Fiscal Decentralization Reform Research Articles

Exploring Budget Surpluses: Budget Absorption Problems in Recently Decentralized Macedonian Municipalities

ABSTRACT This study treats operating budget surpluses as an absorption problem rather than a strategic fiscal policy. Applying a system generalized method of moments (GMM) model on panel data from 80 Macedonian municipalities for the period 2006–2020, the study examines the relation of decentralization and vertical fiscal imbalance with these systematic operating surpluses. The findings from the study are mixed. The findings from this study are relevant to all developing countries undergoing fiscal decentralization reforms, especially post-socialist countries. This study fills a void in the literature examining non-strategic surpluses in recently decentralized local governments.

Fiscal Decentralization and Green Innovation - Evidence from Listed Firms in China

This paper takes the reform of "Province-Managing-County(PMC)" as a natural experiment, utilizes the data of listed enterprises and green patent data from 2007 to 2019, and applies the method of the difference-in-differences(DID) to investigate the impact of fiscal decentralization on enterprises' green innovation. The study finds that the PMC reform makes the green innovation of enterprises decrease by 27.34%, and this phenomenon is more significant in state-owned enterprises and non-heavy pollution industries. The main mechanism lies in the fact that local governments, in pursuit of economic development, reduce the amount of sewage charges paid by enterprises and lower the entry threshold of enterprises, and at the same time, this behavior influences the decision makers of enterprises to reduce the amount of environmental protection investment of enterprises. Additionally, the study found that government environmental protection subsidies can ease financial constraints on enterprise green innovation, mitigating the inhibitory impact of PMC reform. The paper advocates shifting from a traditional rapid economic development model to embracing green development, integrating it into core government management, and methodically advancing fiscal decentralization reform.

Local government efficiency and economic growth: The Italian case

This paper builds on the empirical literature that analyses the relationship between government efficiency and economic growth by investigating the link on a sample of about 3800 Italian municipalities. While the correlation has been explored at country or regional level, empirical studies at municipal or city level are virtually absent. This is a severe limitation given the numerous fiscal decentralization reforms that took place in many European countries over the last few decades aimed at increasing the autonomy and responsibilities of sub-national government. Estimation results show that government efficiency, when instrumented, is conducive for economic growth. The effect is larger for low populated municipalities, for those located in the South of Italy, and in more peripheral areas. Results are robust to alternative measures of efficiency and growth.

Fiscal Decentralization and the Human Development Index: A Cross-Border Empirical Study

Many countries have implemented fiscal decentralization reform in recent decades, which has had a profound impact on their national development. The aim of this paper is to study the relationship between fiscal decentralization and national development. To achieve this goal, we validated our proposition with panel data of 50 countries covering the period of 1991–2020 and used IV estimation to correct any potential endogeneity, with the Geographic Fragmentation Index as an instrumental variable. We used the Human Development Index (HDI) to measure the level of national development, as it is a composite index that includes the three dimensions of economy, education, and health. The results show that there is a significant hump-shaped relationship between fiscal decentralization and the HDI. This result was robust when it was tested on an alternative sample covering the period of 2010–2021. The policy implication determined here is that governments should choose a moderate degree of fiscal decentralization in order to promote national development. We also discuss how to determine such a moderate degree of fiscal decentralization.

Like the new and hate the old: The impact of fiscal decentralization on regional development strategy

This paper evaluates the impact of China’s fiscal decentralization reform, namely the “Province-Managing-County” (PMC) fiscal reform, on local governments’ regional development strategy using county-level data in China covering 2000 to 2013. Surprisingly, after implementing the PMC fiscal reform, local governments will adjust their strategy of supporting zombie firms and attracting new firms, indicating that fiscal decentralization has changed the regional development strategies of local governments. We perform a difference-in-differences (DID) analysis and find that the PMC fiscal reform materially induces an average rise of 0.131 in newly added firms, an average decline of 0.383 in zombie firms, and no significant change in other firms. There is a pronounced substitution effect between zombie firms and newly added firms. We also find evidence supporting this argument: the government’s subsidy, tax treatment, and financial support. Our study provides empirical evidence that local governments’ regional development strategies can be affected by fiscal decentralization.

Carbon mitigation performance of top-down administrative and fiscal decentralizations: Evidence from quasi-natural experiments in China's pilot counties

Chinese-style decentralization reform not only creates miracles of economic growth, but also brings many unexpected gains, the most prominent of which are environmental externalities. The aim of this paper is to use the quasi-natural experiments of county-level administrative decentralization and fiscal decentralization reforms to study their heterogeneous effects on regional carbon emissions in the difference-in-difference framework. We selected the pilot counties as the treatment group from the full sample of 1981 counties during the period 1997–2017. The results show that the parallel trend test provides the empirical premise of the quasi-natural experiment. Due to the consistent estimation of instrumental variable estimation and PSM-DID methods, the average treatment effect of carbon emissions of the two kinds of decentralization reforms and their mixed reform pilots was obtained robustly. Consequently, the fiscal decentralization promotes carbon emission reduction, while administrative decentralization has insignificant effect. The mixed pilot counties that have carried out both administrative decentralization and fiscal decentralization reforms could usher in enhanced carbon reductions. To achieve more environmental benefits, policymakers need to further strengthen the coordination of county-level administrative and fiscal decentralization reforms.

Constructing Risk Analysis for Changes in China’s Local Government Bond System Based on SSP

The local government bond system of China has experienced a series of changes from its initial creation to its abolition and then to a recovery again. During the period, the central government always dominated the changing direction of the local government bond system. However, as fiscal decentralization reform has progressed, the institutional needs of local governments and investors have gradually gained attention. As a result, the size and variety of local government bonds are expanding. Through the introduction of analysis of system change based on situation structure performance (SSP), this paper uses Machine Learning (ML) approaches to predict the risk of government debt of China in the context of changing the local government bond system. Besides, this research work includes the comprehensive weight assignment for government debt hazard, fiscal revenue forecasting, default risk calculation, and finally an analysis of the validity of government debt hazard. The system may provide financial signal advice and strategy reference for dealing with hazards in early payment, organizing debt repayment significance order, optimizing fiscal revenue and cost structure, and so on.

A Study on the Impact of Fiscal Decentralization on Green Development from the Perspective of Government Environmental Preferences.

Green development is necessary for China to carry out high-quality economic development. As an important institutional arrangement in the vertical government structure, fiscal decentralization supports regional green development. Local government environmental preferences indicate local environmental protection awareness and affect the process of regional green development to a certain extent. Based on the review of relevant theories and literature, this study conducts an empirical analysis based on Chinese provincial panel data from 2007 to 2019 using a two-way fixed effects model and a panel threshold model. Both revenue decentralization and expenditure decentralization have a U-shaped nonlinear relationship with the green development efficiency calculated by the superefficiency SBM model, which includes undesirable output. Neither factor has a positive effect on green development efficiency at this stage, while local government environmental preferences are positively connected to green development efficiency. Furthermore, a moderating effect is observed in the relationship between fiscal decentralization and green development efficiency. Under the same level of revenue decentralization or expenditure decentralization, the stronger the environmental preferences of the local authority are, the higher the green development efficiency. This moderating effect is more significant in coastal areas than inland areas. Further research reveals a threshold for the moderating effect of local government environmental preferences on fiscal decentralization on green development. When the environmental preferences of local government are below the threshold, both revenue decentralization and expenditure decentralization significantly inhibit the improvement in green development efficiency. After the threshold is passed, the negative effects of both on green development efficiency are markedly curtailed. Then, the government performance appraisal system should be further optimized, fiscal decentralization reform should be strengthened, local financial investment in environmental protection should be expanded, and synergistic regional development should be promoted. China’s green development should be promoted to an advanced stage.

A study on the impact of fiscal decentralization on carbon emissions with U-shape and regulatory effect

The Chinese government set a goal in 2009 to cut carbon emissions by 40–45 percent of 2005 GDP per unit by 2020. The role of fiscal decentralization reform in strengthening environmental governance has gained importance. This paper explored the impact of fiscal decentralization reform from 2010 to 2019 on carbon dioxide emissions in China. We utilized the first-order differential dynamic panel econometrics model to examine the correlation between fiscal decentralization and carbon dioxide emission under fiscal imbalance and transfer indirect effects. The findings revealed that 1) fiscal imbalance reduced CO2 emissions due to the decentralization of revenue, and expenditure asymmetry undermined CO2 emissions control. 2) The central government’s transfer payments offset the negative consequences of a fiscal imbalance. The fiscal decentralization of the government caused a difference between regional income and expenditures in the budget. However, it could affect local government expenditure on carbon emission control through central transfer payments, which could restrain carbon emissions and control environmental pollution. 3) The impact of fiscal decentralization on carbon dioxide emissions was influenced by the industrial structure with the U-Shape effect. This was because the adjustment of the industrial structure was cross-term. In the early stage of the industrial structure adjustment, there was a significant decline in coal consumption demand and carbon emissions reduced. However, as the proportion of the secondary industry increased, there was a significant positive correlation between the secondary sector and carbon dioxide emissions in China. Our findings have important policy implications. First, while the promotion of Chinese officials is based on local GDP performance, locals may introduce green GDP as the criterion for rating governments’ performance. Second, local governments should improve environmental governance by increasing technical, environmental protection, and innovation investment. All in all, the findings provide a theoretical basis for relevant research and policy suggestions for China.

The functionality of health facility governing committees and their associated factors in selected primary health facilities implementing direct health facility financing in Tanzania: A mixed-method study.

BackgroundIn Lower and Middle‐Income Countries (LMICs), decentralization has dominated the agenda for reforming the organization of service delivery (LMICs). The fiscal decentralization challenge is a hard one for decentralization. As they strive to make decisions and use health facility funding, primary healthcare facilities encounter the obstacles of fiscal decentralization. LMICs are currently implementing fiscal decentralization reforms to empower health facilities and their Health Facility Governing Committees (HFGCs) to improve service delivery. Given the scarcity of systematic evidence on the impact of fiscal decentralization, this study examined the functionality of HFGCs and their associated factors in primary healthcare facilities in Tanzania that were implementing fiscal decentralization through Direct Health Facility Financing (DHFF).MethodsTo collect both qualitative and quantitative data, a cross‐sectional approach was used. The research was carried out in 32 primary healthcare facilities in Tanzania that were implementing the DHFF. A multistage sample approach was utilized to pick 280 respondents, using both probability and nonprobability sampling procedures. A structured questionnaire, in‐depth interviews, and focus group discussions were used to gather data. The functionality of HFGCs was determined using descriptive analysis, and associated factors for the functioning of HFGCs were determined using binary logistic regression. Thematic analysis was used to do qualitative research.ResultHFGC functionality under DHFF has been found to be good by 78.57%. Specifically, HFGCs have been found to have good functionality in mobilizing communities to join Community Health Funds 87.14%, participating in the procurement process 85%, discussing community health challenges 81.43% and planning and budgeting 80%. The functionality of HFGCs has been found to be associated with the planning and budgeting aspects p value of 0.0011, procurement aspects p value 0.0331, availability of information reports p value 0.0007 and Contesting for HFGC position p value 0.0187.ConclusionThe study found that fiscal decentralization via DHFF increases the functionality of HFGCs significantly. As a result, the report proposes that more effort be placed into making financial resources available to health facilities.

Fiscal Decentralization and Gender Parity in Education: Empirical Evidence from Pakistan

Purpose: Fiscal decentralization is an emerging phenomenon in Pakistan from the last few decades. A large number of studies have been investigated the socio-economic and political effects of fiscal decentralization in Pakistan. But none of the study has examined that how fiscal decentralization has affected gender parity in education in Pakistan.
 Design/Methodology/Approach: This study empirically investigated the dynamic relationship between fiscal decentralization and gender equality in education by employing different measures of fiscal decentralization and used autoregressive distributed lag model (ARDL) bounds test approach for cointegration testing for the period of 1975 to 2020. The bounds tests suggest that the variables of interest are bound together in the long run when gender parity in education is dependent variable.
 Findings: The long run relationship is also confirmed by the significance of associated equilibrium correction. The robust analysis of this study suggest that fiscal decentralization is improving gender equality in education particularly education expenditure decentralization and revenue decentralization.
 Implications/Originality/Value: The results are important for fiscal policy formulation in public and social sector in Pakistan. Further, these results might be helpful for other developing countries that share a common experience in applying fiscal decentralization reforms and struggling to reduce gender disparity in education sector.

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.

IN SEARCH OF A LINK BETWEEN FISCAL DECENTRALIZATION AND FISCAL AUTONOMY IN SERVICE DELIVERY IN URBAN LOCAL GOVERNMENT AUTHORITIES IN TANZANIA

This article investigates the link between fiscal decentralization and fiscal autonomy in service delivery particularly in urban LocalGovernment Authorities in Tanzania. In the past two decades, Tanzania government adopted fiscal decentralization reforms as partof broad local government reform program. The reforms include the transfer of fiscal power to local governments to collect and spendtheir own revenues but also to enjoy discretionary intergovernmental transfers from central government. On the contrary, local government authorities particularly in urban areas have not achieved the intended goal of the reforms. Most of the LGAs lack adequate fiscal autonomy to address the growing demand of urban services and infrastructure. Although there is already substantial amount of research explaining fiscal decentralization in Tanzania, most of this literature focuses on the limited revenue base of local government and lack of effective intergovernmental transfers. Overall, there is very little which is known concerning institutional factors which play a role when it comes to decision making on the allocation of fiscal resources to local government. The objective of this paper was therefore two folds: first to identify the current state of fiscal decentralization in two LGAs selected for this research and second was to explore the institutional factors which determine the allocation of fiscal resources in the selected urban LGAs in Tanzania. In addressing this objective, the comparative case study design was adopted namely: Kinondoni Municipal Council in Dar es Salaam region and Tunduma Town Council in Songwe region in Tanzania. The sample of 60 respondents was drawn purposely from the two cases and the data from the sampled respondents were collected through the review of documents, in-depth interviews andfocus group discussion with officials in the selected urban LGAs. The collected data were finally analyzed through contents analysis for documentary review and thematic analysis for the interviews and focus group discussion. The research findings show that the degree of fiscal autonomy has substantially deteriorated in the past six years due to excessive central government guidelines and directives which regulate expenditure and revenue generation by local government. This includes the conditions on the allocation of fiscal resources such as budget or the use of intergovernmental transfers from central government.

Legacies of mistrust: Why colonial imprints on the implementation of fiscal reforms in Mozambique and Mexico matter

National authorities across Latin America and Sub-Saharan Africa have implemented various forms of fiscal decentralization over the past three decades with equivocal results. The design of such reforms has long rested on theories based on the experiences of high-income countries’ efforts at increasing local autonomy, accountability, and basic service efficiencies. Critics of the global advocacy for fiscal decentralization, however, point to several challenges with its implementation across diverse political economies that differ significantly from those in high-income environments. Nonetheless, these critiques often obscure the impact that colonial regimes and their legacies have on current efforts to fiscally decentralize. In two postcolonial environments where fiscal decentralization projects have unrolled, namely Mozambique and Mexico, we show how colonial imprints remain critical to understanding efforts at fiscal decentralization. Our focus in these cases is on how race-based caste systems introduced under colonial administrations fed the development and evolution of dual governance systems across spaces and peoples that bred mistrust between residents, local authorities and central authorities. We argue that the conflicting rationales in evidence between stakeholders involved in fiscal decentralization projects today are rooted in the social mistrust and power struggles born from these colonial experiences. In conclusion, we contend that fiscal decentralization reforms must explicitly grapple with these spatialized and racialized legacies of mistrust and the diverse rationalities guiding stakeholders in both the design and evaluation of public policies meant to strengthen local autonomy, transparency, and efficiencies.

Fiscal decentralization, intergovernmental transfer reform and conflict in Colombian municipalities

In this paper, we examine how conflict in Colombia responded differentially to a fiscal decentralization reform in 2001 for the regions with different presence of armed militia groups, namely the Revolutionary Armed Force of Colombia (FARC), the National Liberation Army (ELN), and the United Self-Defense Group of Colombia (AUC). We also examine the differential impact on municipalities with and without oil reserves. We are using municipal-level data on general characteristics of municipalities, fiscal variables, and variables related to conflict. While there is a rich literature on the economic drivers and impacts of conflicts, the literature that examines the relationship between fiscal decentralization and conflicts is relatively small. We are contributing to the literature by examining this relationship at the local (municipal) level, which has not been explored widely or conclusively in other studies. We are also addressing spatial dependence among municipalities. This is important because it is likely that conflict and other economic variables lead to spillovers that impact municipalities in close proximity. We employ spatial econometric techniques, particularly Spatial Durbin Model (SDM), to account for spatial dependence in the data. Our results show a decrease in conflict in response to the intergovernmental transfer reform, but the exact response vary by conflict region. Oil reserves in some municipalities seem to have played a role in the conflict outcomes as well.

The Impact of Fiscal Decentralization on Economic Growth in Central and Eastern Europe

In this research, we evaluated the impact of fiscal decentralization on GDP per capita growth. Using the unbalanced panel data, the authors assessed the interconnections between fiscal decentralization – considering its expenditure and revenue aspects as well as tax autonomy – and economic growth for Central and Eastern European countries from 1995 to 2018. In the examined states, the expenditure decentralization exceeded the revenue one. We found out that revenue decentralization and tax autonomy adversely affected economic growth. But expenditure decentralization associated with a positive GDP growth rate. In this paper, we also explored the peculiarities of fiscal decentralization reform. Structural transformations radically reduced the size of the public sector in Central and Eastern Europe, which had a positive effect on the economy. The vital components of local budgets tax revenues are personal income tax and the property taxes. The most effective mechanism for the property tax base’s determination arises from the value of the real estate or land.
 Keywords: fiscal policy, fiscal decentralization, tax autonomy, property taxes, economic growth

Analysis Of The Relevance Of Fiscal Decentralization In Ensuring Country Investment Attractiveness

Over the last three decades, fiscal decentralization reform has become widespread in the world as one of the most effective tools for ensuring the efficient functioning of the public and local finances, as it involves the transfer of powers from central to local or regional levels of government under the principle of subsidiarity and more effective allocation of budgetary funds. However, despite the fact that the reform of fiscal decentralization is mainly aimed at a qualitative transformation of the functioning of the budgetary system, it is crucial to take into account the consequences and interrelations of this process with other components of economic policy and their target parameters when developing the concept and algorithm for its implementation. Thus, in particular, many empirical studies confirm the impact of fiscal federalism on country economic growth. However, it is also essential to identify the impact of reform on the parameters of the country investment attractiveness. In the article, empirical studies on the impact of decentralization on the country’s and region’s investment attractiveness indicators were analyzed. The analysis results revealed that this issue has not become widespread in the scientific literature, and the existing research does not allow a clear conclusion about the nature of the impact of decentralization on the parameters of investment activity. The paper provides panel data regression analysis in order to identify the impact of revenue and (cost) expenditure decentralization on net inflow of foreign direct investment, gross capital formation and business network density for a sample of 12 unitary European countries (Czech Republic, Denmark, Estonia, France, Hungary, Italy, Latvia, Lithuania, Poland, Slovak Republic, Slovenia, and Ukraine) for 2008-2018. According to the modeling results, it was found that the level of expenditure decentralization has a positive effect on the net inflow of foreign direct investment and business network density, negative – on the volume of gross capital formation. In contrast, revenue decentralization has no statistically significant effect on any of the performance parameters. Keywords: expenditure (cost) decentralization, revenue decentralization, investment attractiveness, investment activity, regression analysis.

Does Fiscal Decentralization Influence on Management Efficiency of Country Innovative Development?

This paper summarizes the arguments and counterarguments within the scientific discussion on the influence of fiscal decentralization measures on the management of innovative country development. The main purpose of the research is to test the hypothesis that expenditure and revenue decentralizations have a positive impact on the management of innovative country development. Testing the hypothesis considers realization of panel data regression analysis, and consists of several stages, such as: 1) elimination of control variables multicollinearity based on the correlation analysis; 2) identification of the regression model specification (fixed or random effects model) with the help of Hausman test; 3) realization of the regression analysis and characteristic of its results (confirmation or rejection of the hypothesis). It also should be noted that country sample consists of 12 unitary European countries (Czech Republic, Denmark, Estonia, France, Hungary, Italy, Latvia, Lithuania, Poland, Slovak Republic, Slovenia, and Ukraine). Time horizon – 2008-2018. Global Innovation Index is a measure of innovative country development. At the same time, the ratio of local budget revenue to consolidated budget revenue, the rate of domestic budget expenditure to consolidated budget expenditure, the proportion of local budget tax revenue to gross local budget revenue are measures of fiscal decentralization in the research. There are also selected a set of control variables that often used in economic growth models and reflect macroeconomic perspectives of country development. However, the practical realization of the stages, as mentioned above, allow identifying that fixed effect specification of the model is more appropriate in all three cases (for three different measures of fiscal decentralization). Panel data regression analysis allows confirming the hypothesis on the positive impact of revenue fiscal decentralization and the negative impact of expenditure decentralization on innovative country development. In turn, there is no statistically significant cohesion between ratio of local budget tax revenue to gross local budget revenue and Global Innovation Index. These findings in terms of fiscal decentralization reform might be considered in order to ensure a balance between power (expenditures) redistribution from central to sub-central governments and local budget financial capacity. While in terms of innovative country development, it should be considered that the lack of local budget financial resources to cover all redistributed from central government level powers makes it impossible to invest in the development of innovation. However, the increase of local government financial capacity creates opportunities not just for essential functions financing but also advanced features investment such as innovative development. Keywords fiscal decentralization, innovation development, local budget expenditures, local budget revenue, local community.

Fiscal Decentralization Reform and its Impacts on Primary Education Service Delivery in Tanzania: the Case of Dodoma Municipal Council

This study is about fiscal decentralization reforms implemented in Local Government Authorities (LGAs) in Tanzania with special focus on Primary Education Service Delivery in Dodoma Municipal Council. The study investigated the question of poor performance of the municipal council in primary education service delivery despite the reforms undertaken to devolve the finances and functions to the council. It aimed to find out the extent and manner the fiscal decentralization has been implemented and its effects on the council’s performance on primary education service delivery. The study is based on data collected through interview and documentary review. It has been observed that despite to fiscal decentralization reforms, still there has been no significant improvement in quantitative and qualitative primary education service delivery in the council. This study further noted that the practice of fiscal decentralization such as intergovernmental fiscal transfer, (grants) and local government own sources of revenues are not adequate. The devolved funds also are characterized by conditional ties which undermine the autonomy and priorities of the Council. The study also noted that financial capacity of the council is weak despite the reform which have not provided for the expenditure on school infrastructure, furniture and poor academic performance to standard seven examinations and inadequate funds disbursed to the council, have led to poor primary education service delivery. The study recommends that council should be assured of autonomy in fiscal control and management to ensure qualitative and quantitative primary education service delivery.

THE IMPACT OF INTERGOVERNMENTAL FISCAL TRANSFERS ON LOCAL GOVERNMENT AUTONOMY AND SERVICE DELIVERY IN TANZANIA

A large part of the decentralization literature is fragmented along political, fiscal, or administrative lines. In this article, I employed a diagnostic framework to draw the dimension of fiscal decentralization reform through intergovernmental fiscal transfers and how the later has affected local government fiscal autonomy and performance on primary education service delivery in Tanzania. This study is broadly about fiscal decentralization reforms undertaken and implemented in local authorities in Tanzania with special focus to Dodoma Municipal Council. It aimed to find out the extent and manner the fiscal decentralization reform has been implemented and its effects on the council’s fiscal autonomy and performance in primary education service delivery. This study is based on data collected through questionnaire, focus group discussions and documentary review. The findings indicate that despite fiscal decentralization reform, still there has been no significant improvement in quantitative and qualitative primary education service delivery in the council. It was further noted that the practice of fiscal decentralization such as intergovernmental fiscal transfer,(grants) has not granted fiscal autonomy to local governments. The devolved funds also are characterized by conditional ties which undermine the autonomy and priorities of the Council. The study also noted that financial capacity of the council is weak despite the reform which have not provided for the expenditure on school infrastructure, furniture, teachers’ salaries, allowances and poor academic performance to standard seven examinations. The study further noted the challenges facing fiscal decentralization such as delay of funds, lack of transparency, corruption and inadequate funds disbursed to the council, have led to poor primary education service delivery in the Council in the long run. The study recommends that council should be assured of autonomy in fiscal control and management to ensure qualitative and quantitative primary education service delivery.