Intergovernmental Aspects of Service Delivery

Public Expenditure for Human Development Course

Dana Weist PRMPS 12 November 2003

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Key Service Delivery Questions

• Who is doing what? • How is it being financed?

Answers to these questions often determine the equity, efficiency, and accountabilities of service delivery Page ‹#›

Who is Responsible for What?

• Who – determines policy?

– produces services?

– finances? – regulates, enforces, monitors, and evaluates?

• Public versus private sectors?

• Which tier of the public sector?

– Central or local government production – Contracting with other governments, private sector, community groups Page ‹#›

How is it Being Financed?

• Budget allocations • Government transfers/grants • Local taxes/charges/fees • Community charges/fees Page ‹#›

Dilemma: Clinics Lack Medicine or Schools Lack Textbooks

• What does the intergovernmental system have to do with it?

– Discrepancy between responsibility and financing: Local government responsible for providing services without resources – Insufficient funds: weak central or local revenue mobilization – Cash flow: Central Government slow to release needed funds – Weak budgeting: inability to forecast realistic costs – Leakage: corruption/malfeasance Page ‹#›

Decentralization: A World-Wide Phenomenon

• Underway in over 85 countries • Political and economic rationales • Varieties – Deconcentration – Delegation – Devolution Page ‹#›

Positive or Negative Outcomes?

• If designed well, decentralization can: – Move decision making closer to people – Enhance efficiency and responsiveness of service delivery – Potential tool to alleviate poverty • But, design is complicated, since it spans fiscal, political, and administrative policies and institutions • Design + Accountability + Capacity Page ‹#›

Four Pillars of Intergovernmental Fiscal System

• Expenditures • Revenues • Intergovernmental transfers • Subnational borrowing/debt Page ‹#›

Expenditure Design Determines Impact

• Expenditures = government services • Design affects availability, quality, access and appropriate use of public services e.g. health, education, water, roads etc.

• Can ultimately affect macroeconomic stability Page ‹#›

Efficiency

• Considerations for assignment: public goods, externalities, subsidiarity, economies of scale, public sector competition – Ultimately, no single best assignment – Ideally, services should be provided at lowest level of government where benefits lie • • Public provision doesn’t imply public production

Clarity

is critically important • Do local services respond to local needs? – Do citizens have meaningful opportunities for voice? – Do officials face incentives to respond?

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Decentralization of Functions

• Organization • Planning • Personnel • Infrastructure • Resources • Regulation Page ‹#›

Local Revenue Mobilization

• Resources often inadequate to carry out assigned functions • Simplest and most effective form of tax autonomy: discretion to set tax

rates

• Striking variations in size and capacity – one size doesn’t fit all • Mix of local revenues needed • Local revenue mobilization strengthens accountability Page ‹#›

Rationales for Intergovernmental Transfers

• Vertical imbalances • Horizontal imbalances (equalization) • Externalities (inter-jurisdictional spillovers) • Enhancing national objectives at the subnational level • Paying for national programs implemented by subnational governments Page ‹#›

A “Good” Transfer System

• • • Transfers should be transparent and predictable (formula-based) – – – – Equalization transfers should include A measure of “need” A measure of “capacity” Adequate sub-national revenue autonomy Stable but flexible financing Avoid a proliferation of conditional grants Page ‹#›

Changing Central Roles and Functions

• • Change role from “command and control” to policy guidance and facilitation – – – – “Steer the course rather than rowing the boat” Establish government’s policy framework Structure proper incentives for local governments

Stop

delivering most public services Central government plays a central role – – – – Legal and regulatory frameworks Coordination mechanisms Accurate, timely and comprehensive information Capacity building programs Page ‹#›

Setting Standards

• Central government plays coordinating role – – Ensures compatibility and consistent quality Enables various service delivery arrangements • Fine balance: standards that are too restrictive can reduce efficiency or increase service delivery costs • Establish

incentives for performance

compliance with national objectives to ensure • Central government should not use un-funded mandates to compel local government behavior Page ‹#›

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Prerequisites for Local Accountability

Citizens leaders can assess performance of their • Citizens participate and express their views on local decisions • Civic and private partners are involved in service delivery Page ‹#›

Strengthening Accountability

• • • Participatory approaches – – – – Elected councils Locally appointed officers Participatory budgeting and planning Local civic forums Fiscal responsibilities – Local tax collections – Discretion in budget allocations Accountability to central government – – Reporting on outcomes Financial disclosure and reporting Page ‹#›

Strengthening Citizen Feedback

• • • • Surveys Citizen report cards Issue-specific,

ad hoc

councils Citizen participation in implementing decentralized programs Page ‹#›