The Assignment of Expenditure Responsibilities to the Local Government Level

Abstract

The assignment of functions and resulting expenditure responsibilities is often considered the first “pillar” or building block of fiscal decentralization reform. The question of expenditure assignment encompasses the policy decision what functions and expenditure responsibilities are to be assigned to each level of government. The design of local government finance mechanisms (that is, the determination of revenue assignments, intergovernmental transfers, and subnational borrowing) in the absence of a clear expenditure assignment would be like putting the cart before the horse.