bappeda each regency / city. The variables analyzed using path analysis to determine the direct and indirect influence of the variables  the research model . The results of this analysis revealed that fiscal decentralization variable indirectly and fiscal stress variables affects economic growth significantly through regional financial performance , fiscal decentralization variables and fiscal stress directly influence economic growth , and financial performance variables significantly influence economic growth. To promote economic growth in an era where the area of fiscal decentralization, local governments are expected to increase their fiscal capacity, through the development of commodity-based economic activity, the intensification and expansion of revenue and efficient financial performance.
Ensuring adequate subnational revenue is a core concern of fiscal decentralization. Public finance principles for selecting and designing subnational revenue sources have been widely used during the prominent wave of decentralization efforts in developing countries over the past three decades. Available empirical literature, however, suggests that subnational revenue generation often fails to meet needs and expectations, even where normative advice has been or seems to have been followed. Are the principles inappropriate, or are they just poorly applied? This paper argues that both factors are often at play. Basic principles are valuable, but they can be challenging to use and do not cover certain critical factors. Even if the principles are relevant and well applied, implementation commonly faces powerful constraints. Yet despite unsatisfying performance, revenue system design remains substantially based on a conceptually narrow normative framework that lacks a sense of pragmatic strategy and is often overwhelmed in practice by contextual factors it fails to or only weakly considers.
ABSTRACTIn an effort to reduce the cost and size of government, service delivery has become more decentralized, flexible and responsive. One of the strategies for reducing the cost and the size of service delivery is the establishment of special districts. Community Development Districts (CDDs) are a particular type of special created to manage and finance infrastructure services that accommodate new development within the State of Florida. They have significant implications for service delivery since they are considered flexible institutional choices for infrastructure service provision. In trying to assess the CDD performance this study aims at identifying the contribution of the to service delivery and at determining whether they represent an effective and responsive institutional choice for service delivery. Findings demonstrate that the CDD institutional model is both an effective and responsive service delivery tool but only in certain circumstances.INTRODUCTIONSpecial represent an important component of the American governing structure. They are independent, special- purpose units of local government (other than counties, municipalities, townships or school districts) that have administrative and financial independence from general-purpose governments such as counties and cities (U.S. Census, 2007). These entities of government are established by a legislative body to provide specialized services within limited boundaries (Mitchell, 2001).Special are the most common form of local government. According to the U.S. Census (2012) there are 89,004 local governments1 in the United States. Special represent 41.8% of the total number of local governments, followed by municipalities with 21.6%, townships with 18.4% and counties with 3.4%. Besides being the most common form of local government, special have also increased dramatically in the last six decades. Districts more than tripled their number in the last 60 years in comparison with a 8.6% increase for municipalities and a slight decrease of 0.7% for counties and 4.9% for townships. This increase in the number of special is explained by numerous reasons: service delivery for certain areas is better handled by special (Bollens, 1957), were created as a consequence of legal, institutional and political factors (Foster, 1997) and are financial mechanisms (Leigland, 1994; Porter, Lin, Jakubiak & Peiser, 1992) whose proliferation overcomes the fiscal restrictions placed on local general-purpose governments (Bowler & Donovan, 2004; McCabe, 2000).The extant literature distinguishes special purpose governments by different names. Eger III (2006) classifies special purpose entities into three main typologies: ''public authorities,'' ''special districts,'' and ''government corporations.'' He asserts that the degree of financial and governance autonomy explains the diversity of special-purpose governments. Therefore, special purpose entities range from controlled authority which is the least autonomous combination of financial and governance criteria to the most autonomous entities called directly accountable (Eger III, 2006). Porter et al. (1992) acknowledge that special are known by different names such as authorities, and commissions. Foster (1997) divides special-purpose governments in two categories: districts which are local governmental entities with the power to tax and levy special assessments and public authorities which are government corporations without property taxing powers. Even though the aforementioned typologies of special-purpose entities - ''public authorities,'' ''special districts, ''government corporations,'' boards and commissions are used interchangeably in the extant literature, this study will focus on the category of independent special or those special- purpose entities that have both high governing and financial autonomy in Eger's III (2006) words. âŚ
This research wasintended to describe the degree of fiscal decentralization in the autonomous regions in East Javaprovince in 2006-2010. This research belongs to the genre of secondary data with quantitativedescriptive type. The population in this study was all regencies/cities in East Java Province. Thedegree of fiscal decentralization was calculated from data collected by the three ratios, that is: a)PAD (Local Revenue) with TPD (Total Local Revenue); b) BHPBP (Tax and Non-Tax Sharing)with TPD; c) regional contribution to TPD. The research results showed that, first, seen from theratio of PAD to TPD, DDF (Degree of Fiscal Desentralization) of regencies/cities in East Javain 2006-2010 was in very low category with an average DDF percentage of 8%. Second, DDFof regencies/cities measured in terms of ratio of local contribution and TPD, had a high level ofDDF, reaching 83%. Third, DDF of regencies/cities in East Java in 2006-2010 of BHPBP ratiowith TPD had a very low percentage, reaching an average of only 9%, so the regionâs financialdependence on the construction financing of central government funding is very high. Keywords : regional autonomy, fiscal decentralization, degree of fiscal decentralization.
This dissertation aims to explain the nature, cause, and consequence of informal fiscal decentralization in China since 1994. The 1994 tax reforms intended to strengthen the central government taxing power by increasing tax revenue through the tax assignment system. China also prohibited local government debt taking, while increasing intergovernmental transfers between the central government and local government. These series of China's centralization reforms in 1994 have realized uneven success. Central government tax revenue was improved significantly. However, local government still takes debt through the financial platform companies. The increased intergovernmental transfers did not decrease regional disparity, which is one of the goals of the central government. These are the unintended consequence of the centralization reform that this study tries to account for. This study shows that revenue centralization unintentionally aggravates problems of local public finance. While maintaining the budget balance according to budget law, local government has carried out competitive economic growth and expenditure management. The ability to manage expenditure and attract investment is the criteria employed to evaluate the accomplishment of local leaders. This study finds that prohibition of local government debt in China is constrained by their social network. This norm influences the strategy of local governments to increase their debt taking beyond the realm of formal rules under the competitive environment. This study also demonstrates that centralization of revenue made local governments increasingly resort to intergovernmental transfers, which in turn fail to reduce inequality across jurisdictions. This study argues that an informally decentralized state reduces the merits of the decentralization. The informal consequence of the political and fiscal systems in China result in local leaders that acquire the medium level of change in power, while pursuing fiscal decentralization and maintaining political centralization. However, the unintended consequence is the retreat of the fiscal system, such as the increased fiscal instability and large gaps across jurisdictions.
This article examines the relationship between economic integration and fiscal decentralization for Argentina and Brazil. Economic openness adds costs and benefits to fiscal decentralization, beyond those analyzed in closed economies. The relationships among variables with panel data for the period 1988â2005 are estimated. The innovation of the article lies in considering decentralization at the level of states/provinces. In Brazil, the effect of openness on decentralization is negative and significant, both for expenditures and revenues; in Argentina, the effect is negative or not significant. This difference between countries is based on the different structure of subnational government financing.
Provides the basic foundation for understanding intergovernmental finances by (1) discussing why getting municipal finance right remains key to achieving a nationâs broader goals of economic growth, macroeconomic stabilization, and, for some countries, national cohesion among diverse populations; (2) summarizing the key considerations of alternative governance structures, as well as fundamental questions related to what role municipalities should play in a countryâs revenue and expenditure systems; and (3) examining the role of government-to-government grants policy and the tools for ensuring accountability between the various levels of government and between the municipality and its citizens. A strong correlation exists between decentralization and growth in gross domestic product (GDP), though findings relating to macroeconomic stability and the relationship between fiscal decentralization and public sector size remain mixed. Case studies from Nepal, Poland, Egypt, Bosnia and Herzegovina, Sudan, South Africa, and Saudi Arabia show the wide variety of decentralization models utilized world-wide.
In 1991, Indonesia began a process of decentralization in the health sector which had implications for the country's public hospitals. The public hospitals were given greater authority to manage their own personnel, finance and procurement, with which they were allowed to operate commercial sections in addition to offering public services. These public services are subsidized by the government, although patients still pay certain proportion of fees. The main objectives of health sector decentralization are to increase the ability of public hospitals to cover their costs and to reduce government subsidies. This study investigates the consequences of decentralization on cost recovery rate of public hospitals at district level. We examine five service units (inpatient, outpatient, operating room, laboratory and radiology) in three public hospitals. We find that after 20 years of decentralization, district hospitals still depend on government subsidies, demonstrated by the fact that the cost recovery rate of most service units is less than one. The commercial sections fail to play their role as revenue generator as they are still subsidized by the government. We also find that the bulk of costs are made up of staff salaries and incentives in all units except radiology. As this study constitutes exploratory research, further investigation is needed to find out the reasons behind these results.
TWith the help of the available literature, the paper attempts to assess critically the main problems of municipal finances in India and to bring out the challenges that the municipalities face with respect to revenue generation and expenditure management. The main findings suggest that the urban local bodies in India are confronted with lack of proper decentralization of functions and finances, inadequate revenue generation, expenditure shortfalls leading to poor service delivery. It also analyses the suggestions and recommendations that have been offered in the literature to cope with these critical challenges relating to urban finance.
Abstract In this paper we explore some of the policy issues related to the provision of primary and secondary education in the United States from an economic standpoint. We begin with stylized facts and a brief reference to the uniquely decentralized financing and delivery of public education in the United States, and the resulting issues of equity and quality that arise. As a reference point we review the basic efficiency and equity arguments for public financing and the provision of public goods in general, and education specifically, both of which suggest that current practices are unlikely to be efficient or equitable. These are issues that have motivated a number of policy avenuesâthe accountability movement, including No Child Left Behind, as well as recent efforts to establish higher and uniform standards for our public schools. We then turn to the sizable body of literature assessing school performance. We include an empirical example of this approach for Texas primary and secondary schools, with a focus on the many challenging issues involved with modeling and assessing educational performance. Our application demonstrates that research findings are highly sensitive to modeling choices, suggesting that a mixed methods approach is most likely to lead to effective education reforms.
Elites often use social policies to garner political support and ensure regime survival, but social policies are not a silver bullet. Using two waves of Chinese national surveys, I find that a recent policy of abolishing school fees has significantly increased citizensâ demand for greater government responsibility in financing compulsory education. I argue that policy awareness, rather than policy benefits, drives citizensâ demand. Finally, I show that policy awareness has enhanced citizensâ trust in China's central government, but not in local governments. This asymmetry in regime support has two sourcesâthe decentralization of education provision and biased media reportingâwhich induce citizens to credit the central government for good policy outcomes. Given that citizensâ responses are primarily influenced by policy awareness that is promoted by the state media, this study casts doubt on the use of social policies to sustain long-term political support.
Housing decentralization not only positions housing sector as regional obligatory, but also triggerspublic expectations upon the improvement of housing conditions. Various weaknesses of centralizedsystem that full of generalization in housing policy makes decentralized system is interpreted as aninnovative renewal process. However, the central government still does a lot of intervention towardhousing program. Limitation happens to local government such as limitation in housing finance,weakness in coordination ability, and less established of local bureaucracy makes intervention fromcentral government in housing program financed by APBN always dominates. The least contributionfrom local government on public housing sector in decentralization era creates paradox. It is caused bythe Ministry of Public Housing (Kemenpera) that cannot perform fully as substitutional institution rolein managing housing in local area. Kemenpera position as ministerial cluster 3 makes them does nothave representative office in local area. Thus, there will be potential of a repeat experience in the past, inform of generalization in housing policy, that complicates the housing problems itself.