2. Motivation
• With Decentralization, Sub-National
Governments Increasingly Responsible/Pivotal
for sectoral outcomes
• Higher levels of government provide bulk of
subnational finance
• Concerns about subnational outcomes
– Monitoring
– Influencing
3. Approach
• Present Basic Framework
• A Checklist
• International Experience
• Stimulate Multi-Sectoral Discussion Around
Potential Applications/Innovations
5. Performance Grants
• Link between Performance Measurement and
Management
• Use of Indicators to trigger Fiscal Rewards
– Tournaments (limited “winners”) versus Certifications
(“minimum bar”)
– Candidate Pool
• All versus pre-selection/targeting/segmentation?
– Common indicator or reform package
– Time-bound
• How to get incentives right?
– Objectives
– Size of Grant Reward
– Consider vulnerabilities
6. A Checklist
1 Objective Clear What are you buying?
Is it developmentally sensible?
2 Measurable Indicator What indicators tells you that your getting
it? Sensible? Verifiable?
3 Attributable/Actionable Can sub-national governments deliver?
4 Adequate Are you putting enough money on the
table?
5 Credible & Feasible Is the principle credible wrt to ex ante
promises? Is the design feasible given
capacity and political context?
6 Progressive Is it pushing incentives, or just paying what’s
already there. Is it time-bound?
7 Sustainable Can you sustain the results over time?
7. Mind the Context…
• How do RBT interact with the overall complex
of incentives set by the prevailing
fiscal, administrative and political
decentralization?
• What is the political economy driving RBT
design and implementation?
• Do RBT initiatives promise to contribute to
longer term institution building?
8. International Experience
Australia Russia Indonesia EU Structural Italy UK UK-England US
Funds
Example National Regional Fiscal Special Performance National Local Public Regional Economic
Competition Reform Fund Allocation Grants Reserve Performance Service Development Development
Policy (NCP) (RFRF) (DAKs) Reserve Agreements Associations Association
Payments (LPSAs) (RDAs) (EDA)
Objective Pro-growth Reward regions Sectoral Service Promote Promote Improve local Development at Range of regional
reforms w/ strong fiscal Delivery effectiveness, effectiveness, public services intermediate level economic
reforms Objectives management, and management, and of government development and
financial criteria financial criteria adjustment
in in issues; Reward
implementation implementation achievement of
of EU structure of EU structure goal by projects
funds funds, with (e.g.,
additional employment
emphasis on increases)
Objective 1
regions
Performance Analysis of Negotiated Evolving Set/negotiated Initially mainly Negotiated. Government Meeting or
Indicators legislative reform Package with national intermediate Initially 12 Office beating
progress governments, process outcome based Assessment established
focused on (i) indicators, “stretch” targets targets within
effectiveness, (ii) growing focus on in multiple EAD awards,
management final outcome service areas. including to state
criteria, and (iii) focus Now LA’s select and local
financial criteria 35 indicators governments,
from list of 198. building on
Poor absorption Balanced
performance Scorecard
subject to Framework.
decommitment Emphasis on
lagged-
intermediate
indicators to
demonstrate
results (incl.
congress)
9. International Experience II
Australia Russia Indonesia EU Structural Italy UK UK-England US
Funds
Financial National-State 15 regions Less than 3% of EUR 8.25 billion Supplementary Up to 2.5% of GBP 50 million Up to 10% of
Resources transfers, totaling received general allocation (4% of Structural 6% over EU 4% total local project awards,
almost AU 8 additional grants Funds) performance authority budgets
billion between (of 24 applying), fund. EUR 3
1997/8 and typically 13 billion (2007-13)s
2005/6 received USD 8
million, 2 USD 4
for partial success
Concerns National Packages Special funds High share of Complexity and Negotiations on One-time nature, Challenge of
Competition negotiated on seek to substitute projects received limited targets time- limited size of attribution of
Council individual/discret for perceived lack bonus, visibility/promine consuming/compl awards projects to
recommends to ionary basis with of equalization in complexity (with nce of priority ex, risk of regional
treasury, regions general significant objectives gaming development
Challenges of allocation, variations across outcomes,
backsliding EU) bridging short to
longer-term
complex outcome
emphasis
Period 1997/8 2002 2001 2000-2006 2000-2006 Initiated 2000 2004-5 2007
Status On-going First phase Under further Compulsory New performance Second Broader transition EDA shifting
completed development requirement based system for generation to outcome based from project
suspended at EU 2007-13 launched 2003, framework funding agency
wide level further
consolidation
2007
Source: Dumas & Kaiser (2009)
10. Food for Thought
• Fertile Area for Results Based Innovation…
– Use intergovernmental finance as sharp rather
than blunt instrument
