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Unformatted text preview: ement of a more or less balanced budget for providing goods and services. Due to
financial regulation, for most local and cantonal governments it is quite difficult to run or to accumulate deficits in their
(current) budgets. If a large budget deficit occurs, taxation would have to be increased. In many cantons, the amortisation
must not only be recorded in the book, but also correspond to an effective instalment of the loans. At the communal level, if
a local authority would not follow this rule, the cantonal government might decide to raise the annual coefficient of taxation
in place of the commune.
In general, the Cantons apply the "golden rule": local current revenues net of current
expenditures are sufficient to serve the debt interest and bear the running costs of past and new investments. Whether this
rule includes the effective annual reimbursement of the debt on a pay-as-you-use basis (for capital expenditures financed
by borrowing) varies from one canton to another. This also necessitates a clear line between current and capital
expenditures and, of course, separation of the current from the capital budget. Again, the definition is not identical from
canton to canton: in particular with regard to the possibility (i) to transform capital expenditures into current outlays through
leasing contracts to shortcut limitation, if any, or (ii) through outsourcing of certain expenditures to external budgets not
accounted for by the public sector. ♦ The second rule concerns borrowing and debt limitation. Public debt is allowed in many cantons only for financing capital
expenditures, and if the local and/or cantonal government has the financial capacity to pay the interest and amortisation of
the debt out of its current budget. The rates of amortisation are fixed according to the kind of investment and its possible
length of use (pay-as-you-use finance). This of course requires a distinction between the current budget, which must be
balanced, and the capital budget, which can be financed by borrowing. These two quite (more or less) strict requirements express the principle of accountability or budgetary responsibility.
They must be viewed in the perspective of the cantons' and communes' financial autonomy and a large access to own
revenue sources as described above. On the one hand, cantonal and local governments have a fairly large (though
diminishing) amount of autonomy to decide and offer public services, and direct access to taxation. On the other hand, it
is expected that these governments will act in a responsible way and will finance without excess borrowing what they are
asked to produce, either by law ("agency") or in response to their electorate's own demands ("choice"). This is definitely
a classical approach to fiscal federalism (TOLLISON and WAGNER, 1986). The interests of the public debt of the
14 74 For example, in September 1994, the Council of State (executive government) of canton Berne has imposed on th...
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