Analyzing the Fiscal Health of State Governments in India: Evidence from the 14 Major States

The paper seeks to assess the fiscal sustainability of the 14 major State (subnational) governments in India employing the deficit indicators approach. Evidence from the 14 States indicates to a deep fiscal stress across rich and poor States with just a third of the States showing a sustainable revenue account and primary revenue balance and even fewer States showing a sustainable primary deficit thereby reinforcing the serious concern for State‐level (subnational) fiscal health as weak State finances can have an impact on the stability of overall government finances.     

Intergovernmental Fiscal Relations: Coordination Failures and Fiscal Outcomes

This article estimates the fiscal impact of coordination failures in intergovernmental fiscal relations. The coordination failures considered here are due to agency problems arising from the delegation of fiscal powers to sub-national governments, and "common pool" problems associated with funding decentralised government spending through intergovernmental transfers. Particular attention is focused on the trade-off between coordination and fiscal decentralisation. Evidence provided for a sample of thirty countries suggests that coordination failures are likely to result in a deficit bias in decentralized policy making, particularly in the case of developing countries, for which the benefits of decentralization may be over-stressed. Developed countries were found to be less adversely affected by coordination failures and have therefore managed to pursue fiscal consolidation in a decentralized setup.     

The Debate on Australian Federalism: Local Government Financial Interrelationships with State and Commonwealth Governments

The nascent debate on Australian federalism has hitherto focused almost entirely on Commonwealth-state interrelationships to the virtual exclusion of local government. Since Australian local government employs around 156,000 people and spends in excess of $10 billion this neglect is unfortunate. In an effort to at least partly remedy this oversight, the present paper seeks to assess various unsettled questions in local government financial relationships with both Commonwealth and state governments, especially the issue of financial assistance grants and their efficiency consequences.     

The Status of State Governments in Nigeria's Federalism

Nigerian states have almost completely lost their autonomy.The Babangida years and, in particular, 1991–1992, havewitnessed unprecedented reductions in states' powers. The entrenchmentof local government autonomy and the loss of some state powersto local authorities, the reduction of states' financial powersand their share of the Federation Account, as well as the decreeof a highly centralized two-party system, all have, within theframework of structural economic adjustment and the transitionto civil rule (expected to be completed in January 1993), worsenedthe position of the state governments. However, with the establishmentof civilian governance in the states and the return of constitutionalgovernment after January 1993, the state governments may reasserttheir autonomy.     

Information Technology Outsourcing by State Governments in Australia

Outsourcing of IT services is being undertaken at a rapid rate within the public sector in Australia. This paper investigates the adoption of this practice by a sample of state government enterprises and departments from South Australia, Victoria and New South Wales which have tendered long-term IT outsourcing contracts.
The motivation, decision-making process and extent of outsourcing are examined in further detail. In addition, the tendering process, contract and risk management are investigated to determine whether consideration has been given to the full economic costs involved in entering into longer term contracts.     

The Federal Role in State Fiscal Stress

This article examines the extent to which the federal government'spolicies were responsible for the fiscal stress experiencedby most state governments in the early 1990s. Federal policieshave contributed considerably to recent state fiscal stress,particularly through the Medicaid program—the fastestgrowing part of state budgets—and the recession, whichdepressed revenue and increased welfare and Medicaid spending.Federal aid reductions have not been an important source ofrecent state fiscal stress. The real value of per capita federalaid other than for welfare programs fell considerably in the1980s, but the reductions were much greater for local governmentsthan for states. The largest reductions were in the early 1980s.Federal policies have affected state finances in several otherways—through tax policy, unfunded mandates, and the federalfailure to cope effectively with problems like health and poverty.Federal court rulings have also caused budget problems (as havestate court decisions). In some respects, state fiscal problemsare not a federal responsibility. Rising school enrollments,new corrections policies, and inelastic tax systems have createdfiscal stress for many states. Excessive state spending in the1980s has contributed to recent fiscal problems in some states,but not generally.     

Decentralization and Fiscal Discipline in Sub-national Governments: Evidence from the Swiss Federal System

This article analyses the relationship between decentralizationand the extent of fiscal discipline in the Swiss cantons between1984 and 2000. From a theoretical point of view, decentralizationand federalism can be associated with both an expansive anda dampening effect on government debt. On the one hand, decentralizedstructures have been argued to lead to a reduction of debt dueto inherent competition between the member states and the multitudeof veto positions which restrict public intervention. On theother hand, decentralization has been claimed to contributeto an increase of public debt as it involves expensive functionaland organizational duplications as well as cost-intensive, oftendebt-financed, compromise solutions between a large number ofactors that operate in an uncoordinated and contradictory way.Our empirical results show that in periods of prosperous economicdevelopment, the architecture of state structure has no impacton debt. However, the degree of decentralization influencesdebt in economically poor times: In phases of economic recession,administratively decentralized cantons implement a more economicalbudgetary policy than centralized Swiss member states.     

Federal Reimbursement for Mandates on State and Local Governments

One of the remedies sought by state and local officials for the growing burden of federal mandates is a mandate reimbursement law. A major purpose of mandate reimbursement is to deter Congress from imposing excessive costs on state and local governments by making it fully accountable for its actions. The paper begins by extending the economic theory of grants to mandates and reimbursed mandates. It goes on to assess the benefits and costs of mandate reimbursement, and to distinguish mandates that should be reimbursed, should a reimbursement program prove desirable, from those that should not. Then, using the economic theory of grants and mandates, the paper compares reimbursed mandates with two alternatives for accomplishing the same objective, compensating grants and procedural rules. It concludes that the latter are more promising than mandate reimbursement.     

我国地方政府的财政透明与行政成本控制

我国的地方政府财政欠缺透明度,其主要表现是数量可观的地方政府收入未进入任何预算内管理,成为地方政府手中的非正式财源。预算约束的软化及预算执行的弹性化使非正式财源为地方政府的行政成本居高不下创造了便利,导致行政成本的盲目攀升。因此,提高地方政府财政的透明度以控制行政成本的盲目增长尤为重要。     

Improving Financial Management of the Governments of the Americas

Several factors have created an environment that encourages the development of improved financial management systems in the Western Hemisphere. The U.S. Agency for International Development recently created the Latin American and Caribbean Regional Financial Management Improvement Project (LAC/RFMIP) which has several region-wide initiatives underway as well as country-specific activities. In addition, other donor/lender institutions, such as the United Nations, have major projects in progress in the region and a regional Donor Working Group composed of ten donor agencies meets regularly to coordinate activities. A comprehensive catalogue of all financial management improvements in the region has been prepared for the use of the Working Group. Finally, AID has drafted a long-term strategy for improving financial management which is being circulated for comments.     

Fiscal Federalism in 1986: The spotlight Continues To Swing Toward the States and Local Governments

The year in Washington saw the president and the Congress atloggerheads on the budget but in agreement on important taxlegislation. A prominent casualty of the battle to slash thefederal deficit was Revenue Sharing. "Sequestration" and therhetoric of austerity that doomed Revenue Sharing notwithstanding,total federal grants (adjusted for inflation and populationgrowth) rose in 1986 for the second year in a row, continuinga recovery from the six-year decline that had begun in 1979.The net effects of the Tax Reform Act of 1986 will vary substantiallyamong the states, but the federal legislation guarantees thattax reform will be a central issue in many state legislaturesin 1987. Federal mandates continued to be promulgated in 1986with little regard for the costs to states and localities. Anotable exception was the outcome of the struggle over fundingfor grants for the treatment facilities needed to comply withthe standards prescribed by the Clean Water Act of 1972: muchmore generous funding than was sought by the president.     

Fiscal Policy,Deficits and Politics of Subnational Governments: The Case of the German Laender

The first part of the paper briefly describesinstitutional aspects of the German federal system andexamines the economic and fiscal performance of theGerman Laender since 1970. Taking into account theinstitutional settings, especially the fact that theGerman Laender cannot set tax rates individually, wedevelop a highly stylized model of subnationalgovernments that do not have access to the tax rateinstrument and thus have to use expenditures as apolicy variable. The model implies an expendituresmoothing policy of subnational governments andcomplements the famous tax smoothing model. Theempirical section examines whether governments ofvarious ideology show significant differences infiscal stabilization policy. Our results indicatethat regional differences in public debt accumulationand public expenditure policy in general is largelydetermined by interregional differences in economicperformance, whereas we do not find any significantimpact on the ideological composition of the Laendergovernments.     

State Regulation and the Political Consequences of Urban Fiscal Stress

The correlates of citizen-initiated municipal tax limitationreferenda are examined for the period 1975–1977. Locallevel conditons are found to be only a partial explanation forthe initiation andoutcome of tax referenda. State fiscal support(i.e., aids and direct spending) and constraints on local fiscaland programmatic activities are found to be significant correlatesof tax referenda.     

Assessing the Financial Impact of Natural Disasters on Local Governments

In recent decades, the increase in the frequency and the severity of natural disasters has posed growing challenges to governments’ disaster response activities. Disasters can have a considerable financial impact on local governments, but this impact has not been systematically analyzed. This study assesses disaster impact using 17 years of panel data (between 1996 and 2012) from the city and county governments in New York state. The research examines many aspects of local governments’ financial conditions, including liquidity, fund balance, and debt. It tests whether governments’ financial conditions are affected by disasters and whether fiscal institutions moderate disasters’ impacts. The results show that a local government's unreserved fund balance and disaster reserve significantly affect its financial condition, while financial condition indicators are not significantly impacted by natural disasters when the fiscal institution variables are controlled.     

Takeovers of Local Governments: An Overview and Evaluation of State Policies

This article examines state interventions, sometimes amountingto nearly total takeovers, into the affairs of financially distressedlocalities and "academically bankrupt" school districts. Drawingon several examples, this study suggests that state legislatorsand administrators have been cautious about intervening in theaffairs of specific local governments. However, the decisionsmade by state officials on how to approach intervention, particularlywhether to be reactive or proactive, and the assumptions theymake about the nature of the problems to be remedied, help determinewhether takeover is friendly or hostile and its effectiveness.