Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
KATALIN PALLAI THE HUNGARIAN DECENTRALIZATION www.pallai.hu The Hungarian LG System 1 OUTLINE The basic framework Elements of the fiscal decentralization framework Expenditure assignment Revenue assignment Borrowing Design trade offs and problems in the system www.pallai.hu The Hungarian LG System 2 THE BASIC FRAMEWORK www.pallai.hu The Hungarian LG System 3 1990. Act on Local Governments The system created on the model of the European Charter of Local Governments on the principles of Subsidiarity Independent self-government Local government decision can be attacked only at court or Constitutional Court on the basis of its legality Strong decentralization Two main frameworks of public administration (CG&LGs) Public expenditure 54 to 39 % of GDP (1994-97) Local expenditure 17,4 to 10,58 % of GDP (1990-2002) Accountability www.pallai.hu The Hungarian LG System 4 SYSTEM OF PUBLIC ADMINISTRATION CENTRAL GOVERNMENT and its organs at the local and terriotorial levels LOCAL GOVERNMENTS at two levels Municipalities as basic units organized by settlements GENERAL OBLIGATION county governments (not EU regions) not RESIDUAL ROLE: services that settlements are capable to perform or have a regional character www.pallai.hu The Hungarian LG System 5 EXPENDITURE ASSIGNMENT WHO DOES WHAT? www.pallai.hu The Hungarian LG System 6 FUNCTIONS OF LOCAL GOVERNMENTS Physical Services Transport Public Works Social services Education and Culture Welfare and Health Care Public Administration and local management Urban regulation and planning Protection of the natural and built environment Citizens’ administration (birth, death, marriage) Local business and Tax administration Asset management www.pallai.hu The Hungarian LG System 7 SERVICE TASKS OF LOCAL GOVERNMENTS OBLIGATORY TASKS OPTIONAL TASKS Drinking water Basic health and welfare services Kindergarten and primary school education Public roAds & lighting Cemeteries Protection of the rights of minorities www.pallai.hu The Hungarian LG System Depending on size and financial capacities Only on extent not endangering delivery of the mandatory tasks Fire brigades&rescue Welfare services Public transportation Secondary education 8 LOCAL GOVERNMENT EXPENDITURES IN HUNGARY 1992 1997 Education 33 36 Health 20 22 Social security and welfare 6 7 Housing and water 5 6 Transportation and communication 6 2 79 19 100 74 17 100 Current expenditures Capital expenditures Total expenditures www.pallai.hu The Hungarian LG System 9 PHYSICAL INFRASTRUCTURE SERVICES (own responsibilities) Gas, district heating, water, waste, local public transport, cemeteries, etc TRANSFER TO LGs: Responsibility as compulsory task to local governments 1991. Law on property transfer as core assets (actual transfer till 1993) 1994. Price setting authority transferred (except for gas, and veto right of CG on public transport charges) Revenue collection and receipt Investment grants and operation subsidy available Freedom how to organize the service delivery www.pallai.hu The Hungarian LG System 10 HUMAN SECTOR SERVICES, except health (shared responsibilities) PRIMARY AND SECONDARY EDUCATION TRANSFERRED TO LGs: Responsibility as compulsory task to local governments 1991. Law on property transfer of assets used by the institutions (actual transfer till 1993) Employer rights of staff involved Normative grants on the basis of tasks supplied Investment grants on request General revenues to supplement grants www.pallai.hu 1993-97 new sectoral laws regulating service delivery andThe universal quality standards (in Hungarian LG System education basically output regulation) 11 HEALTH CARE – hospitals Mixed system (not shared !) National level - financing of operations Specification of financing rules for activities Operation contract as basis for transfers Specification of type and amount of services to be covered (and up-dated every year) Local level - capital investments Construction and renovation of buildings Purchase of equipment Competition for national grant system Producing dubious incentives www.pallai.hu The Hungarian LG System 12 REVENUE ASSIGNMENT WHO LEVIES WHAT TAXES AND COLLECTS LOCAL NON-TAX REVENUES? www.pallai.hu The Hungarian LG System 13 REAL VALUE OF REVENUES (on 1991 value) 450000 400000 350000 300000 250000 200000 150000 100000 50000 0 TOTAL transfers www.pallai.hu The Hungarian LG System 2001. 1999. 1997. 1995. 1993. 1991. own revenues 14 LOCAL REVENUES Annual revenue transfers Shared revenues Normative operational grants grants Addressed and targeted investment Deficit grant Own-source revenues: Local taxes Fees, charges, contributions Revenues on Property (Lease and sale) Borrowing (loan and bond) www.pallai.hu The Hungarian LG System 15 Role of local taxes 16% 14% 12% 10% 8% 6% 4% 2% 0% 100% 80% 60% 40% Share of local taxes in local government revenues Share of local business tax in local taxes 20% 0% 91 92 93 94 95 96 97 98 99 00 www.pallai.hu The Hungarian LG System 16 Local business tax revenue (per capita in 1998, thousand HUF) 49 50 31 40 30 13 20 10 0 Budapest www.pallai.hu Cities, towns The Hungarian LG System Villages 17 Basically normative system Proportional to tasks Normative grants for operation Addressed and targeted investments grants Revenue localization lease Own revenue – tax, fee, privatization, property and sale Shared taxes Revenue capacity subsidies Different forms of operation and development capacity Equalization grant, based on local tax and PIT calculation www.pallai.hu The Hungarian LG System 18 LOCAL BORROWING Who and How can Generate Local Debt? www.pallai.hu The Hungarian LG System 19 LOCAL BORROWING Borrowing is an independent decision of the local council, mayor, financial chief Macro-economic risks of local Borrowing is reduced by Laws and regulations Regulation of Municipal borrowing (debt service pegged to own current revenues ‘96) Municipal bankruptcy and Debt Settlement Procedure (‘96) Law: Central Government is not responsible for local borrowing (no bail-out) www.pallai.hu The Hungarian LG System 20 PROBLEMS AND CONFLICTS IN THE SYSTEM www.pallai.hu The Hungarian LG System 21 PROBLEMS AND CONFLICTS IN THE SYSTEM Lack of predictability: Annual decisions of central transfers within the State Budget flexibility for central Government vs. Insecurity for Local Governments and Overwhelming fiscal dependency Structural deficit of the national budget: deficit Central government strategy can „push down” the to the LG level www.pallai.hu The Hungarian LG System 22 GDP SHARE OF LG AND CG BUDGET 1991 1996 2000 CENTRAL GOVERNMENT 47% 40% 45% LOCAL GOVERNMENTS 15% 14% 12% www.pallai.hu The Hungarian LG System 23 Local and Central budgets compared to the change of GDP 125 120 115 110 105 GDP local governments central government 100 95 90 85 % 80 1992 1993 1994 1995 1996 1997 1998 1999 www.pallai.hu The Hungarian LG System 24 LOCAL REVENUES AS (%) SHARE OF GDP 18 17 16 15 14 13 12 11 10 1 1 9 9 www.pallai.hu 1 2 9 9 1 3 9 9 1 4 9 9 1 5 9 9 1 6 9 9 1 7 9 9 1 8 9 9 The Hungarian LG System 1 9 9 9 2 0 0 0 2 1 0 0 2 2 0 0 25 PROBLEMS AND CONFLICTS IN THE SYSTEM Decreasing local government revenues: The possible problems: Un-predictable process, insecurity for LG planning Inadequacy of LG funding Interest of local governments: Predictable system: to peg transfer pool to GDP or National Budget More own revenues and financial independence (CG must offer not only right, but make also room for local revenue collection) Better representation of the interests of LGs www.pallai.hu The Hungarian LG System 26 Regulation of PIT sharing 60 50 40 PIT shares on the origin bases 30 PIT shares redistributed 20 PIT shares total to LG 10 0 91 992 993 994 995 996 997 998 999 000 9 1 1 1 1 1 1 1 1 1 2 www.pallai.hu The Hungarian LG System 27 Shared PIT and local taxes (in nominal HUF) 250 000 200 000 Local taxes 150 000 Shared PIT (on origin bases) 100 000 50 000 www.pallai.hu The Hungarian LG System 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 0 28 OWN AND SHARED REVENUES (AS SHARE OF TOTAL REVENUES) www.pallai.hu own revenues shared on origin base 01 20 99 19 97 19 95 19 93 PIT to LGs 19 19 91 45 40 35 30 25 20 15 10 5 0 The Hungarian LG System 29 TRANSFERS PROPORTIONAL TO TASKS (AS SHARE OF TOTAL REVENUES) 60 normative grants for opeartion 50 investment grants 40 30 from PIT on task basis 20 total task related transfers 10 www.pallai.hu 2001 1999 1997 1995 1993 1991 0 The Hungarian LG System 30 PROBLEMS AND CONFLICTS IN THE SYSTEM Weaknesses of the normativity of the intergovernmental financing system Decreasing task related financing Shared tax revenue has decreased Inadequacy of the own revenue sources Revenue capacity calculation for equalization considerably decreased the incentive for own revenue production No calculation of revenue dynamics Increase of discretionary elements www.pallai.hu The Hungarian LG System 31 PROBLEMS AND CONFLICTS IN THE SYSTEM Difficulties caused by the Public Sector Reform Uniform quality standards: changing tasks for local governments Un-funded mandates ? Sector policies vs. Inter-sectoral bargains Central planning advantage vs. micro adjustments and synergies of local policies www.pallai.hu The Hungarian LG System 32 PROBLEMS AND CONFLICTS IN THE SYSTEM Fragmentation In 1990 it was logical to create a system based on the settlement level for reinforcement of communities and participation Differences in capabilities Externalities and economy of scale Certain functions shifted to weak middle level Incentives to cooperation of LGs Privatization and out sourcing encouraged www.pallai.hu The Hungarian LG System 33 IMPORTANCE OF LOCAL GOVERNMENTS Division of monolithic state New methods in governance Participation and local democracy POPULARITY OF LOCAL GOVERNMENTS www.pallai.hu The Hungarian LG System 34 Satisfaction with achievements 60 national local 40 20 szept.97 www.pallai.hu may jún.99 The Hungarian LG System 35 Satisfaction with institutions 60 50 40 30 local governments 20 central government 10 0 1995 1996 1997 1998 1999 www.pallai.hu The Hungarian LG System 36 Role in improving your life 100 90 80 central government 70 parliament mayor 60 local assembly www.pallai.hu 1999 1998 1997 1996 50 The Hungarian LG System 37 Katalin Pallai www.pallai.hu [email protected] www.pallai.hu The Hungarian LG System 38 RIGHTS OF LOCAL GOVERNMENTS LGs autonomously act on public affairs in local interests Responsibility and authority exercised by elected body The office has strictly administrative and preparatory tasks Autonomously select the mix and forms of services delivered Autonomous decision on organization and rules of procedure www.pallai.hu The Hungarian LG System 39 INSTITUTIONAL FRAMEWORK OF FD Legislative Framework: Constitution, Local Government Act, Act on Local Budgets, State Budget Act, Sector Laws and Decrees, Act on Municipal Debt Resolution Organizational Framework for Conflict Resolution Surveillance: Parliament, State Audit Office, Local Administrative Notary, sector ministries (compliance with sector rules) Citizens’ control: transparency, public hearing, referendum, polls, NGOs & private sector representation Dispute resolution: regular Courts, Constitutional Court, No Administrative Court only departments of judges specialized on administrative cases www.pallai.hu The Hungarian LG System 40 OWN REVENUES (as % of local budgets) 50% 40% User charges 30% Local taxes 20% Revenue from property 10% 0% 1995 1996 1997 1998 1999 2000 www.pallai.hu The Hungarian LG System 41 Revenues in Budapest as % of total revenues 100 80 own source revenues 60 40 transfers 20 www.pallai.hu The Hungarian LG System 2001. 1999. 1997. 1995. 1993. 1991. 0 42