commission on fiscal imbalance 合集

This situation raises two basic questions the first

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Unformatted text preview: il the early 1980s, for each additional franc of operating revenues, three-quarters were earmarked for current expenditures (excluding interest) and the remainder to selffinancing and debt service. Between 1983 and 1989, balance was gradually restored between the two components, which reached 50/50 in 1990 (Charts 3 and 4). Starting in 1990, the division once again became unbalanced under the combined effect of the reduction in cash flow and the high level of real interest rates. Today the ratio stands at 90/10 in favour of operating expenditures. Since real interest per franc borrowed is now constantly higher than real savings per franc invested, the leverage effect becomes negative, thus reducing loan requests (Chart 5). It is readily apparent why the indebtedness of local authorities is now well under control. Several convergent indicators confirm this observation: the debt/current funds ratio has been remarkably stable since the early 1970s, i.e. between 234 Commission on Fiscal Imbalance 16% and 17%. Growth in annual loan repayments has roughly kept pace with increases in reportables (the first figure is equivalent to between 50% and 60% of the second one). The portion of savings mobilized for debt service is now lower than it was in the early 1970s and the local debt/GDP ratio has been stable for some time, i.e. between 8% and 9% (Chart 6). The ability of local authorities to get out of debt (debt/gross savings) is markedly lower than the average contractual duration of portfolio loans, i.e. five years and eight to 10 years, respectively. The finance requirements of the APULs, which was 1% of GDP in the early 1970s and virtually disappeared in 1989 (0.16%), subsequently reappeared but remained highly limited (10 billion francs in 1997) in relation, for example, to that of public administrations overall (290 billion francs in 1997) (Chart 7). To conclude, the “financial fundamentals” of the local authorities are, overall, satisfactory. The overall budget share is becoming stable. Budgetary balance and solvency are satisfactory and indebtedness has been contained, although financial risks certainly do persist. The fiscal slippage of a number of cities and the financial problems of certain departments are well known, although they are highly localized and attributable more to situation factors than to widespread problems. 5. WHAT FUTURE IS THERE FOR THE FRENCH LOCAL FINANCE “MODEL”? LOCAL FINANCIAL AUTONOMY IS CALLED INTO QUESTION The flipside of recent changes in local finances is less pleasant. Over the past 30 years, the strong dynamic of the budgets of territorial authorities has been achieved at the cost of heavier local taxation, equivalent to over three points of GDP during that time, and a financial effort by the State that has hardly slackened. Various transfers to local authorities increased from 15% of the State budget in 1980 to over 19% in 1999, although most of the transfers are tied to the decentralization of jurisdictions. This situation raises two basic questions. The first concerns the future of local taxation and the second, the ultimate sustainability of the process of dividing aid paid by the State to local authorities. The archaic nature of the local tax base, the dispari...
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This note was uploaded on 03/06/2013 for the course ECON 220 taught by Professor Paulo during the Spring '13 term at University of Liverpool.

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