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WB Work on Decentralization in ECA

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.

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WB Work on Decentralization in ECA

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  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

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

  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?

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