Central Government Grants Research Articles

Politics of local fiscal discipline with vertical fiscal imbalance

AbstractWe examine the political conditions mediating the effect of vertical fiscal imbalance (VFI) on local government fiscal discipline in Ghana. Based on a panel dataset of 216 local governments in Ghana over the period 1994–2018, we adopt both a static and dynamic approach, in addition to a regression discontinuity design. From the results, while alignment may give “free pass,” local governments could leverage same for effective tax efforts. Further, the benefits of lower political competition may reduce where local governments place reliance on central government grants. There is consistent evidence of a negative effect of VFI on fiscal discipline.

The Impact of Intergovernmental Transfers on Fiscal Behaviour of Local Government in Ethiopia

This paper examines the effect of intergovernmental fiscal transfers on the fiscal behaviour of local governments in Ethiopia for the period 2004-2018. The empirical findings suggest that central government grants bolster state-level employment and expenditure. However, grants from the central government to states do not crowd out state-level revenue collection. Hence, this paper argues that fiscal decentralisation in Ethiopia has mostly, at least in theory, taken the form of devolution of the power to tax and spend public money. However, on average state-level revenue can only finance up to 26 percent of their annual expenditure. As a result, fiscal federalism in Ethiopia appears to be a delegation of spending responsibilities. It must be considered in a decentralized tax system, but with a transfer scheme and political hierarchy. The results are robust to alternative econometric estimation techniques.

The new Ukrainian school reform: Achievements, developments and challenges

AbstractThis article describes the New Ukrainian School reform and its conceptual framework. The reform builds on advanced pedagogical experience, best education practices, European competency frameworks and the promotion of national values. The system‐wide reform focuses on competency‐based content for teacher professional development, safe learning environments, inclusion and the digitalisation of education. Also, it addresses the internal and external quality assessment of education. The reform is financed through central government grants and the budgets of local governments. To test the newly developed content, the reform was piloted at 143 schools one year ahead of the nationwide roll‐out. The schools are a representative sample of schools in Ukraine. The pilot study involved monitoring student learning outcomes, teacher preparedness to implement the reform, and organisation of education environments. Methods used for the pilot study included a survey, test, pedagogical observations, and secondary analysis of statistics. The national implementation of the reform started in 2017 and is planned to be completed by 2030. Russia's full‐scale invasion of Ukraine in 2022 has contributed to obstacles and risks such as learning losses, lacking school safety, absence of funding for the development of schools and for printing textbooks. We describe measures undertaken in Ukraine to promote the reform and good results. A range of challenges remain, such as rebuilding destroyed schools, optimising the school network in line with demographic changes and organising shelters at schools. Additional challenges include the promotion of digital technologies at schools, closing learning gaps and the provision of psychological support at school.

ANALYSIS OF MUNICIPAL FINANCES OF WARANGAL MUNICIPAL CORPORATION

This paper analyses the pattern of total income and total expenditure of Greater Warangal Municipal corporation during the period from 2015-16 to 2021-22 in terms of trends in the composition of capital receipt, revenue receipt, capital expenditure, revenue Expenditure, and allocation pattern as between different sectors, proportions of the plan and no plan expenditure and select performance indicators such as Gross surplus/Deficit or net surplus/Deficit of corporation. The results show that GWMC is faring better in terms of Gross surplus/Deficit and net surplus/deficit in all years. The major sources of capital receipts are state government grants and Central government grants while major sources of revenue receipts are tax revenues, non-tax revenues, deposits, and others. Budget estimates are shown not stable from year to year due to changes in the development schemes and central government contribution to the development of Warangal as a smart city.

Macroeconomic Fundamentals, Economic Growth and Poverty in Ecowas Franc Zone: Does Single Currency Matter?

The paper investigated the role of single currency macroeconomic variables (exchange rate, central government tax and grant revenue, central government fiscal balance, inflation rate, external public debt stock, and gross capital formation) on output, poverty, international trade volume and unemployment in ECOWAS Franc zone. The question was about the state of symmetry of these factors and its effects on economic growth. The core objective was to examine the pattern of relationship these variables have with economic growth. The paper covered the period 1980 to 2019 and countries in the zone. Romer endogenous growth model, optimum currency theory (OCA) and PMG-ARDL methodology were used. From the group coefficients, fiscal balance (0.03) and inflation (0.15); exchange rate (-0.29) and inflation (-4.50); GCF (0.01); and tax/grant revenue (4.10e-10) were significant at the 5% level in the output, poverty, international trade volume and unemployment models, respectively. While the poverty model indicated two OCA groups in the region, the output, international trade and unemployment models showed four OCA groups each. The long run error correction terms in the output, poverty, international trade volume and unemployment models were 0.61, 0.11, 0.10, and 0.093 respectively and significant at the 5% level, meaning divergence from long run equilibrium. A minimum of two OCAs and a maximum of four OCAs were found. The paper therefore concluded that the zone does not fulfill OCA requirements and recommended that appropriate policy mix should be developed to align these single currency macroeconomic factors towards achieving sustainable economic growth in the zone.

The Effect of Education and Health on Poverty Reduction in Aceh Province, Indonesia: Moderating Role of Special Autonomy Fund

Aceh is the highest poverty rate among other provinces on Sumatra Island, and this condition has been going on for 20 years (2002-2021). Poverty that lasts a long time can result in the inheritance of poverty to the next generation so that it can give rise to groups of people who are always poor, which bring various problems. To overcome the problem, the central government grants special autonomy funds expected to reduce poverty in Aceh Province by strengthening the education and health sectors. Many previous studies have examined education and health as determinants of poverty. However, there was still limited research using special autonomy funds as a moderating variable. Therefore, the authors are motivated to fill the gap in research related to special autonomy funds as a moderating variable on the effect of education and health on poverty in Aceh Province. This study aims to investigate the role of special autonomy funds in moderating education and health on poverty using panel data for 2010-2021 in 23 districts/cities in Aceh Province, Indonesia. Analysis using MRA concluded that education had no significant effect, while health negatively affected the poverty rate. Furthermore, special autonomy funds are significant in moderating education and health on poverty. So, to reduce poverty, special autonomy funds can focus more on the education and health sectors. It is recommended that the government still utilize special autonomy funds that focus on supporting both programs, increasing public education and health, since special autonomy funds are proven to strengthen the effect of those two sectors in poverty reduction

Assessing the 2019 Redesign of Bulgarian Fiscal Equalization System

In many countries the narrowing of horizontal fiscal imbalance at local government level is an important issue of national fiscal policy. Large fiscal disparities at municipal level could lead either to lower service levels in fiscally poor regions or to higher tax rates for similar service levels in these regions. In turn, this could thwart efforts to reduce inequality in income distribution between individuals or could induce fiscally inefficient migration of business and individuals. Since the launch of fiscal decentralization reforms in Bulgaria in 2003 part of central government grants system for municipalities has been the equalization grant aimed at financing a minimum level of local services delivery. The equalization formula has undergone many changes during the years, and the last one was implemented in 2019. The main focus of the current study is to compare the equalizing effect of the equalization schemes applied in Bulgaria in 2018 and 2019. In order to test whether the 2018 and 2019 distribution formulas carry an equalizing effect with respect to municipal expenditure needs, per capita transfers received is regressed on three variables or indicators reflecting the differences in the municipal expenditure needs. Our results show that the new equalization mechanism as of 2019 is better designed to capture the differences in municipal expenditure needs and to alleviate fiscal disparities at local level when compared to the mechanism applied in 2018.

Fiscal decentralization and efficiency of public services delivery by local governments in Ghana

AbstractIn this paper, we estimate the efficiency of Metropolitan, Municipal and District Assemblies (MMDAs) in Ghana, and investigate the impact of fiscal decentralization on the efficiency of local public goods and services delivery by MMDAs. Using data from composite budgets of all 216 MMDAs, we employ both non‐parametric and parametric frontier methods to carry out the study. The results with regard to our two indicators of fiscal decentralization indicate that fiscal autonomy proxied by MMDAs’ internally generated funds as a share of their total revenue has a positive influence on the efficiency of MMDAs whilst vertical imbalance—a high share of central government grants in MMDAs’ total expenditure—does not improve the delivery of local goods and services by MMDAs in Ghana. The findings indicate a clear signal to policy managers to prioritize support to MMDAs in the mobilization of internally generated revenue.

The effect of central government grants on local educational policy

The use of intergovernmental grants in educational policies may give rise to a conflict between gains attributable to local flexibility and the central government’s intention to narrow gaps in school spending and resource use across local jurisdictions. This paper estimates the impact on school resources of a Norwegian central government grant intended to decrease the student-teacher ratio in primary school (grades 1–4). The grant was given to the 100 municipalities with the highest student-teacher ratios out of more than 400 municipalities. Using a difference-in-differences approach, our results show that Norwegian municipalities did not increase teacher density in primary schools, despite receiving extra grants for this purpose. Though we cannot rule out that there was some take-up of our grant, we can exclude full take up. Our results suggest that strong enforcement mechanisms may be necessary for earmarked grants to affect local allocation of resources as intended by central governments, although this might come at the cost of reducing local flexibility.

Flypaper Effect of Intergovernmental Transfers and Incentives to Improve Own-Source Revenue Mobilization of Local Governments in the Central Region of Ghana

Flypaper effect and the fiscal interest model have been employed to explain the fiscal behaviour of local government officials in the Central Region of Ghana. Central government transfers or grants have taken dominion over local government expenditure compared with own-source revenues, creating a situation known as the flypaper effect. Using panel data for 17 local governments from 2008 to 2015, the study examined the fiscal behavior of local government officials when presented with intergovernmental fiscal transfers and own-source revenues. The analysis employed the panel data analysis of fixed effects and random effects. However, given the optimal unbiased results, the Generalized Least Squares (GLS) is estimated to account for heteroscedasticity and serial autocorrelation. The results show that central government transfers contribute more to local government expenditure than local governments’ own-source revenues. This situation confirms the flypaper effect on local governments in the Central Region, thus explaining the fiscal behavior of the local governments. Whilst the system of intergovernmental transfers in Ghana has been very successful in directing resources towards the local governments, it may be counterproductive in encouraging the local governments in raising their revenue at the local level as demonstrated by the presence of the flypaper effect.

Funding incentives, disincentives and vulnerabilities in the Irish council housing sector

This article examines the incentives and vulnerabilities generated by arrangements for funding local government-provided social housing in Ireland (aka council housing). These arrangements are unusual in a Western European context because the capital costs of providing this housing are almost entirely covered by central government grants, rather than non-governmental debt finance as is the norm elsewhere. Furthermore, no housing allowances are provided to council tenants in Ireland; rather affordability is ensured by charging rents which are linked (progressively) to tenants’ incomes. Although the character and development of Irish council housing has of course been shaped by macro level political, ideological, social and economic factors, the argument offered here is that funding arrangements have also exerted a strong independent influence. These arrangements render Irish council housing more vulnerable to retrenchment and residualization than the social housing funding arrangements used in most other Western European countries.

The Effects of Central Government Transfers on Local Revenue Collection by Urban Local Governments in Uganda: A Case of Selected Municipal Councils

Government of Uganda is undertaking reforms to improve on the funding levels and modalities of local governments but is faced with a limited budget to fund both the central government and decentralized functions. Less is known about the effect of central government transfers to local revenue collection especially in the context of decentralization in Uganda. We assessed the effects of central government transfers on local revenue generation by municipalities in Uganda by analyzing the trends of central government transfers and locally generated revenues by the municipal councils and assessing the effects of central government transfers on own local revenue generation. Our study focused on municipalities that have been in existence since introduction of decentralization policy and some of these have recently been upgraded into cities. Time series data covering the selected municipalities were obtained from the Local Government Finance Commission. The dataset comprised of locally generated revenue and central government transfers for 13 old municipal councils. The data was in Excel and it had to be exported to E-Views statistical software for further analysis using the fixed effects regression model. Our findings indicate that over the period 2002 to 2017, both central government grants and local revenue generation grew exponentially. We find that increased central government grants contributed to a decline in locally generated revenue and this partly attributable to too much reliance of the local governments on central grants. The results showed that the lagged total central government grants had a significant negative effect on the locally generated revenue. Government should factor in the allocation formula for central government grants to the local revenue performance to serve as an incentive for the municipal councils to raise own local revenue.

Local government funding in Ireland: Contemporary issues and future challenges

Abstract The years since the 2008 financial crisis and subsequent economic crash have witnessed significant changes to the funding of the local government system in Ireland. This paper outlines these developments, while, at the same time, exploring some of the most important future challenges relating to the financing of Irish local authorities. The dominant local government revenue issues of the last decade outlined here are fiscal autonomy and the balance between own-source income and central government grants, income differences between urban and rural councils, the Local Property Tax, changes in commercial rates and fiscal equalisation. In terms of fiscal dependency and equalisation, our findings show reductions in the vertical and horizontal fiscal imbalances in the Irish local government system. Likely future challenges include the need to re-examine the balance between business taxes and non-business taxes, funding the expected growth in metropolitan areas and the financing options for capital investment by local authorities, including consideration of municipal bond issuance for the Greater Dublin Area.

Practice ecology of sustainable travel: The importance of institutional policy-making processes beyond the traveller

Changing mobility behaviour towards activities and actions that have a less detrimental impact on the environment, public health and society is an objective of transport policy jurisdictions globally. In line with a burgeoning body of research examining behaviour and social change, this paper explores the governmental systems that influence mobility behaviours through a social practice lens. This paper blends two social practice theoretical models, the ‘3-Elements Model’ and ‘Systems of Provision’, as a means of understanding the delivery of the Local Sustainable Transport Fund (LSTF), a central government grant scheme for English local authorities. We examine how the meanings, materials and competences within the practices of bid writing by local authorities and scheme selection by government influenced the distribution of funding to local authorities. The research starts from the principle that, where funding is provided by central government, in the case of this research that of the UK, an opportunity is created for mobility practices to change. The significance of funding is not easily theorised by the 3-Elements model but is more helpfully explained when that model is blended with the wider Systems of Provision model to create a model of practice ecology. Our theorisation allows for a rigorous exploration of the ‘practice scaffolding’ which shapes how people travel. Policymakers are recommended to consider a practice ecology approach when developing mobility management schemes to tackle air quality, climate change and obesity issues more effectively.

KAJIAN IMPLEMENTASI PROGRAM WAJIB BELAJAR 12 TAHUN DI KOTA SURABAYA

This study aims to find out the strategy applied by Surabaya city in implementing the 12-year compulsory education program and the funding of school operational cost of secondary education. The approach used was both qualitative and quantitative with data and information gathered from interviews, Focus Group Discussion (FGD), and survey form. It can be concluded that the first strategy done by Surabaya city in supporting 12-year compulsory education was preparing a regulation support through a local government’s (including the mayor’s) laws and regulations, which mandate about educational financing. This educational budget is used in improving students’ participation and competence, improving schools’ infrastructure and facility, and improving educators and educational staffs’ competence and welfare. The only sources of school operational cost funding for public secondary schools in Surabaya are the BOS grant from central government and BOPDA grant from local government, whereas for private schools, there is also support from the community in the form of committee contribution. The 12-year compulsory education program in Surabaya can be adopted as a best practice for other districts/cities who are implementing the program.

ANALISIS KEMANDIRIAN KINERJA PENGELOLAAN KEUANGAN DAERAH PROVINSI SUMATERA SELATAN

South Sumatra is a province that consists of 13 Districts and 4 Cities. South Sumatra formally implement autonomy in 2004 set out in the legislation. Autonomy basically aims to provide greater opportunities for the regions to conduct financial management in particular regions. The construction has been done in South Sumatra Province can not be separated from central government grants to help regional development. The level of financial management independence showed that a region has gone well with maximizing resources to develop the region. Based on the data collected showed that The level of financial management independence South Sumatra province average is still a low level of self-sufficiency. Low levels of financial capability to finance its own activities of government in governance, development, and service to the community. Moreover, it can also mean that there are no significant improvements in terms of community participation in local development, namely in terms of payment of taxes and levies. Key words : Autonomy, Financial Management Independence, South Sumatra, public Sector Financial Management

India and China Debt Market Structure; Opportunities and Challenges

Bond markets are better indicators of the investment climate than equity markets and tend to react much faster. Global emerging local currency Bond markets have grown rapidly from US$ 1.4 trillion in 2000 to US$ 8.1 trillion in 2011.Debt Capital Market (DCM) development is a widely-discussed topic in Indian financial and political circles today. The share of emerging market has increased from 4.8 per cent in 2000 to 11.7 per cent in June 2011. The size of East Asian bond markets (EABM) was US$ 5 trillion and contributes 61 per cent of global total. If India is included, the share increased to 70 per cent. China is the largest market worth of US$3.1 trillion, which comprising of 38.5 percent of the top ten emerging bond market followed by Brazil (18.9%) and South Korea (15.1%). India holds fourth position in the emerging bond market. China has established the local government bond market is to finance their massive infrastructure projects. Current revenues and central government grants are insufficient. Current revenues and central government grants are insufficient. China’s globally unprecedented rapid pace of urbanization from 23 per cent in 1989 to 52 per cent in 2012 has created a massive demand for infrastructure in its cities, including roads, mass transit, water, sewerage, schools and hospitals. An urbanization rate of 66 per cent is anticipated by 2030. Both corporate and government get funded by debt market and helps the smaller borrowers to get tap bank lending which are squeezed by the large corporate. In this paper the debt market structure of India and China, scope for taping the excess liquidity through debt instrument, development of state and industry, opportunities and challenges ahead are discussed.

The stimulative effect of an unconditional block grant on the decentralized provision of care

Understanding the impact of central government grants on decentralized healthcare provision is of crucial importance for the design of grant systems, yet empirical evidence on the prevalence of flypaper effects in this domain is rare. We study the decentralization of home care in the Netherlands and exploit the gradual introduction of formula-based equalization to identify the effect of exogenous changes in an unconditional block grant on local expenditure and utilization. A one euro increase in central government grants raises local expenditure by twenty to fifty cents. Adjustments occur through the number of hours as well as through substitution between basic and more advanced types of assistance. These findings suggest that conditioning of grants is not required for the central government to retain a moderate degree of control over the decentralized provision of care.

Institutional entrepreneurship, practice memory, and cultural memory: Choice and creativity in the pursuit of endogenous change of local authority budgeting

This paper explores how a lower government organisation can act as an institutional entrepreneur. It builds on recent public sector budgeting research that identified the endogenisation of budget rules as an important element of institutional entrepreneurship. Inspired by a Wittgensteinian practice theory we identify rules as one element of budget practices and proceed to investigate the endogenisation of another element, termed teleoaffective structure. It refers to the objectives and ends of a practice and the moods and emotions with which they tend to be associated. We develop our argument with reference to two innovative accounting practices developed by Newcastle City Council in order to address radical cutbacks of their central government grants. We emphasise the historical dimension of the endogenisation of teleoaffective structure and show in particular the potential significance of practice memory and cultural memory for shaping teleoaffective structure.

Urban transport social needs in China: Quantification with central government transit grant

Social inclusion requires suitable measures to improve public transport, thus satisfying the needs of socially disadvantaged groups (SDGs). Although numerous measures are available in principle, in practice, however, financial problems hinder the implementation of these measures. This study addresses an important issue in China—how to finance a socially inclusive public transport system given the incomplete nature of fiscal reforms at local government level. Central government grants are required to achieve a more equitable distribution of public transport resources. To calculate the demand for central government grants, an approach was developed to quantify transport social needs (TSNs). A primary component regression model was established to identify the factors that affect the SDGs using public transport. Further, a need-based method is proposed for the allocation of central government grants. The allocation procedure was designed with the categorization of cities to avoid distorted incentives, and a two-step formula was used to address the funding allocation equity problems. The data obtained from 252 municipal cities in China in 2010 show that the TSNs were 37.63 billion trip-kilometers. The corresponding central government grant was ¥18.82 billion. The results of the proposed allocation show that more funding was provided to small and low-density cities had unfavorable situations due to local public transport investment. This investigation would help in a more equitable distribution of public transport funding.