Municipal budgets and urbanization

A series of workshops tackled the themes of decentralization and urbanization in relation to human rights and the budget.  Vinod Vyasulu ran a workshop on municipal budgets and decentralization based on his experience and research in India, while Minar Pimple of YUVA, Mumbai facilitated sharing of experiences and lessons of budget analysis and issues in urban, decentralized environments.  One example of this type of work was given by Sita Sekhar from the Public Affairs Centre in Bangalore, who spoke about their experience of monitoring and evaluating public services in five cities in India based on a scorecard technique.

Decentralization, poverty and development:

India, a huge and politically complex country, has been undergoing a process of fiscal and administrative decentralization with the aim of bringing government closer to the people and deepening democracy.  This provides an opportunity for more responsive and participatory budget making.  However, as Vinod Vyasulu found through research into the decentralization process, experience at local levels has not matched up to the expectations around the decentralization process. 

The decentralization process has been held up as the answer to many political and administrative problems, including corruption.  However, in reality decentralization of fiscal powers and processes has not kept pace with political and legal changes, and structures have not changed sufficiently to reflect the new reality at local levels.  For example, money is given to elected bodies at local level on request and satisfaction of conditions, leaving the power still in the hands of central government.  A further workshop explored the importance of municipal level budgets, particularly in urban areas.

Urbanization and local government budgets:

Local governments are not uniform, some have more tax-raising or legislative powers than others,  but their fundamental responsibility is to provide basic services for their residents.  The prevailing global philosophy, with influence from the international financial institutions is towards administrative decentralization and a reduced role of the state.  This has meant an increased basket of responsibilities for many urban local governments, including anti-poverty programs, while privatization of services is encouraged.  In reality this means that many of the basic services provided by the local government are becoming dependent on the ability to pay, clearly contradicting the anti-poverty function of the local government.  This trend needs to be analyzed from a rights perspective.  

Minar Pimple, from YUVA, suggested a useful framework for analyzing the performance of local government, covering the three fundamental responsibilities of poverty, governance and the environment.  

… beyond expenditure analysis: In an urban context, budget analysis needs to go beyond revenue and expenditure to look at the structure of the local economy.  Many cities were developed on the basis of a particular activity or function, which determines the demographic profile.  As this changes, due to privatization or global trends, and many cities move from manufacturing towards the service sectors, the needs of the city change, the demographic profile changes, and different types of services are required.  

Local governments do not usually keep up with the changes of the structure of their cities’ economies, and this is visible as much in patterns of revenue as expenditure.  In many cities tax concessions are given to the new industries, such as information technology, while user charges are required of the newly unemployed manufacturing workforce.  If we don’t analyze the social and economic structures of the city, the winners and losers in the budget, we cannot do a successful political economic analysis of the budget.  

… the urban budget and the marginalized:  In an urban context where the social fabric is broken down, vulnerable groups are more dependent on the services of local authorities.  Analysis of municipal budgets will show whether special provision is given for more vulnerable, socially invisible groups, including those with HIV/AIDS, sex workers, street children, disabled people and so on.  The needs and rights of migrant workers and nomadic tribes, who are not necessarily registered within the city but swell the population seasonally, are not usually considered in city planning and budgeting.

Religious differences and conflict is also more prevalent in these larger, more mixed communities.  In Mumbai slums religious divisions can be a flash point for riots when, for example, poor Muslims have lower access to services than their poor Hindu neighbors.  What is touted as religious conflict is in reality an issue of access to basic services.  This discrimination can also be seen along lines of caste and gender and deserves careful analysis. 

Realistic planning and budgeting in cities needs to be based on a rational analysis of patterns of urbanization.  Broader budget analysis enables us to comment on national resource allocation and macroeconomic policy, the push factors for urbanization as well as the urban pull.  The prevalent development model in India encourages the extraction of natural resources from rural areas followed by the extraction of surplus labor, which further degrades the rural areas and floods the urban informal sector, undermining workers’ power to negotiate for their rights.  As Minar commented, the ideology of urbanization is that ‘we want your labor but we don’t want you.’ And this becomes a major assumption behind the budget, which needs to be challenged.

We need to work with the marginalized sectors of the cities to express their needs and concerns, and work at the policy level to encourage alternative economic structures more representative of people’s needs.  Budget analysis, both of revenue and expenditure, can provide a tool for this, enabling us to gather reliable information, but it is not sufficient.  We need to complement this with action and collaboration with grass roots groups.  Sergio Baierle, from CIDADE in Brazil, noted that in Porto Alegre, the participatory budget process has provided an avenue for such debate and collaboration.  

Evaluating urban services: 
In response to the observations of reliance of the urban poor on deteriorating public services, and the lack of collective action to demand improvements, the Public Affairs Centre in Bangalore undertook to evaluate the state of government services to the poor through the use of client surveys or scorecards. This methodology was developed to give comparative feed back on the state of public services, allowing diversity of financial health and status of municipalities to be taken into account.  

The client surveys were done as a way of getting citizen’s feedback on services, to focus on the use and quality of services and develop a collective voice about problems encountered.  The survey was done on a sample of poor people and a sample of non-poor, and asked about levels of satisfaction with various services provided by local government.  As different communities place importance on different services, focus group discussions were held to ensure that each community was able to evaluate the most appropriate services for them.  The surveys also asked about perceptions of levels and gravity of corruption.

… findings:  While no respondent was completely satisfied with any service, levels of dissatisfaction varied between services and communities.  The service with which most people had a problem was the police force, with 75% of people dissatisfied with the service provided.  This was in part due to levels of corruption, which were considered highest in the police force, followed by hospitals.  

While sectors such as schools, hospitals and water boards were not providing satisfactory services to up to 40% of their clients, only 1-2% of respondents claimed to have had problems with such services resolved. 

… further budget analysis:  The findings of the surveys were also used to choose sectors for budget analysis.  The first of these studies was done on the health and education sectors in Bangalore.  This study showed that revenue and expenditure in the local government services is not growing in line with the economy of the city and that most of the health and education sector budgets were used up with salaries.  

Following this a five-city study was realized, analyzing budgets from 1989-96 to pull out the key issues including:

• growth of revenue and expenditure

• growth in real terms accounting for inflation

•  sources of revenue

• size and composition of resource mobilization

• allocation patterns

• concentration of expenditure

• good practice in local government budgeting

Broad differences were seen in the growth and composition of revenue and expenditure between the municipalities. While Bangalore had only grown 1% in income, Mumbai had increased by 7%, while Chennai’s 36% spent on education dwarfed the 8% allocated in Pune. Operating expenses varied from 6-14% of the budget and per capita expenditure was more than triple in Mumbai that of Chennai.  In the composition of allocations within sectors, salaries only made up 5% of the education sector in Ahmedabad and an incredible 97% in Bangalore. 

… impact of the survey and studies:  The findings of the surveys were presented to the public through meetings with resident groups and elected representatives, and distributed to research organizations, the media and to the government agencies and their clients.  A ranking of services was compiled, which had a great impact on service providers, who didn’t want to be seen at the bottom of the list.  The data was used to strengthen policy advocacy work, in meetings with commissions and the taxation committee, and in public mobilization and awareness raising.

As a result of the surveys, and the dissemination of the findings, public awareness and unity was increased and resident groups were able to lobby for improvements in services.  To sustain this activity, public fora for advocacy and discussion were established, including organizations for women.  

As a result of this, and the studies, several changes were made to the taxation and budgeting system in the local government of Bangalore.  The accounting format was changed to include a section for capital accounts and to clarify spending.  Tax collection on property was changed to self-assessment in order to improve collection and reduce corruption, and performance budgeting was introduced on a trial status.  However, as Sita noted, it is too early to tell the impact this will have on the budget.