Using SpecificIntergovernmental Transfers to Buy Local Results
Motivation• With Decentralization, Sub-National Governments Increasingly Responsible/Pivotal for sectoral outcomes• Higher levels of government provide bulk of subnational finance• Concerns about subnational outcomes – Monitoring – Influencing
Approach• Present Basic Framework• A Checklist• International Experience• Stimulate Multi-Sectoral Discussion Around Potential Applications/Innovations
Performance Grants• Link between Performance Measurement and Management• Use of Indicators to trigger Fiscal Rewards – Tournaments (limited “winners”) versus Certifications (“minimum bar”) – Candidate Pool • All versus pre-selection/targeting/segmentation? – Common indicator or reform package – Time-bound• How to get incentives right? – Objectives – Size of Grant Reward – Consider vulnerabilities
A Checklist1 Objective Clear What are you buying? Is it developmentally sensible?2 Measurable Indicator What indicators tells you that your getting it? Sensible? Verifiable?3 Attributable/Actionable Can sub-national governments deliver?4 Adequate Are you putting enough money on the table?5 Credible & Feasible Is the principle credible wrt to ex ante promises? Is the design feasible given capacity and political context?6 Progressive Is it pushing incentives, or just paying what’s already there. Is it time-bound?7 Sustainable Can you sustain the results over time?
Mind the Context…• How do RBT interact with the overall complex of incentives set by the prevailing fiscal, administrative and political decentralization?• What is the political economy driving RBT design and implementation?• Do RBT initiatives promise to contribute to longer term institution building?
International Experience Australia Russia Indonesia EU Structural Italy UK UK-England US FundsExample National Regional Fiscal Special Performance National Local Public Regional Economic Competition Reform Fund Allocation Grants Reserve Performance Service Development Development Policy (NCP) (RFRF) (DAKs) Reserve Agreements Associations Association Payments (LPSAs) (RDAs) (EDA)Objective Pro-growth Reward regions Sectoral Service Promote Promote Improve local Development at Range of regional reforms w/ strong fiscal Delivery effectiveness, effectiveness, public services intermediate level economic reforms Objectives management, and management, and of government development and financial criteria financial criteria adjustment in in issues; Reward implementation implementation achievement of of EU structure of EU structure goal by projects funds funds, with (e.g., additional employment emphasis on increases) Objective 1 regionsPerformance Analysis of Negotiated Evolving Set/negotiated Initially mainly Negotiated. Government Meeting orIndicators legislative reform Package with national intermediate Initially 12 Office beating progress governments, process outcome based Assessment established focused on (i) indicators, “stretch” targets targets within effectiveness, (ii) growing focus on in multiple EAD awards, management final outcome service areas. including to state criteria, and (iii) focus Now LA’s select and local financial criteria 35 indicators governments, from list of 198. building on Poor absorption Balanced performance Scorecard subject to Framework. decommitment Emphasis on lagged- intermediate indicators to demonstrate results (incl. congress)
International Experience II Australia Russia Indonesia EU Structural Italy UK UK-England US FundsFinancial National-State 15 regions Less than 3% of EUR 8.25 billion Supplementary Up to 2.5% of GBP 50 million Up to 10% ofResources transfers, totaling received general allocation (4% of Structural 6% over EU 4% total local project awards, almost AU 8 additional grants Funds) performance authority budgets billion between (of 24 applying), fund. EUR 3 1997/8 and typically 13 billion (2007-13)s 2005/6 received USD 8 million, 2 USD 4 for partial successConcerns National Packages Special funds High share of Complexity and Negotiations on One-time nature, Challenge of Competition negotiated on seek to substitute projects received limited targets time- limited size of attribution of Council individual/discret for perceived lack bonus, visibility/promine consuming/compl awards projects to recommends to ionary basis with of equalization in complexity (with nce of priority ex, risk of regional treasury, regions general significant objectives gaming development Challenges of allocation, variations across outcomes, backsliding EU) bridging short to longer-term complex outcome emphasisPeriod 1997/8 2002 2001 2000-2006 2000-2006 Initiated 2000 2004-5 2007Status On-going First phase Under further Compulsory New performance Second Broader transition EDA shifting completed development requirement based system for generation to outcome based from project suspended at EU 2007-13 launched 2003, framework funding agency wide level further consolidation 2007 Source: Dumas & Kaiser (2009)
Food for Thought• Fertile Area for Results Based Innovation… – Use intergovernmental finance as sharp rather than blunt instrument