Restructuring Intergovernmental Transfers and Educational Finance in Bulgaria
Restructuring Intergovernmental Transfers and Educational Finance in Bulgaria James S. Mc. Cullough
CONTEXT: GDP/CAPITA
SITUATION IN 1998 § MUNICIPAL BUDGETS DECREASED BY HALF § HIGHLY DEPENDENT ON SHARED TAXES AND SUBSIDIES § LARGE HORIZONTAL INEQUITIES IN MUNICIPAL REVENUES § COMPLEX AND UNSTABLE SUBSIDY FORMULA § SOCIAL SECTOR EXPENDITURES DOMINATE MUNICIPAL BUDGETS § NO LOCAL CONTROL OVER MUNICIPAL OWN SOURCE REVENUES § NO REAL POLICY ANALYSIS & DEBATE OVER MUNICIPAL FINANCE SYSTEM
MUNICIPAL TRANSFERS PER CAPITA 1998
COMPOSITION OF MUNICIPAL REVENUES 1997
THE PRECIPITATING CRISIS 1999 -2000 § RAMPANT MUNICIPAL BUDGET DEFICITS § AD HOC BAILOUTS OF MUNICIPAL DEFICITS § COST FACTORS BEYOND MUNICIPAL CONTROL § PIECEMEAL REFORMS TO SUBSIDY SYSTEM § INEFFECTIVE EXPENDITURE CONTROLS BY MOF § ACCELERATED DECLINE IN MUNICIPAL CAPITAL INVESTMENT § BREAKDOWN IN CENTRAL-LOCAL MEDIATION ATTEMPTS
SETTING THE STAGE FOR REFORM 1999 -2001 § LOCAL GOVERNMENT INITIATIVE POLICY WORK § ANALYTICAL STUDIES & POLICY DEBATE § EMERGING CONSENSUS ON NATURE OF PROBLEM § POLITICAL CAMPAIGN & ELECTION OF 2001 § KNOWLEDGEABLE ACTORS GAINING INFLUENCE § POLICY AGENDA IDENTIFIED
MUNICIPAL FINANCE REFORM 2001 § NEW GOVERNMENT § HIGHLY PLACED CHAMPION IN NEW ADMINISTRATION § FORUM OF KEY STAKEHOLDERS SETS UP WORKING GROUP § FORMAL WORKING GROUP EMPOWERED BY COUNCIL OF MINISTERS § GUIDING DOCUMENTS: Ø “CONCEPT”: COMPREHENSIVE REFORM STRATEGY Ø “PROGRAM”: MULTIYEAR DETAILED PLAN
MATCHING FINANCING TO SERVICE ASSIGNMENT § CLEAR DEFINITION OF MANDATED SERVICES § REDUCTION OF HEALTH SERVICE ASSIGNMENT § ELIMINATION OF SOCIAL WELFARE ASSIGNMENT § ADOPTION OF COSTING STANDARDS FOR FUNDING ALL OPERATING COSTS OF MANDATED SERVICES § FULLY FUNDING ALL MANDATED SERVICES WITH TRANSFERS Ø BLOCK SUBSIDY + SHARED TAXES = MANDATED SERVICE FUNDING § PERSONAL INCOME TAX BECOMES 100% DEDICATED AS MUNICIPAL SHARED TAX
LOCAL OPTION SERVICES FUNDED BY OWN SOURCE REVENUES § LOCAL FEES AND CHARGES UNDER LOCAL CONTROL § LOCAL TAX AUTONOMY REQUIRES CONSTITUTIONAL AMENDMENT § FOR POOR MUNICIPALITIES, SPECIAL SUBSIDY POOL CREATED TO PROVIDE BASE LEVEL OF OWN SOURCE REVENUES § MUNICIPALITIES CAN USE OWN REVENUES TO “TOP UP” MANDATED SERVICE FUNDING § VERY BOUYANT LOCAL REVENUE GROWTH DUE TO AGGRESSIVE LOCAL RATE INCREASES
EDUCATION FUNDING § PRIMARY & SECONDARY SCHOOLS FUNDED THROUGH MUNICIPAL BUDGETS § USE AGGREGATE LEVEL OF EDUCATION FUNDING IN 2001 AS BENCHMARK § MUNICIPALITIES STILL DO NOT CONTROL TEACHER COSTS § HORIZONTAL INEQUALITY GREATLY REDUCED § COSTING STANDARDS HASTILY DESIGNED AND NEW STANDARDS FORMULATED BUT NOT APPROVED § COSTING STANDARDS COVER OPERATING COSTS ONLY
EDUCATION COSTING STANDARDS PER STUDENT ALLOCATION = 1. TEACHER SALARY COSTS (normed on actual average class size) 2. “MAINTENANCE” (NON-SALARY) COSTS (biased adjustment for actual class size) NOTE: DIFFERENT TYPES OF SCHOOLS HAVE DIFFERING SETS OF STANDARDS
DELEGATED BUDGETS EXPERIMENT § EXPERIMENTAL REFORM UNDER WORLD BANK LOAN § FORMULA-BASED ALLOCATION FROM MUNICIPALITY TO SCHOOLS § GIVES LOCAL SCHOOL ADMINISTRATORS PARTIAL CONTROL OVER BUDGETS § UNSPENT FUNDS CAN BE CARRIED OVER § SCHOOLS CAN ENGAGE IN REVENUE RAISING ACTIVITIES § SUCCESSFUL RESULTS SO FAR BUT LIMITED SPREAD EFFECT
LESSONS LEARNED § LENGTHY PERIOD OF FAMILIARIZATION, ANALYSIS, DEBATE AND EXPERIMENTATION REQUIRED TO GET FUNCTIONING FISCAL DECENTRALIZATION SYSTEM IN PLACE § CONTINUOUS MONITORING AND ADJUSTMENT REQUIRED TO MAKE FISCAL DECENTRALIZATION WORK § MINISTRY OF EDUCATION HAD LIMITED INVOLVEMENT IN OVERALL FISCAL DECENTRALIZATION DEBATE & CAPACITY BUILDING § AGGREGATE LEVEL OF PUBLIC EDUCATION FUNDING STILL UNRESOLVED IN BULGARIA § SHOULD EDUCATION TRANSFERS BE EARMARKED OR PART OF BLOCK GRANT? § COSTING STANDARDS INCREASE TRANSPARENCY & PREDICTABILITY BUT, ONCE ADOPTED, TEND TO PERSIST EVEN IF BADLY DESIGNED § EMPHASIS ON FISCAL DECENTRALIZATION HAS SO FAR IGNORED ISSUES OF SCHOOL GOVERNANCE
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