Page1 Intergovernmental Aspects of Service Delivery Public Expenditure for Human Development Course Dana Weist PRMPS 12 November 2003

Page2 Who is doing what? How is it being financed? Answers to these questions often determine the equity, efficiency, and accountabilities of service delivery Key Service Delivery Questions

Page3 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 Who is Responsible for What?

Page4 Budget allocations Government transfers/grants Local taxes/charges/fees Community charges/fees How is it Being Financed?

Page5 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 Dilemma: Clinics Lack Medicine or Schools Lack Textbooks

Page6 Decentralization: A World-Wide Phenomenon Underway in over 85 countries Political and economic rationales Varieties –Deconcentration –Delegation –Devolution

Page7 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

Page8 Expenditures Revenues Intergovernmental transfers Subnational borrowing/debt Four Pillars of Intergovernmental Fiscal System

Page9 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

Page10 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?

Page11 Decentralization of Functions Organization Planning Personnel Infrastructure Resources Regulation

Page12 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

Page13 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

Page14 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

Page15 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

Page16 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 to ensure compliance with national objectives Central government should not use un-funded mandates to compel local government behavior

Page17 Prerequisites for Local Accountability Citizens can assess performance of their leaders Citizens participate and express their views on local decisions Civic and private partners are involved in service delivery

Page18 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

Page19 Strengthening Citizen Feedback Surveys Citizen report cards Issue-specific, ad hoc councils Citizen participation in implementing decentralized programs