Intergovernmental grants in developing countries

A country's grant system is the product of its political environment. Such systems tend to develop over time in response to prevailing political needs and then become institutionalized. Since they have developed in a haphazard fashion over time, grant"systems"commonly are not systems at all. Hard pressed government ministries seldom undertake any thorough analysis of these arrangements; hence their overall impact is unknown in spite of the importance of this use of resources.Public Sector Economics&Finance,Banks&Banking Reform,National Governance,Municipal Financial Management,Public&Municipal Finance

The Role of Multi-Year Forecasting in the Annual Budgeting Process for Local Governments

The annual budget focuses on a single twelve-month period, yet spending and reve­nue decisions made today can have long-lasting fiscal effects. New capital projects re­quire future spending on operations, maintenance, and debt-carrying charges; altered pension benefits carry long-term commitments; new fee structures will influence later years\u27 revenues; and hiring, layoff, and salary schedule decisions have fiscal impacts well beyond the year in which they are made. Despite these very obvious long-term im­plications, surprisingly few local governments have attempted systematically to link the annual budget to a multi-year fiscal plan. Multi-year projections of revenues and expenditures are a necessary step in over­coming the myopic attitudes often exhibited in the annual budget process. Projections do not, by themselves, constitute a multi-year fiscal plan, but they are both the first step and the major building block in preparing long-term budget plans. The aim of this paper is to argue that local governments can prepare and effectively use revenue and expen­diture forecasts in the annual budget process, and to report the successful experience in a group of large cities. We begin by briefly describing the techniques which can be used to derive three-to-five-year forecasts of spending and revenues. The experiences of several large cities which use such projection efforts are then reviewed to show how the results have been directly applied in preparation of the annual budget. Finally, the role of forecasts in budgetary policy making is summarized

Local Government Revenue and Expenditure Forecasting

Soaring inflation rates, the threat of recession, increasing reliance on federal and state grants, taxpayer revolt, public employee unrest, and fears of default all describe the current economic and political envi­ronment in which local governments operate. Despite the uncertainties of this environment, government decision-makers must anticipate the future in making fiscal decisions that have implications for periods longer than the traditional single budget year. Collective bargaining negotiations often involve multi-year contracts, capital spending deci­sions imply long-term debt service and operating expenditure commit­ments, and decisions to increase service levels can have longer-term implications. The recent and considerable interest in multi-year fore­casts of expenditures and revenues is not surprising and is overdue. In this paper we discuss, in general terms, how cities have approached the multi-year forecasting problem and how the outputs from such efforts have been used