restructuring intergovernmental transfers and educational finance in bulgaria james s. mccullough
TRANSCRIPT
Restructuring Intergovernmental Transfers and Educational Finance
in Bulgaria
James S. McCullough
CONTEXT: GDP/CAPITA
0
50
100
150
200
250
300
350
91 92 93 94 95 96 97 98 99 00 01 02 03 04
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
0
20
40
60
80
100
120
140
160
180
200
1 2 3 4 5
SUBSIDY
SHARED TX
COMPOSITION OF MUNICIPAL REVENUES 1997
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
BULGARIA ALL EUROPE
LOANS
SUBSIDY
SHARED TX
OWN SOURCE
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:“CONCEPT”: COMPREHENSIVE REFORM STRATEGY“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 TRANSFERSBLOCK 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