Central European University A Program for University Teachers, Advanced Ph.D. Students, Researchers and Professionals in the Social Sciences and Humanities Summer University

since 19-09-2003 you are visitor no. 

Copyright © 2003 Central European University. All rights reserved.

download course description (Word doc, 38 kB)

Intergovernmental Fiscal Relations and Local Financial Management (in co-operation with the World Bank Institute)

July 9-July 27, 2001

Robert Ebel (World Bank Institute)  

Adrian Ionescu (Local Government and Public Service Reform Initiative of the Open Society Institute, Budapest)

Jozsef Hegedus (Metropolitan Research Institute, Budapest)

Robert Ebel is Intergovernmental and Local Finance Management Specialist for the Economic Development Institute of the World Bank. He is also the World Bank Director of the Fiscal Decentralization Initiative in Central and Eastern Europe, a cooperative program for research initiated by the World Bank, OECD, the Council of Europe, the Open Society Institute (Hungary) plus several bilateral partners. In addition to his work in Central and Eastern Europe, he has also led World Bank fiscal sessions in the Middle East (Jordan, Lebanon, Palestine, Yemen). Widely published, his most recent book (with Richard Bird and Christine Wallich, eds.) is Decentralization of the Socialist State (World Bank, 1995). This book will be revised in preparation for the summer offering at the Central European University.

Jozsef Hegedus is Head of the Metropolitan Research Institute. He was trained as an economist and holds a Ph.D. in sociology. He has ten years experience in Hungarian local government reforms, especially financial issues such as grant allocation, budgeting process, designing equalisation grants, analysing effects of local tax, local government capital budgeting, etc. As a project manager he has been lately involved in research on local government finance in Budapest, and in the preparation of the Budapest Program for 1996-2000. He led a team at MRI in co-operation with the Urban Institute, Washington to develop a training course for local government financial experts on program budgeting and related financial issues, and took part in the SNDP (Sub-National Development Program of World Bank, USAID and Know How Fund in Hungary). He was co-author of the study "Local Management in Hungary: Fiscal and Structural Adjustment at the Local Level in the Context of Economic Transition."

Adrian Ionescu is the Program Director for the Local Government and Public Service Reform Initiative (LGI) at the Open Society Institute in Budapest, Hungary. In addition to managing LGI, he is responsible for the "Subnational Governmental Finance, Fiscal Decentralization and Budgeting" program to generate and disseminate knowledge and best practices in CEE and fSU. Before joining the program in Budapest, Adrian worked as Project Manager for the Soros Foundation, and previously as a Research Officer for the Ministry of Public Works and Regional Planning in Romania. He holds a certificate from Harvard University, a MBA from Universite du Quebec a Montreal and a M.Sc. in Engineering from the Polytechnic University of Bucharest.

The objectives of the course are to (i) provide participants with the analytical framework for understanding intergovernmental fiscal economics and various modules of the central-subnational (e.g., local) relationship, (ii) enhance participants’ capacity for successful implementation of public sector resource management reform by analysing mechanisms for the transfer of resources among governments and identifying ways to address the issue of regional disparities and local resource mobilisation, (iii) and increase participants` understanding in the issues of fast restructuring public economy in countries of transition, (iv) enhance the participants’ capacity to understand and use the practical simulation methods on public finance issues (transfers, local taxes).

I. Fiscal decentralization

The Concept of Fiscal Decentralization; Why Such Current Interest in Fiscal Decentralization? What are the Benefits of Fiscal Decentralization?; What are the Benefits of Centralization?; Do Countries Decentralize?; What Are the Basic Approaches to Fiscal Decentralization?; The Revenue Instruments for Fiscal Decentralization.; Intergovernmental Transfers; Rules to Follow in Decentralizing Government Finance

The Importance of a Decentralization Strategy; The Roles of the Public and Private Sectors in the Economy; The Primacy of Expenditure Assignment in Intergovernmental Fiscal Relations Design; Examples of Current Assignment of Expenditure Functions; General Principles of Expenditure Assignments; Most Common Problems with Expenditure Assignments and the Need for Reform; Capital Investment Responsibilities and Borrowing; Divestiture of Social Responsibilities by Enterprises; Vertical and Horizontal Fiscal Imbalances; Are Subnational Expenditure Needs Covered?; Will Subnational Governments Provide Minimum Desired Service Levels?; The Need for Privatization and Greater Efficiency in Public Expenditures at the Subnational Level; General Recommendations for reform in Expenditure Assignments

Narrowing the Scope of Inquiry: Musgrave's Three-Function Framework; Realizing the Political Benefits of Tax Assignment; Constraints on Tax Assignment; Conceptual Arguments; Alternative Methods of Revenue Assignment; Administrative Considerations; Vertical Imbalance and Horizontal Disparities; Concluding Remarks: Tax Competition Revisited

The Reasons For More Than One Tier Of Government; Central Intervention With Subcentral Authority Services; The Assignment Of Services Among Levels Of Government; The Optimum Size Of Authority For The Provision Of A Given Service; Intergovernmental Grants in World-Wide Context; Case Study Part I: Current System Of Intergovernmental Grants In Hungary; Case Study Part II: Grant Structure for a Capital City: districts and municipal government

Framework for International Local Creditworthiness; General Features, and Issues Underlying the Development, of Municipal Credit Markets; Analytical Parameters of Fixed Income Securities; "Structured" Financing in Municipal Credit Markets; Legal and Regulatory Framework; Local Government Institutional Capacity; Infrastructure Financing and Access to Private Capital Markets; Market-based Financial Intermediaries for Local Investments; Links to Capital Market Development Issues; Credit Ratings; Municipal Bond Markets Experience Of The USA; Municipal Bond Markets Prospects for Developing Countries

Increased importance of the property tax in the OECD countries; Advantages of a property tax; The property tax as a local tax; Basing the property tax on market values; Taxing both land and buildings or taxing land alone; Administration of the property tax; Exercise: designing property tax (simulation). Concept of user fee finance; Design options for user charges; Implementation: metering, collection, enforcement, billing; Case study.

Budget purpose; Types of budgets; Budgeting and Accounting; Stages of the budget process; Capital Budgeting; Evaluation of performance.

Role of the state in housing in the pre-transition and after the transition; Different privatization strategies: alternative service delivery (municipal, non-profit and private); Central and local housing programs: structure of grants and subsidies (housing allowances, vouchers, construction subsidies, etc.), combining central and local programs; Private and public partnership in housing development at local level; Local Housing Funds: revenues and expenditures, operational issues; Issues of regulation: rent control (central and local solution), building regulations, land development, arrears; Issues of externalities: grant "leakage"; Local housing indicators; Exercise: designing a housing program grant (simulation)

Basic issue of the education programs and financing education; Responsibilities: different level of sub-national governments; Alternative services delivery: role of the non-profit sector; Institutional setting: relative autonomy of the institutions; Dilemmas of the grant structure: using task financing or general purpose grants; Externalities: problem of the agglomeration (commuting students); International outlook: example of the school districts; Exercise: role of performance measurement

Basic issue of social policy in transition; Problem of the "agency" or "choice" model; Interaction between the sectors: health care, housing, public services and social; Financing institutions and benefit programs; Local social policy and central programs; Financing institutions providing social care; Grant structure: role of matching grants in social services, Exercise: Designing local social program