1. WB Work on Decentralization in ECA
72 active projects, studies involving decentralization, local government, urban, rural, or community development
57 multisectoral DPLs since 2000, many of which have IGR components
PEIRs also address decentralization, intergovernmental issues

2. Project lending focuses on the grass roots or specific municipalities
PROJECT NAME
COUNTRY
Rural Investment Project (AZRIP)
Azerbaijan
Rural Development Project
Georgia
Rural Investment & Services Project (APL #2)
Moldova
Post-Accession Rural Support Project
Poland
Rural Development Project (APL #1)
Romania
Rural Infrastructure Rehabilitation Project
Tajikistan
Community Works 2 Project
Albania
Community Development Project
Bosnia and Herzegovina
COMMUNITY DEV SUPPLMT
Community Development Fund 2 Project
Kosovo
Municipal Development & Decentralization 2 Project
Municipal Services Project
Turkey
Municipal Water and Wastewater Project
Armenia
Urban Infrastructure & Service Delivery Project
Municipal Environmental Infrastructure Project
Croatia
MUNICIPAL SERVICES PROJECT
Municipal Infrastructure Development Project
Fiscal Decentralization IDF Grant
Local Government Capacity Building Grant to Implement Intergovernmental Fiscal Reforms
Kyrgyz Republic

3. Correspondence: finance follows function
Major Issues in IGR in ECA Countries •
Correspondence: finance follows function
Transparency and predictability
Equity
Macroeconomic control
Incentives for efficiency

4. Before Reform
Local governments had broad responsibilities: public utilities, education, health
No political autonomy
Resources based on norms, negotiations

5. The Transition (1) Local governments became legally independent
Existing organizational structure maintained or even further fragmented

6. The Transition (2) Multi-party elections held
Some countries centralize social sectors
But most leave existing local functions intact and
Search for new ways to finance them

7. The New Revenue Structure
Very little local taxing power
Most revenues from shares of national taxes, intergovernmental transfers

8. Intergovernmental Transfers
New systems distinguish ‘local’ from ‘delegated’ functions, with separate funding for each
Local functions: water supply, sewerage, SWM, roads, planning, land use
Delegated functions: education, health, social assistance

9. Local Functions Financed from shares of PIT, non-earmarked transfers
Shares of PIT vary

10. Criteria for Equalization
Revenues per capita
Expenditure needs
Land area
Road length
School aged children
Hungarianism

11. Financing Education
Declines in enrollment in rural schools prompt shift in financing
Old system: based on facilities, teachers
New system: based on enrollment
Equitable: equalizes spending per pupil
Encourages efficiency:
Cuts spending in under enrolled schools
Gives school directors budget autonomy

12. But… Controversial, because schools closed, teachers dismissed
Governments respond by:
Adjusting formula to reduce immediate impacts
Improving surviving schools

13. Health
High costs, inefficiency in health care prompt changes in financing
Governments respond by:
Dividing primary form secondary health care
Introducing capitation financing for primary care

14. But..
Attempts to introduce performance criteria into primary care financing not successful
Performance criteria for secondary health care even less so

15. Are reforms successful?
objective
status
correspondence
Ongoing debate over adequacy of transfers
transparency
Yes, but some more than others
equity
Yes, but some more than other
macro control
Yes, although threat of arrears, borrowing
efficiency
Yes in education; less so in health