0w2010 01 RESUM EJECUTIVO 04 DEFcarta ang
26/10/10
19:45
Pรกgina 78
CONCLUSIONS 78
United Cities and Local Governments
Europe and North America, are deeply impacting local finances. Local governments in many of those countries fear that a disproportionate share of the costs of further fiscal consolidation will fall on them in the form of cuts in intergovernmental transfers, restrictions on local credit, and other austerity measures. The financial and economic crisis is not the only global crisis with relevance for local governments. Financing climate change mitigation policies and the investments required for the associated risk management would considerably increase the resource needs of local governments worldwide. The financial implications for local governments of the response to environmental challenges are only beginning to be understood.
Partial or interrupted decentralization Reform
implementation of intergovernmental transfer systems can compromise incentives and capacities for service delivery, local revenue generation, and borrowing. Among the most pervasive and damaging instances of incomplete decentralization is the assignment of too few revenues to finance assigned functions. At a global scale, very few countries escape dealing with major gaps between local expenditure and local revenues. This can result from a flaw in system design, but revenue inadequacy tends to occur for political or capacity reasons even in countries where constitutional or legal provisions prohibit unfunded local government mandates. The problem tends to be more significant in some regions. African countries, for example, generally have much less decentralization of revenues than of expenditures, leading to particularly severe revenue-expenditure gaps.
Demographic shifts The global crisis provides one example of how decentralization can be stalled or reversed, but this is a more general problem taking different forms as evidenced in the regional chapters. Fiscal decentralization frameworks involve complex systems with many interrelated components, and some are easier to implement or politically more feasible than others. Thus, some local finance systems are only partially designed (relative to best practice principles) and some are only partially implemented even if they are mandated in the legal framework design.
Many European countries are confronted with the challenge of coping with the effects on public finances of a rapidly ageing population and the need to integrate immigrants into the labor market and society at large. The ageing population challenge is also relevant in several countries in Asia, such as China and Japan, and in Eurasia, such as Russia and Ukraine. In some developing countries, the growth of youth as a share of population poses different types of service challenges that also have serious financial implications.
If only certain elements of the system are implemented or partially implemented, however, problems can arise because of the interdependencies involved. Deficiencies with one component often undermine the ability of the overall system to function effectively. For example, lack of clarity with functional assignment can lead to uncertainty regarding the financial needs of local governments. Similarly, problems with the design and
Rapidly increasing urbanization, particularly in many of the developing countries of Africa, Asia, and Latin America, continues to create demand for public services and infrastructure that requires a huge volume of resources. The needs are even larger if investments for climate change adaptation are included. To get an idea of the magnitude of the sums involved, given available maintenance and development costs of urban investments, it would seem