The death knell is sounding for the National Endowment for the Arts. The agen- cy's federal appropriation last year fell by one-third, from about $150 mil- lion to about $100 million, and its appropriation may be cut again or even eliminated in the current session of Congress. The NEA is not only anathema to cultural conservatives, libertarians, evangelical Christians, and even a good number of artists. It is also likely to lose key political support as Presi- dent Clinton and other Democrats resolve to keep moving toward a balanced fed- eral budget without compromising Medicare, Medicaid, education, or the environment. But the end of the agency's federal funding need not prove cataclysmic for the arts in America. Artists, arts organizations, and their supporters have many strategies at their disposal for maintaining the vitality of the arts in a post-NEA era. And in any case, the importance of federal grantmaking to the arts has been greatly exaggerated. The NEA currently contributes to the arts in two ways: direct funding and less tangible, indirect services. Nowadays direct funding consists almost entirely of cash awards to arts organizations and event sponsors. (As of 1996, grants to individual artists were eliminated, except for creative writers, jazz greats, and masters of folk crafts.) NEA-financed music ensembles, dance festivals, museum exhibitions, and the like undoubtedly face a period of sacrifice and uncertainty, and there will be some casualties. But their prospects are far from hopeless. The NEA also renders indirect, noncash benefits and services through its peer-review panels. Their judgments can stimulate funding from other sources and identify certain artists and organizations as more deserving than others. In this realm of power-by-imprimatur, the judgment process would, in fact, probably work better if it were decentralized and used to spur greater involvement by funders. Making up the Shortfall To understand the reasons for optimism, it is necessary to assess the true nature of NEA spending priorities. The NEA's largesse regularly benefits the great established urban institutions and smaller local organizations of long-standing reputation. The NEA has also funded, less dependably, dozens of marginal artistic groups, some of which claim to depend on NEA funding for their survival. As a rule, the larger institutions will overcome the NEA's decline easily, but the smaller ones need not suffer if they heed certain examples set around the country. One might not know it from the political controversies that have attracted public attention, but the NEA has always favored the most venerable -- and richest -- cultural establishments over the esoteric, the shocking, and the avant-garde. A survey of funding patterns in 1985, 1990, and 1995 clearly reveals this preference. The Metropolitan Opera in New York City has been the single largest recipient of NEA funds, with annual grants between $800,000 and $900,000. Typical grants for other high-profile beneficiaries range from $200,000 to $350,000, awarded year after year and now incorporated into annual budgets. In theater, by far the biggest ongoing grants go to the major presenters and training centers, such as the American Repertory Theater in Cambridge, Massachusetts ($305,000, on average, in 1985, 1990, and 1995), the Center Theater Group of Los Angeles ($251,000), the Guthrie Theater in Min- neapolis ($274,000), and the Yale Repertory Theatre ($167,000). In the museum world, the consistent winners are big-city institutions: Boston, Chicago, Detroit, Los Angeles, New York, Philadelphia, San Francisco. In dance as well, the NEA has heavily favored the most established organizations. The Dance Theatre of Harlem, for example, averaged $303,000. Nearly all other troupes with six-figure grants bear the names of modern American legends: Alvin Ailey, Merce Cunningham, Martha Graham, Paul Taylor, Twyla Tharp. This preference for elite establishments should not be surprising, since it is usually the larger, wealthier institutions that have the staff and resources to put together winning grant proposals. …
The cutbacks in Medicare and Medicaid reimbursement, and the Republican takeover of Capitol Hill and the state legislatures as a result of recent elections, suggest that the payer-driven forces of managed care, capitated payment, and the regional networks (alliances) will serve as centerpieces to improve the organization, financing, and delivery of America's health services. These "voluntary" alliances that are now being forged as an amalgam of health providers and insurance underwriters, often foreshadow the powerful, geographically linked regional health networks that are evolving into oligopolies throughout the United States. As the Department of Justice and the Federal Trade Commission are unable to appropriately analyze the efficacy of most prospective mergers, the American health field increasingly can expect monopolistic environments. In this process, the public eventually may demand the formation of state health services commissions. Within this framework, the German decentralized, multipayer, multitier approach, which historically is self-governing and allows for negotiating reimbursement rates between insurers and providers, offers a preferred option to the traditional American public utility model.
While regulatory compliance costs continue to escalate, changes in the needs and practices of customers are creating challenges for the bulk liquid terminals business. Minimum inventory policies have reduced demand for petroleum storage, and surplus private tankage of utilities and oil companies is being thrown onto the public market. Petroleum companies, following the lead of chemical companies, are moving toward more centralized distribution management. Responding to such changes, GATX Terminals Corp. recently realigned the management of its operations. Until this January, terminal functions of the $300 million enterprise were largely managed by highly autonomous business units. Now it has moved to a new flexible structure that combines aspects of centralized and decentralized organizations.
We examined a setting where decision making about financing a given amount of government spending is decentralized. Seigniorage is the residual tax that passively adjusts to meet the budget constraint. We place this budget making process in a repeated game setting and characterize the cooperative tax-seigniorage function. Three main results are (1) Seignioiage and transitory changes in output are positively correlated. This result holds after controlling for changes in government spending. (2) A positive (negative) covariation between current period government spending and transitory output strengthens (weakens) the positive relationship between seigniorage and transitory output. (3) Seigniorage is negatively correlated with trend output growth. Time series empirical tests using annual data for 20 OECD countries support the first two results. A test using cross-section data on 75 countries confirms the third hypothesis. Copyright 1997 by Ohio State University Press.
In the world of business and finance, the old phrase cooking the books implies that manipulating financial ledgers will produce an illicit advantage for someone. Maybe this practice is used more often in movie and TV scripts than in real life, but what happens when the need for financial data outpaces the ability to provide answers? The recent controversy started by a federally appointed commission that suggested the Consumer Price Index has been miscalculated for several decades may be more than just an interesting example. Could there be a parallel in education? Are the traditional regulatory reporting mechanisms using district-level data built around average per-pupil expenditures, average daily attendance, or full-time equivalents flawed? Is there a better way to account for expenditures in education? Can tracing the flow of dollars to building- and program-level decision points create a better financial management tool? Recent reform efforts that have put the emphasis on buildings that use site-based management and other decentralized models have created a need for data that traditional school district accounting departments cannot meet. When building principals, teachers, and parent councils don't know how much money they have to spend or cannot gain control of the funds flowing to their buildings, then real reform is not possible. Out of sheer frustration, a Denver teacher involved in site-based management took her own personal computer and built an understandable version of the school district budget. Tracing the Flow of Dollars A few years back, Bruce Cooper of Fordham University took a new tack when he helped a student, Robert Sarrel, with a dissertation that attempted to answer the question of how much of the total state and local per-pupil allocation actually reaches the classroom in a New York City school building. Someone not familiar with the traditional school finance practices would probably assume that this would be an easy question to answer. But in the traditional green eyeshade back room of school accounting, the data were nowhere to be found. In fact, making new assumptions, asking for new data on personnel, seeking better descriptions of functions, and so on can lead one back up the accounting trail even to the offices of green eyeshade back room state-level accounting. With no solid answer in sight, the efforts of Cooper and Sarrel nevertheless caught the attention of some national education groups. Their early reports that perhaps as little as 30% to 35% of funds could be traced to the classroom fueled interest in the original study. Those who were sure that all the remaining funds went to something called administrative bloat also saw this as a topic worthy of more study. The U.S. Chamber of Commerce became interested, and the Lilly Endowment put up some money to help perfect the questions and the process. The Chamber found eight school districts that were willing to participate in a study tracking the flow of dollars down to the buildings, and the work proceeded with little fanfare. Accepting the idea that funds should be tracked in this way was not always easy, even when a superintendent and board had agreed to work on the new accounting model. The risk that new data could shine a spotlight on district decisions was real. Taxpayers, unions, principals, and parents would have data that could translate very quickly into a public clamor. For the most part, the information gathered from the eight districts did not cause any major problems. Administrative bloat was not as evident as some critics had expected, and usually the new data led not to corruption but to more questions pointing up the need for better information. In one district, for example, two middle schools with nearly the same enrollment had quite different spending patterns - even when faculty age and placement on the salary schedule were set aside. There were no cooked books, but it was evident that a new budget management tool was needed. …
English-- not the language, but the activity that takes place in English departments at American universities--has long ceased to be anything resembling a single discipline, if in fact it ever was. It is a collection of disparate activities with multiple objects of inquiry, vaguely articulated methodologies, and diverse notions of proof. With new essays by Gerald Graff, Paul Lauter, Louie Crew, George Garrett, Thomas Dabbs, Walter L. Reed, Phyllis Frus, Stanley Corkin, Tilly Warnock, and Stanley Fish, this volume does not attempt to define the discipline. Instead, as Graff observes in the opening chapter, it enacts it, sometimes with a passion verging on violence, each essayist defending interests that are threatened by the others. It is English as theater. The essays can be read in any order; the arguments among them will out. The conflicts rage on even after the curtain falls. But the issues are clarified: What's at stake, not just for English but for society at large, is the tenuous boundary between conversation and chaos.
In this paper a competi tive general equilibrium model is used to investigate the welfare and long run allocation impacts of privatization. There are two types of capital in this model economy, one private and the other initially public ('infrastructure'), and a positive extemality due to the latter is assumed. A benevolent governrnent can improve upon decentralized allocation intemalizing the extemality, but it introduces distortions in the economy through the finance of its investments. It is shown that even making the best case for public action - maximization of individuais' welfare, no operation inefficiency and free supply to society of infrastructure services - privatization is welfare improving for a large set of economies. Hence, arguments against privatization based solely on under-investment are incorrect, as this maybe the optimal action when the financing of public investment are considered. When operation inefficiency is introduced in the public sector, gains from privatization are much higher and positive for most reasonable combinations of parameters.
While Washington has been unable to lead the way in significant health care reform, the health care system has begun to transform itself in terms of curbing skyrocketing health care costs, dealing with the more than forty million Americans who lack health care coverage, and the problems plaguing the Medicare and Medicaid systems. The search has begun for a health care model that ensures quality care to a wide population in a cost-efficient manner. This article explores how the U.S. Health care system currently functions, examines several innovative models, and suggests ways in which a decentralized, community-based approach to health care reform can address our nation’s health care crisis. Specifically, Part I examines the current system of health care financing. Part II discusses current efforts to provide community based care. Part III offers suggestions for a community-based approach to health care reform, including ways to stimulate provider volunteerism, financing mechanisms, and methods to overcome potential legal barriers to local reform efforts.
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Health Systems, Economic Evaluations, Quality of Life
This paper describes the evolution of accounting systems, accounting education, and the accounting profession in the People's Republic of China. Throughout the reform process, accounting development has been recognized as critical to Chinese economic progress. As China moves towards a more decentralized, market-based economy, ownership and financing arrangements for enterprises are becoming more complex and diverse. The Chinese accounting system is being transformed to meet the demands of these new and emerging economic relationships.
The decentralization of the government authority, or the establishment of local autonomy is one of the most important policy targets in Japan. This problem has lately drawn considerable attention. In this research we aim at the investigations of a appropriate local revenue structure focusing on the intergovernmental fiscal transfers. According to the current data, two-third of the total tax revenue is collected by the central government and one-third of the total government expenditure is conducted by local governments. An imbalance between the tax revenue and expenditure of the local governments shows that there exists the large intergovernmental transfers of financial sources from the central government to the local governments. Local governments receive these intergovernmental revenues so that a policy objective may be accomplished. The most general observation that can be made is that intergovernmental revenue has become essential for most of local governments, except a few that contain metropolitan areas in their jurisdiction. Though intergovernmental revenues can be justified by some reasons such as fiscal equalization among local governments and the redistribution of income from higher-income taxpayers to those who by definition of their eligibility are lower- income, it is also true that they invariably influence the fiscal status of local governments. The central government provides funds for local governments mainly in the shape of the matching grants and unspecified financial resources. In this report, we focus on the matching grants, which play a main role of the central control over local governments. We also focus on the local taxes which support local autonomy as the revenue source. The intergovernmental transfers from the central government to local governments induce a divergence between the benefit from local public goods and local tax burdens of inhabitants. More appropriate resource allocation is achieved when the benefit of public goods coincides with the burden. Thus, resource allocation may be distorted by the intergovernmental transfers. We construct the account of regional fiscal finance to verify the possibility of divergence between the benefit and the burden. This report consists of six chapters. In Chapter 1, we overview current situation and problems of the matching grants, especially grants-in-aid for public works. Our observation shows that the local economy has been increasingly dependent on the central government expenditures such as public investments and agricultural grants-in- aid although a large amount of grants-in-aid had been already allocated to the rural areas for their public works. We conclude that expanding the self-revenue resources of local governments, or replacing the amount of matching grants with the distribution of local transfer taxes is required to achieve more appropriate resource allocation. Chapter 2 clarifies the structure of the matching grants. First, we set the criteria for the evaluation of the grants, such as the rational of subsiding, a starting year, the ratio of subsidies and variations of the amount of grants-in-aid. Then, we list categories of grants-in-aid which should be reconsidered in order to scrap and build. In Chapter 3, we analyze the welfare effects of replacing from the matching grants to the unspecified financial resources by a numerical simulation method. This policy reform will create the welfare gains at the level of 1.8 percent at large to prefectural governments in terms of the welfare index compared to the circumstance in which the reform has not been taken place. The analysis also shows that matching grants for compulsory education and social capital have a tendency to stimulate local governments to their additional expenditures compared with those for social welfare and others. In Chapter 4, we construct the system of regional account and examine benefits and burdens of local public services in each region. We measure the effects on inter-regional redistribution by Atokinson coefficients. The analysis shows that the redistributional effect through the government expenditures has been increasing since the 1980' s. Chapter 5 examines an appropriate local tax system in the era of decentralization from global point of view, based on the analysis using OECD data. It suggests the importance of independent local tax system. In Chapter 6, we summarize all above results and present the policy recommendations to promote the decentralization. Finally, the Keizai Bunseki (The Economic Analysis) is a series issued by the Economic Research Institute of the Economic Planning Agency and contains results of research works by the member of the Institute and the Economic Planning Agency. The purpose of the publication is to promote understanding of the general public about current research works and ideas in the Institute and to ask for any comment on the research results in order to enhance quality of the research activities in the Institute while the works are still not completed. Thus, the views expressed are those of the authors and do not represent those of Economic planning Agency.
Lixin Colin Xu, Bob Cull, Joe Hotz, D. Gale Johnson · 5 authors
In moving toward a more market-oriented system, how did China's government and state enterprises partition control rights, incentives, and financial arrangements? In 1980, China's government owned and controlled its state enterprises, which were managed (inefficiently) by bureaucrats. During the 1980s, the government experimented with decentralizing state enterprises to boost productivity. By decade's end, China's state enterprises had become more market-oriented, and the structure of enterprise property rights had changed dramatically. One factor in the move toward a more market-oriented system was the use of performance contracts with incentive components to govern state enterprises. Xu examines how China's government and state enterprises partitioned property rights - how the government and enterprises decided about incentives, financial arrangements, and control rights. Xu assumes that the government is risk-neutral and the enterprise manager is risk-averse; that the government's goal is to increase revenue (or profitability), to retain maximum control of the firms, and to reduce the inequality of income across firms (by bailing out firms in financial trouble and collective heavier taxes on high-performing firms). The enterprise manager and employees, on the other hand, have an informational advantage over the government that allows them to earn a rent; that advantage leads to suboptimal efforts. Among Xu's findings: The government, in striving for equality, rewards inefficient firms while penalizing efficient ones (the so-called ratchet effect). Efficient firms are unwilling to reveal their true efficiency. They pretend to be inefficient by slacking, so they can get more transfers. There are inherent conflicts between two of the government's goals: Profitability and equality. And the government's desire to control state enterprises prevents many of them from becoming decentralized and improving their productivity. Capital-intensive firms depend more on bank loans and less on retained profits, probably reflecting both their greater need for capital and the banks' role in allocating investment funds. Larger firms rely more heavily on the government for investment, their managers have more autonomy, yet the firms are easier to control (it's easier to monitor 100 employees in one firm than to monitor one employee each in 100 firms). This paper - a product of the Finance and Private Sector Development Division, Policy Research Department - is part of a larger effort in the department to understand state-owned enterprise reforms and government behavior.
The governments of Eastern Europe and the former Soviet Union are at a crucial juncture in their movement from highly centralized command economies to more decentralized market economies. While there is a belief in these countries that decentralization brings greater economic efficiency, the reality is that such a transition is a difficult process. This paper examines what types of administrative reforms are needed for the decentralization process, how far along the countries are with respect to these reforms, and what reforms are missing. As we discuss, many of the necessary administration reforms are missing and we argue that more attention must be paid to these elements for successful decentralization of these governments. This paper examines the recent experience and reform needs of the key administrative aspects of the design of intergovernmental relations in countries in transition in Eastern Europe and in the former Soviet Union. There is a widespread realization in all of these countries that decentralizing government will help increase efficiency in the public sector just as privatization will improve efficiency in their economies. Decentralization of government operations is also attractive as a way to cement a democratic form of government. Despite the appearances of the existence of an already decentralized system, such as in the case of the Soviet Union, this experiment started in practically all cases with a lack of institutions and experience on how decentralized government operations should be organized. As different as these countries are, there are many similarities in the reform process they are following in order to decentralize government structure. While the basic components of a decentralized system of government are emerging in many of these countries the structure of government has not fully evolved in a manner that can support such a decentralized system. Often, governments remain structured along a vertical hierarchy: information, budgetary authority, and revenue pass from the central government down to subnational levels of government while little communication or interaction exists at a horizontal level. In general, the assignment of revenue and expenditure has not been clearly defined among the two or three levels of government, central government transfers continue to occur in a relatively ad hoc manner, and the entire budgeting system still rests in many cases on more or less formal system of negotiations and bargaining among the different levels of government. There has been some change in this structure in certain countries. Over the last three years, both Poland and Hungary have legally increased the automony of subnational governments. In 1994 in Russia a new and more transparent system of intergovernmental grants has been established between the federal government and the regions. In 1994 also, Latvia introduced a more transparent formula-driven, transfer formula for the regional and municipal governments. The focus of this paper is to develop a “blue print” for necessary changes in organization and administration of intergovernmental relations in countries in transition. While many experts have recently been discussing the public finance policy components of this new, evolving relationship among levels of government, less attention has been paid to the structural and administrative challenges and the information design issues that must be met in order to develop and support a system of intergovernmental relations. The paper is organized as follows: First we review the major responsibilities and their allocation among levels of government, the assignment of revenue sources, and the system of transfers. We then turn to a discussion of the current experience of Eastern European and NIS countries in the context of the structural components of an intergovernmental fiscal system. Next, we analyze the organizational reforms that are necessary for the efficient functioning of a decentralized system of government in the economies in transition. Finally we “rate” the transition economies in relation to their current design of the system of intergovernmental relations and support mechanisms.
Government financing of schooling is necessitated by capital market imperfections. Governments are also res ponsible for maintaining a stock of public capital that enters private production function. In this paper the welfare implications and politics of these investments are examined in a version of Diamond (1965) growth model. It is argued that in decentralized environments where the working generation is decisive each period significant underinvestment in both schooling and in frastructure will be observed relative to the Ramsey equilibrium.
Estonian authorities have made remarkable progress in a relatively short period of time by putting into place the elements of a modern budget process and fiscal management system. This progress is especially notable given the difficult circumstances the country has gone through in the transition period of the last five years. The most significant changes in budgetary policy took place with the adoption of the Law on State Budget in June 1993. Several other pieces of legislation have come to complement the Budget Law including laws on local budgets, state external audit and the department of treasury. Other reforms have helped establish the basis of a modern fiscal management system. These include a monetary board assuring the independence of monetary policy from fiscal management and eliminating all possibilities of inflationary deficit financing, a well designed and impressively simple tax code, an overall well designed system of decentralized government, and the privatization of many state enterprises.However, there are still significant steps that need to be taken for making the government budget and the budget process itself effective instruments of fiscal management in Estonia. In some cases, the new budget institutions are at the early stages of development and appear fragile because of lack of resources or trained personnel and lack of tradition. In other cases, the proper institutions for fiscal management have not been developed or are lacking. Addressing these reform issues should significantly enhance the ability of the Government of Estonia to accomplish its objectives of macroeconomic stability, a more efficient allocation of public funds, and growth of the economy’s private sector.This report takes stock and evaluates the reforms in fiscal management already introduced, those scheduled for introduction, and those that the Government still should consider putting in place to accomplish an effective fiscal management system. Because they have been reviewed recently, this report does not discuss in depth existing budget institutions but instead puts emphasis on recent reform and highlights those problem areas where additional reforms will be necessary. The first section of the report provides a brief overview of the main accomplishments and failings of Estonia’s budget process and fiscal management system. The next three sections of the report review in more depth the three stages of the budget process: policy formulation, forecasting and budget preparation; budget execution and the ongoing effort to introduce a modern treasury function in the Ministry of Finance; and the institutions for budget compliance, namely internal and external ex-post audits and budget evaluation.
This paper investigates theoretically a factor that impacts the institutional and structural environment of initiating small investments in Taiwan, namely personal relationship networks. A potential investor needs market opportunities in order to earn profit, business organization to exploit the opportunity, and capital to initiate the business. In Taiwan's network economy, the solidarity provided by family networks makes small initial business organizations possible. Subcontracting systems, both horizontal and vertical, make the entry-level investment low, and the decentralized production/marketing processes provide numerous market opportunities for small investments. Taiwanese entrepreneurs opt to start their business ventures primarily through the use of network financing, since bank loans fall under the dominion of government policies.
About the Internet, there have been a number of indications recently, that the use of electronic methods not only for expanding business or creating new business, but also for making payments, may introduce a new " industrial and monetary " order. This idea, (millenarianism ?) implies a large adoption of new technologies, of e-business opportunities and usages and finally, the resolution of e-payment problems, especially taking into account the Internet's characteristics (decentralization and aperture). These problems do not depend only on implementation of information's technologies, cryptography or network management. Because payments concern the core of the market's economy, the e-payment systems involve i) the monetary regime - i.e. forms and nature of money creation - and ii) agents qualified to create money. On these points, the emergence of e-payment systems is not anodyne, because it participates in the evolution of the actual monetary regime in the direction of a weakening between money supply, quantity of money and economy financing by bank's credit. It participates also in the evolution of the " banking industry " in the direction of a real disintermediation.
The paper reviews the theoretical basis for the application of user fees in the public health sector in low-income countries with particular reference to the special characteristics of medical care as a commodity. The general equilibrium efficiency result of the market mechanism is shown to be the theoretical justification for the financing of health services via a system of user charges. If markets for all goods and services exist, and are perfect in a very strict sense, the welfare outcome of the price mechanism cannot be improved upon by any other resource allocation device. Furthermore, the decentralized and impersonal nature of this mechanism renders it more convenient to use in the allocation of commodities, health care included, than its alternatives such as a system of centrally administered prices or a system of administrative controls and directives. However, since many of the assumptions of the price system are rarely met in actual situations, especially in the health sector, it should be applied with caution. In particular, problems of information asymmetry and consumption externalities in health care markets necessitate a simultaneous use of fees with government interventions in order for fees to achieve their often intended aim of efficiency and equity improvement in health care provision. The most important intervention of the government here is the enactment and enforcement of institutions that reduce costs of transacting in health care markets and that in addition facilitate the emergence of new markets such as the markets for medical insurance. A striking finding of the paper is that health services in low-income countries are best financed primarily by revenue from general taxation, supplemented by a system of moderate user fees. Since medical insurance markets are generally non-existent in low-income areas, it is argued that financing health services primarily through user fees in such areas would be inefficient and inequitable. However, to mitigate the moral hazard problem as well as the problem of the commons, both of which characterize publicly financed health care, imposition of modest user fees is required. The importance of fees in this proposal increases with economic growth and with evolution of institutions that facilitate market transactions. Strategic interaction among economic agents is shown to affect the structure and implementation of user fees. A game-theoretic analysis of the general problem of health care financing shows that this problem is best tackled by harnessing the efforts of households, private health care providers, the government and civil society. These entities form what might be called a winning coalition in health care financing game of society. It is argued that the government is better placed to provide an institutional framework for coordinating the efforts of the various players to the desired end.