Tony Levitas

In 2015, the Government of Albania (GoA) consolidated 373 municipalities and communes into just 61 larger municipalities. The creation of these larger municipalities was the first step in a broader plan to increase the role of democratically-elected local governments in the country’s system of public administration. Once local governments had been consolidated, the GoA passed a new framework law on Local
Self-Government (LSGL). This law transferred important service responsibilities to municipalities as own-functions.

The purpose of this paper is to explain the most important challenges that need to be addressed in order to move to the unconditional funding of these new services, and to recommend way that this might best be done. First, we trace the origins of the current situation and briefly characterize the most important problems that need to be addressed. We illustrate these problems by discussing the non-educational functions that have recently been decentralized and outline some recommendations about how their financing might be treated going forward. Finally, we focus most of our attention on preschool education because it is by far the costliest responsibility that the GoA has assigned to municipalities, and arguably the most important for Albania’s future.

This is the fourth edition of the Report prepared by the NALAS Fiscal Decentralization Task Force, as an ongoing effort to provide national and local policy-makers and analysts with reliable comparative data on municipal finances and intergovernmental fiscal relations in South-East Europe.

As before, we present a comparative picture of what has been happening in the region as a whole, but with increasing focus on monitoring the intergovernmental finances of individual countries. The report provides a reasonably clear picture of the structure, functions, and financing of local governments in South-East Europe today, as well as an overview of how intergovernmental financial relations have evolved over the economically turbulent period 2006-2013. The report has been used by member associations to argue for policy changes at home. It has also provided input for the design of the monitoring system of the regional strategy South East Europe 2020.

The report is divided into three sections. The first discusses the data used in the report and some basic methodological issues. The second begins with a review of the structure and functions of municipal governments in South-East Europe, as well as a few important macro-economic indicators. It then presents comparative indicators of fiscal decentralization for the region as whole. The third section focuses on the changes in intergovernmental fiscal relations that have occurred within individual NALAS’ member countries/entities.

This is the sixth edition of the Report, as an ongoing effort to provide policy–makers and analysts with reliable comparative data on municipal finances and intergovernmental fiscal relations in South–East Europe.

The report consists of four sections. The first reviews the data used in the report and discusses some basic methodological issues. The second begins with a presentation of the structure and functions of municipal governments in the region. The third section examines selected indicators of macro–economic performance and fiscal decentralization. The fourth section focuses on the evolution of intergovernmental finances in each NALAS’ member country or entity.

On the morning of the 21st century, it is clear that knowledge, not physical labor, has become the driving force behind economic growth and increasingly rapid social change. More and more people will work with their heads, and more and more physical production will be carried out by the congealed products of past mental labor. What we know, how we learn, and how we learn from learning, will play an ever-larger role in determining our individual and collective life chances.

The major social challenge of Poland's current "transformation" or "transition" is thus fundamentally the same as the challenge facing other industrial societies entering the "information age".  It is just more extreme. More extreme still, the farther one moves out from Poland's major urban areas. Indeed, while urban Poland seems to be clearly, if still uncertainly, moving towards the 21st century, rural Poland, with its small and archaic farms, its still frequently grinding poverty and unemployment, and its poorly educated population, increasingly shows signs of being left farther and farther behind.

This divide is fraught with profound social, economic and political dangers. And it must be prevented from widening if Poland is to meet the immediate challenge of European integration as well as the larger challenge posed by increasingly rapid, knowledge-driven socio-economic change. In short, Poland must begin to take make serious efforts to improve the capacity of its rural population to absorb, use, and transform knowledge. These efforts will require sustained public investment in Poland's educational system, a wide social commitment to lifelong learning, and continual reflection by the national government, local governments, and private and public organizations of all shapes and sizes.

Between March and June 2001, the Education Finance Team of the LARGIS Program analyzed the way the City of Lviv and its rayons allocate funds to schools.  The purpose of this work was to help the City define financial policies for the sector that would facilitate its educational goals. During the same period, the Team helped five schools undertake self-assessment procedures through stakeholder surveys and public meetings. The purpose of this work was to help these schools better define and address their problems, and to lay the foundation stones for eventually linking the city’s financial policies with the action plans of schools. This report summarizes work in both areas.

Financial Analysis

To conduct the financial analysis, the Team developed indicators, measures, and statistical procedures for the examination of school budgets and program hours. The analysis showed that:

a) National government funding is insufficient to cover the teaching hours and programmatic standards mandated by the Ministry of Education.

b) The provision of additional funds by the city makes it possible for most schools to teach the program hours called for in the "state plan", but not the additional facultative hours that are also supposed to be funded by the national government.

c) The City sets its education budget equal to the funding promised by the national government, despite the fact that it knows that it will have to contribute significant additional funds at the end of the year.

d) Deficit budgeting has created a bargaining regime between schools, rayons, the city, and the oblast for additional education funds.

e) Bargaining has led to disproportions in per pupil funding across schools and to haphazard and uncontrolled reductions in the services that schools purchase with those funds (program hours, split hours, class sizes).

f) The City has no policy with respect to standardizing either per pupil spending or the services that this spending buys across schools.

Based on these findings, the Team made the following recommendations:

a) The City end deficit budgeting and agree ex ante to contribute a realistic sum to the education subvention provided by the national government.

b) The City equalize per pupil funding for school tasks across rayons (starting with normal schools), and rayons should use the indicators and measures developed by the Team to begin to equalize per pupil funding across schools.

c) The City should immediately analyze and develop similar measures and indicators for the budgets of preschool and non-school tasks in order to pursue similar efforts at standardizing costs and services.

d) The City use its "experimental status" for education with the national government to win a reduction in the number of hours in the state plan. This would give school directors more programmatic flexibility within existing financial constraints.

These recommendations have been accepted by the City’s Education Department and the, using the measures, indicators and statistical procedures developed by the Team, the  Department has begun to work towards implementing them for FY 2002.

School Self-Assessment

Prior to the work of the Education Team in Lviv, the City had decided to evaluate the performance of its schools. To this end, it translated a school self-assessment instrument developed in Poland. This instrument was then administered in three schools by the staff of the City's Methodical Center. The staff however, did not fully understand the difference between a self-assessment instrument designed to help teachers, parents and students identify and act on the problems of their communities, and an instrument of external control or evaluation. Not surprisingly, school directors either objected to the use of the instrument or colluded with parents and teachers to produce favorable results. To remedy this situation, the Team provided training and support to the City and to schools in the proper use of the instrument. This involved:

a) Training independent survey administrators and discussing the purpose of the instrument with school directors, the City's education department, and the of the Methodical Center

b) Administering the instrument in five schools and preparing reports and presentations for each of them.

c) Training the staff of the Methodical center in interpreting survey results and facilitating school meeting.

d) Presenting these reports to parents, teachers and pupils at each school and helping them constitute working groups to develop action plans to address the most pressing problems identified through the surveys.

The level of constructive social engagement demonstrated by parents, teachers, and pupils surprised school directors and the City has decided to:

a) To systematically encourage self-assessment across the city's schools.

b) To make clear to all participants that the goal of the process is not external control, but the self-identification and resolution of school problems.

c) To give preference to schools that engage in the process to additional city funds for teacher retraining.

Die 2014 in der Ukraine eingeleitete umfassende Dezentralisierungsreform hat sich trotz widriger Umstände bei der Implementierung relativ erfolgreich entwickelt. Insbesondere die darin enthaltene Gebietsreform, vor allem die bislang freiwillige Zusammenlegung von Kleinkommunen zu sogenannten »Vereinigten Territorialgemeinden«, hat Fortschritte gemacht. Ungeachtet des Kriegszustandes, in dem sich die Ukraine seit 2014 befindet, wurden die schon vorher relativ hohen Staatsausgaben für die lokale Ebene beibehalten beziehungsweise sogar noch erhöht. Auch die Dezentralisierung des ukrainischen Bildungs- und Gesundheitswesens hat begonnen. Allerdings kann eine den Verwaltungsumbau absichernde Verfassungsänderung aufgrund ihrer Koppelung an eine Klausel, welche den Minsker Vereinbarungen geschuldet ist, derzeit nicht durchgesetzt werden.