WB Work on Decentralization in ECA

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WB Work on Decentralization in ECA
72 active projects, studies involving
decentralization, local government, urban, rural,
or community development 57 multisectoral DPLs si
nce 2000, many of which have IGR components
PEIRs also address decentralization,
intergovernmental issues
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Project lending focuses on the grass roots or
specific municipalities
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Major Issues in IGR in ECA Countries
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Before Reform

• Local governments had broad responsibilities
  public utilities, education, health
  
• No political autonomy
• Resources based on norms, negotiations

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The Transition (1)

• Local governments became legally independent
• Existing organizational structure maintained or
  even further fragmented

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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

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The New Revenue Structure

• Very little local taxing power
• Most revenues from shares of national taxes,
  intergovernmental transfers

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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

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Local Functions

• Financed from shares of PIT, non-earmarked
  transfers
  
• Shares of PIT vary

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Criteria for Equalization

• Revenues per capita
• Expenditure needs
• Land area
• Road length
• School aged children
• Hungarianism

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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

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But

• Controversial, because schools closed, teachers
  dismissed
  
• Governments respond by
• Adjusting formula to reduce immediate impacts
• Improving surviving schools

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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
  

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But..

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

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Are reforms successful?