Grant Financing of Metropolitan Areas: A Review of Principles and Practices Anwar Shah, SWUFE, China...
-
Upload
kasey-adair -
Category
Documents
-
view
215 -
download
1
Transcript of Grant Financing of Metropolitan Areas: A Review of Principles and Practices Anwar Shah, SWUFE, China...
![Page 1: Grant Financing of Metropolitan Areas: A Review of Principles and Practices Anwar Shah, SWUFE, China and Brookings Institution (shah.anwar@gmail.com)shah.anwar@gmail.com.](https://reader035.fdocuments.us/reader035/viewer/2022062511/551b4fec550346d31b8b4f7c/html5/thumbnails/1.jpg)
Grant Financing of Metropolitan Areas: A Review
of Principles and Practices
Anwar Shah, SWUFE, China and Brookings Institution (
[email protected])WBI Webinar 28 May 2012
![Page 2: Grant Financing of Metropolitan Areas: A Review of Principles and Practices Anwar Shah, SWUFE, China and Brookings Institution (shah.anwar@gmail.com)shah.anwar@gmail.com.](https://reader035.fdocuments.us/reader035/viewer/2022062511/551b4fec550346d31b8b4f7c/html5/thumbnails/2.jpg)
Metro Areas – basic characteristicsMetro Areas – basic characteristics• At the core of prosperity of nations• Great expectations critically linked to fiscal health and
thereby to fiscal regimes. e.g. St.Louis. MO • Compact areas with high population and population
densities • Varied governance structures and tiers – From uni-city to
fragmented governance • Large and dynamic tax bases but metropolitan government
access restrained. Existing bases overtaxed in OECD. Unfunded mandates
• Grant design critical for responsive, responsible, fair and accountable metropolitan governance and local economic development
![Page 3: Grant Financing of Metropolitan Areas: A Review of Principles and Practices Anwar Shah, SWUFE, China and Brookings Institution (shah.anwar@gmail.com)shah.anwar@gmail.com.](https://reader035.fdocuments.us/reader035/viewer/2022062511/551b4fec550346d31b8b4f7c/html5/thumbnails/3.jpg)
3
• Allocation basis among local governments: school age children (ages 6-17)
• Distribution to providers: equal per pupil to both government and private schools
• Conditions: Universal access to all, private school admissions on merit regardless of parents’ income, improvements in school achievement scores, graduation and drop out rates, no condition on spending
• Penalties: public censure, reduction of grant funds
• Incentives for cost efficiency: retention of savings
• Built-in bottom up results based accountability: competition with voice and exit options as parental choice of school determines school grant.
The Practice of Intergovernmental Fiscal Transfers
An example: An Output based (performance oriented) education grant to set national minimum standards and encourage competition
and innovation and citizen empowerment
![Page 4: Grant Financing of Metropolitan Areas: A Review of Principles and Practices Anwar Shah, SWUFE, China and Brookings Institution (shah.anwar@gmail.com)shah.anwar@gmail.com.](https://reader035.fdocuments.us/reader035/viewer/2022062511/551b4fec550346d31b8b4f7c/html5/thumbnails/4.jpg)
Metro services that are strong candidate for grant finance
Metro services that are strong candidate for grant finance
• Primary and secondary, education and public health
• Welfare assistance• Arterial road and regional public transit• National heritage museums and Olympic parks
![Page 5: Grant Financing of Metropolitan Areas: A Review of Principles and Practices Anwar Shah, SWUFE, China and Brookings Institution (shah.anwar@gmail.com)shah.anwar@gmail.com.](https://reader035.fdocuments.us/reader035/viewer/2022062511/551b4fec550346d31b8b4f7c/html5/thumbnails/5.jpg)
![Page 6: Grant Financing of Metropolitan Areas: A Review of Principles and Practices Anwar Shah, SWUFE, China and Brookings Institution (shah.anwar@gmail.com)shah.anwar@gmail.com.](https://reader035.fdocuments.us/reader035/viewer/2022062511/551b4fec550346d31b8b4f7c/html5/thumbnails/6.jpg)
![Page 7: Grant Financing of Metropolitan Areas: A Review of Principles and Practices Anwar Shah, SWUFE, China and Brookings Institution (shah.anwar@gmail.com)shah.anwar@gmail.com.](https://reader035.fdocuments.us/reader035/viewer/2022062511/551b4fec550346d31b8b4f7c/html5/thumbnails/7.jpg)
![Page 8: Grant Financing of Metropolitan Areas: A Review of Principles and Practices Anwar Shah, SWUFE, China and Brookings Institution (shah.anwar@gmail.com)shah.anwar@gmail.com.](https://reader035.fdocuments.us/reader035/viewer/2022062511/551b4fec550346d31b8b4f7c/html5/thumbnails/8.jpg)
Additional considerations in developing a grant strategy for metro areas
Additional considerations in developing a grant strategy for metro areas
• Autonomous public agencies for service delivery. Not relevant for grant design.
• Functional, overlapping and competing jurisdictions. Output based grants a suitable tool.
• Fragmentation of metro by single purpose jurisdictions. Revenue inadequacy relevant for grant design.
• Contracting out metropolitan services. Output based grants to assure services to the poor.
![Page 9: Grant Financing of Metropolitan Areas: A Review of Principles and Practices Anwar Shah, SWUFE, China and Brookings Institution (shah.anwar@gmail.com)shah.anwar@gmail.com.](https://reader035.fdocuments.us/reader035/viewer/2022062511/551b4fec550346d31b8b4f7c/html5/thumbnails/9.jpg)
Grants and own source revenues in uni-city metro areas
Grants and own source revenues in uni-city metro areas
![Page 10: Grant Financing of Metropolitan Areas: A Review of Principles and Practices Anwar Shah, SWUFE, China and Brookings Institution (shah.anwar@gmail.com)shah.anwar@gmail.com.](https://reader035.fdocuments.us/reader035/viewer/2022062511/551b4fec550346d31b8b4f7c/html5/thumbnails/10.jpg)
![Page 11: Grant Financing of Metropolitan Areas: A Review of Principles and Practices Anwar Shah, SWUFE, China and Brookings Institution (shah.anwar@gmail.com)shah.anwar@gmail.com.](https://reader035.fdocuments.us/reader035/viewer/2022062511/551b4fec550346d31b8b4f7c/html5/thumbnails/11.jpg)
Grant and own source financing by horizontally coordinated or fragmented metro areas
Grant and own source financing by horizontally coordinated or fragmented metro areas
![Page 12: Grant Financing of Metropolitan Areas: A Review of Principles and Practices Anwar Shah, SWUFE, China and Brookings Institution (shah.anwar@gmail.com)shah.anwar@gmail.com.](https://reader035.fdocuments.us/reader035/viewer/2022062511/551b4fec550346d31b8b4f7c/html5/thumbnails/12.jpg)
![Page 13: Grant Financing of Metropolitan Areas: A Review of Principles and Practices Anwar Shah, SWUFE, China and Brookings Institution (shah.anwar@gmail.com)shah.anwar@gmail.com.](https://reader035.fdocuments.us/reader035/viewer/2022062511/551b4fec550346d31b8b4f7c/html5/thumbnails/13.jpg)
Metro dependency on central transfers by type of metro governance
Metro dependency on central transfers by type of metro governance
![Page 14: Grant Financing of Metropolitan Areas: A Review of Principles and Practices Anwar Shah, SWUFE, China and Brookings Institution (shah.anwar@gmail.com)shah.anwar@gmail.com.](https://reader035.fdocuments.us/reader035/viewer/2022062511/551b4fec550346d31b8b4f7c/html5/thumbnails/14.jpg)
Metro areas with major dependency on central transfers
Metro areas with major dependency on central transfers
![Page 15: Grant Financing of Metropolitan Areas: A Review of Principles and Practices Anwar Shah, SWUFE, China and Brookings Institution (shah.anwar@gmail.com)shah.anwar@gmail.com.](https://reader035.fdocuments.us/reader035/viewer/2022062511/551b4fec550346d31b8b4f7c/html5/thumbnails/15.jpg)
Examples of better practices are hard to find.
Examples of better practices are hard to find.
• One size does not fit all. Prague as the only exception.
• Grant to promote competition among local jurisdiction. Examples Albania and Russia.
• Output based transfers for school finance. Examples: Thailand, Brazil, Canada, Chile, Australia.
• Solidarity principle for inter and intra metro equalization. Examples: Denmark, Finland
• Tax rebates by origin of collection. Shanghai, Beijing
![Page 16: Grant Financing of Metropolitan Areas: A Review of Principles and Practices Anwar Shah, SWUFE, China and Brookings Institution (shah.anwar@gmail.com)shah.anwar@gmail.com.](https://reader035.fdocuments.us/reader035/viewer/2022062511/551b4fec550346d31b8b4f7c/html5/thumbnails/16.jpg)
Notable Points of Departure of Practice from Principles
Notable Points of Departure of Practice from Principles
• One size does fit all approaches. No recognition of metro governance structure, responsibilities, unique role in global and national connectivity.
• Nature of metro services not considered. School financing from property taxes and input control grants in USA, UK rather than from PIT and output based grants.
• Complex criteria with lack of focus on objectives• No sunset clauses or review provisions
![Page 17: Grant Financing of Metropolitan Areas: A Review of Principles and Practices Anwar Shah, SWUFE, China and Brookings Institution (shah.anwar@gmail.com)shah.anwar@gmail.com.](https://reader035.fdocuments.us/reader035/viewer/2022062511/551b4fec550346d31b8b4f7c/html5/thumbnails/17.jpg)
Departure of practice from principles (2)Departure of practice from principles (2)
• Self-financing highly constrained with only a handful of exceptions
• Tax by tax sharing and revenue sharing widely practiced.
• General purpose transfers –one size fits all approach- discriminates against metro areas.
• Spillout of benefits rarely compensated.• Project based specific purpose transfers with
input conditionality and unfunded mandates in vogue –undermine local autonomy and accountability –examples Bangkok and Jakarta
![Page 18: Grant Financing of Metropolitan Areas: A Review of Principles and Practices Anwar Shah, SWUFE, China and Brookings Institution (shah.anwar@gmail.com)shah.anwar@gmail.com.](https://reader035.fdocuments.us/reader035/viewer/2022062511/551b4fec550346d31b8b4f7c/html5/thumbnails/18.jpg)
Notable points of departure of practice from principles (3)
Notable points of departure of practice from principles (3)
• Need greater tax autonomy through tax decentralization and tax base sharing
• Greater access to capital finance• Results based grant financing (output based
grants) of social and infrastructure services to encourage competition, innovation and citizen based accountability.
• Tournament based grant financing to encourage benchmarking.
• Certificate based grant financing to incentivize management reforms
![Page 19: Grant Financing of Metropolitan Areas: A Review of Principles and Practices Anwar Shah, SWUFE, China and Brookings Institution (shah.anwar@gmail.com)shah.anwar@gmail.com.](https://reader035.fdocuments.us/reader035/viewer/2022062511/551b4fec550346d31b8b4f7c/html5/thumbnails/19.jpg)
Lessons from International PracticeLessons from International Practice
• Metro areas have high dependency on central transfers.
• Metro areas unfairly treated in grant design. Require separate program.
• Metro areas need greater tax autonomy and access to more productive tax bases e.g. income, sales and environmental taxes.