uwhpie unfi?~r&~~drz~~rs"~d~nun~una'n *5ljum4nn~&a~~ U B I Z ~ U > R ~ ~ B ~ U $~13ui~dndi i1uulf i

Wisfdtzmff~nn ~ t a ~ m n o ~ ~ n ~ d n n ~ n ~ r h u f l ~ ~ ~ ~ u i ; ~ r n : : lunnri~iir~ltt~~s~ui~n~m~~ut~atfi~~flu

n ~ n u f i u t h . n s n r o l n s ~ u ~ l n ~ i 1 d f ~ 1 n 1 ~ ~ u ~ u ~ ~ ~ ~ 1 ( 1 ~ ~ 1 n 1 ~ n 1 f ~ 5 4 I ~ ~ ~ ~ ~ I I ~ ~ ' ~ & U R O I I P ~ : mln l i l ~ ~ ~

ilg~inirt3unand3a~X~adv n f o ~ ~ u ~ m u n i n ~ ~ ~ ~ ~ ~ ~ r i l ~ ~ ~ n f i ? ~ m ~ ~ m s m l l j ~?IJ$YU~IK+~UJ

u~uublana creditmrth~ness ~ ~ ~ ~ u ~ r o ~ ~ ~ ~ d s r ~ n ~ ~ i d u n ~ ~ ~ n ~ ~ b y ~ ~ a ~ dn , lurf~slnalno

n7zEriunwn7r~iG t j~7b;nrr~w~~nr j ie~n'n~dnn'1~~r i~uX~~~u retln., 'Iduilmn&w~mii

o:6n~ir~dlsuhau1(~11~11ar~9~~noa~a~1 HlA 0dn. ~ ~ ~ l 4 ~ ~ l ~ b i ; u d f i ~ ~ ~ ~ d f l U 1 I n 1 ~ f l 1 ? h 4 ~ ~ d l ~ ~ ~ ~ 1 ~ l ~ ~

I u ~ ~ ~ ~ T J T ~ U ~ ~ ~ H H ~ ~ J P I I O ~ ~ ~ ~ X nln. @u drfiunnnllniuU dn. ~ r u a ~ 4 u ~ ~ ~ ~ u ~ i n ~ n a d o ~ : f i ~ l ~ ' ~ ~ n ~ a a ~ ~ u iruu&ui;'iiun~#a

~n~o'rlrzrn~l d~rnlrarn ?lq~7$?an47 -nmdrsanndn (lax aponinp) anrIsmrj.tlburo17ugRww~ln L su~auu diduhai'iuduif 'IriC~ium~rnd udrjupnyufiu~slnmiamaIdiiuulni~uuH$t~uinq d J'l r n n naoq q x i T i s e ~ ~ h . ~ o . t m ~ ~ ~ a ~ ~ ~ u n ~ ~ u *tu-rdnqjw i ~ u w i i r r ~ i u ~ % ~ u 1rr1r=#~labumlravi11i110ii18u

-uouvt3. nla -.rrn?gnm d4mnu~9ua<jrdurny1~11am1 drrnndmu n1so'Rnsrr3up~~yunwrud~tlu1ar

upiu~uiu 1 3 u n ~ - u ~ u ~ I I ~ ~ ~ ~ I ~ I ~ ~ I I . ~ .u~nnin~s%nwbinno'atl~~m~nn'nJ~r~n~nw

Q ~ ~ ~ ~ I ~ I I ~ ~ I ~ & ~ ~ ~ ' D I ~ ~ I ~ ~ U ' D Z ~ U H ~ ~ ~ U odn. ~nuunr dia a~1~@~11f?~~~l ld~ln15 -&mu

or uinni~n~suwtpnwyrr ~ ~ ~ ~ u f i m u ~ n ~ m ~ u ~ n u u ~ u d m u ~ i i ~ ~ ~ l u ~ i i n megiond urn ~ew~opmem

~ m d , Rmn i i 7 a ~ 1 ~ ~ a ~ * ~ T ~ 1 ~ 4 n 1 ' 1 0 ~ r ] ~ ~ ~ a l m ~ 1 ~ l l a ~ a ~ ~ ~ 4 4~t r~~~n~rdui i?wi~uo: :~uu~au h n h sdn. du 1 'IX~?Iunri~d uuudlnnq d i i worthiness b r n x u o ~ n n h n ~ r d ; ~ w-trz#nri~uwiil* (W

senice) IJaassqaiiulJ fm'aaot: IS u a s s ~ ~ l d q a s sdn. i~md~dnniun~sm~ve~Ko~~unurnn

l ~ s t ~ n o i ~ ~ ~ n ~ d Iwrrta"Ttl~unrr1id~u~ui7~ 7 N ~ I ~ e s c n t Value (NPV) vn;rn-t5$whvd &ij~alunt~u

~h'tu?iiurnrlristusnu'~~~den~~~~uluau~na idludi edn. ~ a ~ a q u l u f l o ~ i u - - ~ t # ~ ~ o u ~ ~ ~ - i i u l u J d 4 eu1~mt~cmd~u~o~mrz~~oj9u~nu4fu'ib 1ris.ri5u1d asu#wiae~unnmu ~ ~ ~ u u ~ ~ ~ ~ ~ " B u ~ c I A ~ I ~ H ~ ~ ~ ~ u B ~ ~ I ~ o ~ ~ nlr~dun51'7nnaorn'uwh~r114

" J ~ l u ~ a i d s t j w ~ ~ G rrdn. $u ununl~paw ~ ~ P I ~ ~ u ~ ~ L u I ~ I I ~ u ~ ~ ~ ~ ~ : I ~ u x B ~ I f iu~ir i lu#~rf imui~nuf

Abstract 14 this pnper the a u h r reviewh lhq fiscal discipline concepls as applid for Iwul governaem

and prmposes the borrowing guidetine for local authorities k u d trn the crediiw~hincss model. This

docs nol meon to say that Thai Imal gwcmmevs. at presanr, are having financial pmblerns duo to

u v t h m w i n g nor thcy arc lucking of Ihe fiscal divciplinc BUI ii is possible lhnt these Linda elf

ovemptnding lhmu@h debt financing coald happen in rk course aT tkcen~ralizdon as &a1 auihorities

are to have n m power and ;rulonow 10. spend nloncy and to borrow. A rcview ftnm the pas1

exprlerlcc of Im1 govenunents in other cwotries from overborrmving, #oft-budgeting, inability 10

nwy debts and the b a i h t . their causes of problems. and how he prbbt@m$ ectr handled, could lx r~wful Icssons Tor local ndlainistmtots in Thailand.

By adhering to the "fiscal discipline" dws nut meal fhm rhe Iwul ~dministrative

organizatiuna muU abide to the balance budgeting ell the timc and nhuuld never brrow. 11' one local

aulhw3ly h~ppens tu have some &00d inveslniont pmjwts with reasonnhle finnnt'id rrelum~. in such

cw-the bowing is worth undtwking and this could be benertcial 10 her ~itirens from the betlcr local public scrvlccs and from positive spillover etTec~4 on local eeunumy. In the opposite. the rigid

rule against local gwernrnmt h m w i ~ ~ g would inducc Iwal authorides to lobby for s p i f i o and the

projecl based gmws tkwr the ccntrul government which cuuld yield even morc undwirAble efE-s lo

follow. By pressuring rhe central govcrnmenl LO p v i d e more grant means 'lax exporting' the

fidancinl bu~dcn lo repuy debl is p ~ d on to he tk burden of the whole pr)pi~lajon in terms of general

kixes: and lherc i s the tendenry tkt S U C ~ invalrnent projeds would bc eqcessive due to Ihe wmng and

illu$ory pwption thut i t i s "r.hwp" nr "no cost" to those lobbying iocnl governments. And t i i s

unclenr how thc ~pccific grants im allocated when there is &vi~)usIy mom demand for grunt lhn the

money avaihkdpil is inost likcly lhat h e process 01- g m a oll~atian is decidcd bawd an politicrll

Ensons thaw lhe etl!cicney allocation rulc. It b a good news in h i l a n d lhal somc IocaI authorilia

[cumtly mrrinly niunicipalities) bcgtin u) bprmw money. Twrn !ha RUDF (Regional Ulban

Devdls~p~ncnt Fund) vnd I"mwcia1 Instiluriun%. lo finance investmetti projecrs mtkr than waiting for

s N 2 f r c nnd p m j e u l - h i gml* Tlwse shquld be viewed ;lu a lenrning-by4or'ng wtpericnces in which

thc loeal managmiit Iwrnr how lo plan for sound invcx~wn~ projects with reasnnablc murns and to

repay fur debt withuut having pmhlans due to cerclr;s% bmwing. 111 fact there m cases of hucccsdul

hornwing Tmm RUDF which could provide exrrmplts for other Iwal authorities io Sollow. Thew

could h t viewed as an institutional dev$fnmnt thnr embodied in llrctll prmtlnels nnd mahagem how

to hmdle sound in-vtstmenl projects nnd, at the same time. to properly mma$e finwcial flows wilhovr

difficulty, The ]as1 .satinn of [his paper d i u s w the next step crf development for local gavernmeni in

Thail~nd in lerlns, uf bond financing and the need to enhance ~pbi l i t i e s of local personnels 10 handlc

rlre souid iavesitncnt prcrjuls.

Keywords: Rscd discipline, creditworthiness madel

1 n71v7m~u'an74n7sd~~101f1n"~11~~fl~~~1nm nrnumm~u~s~s~?Vcr ~&orlna~un<nnn

aap%3nlru yq ..a 254) d 1 ~ ~ a ~ h ~ i ( n 1 l ( ( l ( l ~ ~ 4 d 3 u # ~ ~ d u (B JIJ !mluiflu 8 n l l i l ~ n l l 5 w - n inrnruoqnuac usnnn&hrdnwwnw+ ~ e l a v l ~ s h h n u ~ r s ~ n ~ ' ~ @ ~ ~ u ~ ~ a h . ~=~mliudifouf m a i r 8 ~ ~ s r . i ~ a r ~ ~ 1 u n d m ~ ~ 1 i i o h . dudu o h . i~un~ihs!#@u~inr

~ ~ i ~ l l u ~ ~ d ~ a ~ u ~ ~ ~ ~ ~ n ~ ~ ~ ~ ~ u 1 ~ ~ 1 h t n ~ ~ ~ z ~ w 1 3 u w ~ n t ~ m u ' u n ~ ~ ~ nlrssnriurLr

~ & l Q i ~ u l n t ~ r n r ~ ~ ~ u n ~ ~ u rlmr@udoa~qu~maii~nmuiimudu -inp to r i c t

4 Jam Kumai (1992) l~unullfndl&ilhfin1r~ budgd slwtmint HUIU~J Lhe iluation when an entity (ey, a

pim) can rnanipulak i& nccw to funds In underirable wayx. A snft budget . e l m i n t exis& for a abdmal A

gov~mmmt if lhEm is m msn ex anw Rred mame mvew within which it mi bctim. .... ~ ~ I ? U I ~ I ~ ~ I I U U H U ~ &A

roIt budget w w l m l ~ t d $ e s w h e w a fhnding mmc rids It impossiblr k, ktep an entwprist to a fmcd i-q

whwvet ?he enterprise can wtvoet ex pod n bigger subs* or laan thaa would hve k e n c m d c d ellciml a* mlt"

(Eric Mmkin 19kM

5 Ba(lod - the Mnd of J hx additiml rundia~. hai bprwvidod wben ao m&y would dmwk b e d l a ia sewicc its

n i l piatlonfi.rSt tax exportin3

s ~ n ~ d d I h ~ o mln, ~ ~ H ~ J ~ ~ ; A ~ ~ U J I I ~ ~ ~ I I ~ A ~ ~ ~ ~ I ~ U U ~ I

tauir~sw?

r u ~ ~ ~ ~ ~ ~ n ~ r n ~ ~ u ~ r n u ~ z ~ u 1 m u ~ i ~ o u k i ~ r r i w ~ u ~ ~ ~ ~ ~ n u R n ~ ~ d a ~ u l ~ ~ c I i h r ~ ~ ~ A

~ L . ' ~ I ~ T ~ ~ I ~ . ~ ~ ' ~ ~ I ~ Q ~ Q ~ : I X P " I I L $ U ~ A W ~ U ~ ~ ~ ~ ~ I ~ (fluaiii~f~u~aiurnrt:pi~u k

wu~mawii e h . r:d~a"tupr"wd~u I-k) o h . ~ ~ I f u u a I ~ u ~ u n ~ ~ f * P

d u o 3 4 ( ~ ~ G U B , a n i ~ t d i i i i ~ ~ ~ ~ u n i ~ r n r i ~ o s m ~ ~ ~ t ~ -rli& nuiuas a3

~dnnmrn~l#riuu~urau ( n n d u n 1 r z r s ~ f l 3 a n i ~ 1 n ~ ~ d ~ z i n ~

n d e q

rr7~'~s~t~sG R O fnman h ~ ~ ~ i ~ ~ t l a 6 ~ t l ~ ~ n q ~ ~ ~ n u u ~ t l ' 1 ~ q n ~ " I ~ ~ ~ n o ~ n 1 ~

R.REub1~8n~ OIL sequeu~*~ decisioo d g nn'nao LRsdHdp J ~ U ~ P X D ~ ~ A I ~ ~ ~ W T U I

L5ultin:wqu W ~ ~ ~ ~ * ~ ~ ~ I ~ ~ I U U I ~ ~ ~ I H I I I = I ~ U n iar~neu1~iimiian1ra4yuw 1~n184 ~uuo4aulo.l (A, deficit f-cc vder fiscal discipline dc) 1nmlrilonnd41wa4~u1u

~ n s ~ n i s u u i ~ ~ ~ ~ ~ ~ a u , ~ ~ n ~ s v l w ~ u ~ u J ' ~ ~ u ~ w (B, d t b i t fm- beyond the fiscal discipline d* " NU k n n w w m r ~ i l u 1 r ~ ~ ~ n 6 o i l ~ ~ ~ 1 ~ ~ ~ 1 ~ ~ ~ n h t ~ ~ i i ' ~ # ( ~ e f d on debt)

J ~ a u ~ ~ p r ~ ~ u ~ d i n m o . ~ d w ~ q ) ~ ~ v o ~ i ~ i l ~ n n ~ 1 4 S j g r l i o c ~ ~ w I ~ ~ U W ~ P ~ ~ O ~ U ~ I T ~ ~ "

~uma~~lnmrad.r riu n l r l ~ i j u ~ m ~ u ~ i s n n ~ U ~ ~ I I ~ I ~ ~ ~ ~ U U U ~ U Y O ~ P ~ ~ ~ I

i 3 u m ~ t b u ~ ~ ~ ~ i 6 ~ ~ ~ ~ : : h a u ~ ~ i ~ ~ r : ~ & n ~ u r l ~ \ d ~ d ~ ~ m u 6 ~ ~ ~ ~ ~ l i

mr k i i u l r r a ~ f g u n n n i ~ d ~ i l q ~ ~ dcfavlt o s ~ f i u n d i n ~ h

T~u~ lmani inm~bn 2 r n q HA t i u 0~0~:1dGuq.~yu ~ R ~ W H ? B ~ U ~ ~ ~ ~ ~ I W W ~ ~ Y I R ~ ; B Q ~ U I % ~ ~ I M noJ i lumna~d g'lrn~s~1#n1fi?tl1nw"n

~ u ~ a ~ l d u ludundihnuil&iunar~lu na'13tio i p s ~ o t ~ ~ ; r l m . - ~ l u r ~ n a ~ ~ l ~ ~ ~ d n n . ~ ~ ~ u l ' . ~ u l r l ~ u ~ ~ ~ n ~ ~ d ~ ~ ~ w ~ f l ~ (vrSeuriuio1su1rn~~#8ni1a q muIAfia~ubi

11uuau~11~;Jl4oya (n1~~8uniiv q) ~nJs:naumaimGuls

~ n a & d d Igu1nnar~rinrzJ~on1mttl11111.5~ J*J~HIW&JYV.I~J& .58 r8u n f i ~ w ~ ~ ~ ~ ~ n h s & ~ r R w f l ~ ~ ~ ~ ~ ~ m* - ur i i Iu~a6~dui ;o i~r~ ls i .~3~~w~~x. j in~m~~i i

kodrr lrlf?~ * r L i l r r ~ ~ n ~ ~ u u ~ o i ~ a ~ ~ a ' ~ ~ ~ ~ m ~ ~ # o ~ ~ ~ t u ~ $ ~ ~ ~ ) ~ ~ ' o ~ ~ l n ~ s ~ d q d ~ u l c ilwnoawi~ * ~ ~ u m n n ~ s l r i A o r n 1 r 9 ~ q w ~ ? ~ I ~ ~ B ~ I ~ S ~ S U Q ~ A ? U do l ~ ~ m ~ w d ~ d u l u r r u u

I * n1n~un~mdj~h~~n~?n~~wo~r'~il'1~d8~~~8~ ~~nfornr ~~iadu'uil~41 ..Lrmndgurk d lw~~u~und~wz21n'~(rfXiPx1'IX;~ "

a fiflu~fijl too big to hi!

Now ewlsider subnational fiscal problems, s o m e t h i less dramatic than

burning houses, What if w h e n catmat be paid and children we &out to k

sent home aIter a municipality spenQ its money on an exiramgmt prnjcet

and the mayor throws up his hands? ,... The rnuniqplity may have h d s

variety of reasons [a surjni* that the center would not be abie tu resist using

its "firc truck".

JUIOS ~ p ~ o a i ~ n ~ m ~ ~ ~ i a ~ ~ u ~ ~ a ~ ~ k n ~ ~ n d ~ ~ ~ ~ i u i ~ i ~ ~ u ~ u ~ i l p r ' n ~ f ~ e ~ ~ ~ ~

d r r r n & r h ~ f f ~ ~ ~ o r i ~ ~ n a d ~ i i t ~ y ~ ~ ~ ~ ~ a i ~ o~arriiimilqnl 4mrim. inmnsi~tmcyy* &JI# ndl-ih diiigu1nnn1r7Adr~n1nlII~~83d~ i k y ~ i u s ~ b ~ d u - + d ~ # D ~ I L ~ ~ B ~ 1id160 enwnlrdi5ao?jii1dduulri1%lw utQI-ru.1i~n.nsnriw1s~ru~ilarro~un~~d~a~3im~iu

When h e cmtrai government might ~f fer a fiscd bailout to a laeal

government M n g &fault. The wmtial problem here is one OF time-

inmnsistency, or wbai has became known as the problem of the sbfi budget

constraint: today's p m i W by the cenml g o v m t of no bailouts are not

mdibk agabpt tornomow's circumstances. (K~r'iXti, 1986)

~ ~ ~ u ~ u d ~ ~ i i ~ n f f . ~ d ~ n ~ ~ u # a ~ d ' ~ ~ a n f n ~ w I I O ~ ~ ~ I C W I I ~ ~ ~ I ~ H U I ~ ~ T nd15io rnt n ~ q u n 5 3 i ~ ~ ~ u o : l l n u ~ ~ l n ~ ~ ~ ~ n i ~ ~ ~ ~ ~ w ~ m ~ (averinvwtmmt W?EI e x c m q m c i t y ~

i I ~ E d l ~ q ~ ~ ~ l ~ i u ~ iy~inniumr:&uyu (disrribulional eo* of bailoul) %~4fpJ7€innW rr

nuarn~u-i~ +uma1rrr4~mdr trno1~1aditld12i611im~u 7 na ~ T o m " a n ~ r i ~ $ u m ~ o ~ n r

u o ~ d a n r u ~ ~ h 1 n r r n 7 ~ u d ~ ~ a ~ 6 u ~ ~ d ~ 1 1 1 1 r i ~ ~ d ~ m u d s a d u r n r ~ ~ a n r u ~ ~ w n ~ ~ o ; ~ ~ ~ ~ J Y Q

~ u ~ n ~ ~ i v h l t n r ~ r n r n ~ ~ u d u 7) u a m ~ m u ~ u ~ q ~ ~ # u g u n i ~ n ~ ~ ~ f u ~ t ~ ~ ~ s n ~ r u ~ ~ ~

ilqw~?nqii (fIimcial m* of d ~ f a v ~ t ~ w u ~ P x u ~ u ~ u ~ ~ ~ M ~ ~ ~ miud~uin n~rnnnnu

nmrru IaMb & ~ 3 u i ~ ~ n ~ $ l l d ~ l&d Arkansas, lUiods, Indiana, Loubha, Msrylaod,

Michigan. Mississippi, Pennsylvania, 1W Fbrida d~rdlqt17'11it~1~7~ n f l¶$a*~Iii (nll@IJ

htiiumrluld6~rhrr~lr?g~ 1aJE~4fu1 i i ~ u # n l o ~ n~~unst%i~uda~G lun&i!oCoi~ The Repudiation of State Debts: A Study in the Fiaancial History T ~ r r W.A. Scott W4r~fl~g %ff.

" r w 4 1893, B o s ~ : C m w e l l unnlnnuusuun~lfff1t:.H"iua1~~15~tnn1f h a W. English U P ~ ~ ? I U

i t 0 4 'Ulu*-ding h e mar of mareign dofault American state drb ls in the 1 Wk," Amaim

Economic Review, 86 (1996k 259-275

lutonnrrdqno tai7uli~"un"n'it I I ~ I ' I I I ~ U ~ ~ ~ ~ ~ I . ~ I ~ I Q ~ ~ ~ L ~ U I I B Q ~ B ~ # n d i d s ' S ~ n 5 ~ $ 6 ~ n u 1 ~ u n u i ~ ~ r ~ ~ d u ~ i i ~ ~ ~ k ~ u (some payments) ~ U U ~ : I ~ U ~ ~ V ~ B O ~ R T I ~ ~ I S

w d ( ~ u B U " $ ~ ~ ~ U ! H ~ ) ~ R U % R I ¶ ~ D ~ W ~ # ~ ' R ~ I ~ ~ D ~ ~ ~ ~ U ~ Q I ~ U f l ~ @ d l 4 ' t 5 ~ ~ 1 ~ ~ l f l ~ l ~ ~ " 1 f i ~ ' ~ l t ~ ~ ~ l I

~Xng1uinom~?unu1mufi~A~'1 w ~ n ~ ~ i ~ u f i i i p ~ z ~ ~ ~ i i ~ ~ u ~ ~ ' ~ ~ ~ snr3iS'dilwm tiu unrj

afni~fl~ar k ~ k n l ~ u l i ~ d r r l n J i i l u h r n.a ism m ~ & u ~ a * l u ~ j m ~ r s ~ u ~ ~ i ~ ~ ~ ~ ~

~?o'arnuR' ($~!d~91ni) / i ~ G ~ u l f i u ~ i n ~ w d ( p a M~UC) I U ~ U : # + U ~ U ~ ~ R T V ~ ~ U ~ ~ ~ ~ ~ ~

ilqunrniui~n~j~nlu~imid~~ni~~n~~~ri~~~ (0.l5 u o a x ~ m i w i ~ lunr6irocoafid5tlqu~

jnqftfnliju ?kt; Arkan- South Carolina llnS: North Calorim)

mnnnrrm' h a n k !&d1~it3irn'nunswa47~3~013~tl s t? '~tn~p~fd#u~u'~~i f i~~u d ii u a f j i i s .I ~ X ~ ~ I ~ ~ - ~ ~ ~ I ~ U U Y ~ ~ ~ H ' ~ ~ Y I ~ ~ W ~ ~ ~ ~ ~ S V ~ X I ~ ~ ~ U ~ W R Q O ~ ~ J ~ ' I U ~ I P Y B S Y R Y ~

d , 2 crrdil*arthi~ms u 1 1 ~ ~ ~ f i $ ~ ~ ~ u m ? % w 8 ~ h f I P P # ~ H S ' ~ O I U ~ ~ ? ' ~ nnJa%~infi~ iruu Has;

OYU~UW ~ ~ U I ~ ~ D . I ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ I ~ ~ ~ - ~ ~ " ~ I ~ I P ~ ~ ~ Q ~ ~ I ~ ~ I ~ ~ . J U ~ I ~ ~ I U I I ~ ~ ' I I ~ ~ ~ ~ I S

n & (UIQU~ of default) o d wlrh1u~11~~it1snei13i-i

m r ~ ~ s r ~ ~ u ~ p d n ~ d u d " i u ' 1 d t n ~ ~ ~ ~ 1 ~ ~ a ~ J ; ' s n 3 ~ ~ ~ h o d w l n r t n m (l#iu

~nmou~~nu+d~) ~du ~ ~ ~ U ~ ~ ~ ' ~ ~ ~ ~ R ? ~ ~ U I ' S U U ~ I ~ B ~ R R R B ~ ~ (~r i e canaj rAm*wu~rnr

V U ~ J W I ~ ~ I I ~ ~ ~ ~ ~ U ~ ~ I U ~ I ~ W ; ? u ' i ~ s l ~ m n ~ ~ r : o " ~ ~ ~ ~ ~ d d ~ ~ ~ ~ l u . i ~ r n n - ~ ~ ~ ~ i i c ~ n ~ ~ n f ~ ~ ~ ~ l u n c 1 ~ ~ 1 1 1 I rno ihi;nhwd~Ctiiidqm amt

~ c 5 ~ ~ 1 1 w h t o ' u (mnui~~~riaptluab~~n~o~~w';~~ lunnfy 8 4 q &~~~ut%~mm~niw~qd~# liidral$vi~an~~u 1ldii~fit~$uilm1uil~~rfi1n"1#~1# l d a ~ ~ ~ r n ~ u l l i ~ l a ~ m r i ~ ~ A ~ ~ I G Y B ~

10 ~Inuorrrtrrarrnld Roberl Inmm n R ' n i ~ ~ r o t f s M =wry r e m 10 v i m ttwmv(vcr at the top o f aay pridty

li$l for T E d d n ~ ~ i m m e A4xmdct tlmil~m'r -rsFul cffwts in 1790 to hava the f&rd p v m n w n i wwnc all

debts of thc stah folluwbg the approval nf L e new Unim urarc kd on the argument hat Ibe ~cdcrsl gmcnrment mu&

@ bebind h e crcditworthkms o f its mkr smep in h s e stat&, WI tk federal premmml. wat to haw Lo

h r a p a cupid (blnm~ 2003. p-M)

ni~s i~rq i i rmn~~~~un ' t~~gd~dsyf i~~H"~nn~~nr~~n i~ i~ in .3~ f1o~~: : lo lio41~Sq$iu 2 dq~11u'rnn~oJlr~~unu'td luiw'inoclumle (~nlario &~duim?~ku?~Amh~nlla

dx~inmuu~riu) i i m m i n u m n i ~ 40 1d~~dr:llufl~ui~n~p1flITfiut~n~16bipJiso~f~H~

1X - m~w~d?u~d~oa~du~nsit-~i~X~s~~~flri'~# L ~ O J u I ~ ~ I I ? ~ ~ " ~ ~ Y I ~ # ~ u J L B ~ ~ ~ ~ ~ L ~ Q u ~ 7 'lri n ~ u i s n k % - ~ n i i n ~ 1 ~ ~ ~ ~ ~ ~ n ' 1 1 1 u ^ o ~ H ~ ~ u ~ T ~ ~ ~ ~ ' ~ u ( R ~ D ~ ~ u ~ o I u ~ : ~ I Q & J F

laudw m a m a ~ ~ ~ n u f l ~ u i n d ~ a a ~ i ~ f i u f iwa i&7qnaniu rn~81"fisn'~Pf 141

nhs&4rilym du lug n.H. 1932 I&CR& ontario Municipal ~ o r d (OW $UUI t d o i $ ~

~ 1 ~ ~ ~ ~ ~ ~ ~ 3 ~ l ; ) ~ ' 5 1 0 P ' 1 t ) $ 1 4 ~ ~ ' ~ 0 4 1 ~ ~ 1 ~ '40 validate h e bornwin% bylaws of muaicipalilies

a d consider the nature of the u n d d n g the finatlcial pasitian of the municipality, its ekisting se~

of obtigalions and other ma-. A few years later, in 1935, the OMB wa9 given a power to control

all municipal capital expenditures and limit lo& bwrowing witboar O m approval ..." (Birds and

Tssonyi, 2003, p. 102) dJ 29 nu~iuliia~a'ud~q!~fid~~n"4 nrw nun,u&~i (wind~r &ihod~nbIir*bs#

nrsi ~rnunsu~uaaululisro~anyf) n u d ~ i n l l r % ~ h ~ ~ ~ ~ n ~ ~ ~ u d ~ u ' n w ~ ~ ~ d a u a ~ d Y

~ 5 2 ~ u ~ ~ e s s w m i n (debt services aa % of cxpeolditure) q ~ i f ~ f a u t ~ 45 UQQI U ~ I U ~ ~ U U I

aqm ddmn ~ u i i i ~ d n ' 1 1 i ~ 1 1 1 a ~ 4 ~ ~ ~ ~ l i u l ~ u 3 n ' u h o i i u h iu4a5~ hlbem h o 2 ~ r : n u i t ~ n i ~ n ~ ~ ~ u t 1 ~ ~ ~ ~ ~ 9 ~ ~ ~ ~ 1 ? i 1 1 ~ ~ 1936 (ynk defaull q& 1 Ih 3 vmwuj/U%~m~

&mum) w ~ ~ i o t ~ q ~ H ~ R ~ ~ ~ ~ Q ~ R I I ~ U ~ ~ ~ ~ I ~ ~ U S ~ ~ I $ ~ O I ~ ~ ~ M U ~ ~ ~ I ' I ~ U ' I I ~ ~ ~ ~ U ~ ~ ~ Q - nn J I3~unaIiiwre*#o4buuu~ jgu ~ G J T ~ ~ ~ I I ' I I U ' R H ~ ~ U I ~ A ~ ~ I LGU lou. I $ U ~ ~ U

Jury' 8mn;duilgnmir1~uU ~ d u ~ o ~ n n + l r l r n u u o ~ n n ~ ~ ~ i ~ i ~ ~ ~ n ~ w S ' W U ~ ~ ~ ~ U I I ~ 4

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nrn.ip;l s C i l d w y ~ p ~ u ; l # ~ ~ u i n k n i R - mnnul~uosf~uiakwi~~1~d~ni1at;w'1~~iu1Biil ioun 4 W 1987 bnim ~ b a t l ~ M ~ ~ ! ~ ~ ~ I ~ ~ T ~ ~ I ~ ~ ~ I . I I ~ I ~ I J I I I I H ~ B IR&CI~U@

~ B i ~ o ~ ~ u r ~ ~ s r u ~ ~ u ~ b d m n ~ w ' ~ ~ ~ ~ i f o ~ r ~ n s ~ ~ u n ~ " n u i n s r ~ s ~ ~ r ~ i d ~ m n ~ i d u ~ ~ i ~ u ~ ~

13 ~~arru~dqlvnrn~uwi tab~ry i l ~mdjan & d e n , *rim WZ); -Wamcnt and the 6-t of-

we conunitrod to tbt principle o t rmking qu l imion paymPnls LO enwe that p r w i d ~~ bwe sufimlerrt

reve~las to p m i d e reascmmbly c-b I d s of public sa+cex al d l y campadk Iwkluof U~~~BXP~~DII.~

14 A eormj d U h i o a wish hw w n a ~ M WqmI W af f- > . f i d amopnmW any pawiget

whew m~nug (h tk equalid tmdw dm formula. nnd ai tbc ~ ' s fdl below h pmiaw

ysar's revenue wuld recPived s corn^^^ a&ldim payment:

drzmi11auo~auaru3n1

drrrnrru~1P3a 3naaiuilnviuas oddo on (2003) ~ltl~l~~lfi~ql~1'11?1~u'011~~~1ffid~

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& ( 4 1u3uum ro t nmlsmur u' lu 'ntu75~4i~r i iu~d & ~ . n i o u ~ ! X n n ~ u ~ d u ~ ~ n i v o ~ ~ u i ~ ~ ~ 4 w mird b~d~u1mmm~mnawu6~1~111)~5'~~ I R ~ F I ~ ~ U ' ~ ' ~ ~ I U ~ U U T ~

i l q l ~ ~ d ~ ~ l l i s n m u r i ~ 1 n ] o " ~ n ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ o ~ ~ J I ~ ~ ~ ~ ~ n 5 I tud~lfllimuaalnr #uni&id~;mn i w q m r ~ ~ d n l : g l n n h w t a ~ u ~ 1989 t$oannmr@u (nhu) ua.r

i ~ u ~ n u n ? ~ ~ f l v s i n ~ u ~ ~ ~ ~ w ~ t i i ~ ~ u ' u o ~ s ' ~ u ~ n (he ~ e d c n r ~ Housing and Saving B& do41

CEO I ~ o ; r i e ~ r n i ; l ~ o u ~ n i ~ z v a ~ r n z n ~ ~ ~ n ~ 7 f i ~ ~ u n ~ u ~ i ~

~oddm I ~ B ~ u ~ u ~ I ~ ~ ~ H ~ I ~ ~ ~ ~ I ~ u d ~ d u ~ ~ ~ ~ i i u ~ ~ u u n i ~ ~ i i ~ ~ ~ ~ ~ i l ~ ~ ~ doqqin

~ w i m ~ m ~ 1 r l s ~ r ~ i i ~ ~ ' 1 ~ - d ~ u 1 ~ ~ ~ ~ ~ 1 ~ ~ ~ ~ ~ 1 n a ~ u u ' n n i ~ ~ f ~ 4 9 ; ~ 11odo&~iuua4

liomsbitsr l ~ n ' u ~ ~ u ~ t i i t u ~ ~ ki ia~~uaa1ai~Xou~lPSI3'~~1ann1~~Giui l i~u uialr lnir

g a n y u 9 u ~ i s ~ b u u i f 4 7 i ~ ~ n m a ~ ~ - - i ~ r r r u ~ ~ r ~ ~ u ~ ~ ~ n ¶ d F i l Q ~ ~ ~ ~ u ~ ~ ; ~ ~ ~ u n ~ ~ ~ u ~ ~ ~

i ~ u ~ n n & y b i o l d e ' ~ 6 n ~ n m u d ~ ~ 4 i 3 m d u ' i p 1 8 a rnr mn~lr:ilund (d& mice 4 4 w

e o ~ q e ) r k ~ ? d ~ f i u n i r ~ a ~ u # n ~ ~ u i a r i ~ n u ~ -4 ~ # i i u ~ n ~ a n n m r u u i u h 6 ~

a o ~ a a ~ u Z . & ~ (~rowm m d nwk ordcbr) ~ ~ B U ~ U ~ I ~ D ~ U I ~ ~ I I ~ O ~ ~ ~ ' I ~ : Q Y ~ ~ ~ ~ I

~ d ~ ~ a m r a s n * i u r ~ ~ ~ l t ( m ~ i ~ ) I#I$ ~nmindo~mllhh (sm ~aula) I $ E I ~ ~ ~ ~ L R ~ W I U ~

( Rio & Jaueirol ldl4i~ldlfllnllf €? (M- Gerais) llnr~384?~1)llnf ~ R W (Rio Clraade do Sul) . * a d W l m

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i1a;~ruu~il iura~rn~s'~d&40~ ( i i lns tahr lu~ . 'waw&~ ~diildrnuno(lo~riuilqpi n n u ~ u , n n I ~ uonc1ndu'~1&11tl41ui1 nakrosuosn~a~mlrt10'1(w" (nwmnlisq) sloa:

Q1Idrjilq~iF~nd12 ~ d o i o ~ n ~ " m ~ l d i i (Ru{n-ion~iududo~lHd, ~ ~ d v u ~ ~ l w q h ~ u n i ~ d .B la 5yv:da'm%8kSkr $#' i;~flu#~i~qGnllrsni.rwu~

eilda~ugu~ i 9 u ~ n d s : ~ n ~ n d ~ ~ ~ l l ~ ~ ' ~ ( ~ ~ ~ ~ ~ 4 n ~ w n i ~ n 1 ~ 1 ~ & l u i l u i n 6 ~ e r i 3 u i ~ d ~ ~ ~ u

nu.nuntri?nlnwo4 Webb 12003) n d i ~ i i 'lunmrru 1980% ~ r n s ~ 4 n ~ ~ d s e a v i l ~ w 1 1 6 ~ 9 ~ 1 n

~ ~ ~ ' ~ ~ I W J ' ~ ~ U I U I I I J Y ?i.i:c~.i:a';l (soft budget constraints ) ~ ~ I ~ ~ U O W ~ ~ ~ ~ U ~ R ~ R P I O . ~ ~ " ~ ' L I I ~

douihiiuuinln~uin (bi$uiYmrimn3 50% u o . r r n r u ~ n ~ n ~ . r r n ~ p 1 ~ n 1 ~ C ~ s a u ) 4uY 1989

gtg~iw o ~ o ~ f ~ s u ~ u ~ ~ u ~ ~ ~ ~ u ~ n ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ u ~ d u ~ z w 7 0 ' ? g ~ ~ a o ~ f l w u l u ~ d i o u d ~ i w " ~

u ~ f i s n i ~ ~ n 1 u o d i ~ b ~ ~ 1 i f l 2 1 ~ ~ ~ ~ 1 f l ~ 1 u n ' t ~ d 1 1 8 ~ & a ~ ~ ~ ~ a n ~ ~ ~ ~ 1 ~ n ~ i d 0 i u n i ~ a t " " a n ~ ~ 9 n i ~ d

nls~unlsn i~ '90~~ounwiu~9~d * u wamm kvoq#o&i~ ~ r a ~ ~ a ~ ~ u ~ ~ ~ u d K u ' ~ z ' ~ ~ u n ~ ~ f i ~ . p ~ ~ ~ ~ ~ n

?lu~a$nb~$d~bedlhxmr~uda~n niru?mr mnPunirnn"us~duurrnin"ldD

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o'lldtrw'o4u7ansnb~%9~~~1~fl~(n1~n1~dn1a~1m$1~~41%i 7@u%$u7w sn7rmsf h o n e t o y

poiicyi 1411 IEUINI~~U ~ U I % O JIUIIDUIPU n13n2u4u~~51mBn16tI i!nimln~uqud~41

rran~nliuu .rar ~ L ~ ~ E H T ~ ~ ~ T ~ P I T I ~ I ~ R ~ ~ l f l s ~ r poiicy mmtl89 ) J I P ~ T ~ I T ~ I ~ III'I~IHUA 2'

audr:uiol rnrrionu i n q ) ~ ~ o d ~ ~ u i ~ n o i v ~ u l k u i ~ s n ~ m " u a o ~ n a ~ l ~ ~ u u ~ m 1 ~ ~ ~ ~ 1 ] ~ ~ d

d9ur-a~ (Aggregate Demand) ~ l i ~ ~ ~ ~ r : ~ u ~ ~ ) l u i ~ d u ~!nrnr$laesvnso~u wu"ui~w I R M ~ D % ' U I U ~ I ~ i ~ d i f l ~ ~ . ) n i n ? j % m u ~ a u G =

4 Govemmmf Expenditures ( ~ J I U ~ I U ~ ~ ~ U ~ ~ ~ ~ ~ ' I U " I I ~ . I T " ~ Y I B X ~ J ~ ~ U ) ~ f i u o . ~ i d l x n ~ f l ~ d ~ 0 . 1 4

qdn.litiizi?ur2u k i u irlu-iamu~roa:d~~~dihu G (governcut expenditure) LIRE T (tax) TRU P n u " ~ o " s u u ~ w p d - r r ~ i ~ ~ ~ n ~ ~ ~ o n ' ~ ~ u t n~%#d~ t l uT%n m ~ a q u f l i ~ r i ~ ~ ~ n lim: n1~61i4-1~ IWU WUIUIY 7 ~ u u 1 ~ ~ ~ ~ ~ d ~ ~ ~ d ~ ~ ~ ~ ~ i n u 1 : ~ u ~ u ~ d m u d ~ u r 1 u ~ w d s ~ 1 n u a . r ~ i i l l ~ 1 u ~ d i

d flxri~13~aaz ni.i$~?r9~7w~qwaniw%ueiau ~ ~ ~ u I ~ T ~ I T ~ I T ~ ~ u - ~ ~ u I ~ ~ I ~ ~ ~ ~ I ( ~ ~ U P U I ~ I ~

nmq) l ~ u ~ o 1 a 1 u ~ ~ w ~ ~ ~ a d 3 ~ 1 1 f ~ ~ 7 ~ ~ ~ ~ ~ i i ~ 1 ~ ~ ~- imsn l i !u duiu

l a u d ' m r u ~ r n ~ t i 1 r l 5 ; u ~ a : n 1 r a ~ ~ ~ ~ ~ ~ " ~ u i ~ ~ ~ a ~ u dauozfiwariw~6otnrl4d1~ 24 4

UDB~I IR~JT~ IJ (general government expenditure) $ ; ~ ~ b ~ ~ ~ t 0 ~ ~ ~ ~ ~ ~ ~ ~ ( f d " ' ~ d ~ ~ ~ w ' 5 ' ~ f ] 1 ~ ~ 6 1 1 9 w " 0 4

16 The expcriencecl of the B&ltan ~utes over tho pas1 two decades demon$mre bow hjemhiral and market-based

oversight mechanisms can fail" Radden 2003. p.243. '?loo big to nil" the center itself is often little more limn a loose

cpaliliun of $latebased in terg t giwup~.

I7 Webb, 2003, p.190 'lqfhil "on the brink orcall-"

I ~ I ~ ~ ~ ~ ~ ~ ~ I ~ I ~ S ~ I I ~ P I I R ~ : I ~ I ~ I I ~ I I ~ ~ ~ ~ ~ ~ ~ T ~ u n i ~ a i i ~ v ~ ~ v ~ ~ ~ i u i4sC slcpbco ~ ~ i ( q r

(1999, p.81) 1#~4~Bktna<l govmrna& may wish to mnrml local pr-cnt i ~ . arptnditurw in aggregate both b s c they may impinge upon the former's management of the

e~womy and they src usually prkbanced by central government. (Bailey 1999, p.81) & d W r n J -* A

I d % ~ ~ ; d U ~ R W ~ r y ~ l U 1 ~ ~ ~ ~ 1 B ~ 1 J R n ' 4 Y ~ 4 ~ O J O U ~ 8 ~ L n ~ ' Y I U ~ (lumdgua) r 4 A l*l#mnaaiornmq mii & I ~ u ~ n X a r a u a ~ ~ w T n ~ t n i 1 ~ ~ 1 ~ ~ ~ ~ t ~ t l 1 ~ ~ ~ ~ 1 ~ ~ H?FI

m~n7rfuiluu~ii~wadrt I ~ ~ ~ I I ~ ' ~ ~ ~ ~ ~ ~ - P ~ ~ B U I I ~ U ' I I O ~ ~ I R O J ~ ~ ~ ~ I ~ - J ~ ~ ~ I R ~ U ~ ~ ~ I I ~ ~ ~

rnu2m+ar~undj# rn r n ~ r A ~ ~ u u o c s i a l 8 (rnrltilurnis1nt1m~ti11~~~~3~~~ d riuniriliunnznr i i a wni~ nfeo~rdi~nintY~~iu (cu14uvi.r) E ~ ~ w n u I A n n n i J m ~ ~ ~

l u l . r i ~ ~ ~ ~ ~ ~ i i u W h a d j u k u i ~ A I ~ * W B ~ P L I ~ ~ T U I I I ~ i a l / h f i ~ ~ n i ~ ~ ~ w ~ i h

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~5f l1dh~usn-~~aw~&d ~ ' ~ ~ I ~ ~ B ~ ~ U O : : J I ~ I W J ~ ~ ~ ' I ~ J ~ U ~ Z U U ~ R I W ~ L ? ~ U ~ ~ ~ h m r aprludlri(ulii ( c x o c ~ cWity~lu d iloirmwnnlGop lriu linnado~~ioadud~li~dafh

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i ~ u i n n ~ 1 r 1 h u ~ ~ t n ~ o 1 ~ q ~ q ~ ~ y ~ ~ 1 ~ ~ 1 X 3 ~ ~ 1 ~ n ' ~ 1 1 ~ n i i i u k i a l d s l ~ . e n m o d ~ i l ~ ~ t n ~ ~

nk.oqli?urrmll lriu m r i u b u ~ ~ ~ ~ n i l u ~ a d m ~ f u ~ i ~ ~ ~ d ~ i i w i i " I I ~ ~ t a n r w ~ ~ a 9 ~ ~ G o a

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G ~ ? ~ ~ I ~ ~ ~ ~ A ~ ~ ~ ~ I ~ ~ X ~ ; U R W ~ ~ Y Y ~ ~ ~ ~ ~ I ~ ' B ~ P ~ I I U ~ ~ ~ ~ ~ S U I I B Q ~ ~ ~ S I Y ~ I (riu

N U I I U ~ U ~ ~ O ~ William ~ i s h dnn~ql#18uii r-uur i~mimff1unilHaa "auhi

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n?ra:I#u?rnr PI IR optimum q ~ d net benefit P ~ ; ~ R ) I I ~ H ~ ~ O ~ I T ~ I ~ ~ E I ~ I ~ O ~ - ~ZIJI: 3 ~+ond~ilm;riuufb ilo r d u i h e l i t - cog I - ~ ~ ~ ~ ~ ~ s : l ~ ~ i l q ~ ~ v ~ ( n i ' ~ u i f i q u 1 1 4 ~ l l

4 d m 7i1ritnAidq~ r n r i ~ ~ u ~ ~ ~ i u i u ~ r ~ ~ w n ~ u t ~ ~ i l n i ~ ' u (a~natt iu~n~ra1wrS~o~o~in~-

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d, & mfi budget constr8ini fi~nwu18: i~~:~7n~l~#l~milq~7~nq1n1~a~3~4r~d3~430~ (TsJ~~in~u~

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8au~n~l~o~*lo~Cio~d1~5'flfi15~~qld Q a f i u n i ~ d u i.t.md finance) wn'nrn.rd~il#tiuih y n n e ~ w ~ o ~ ~ u n i n s n m ~ ~ o ~ nin5'g (tdu~unreif~umL~ih d o v a ~ n r i ~ ~ n n d ~ u q r ~ ~

n i i r n o i r l i u m ~ n k u o ~ ~ ~ n ' n ~ ~ m ' 1 0 ~ & ~ 6 ~ ~ 1 a n ~ ~ ~ ~ i n ~ r i ~ u ~ ~ ~ ~ )

n ~ ~ n ~ r l u u o ~ h ~ 6 u ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ n ~ ~ t ~ ~ ~ n ~ ~ ~ ~ (uaziimiul~du) 1174

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7. 8 u Q ~ n y u h ! ~ ( ! ~ T P ~ ~ ~ U ~ R H ~ U ~ Q ~ I ~ L ~ ~ ( 1 ~ ~ ~ ~ l ~ 0 4 ~ i l ~ F I j l apecik g m t d ndn. l~iuuidw ~ o q l l i w l d a n n h 7 dl&

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m u ~ z r t ~ d i n i u l # f i u ~ nl~imwunlunr anzihu$minsl I2bJsmriluii1~uarb~11fia~84 4 4 da~nuna drrrrunls niui~uiu ilnirn'ouo.rn-~s R P ~ U ~ P ) U Q I ~ ~ Q i ~ ~ : i ~ r n u z n i ~ ~ t l ~ a r ~ n ' ~

i s u 41rii t~md~r ia ' lP;s~~~a~ei~no'~~.ku n d nislfiv i~nnuliit lu u n x h 7 1rnrnal0ii;

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