2011年-世界发展银行全球_Romania_-_Reining_in_Local_Government_Spending_27页_1mb

Romania: Reining in Local Government Spending

Core Content

This report, prepared by the World Bank and based on consultations with the Government of Romania between January and December 2010, analyzes the measures taken to control local government spending in response to a fiscal crisis. It provides an overview of the current legal and fiscal framework, discusses the rationale and implications of the reforms, and offers insights into the challenges and potential improvements.

Main Objectives

• To evaluate the effectiveness of recent measures aimed at reducing local government spending.
• To provide analytical support for policy discussions and legislative proposals.
• To suggest long-term reforms that could enhance fiscal discipline and efficiency.

Key Information

Local Government Structure

• Romania has a two-tier local government system: counties (41 in total, plus Bucharest) and localities (second-tier jurisdictions, including communes, towns, cities, and districts).
• Both levels have elected councils and directly elected mayors/presidents.

Fiscal Framework

• Local government revenue is primarily derived from:
  • Earmarked grants (28% of total revenue), including teacher salaries.
  • Discretionary revenues (72% of total revenue), mainly from tax sharing and equalization transfers.
• Personal Income Tax (PIT) is a central source of revenue, with 16% of the tax rate retained by the central government, 13% allocated to counties, and 47% to localities.
• Equalization funds are allocated to localities based on their fiscal gap relative to the county average, as outlined in Box 1.

Personnel Spending Control

• The Government introduced staffing ceilings under an emergency ordinance, which:
  • Set maximum staffing levels based on population size and jurisdiction type.
  • Excluded staff in education, health, and social assistance but included political positions.
  • Required local governments to reduce positions and dismiss excess staff within legal terms.
• Personnel spending ceilings were also introduced, with the central government setting base wages.
• Penalties for non-compliance included fines and potential imprisonment.
• The staffing reductions were reported to be largely symbolic, as many roles were shifted to contractors.

Intergovernmental Transfers

• The PIT sharing ratio was reduced from 47% to 44% for lower-tier localities and from 13% to 12% for counties.
• The equalization fund share was reduced from 22% to 21%.
• The central government retained a larger share of the PIT (18% now, up from 13% in the previous version).
• The total share of the PIT allocated to subnational governments was reduced from 82% to 77%.

Fiscal Implications

• The staffing reductions do not directly reduce the public sector deficit, as the central government retains control over intergovernmental transfers.
• The proposed reforms were initially based on setting service and cost standards, but this was abandoned due to practical concerns.
• The current approach of setting absolute staffing ceilings is seen as overly rigid and may not address underlying inefficiencies effectively.

Revenue Sources and Taxation

• Local taxes and fees account for about 14% of total revenues.
• Property tax is a key component, with yields at 0.7% of GDP.
• The tax yield is influenced by:
  • Completeness and accuracy of data.
  • Unit cost factors for buildings and land.
  • Tax rates, which vary by jurisdiction and type of taxpayer.
  • Collection rates, currently estimated at 80%.

Challenges and Criticisms

• Local governments have largely complied with the staffing ceilings, but not necessarily with the spirit of the reforms.
• Reducing staff may not lead to real fiscal savings, as many functions are now outsourced to contractors.
• Arguments over personnel spending are not well-supported, as higher staffing levels do not necessarily indicate inefficiency.
• Administrative burden is significant, particularly in monitoring compliance and enforcing penalties.
• Further reductions in intergovernmental transfers are not straightforward due to the difficulty in accurately determining the appropriate level of local spending.

Main Views

• The current measures are a response to the fiscal crisis, but they are short-term and restrictive.
• The staffing ceilings may not be effective in reducing overall public sector spending.
• The PIT sharing reforms are a step toward greater fiscal discipline, but their impact is limited.
• Long-term reforms should focus on improving tax collection efficiency, adjusting unit cost factors, and revising tax rates to better reflect market conditions.
• The system of equalization transfers is transparent and objective, but it does little to address inter-county disparities in revenue.

Conclusion

While the recent reforms aim to improve fiscal discipline and reduce local government spending, they face several challenges and criticisms. The staffing reductions are largely symbolic, and the PIT sharing changes are modest in impact. The Government may need to consider less intrusive approaches for long-term sustainability. Further reforms should focus on enhancing local revenue mobilization and tax administration efficiency.