Assessing Intergovernmental Fiscal Relations Financing Higher Education Controlling Health Care Expenditures Managing Fiscal Risks in Public-Private Partnerships VOLUME I: MAIN REPORT VOLUME II: COUNTRY CASE STUDIES (CD) Contents FOREWORD ....................................................................................................................................... 7 Daniela Gressani CONTRIBUTORS ................................................................................................................................ 9 CONFERENCE AGENDA ...................................................................................................................... 10 OVERVIEW ....................................................................................................................................... 11 Thomas Laursen I. FISCAL CHALLENGES FOR THE EU8 COUNTRIES ......................................................................... 27 Paulina Bucon and Emilia Skrok 1. FISCAL DEVELOPMENTS 1995-2004 ........................................................................................ 27 2. MEDIUM-LONG TERM FISCAL PROSPECTS ............................................................................... 43 3. QUALITY OF FISCAL POLICY ..................................................................................................... 46 II. INTERGOVERNMENTAL FISCAL RELATIONS ............................................................................... 58 William Dillinger 1. INTRODUCTION ....................................................................................................................... 58 2. EVALUATION CRITERIA ............................................................................................................ 58 3. THE SYSTEM EX ANTE .............................................................................................................. 59 4. POLITICAL AND ORGANIZATIONAL REFORMS .......................................................................... 60 5. ASSIGNMENT OF FUNCTIONS .................................................................................................. 62 6. REVENUES ............................................................................................................................... 66 7. DEBT CONTROLS ...................................................................................................................... 73 8. DIRECTIONS FOR FURTHER REFORM ........................................................................................ 75 III. FINANCING HIGHER EDUCATION .............................................................................................. 80 Mary Canning, Martin Godfrey, and Dorota Holzer-Zelazewska 1. INTRODUCTION ....................................................................................................................... 80 2. HIGHER EDUCATION SYSTEMS IN A COMPARATIVE PERSPECTIVE ............................................ 81 3. DIRECTIONS FOR FURTHER REFORM ........................................................................................ 93 4. CONCLUSIONS ......................................................................................................................... 96 IV. CONTROLLING HEALTH EXPENDITURES .................................................................................... 99 Mukesh Chawla 1. INTRODUCTION ....................................................................................................................... 99 2. HEALTH EXPENDITURES ........................................................................................................... 103 3. HEALTH SECTOR DEFICITS AND DEBTS ..................................................................................... 107 4. KEY EXPENDITURE AREAS IN THE HEALTH SECTOR .................................................................. 109 5. SPENDING ON AGEING POPULATIONS AND MEDICAL TECHNOLOGY ...................................... 114 6. DIRECTIONS FOR FURTHER REFORM ........................................................................................ 117 7. CONCLUSIONS ......................................................................................................................... 129 V. MANAGING FISCAL RISKS IN PUBLIC–PRIVATE PARTNERSHIPS ................................................ 135 Hana Polackova Brixi, Nina Budina, and Timothy Irwin 1. INTRODUCTION ....................................................................................................................... 135 2. THE FISCAL EFFECTS OF PPPS ................................................................................................... 137 3. HOW FISCAL INSTITUTIONS AFFECT THE FISCAL COST OF PPPS ................................................ 143 4. DIRECTIONS FOR FURTHER REFORM ........................................................................................ 147 5. CONCLUSIONS ......................................................................................................................... 154 SUMMARY OF CONFERENCE DISCUSSIONS ....................................................................................... 157 Thomas Laursen Boxes Box 01. Objectives of Intergovernmental Finance Systems ............................................................... 17 Box I.1. EU8 Tax Reforms: .................................................................................................................. 33 Figure A. EU8 Effective Corporate Income Tax Rates (macro backward-looking approach). ......... 33 Table A. Top statutory tax rate on personal income .................................................................... 34 Table B. Top statutory tax rate on corporate income .................................................................... 34 Table C. VAT rates ....................................................................................................................... 34 Box I.2. Public Spending Measurement Issues .................................................................................. 36 Box I.3. Factors Affecting Expenditure Developments ...................................................................... 36 Figure A. Public Expenditure and Output Gap (%) ........................................................................ 37 Figure B.1. Political Economy at Work in the Baltic Countries ....................................................... 37 Figure B.2. Political Economy at Work in the Visegrad Countries ................................................. 37 Box I.4. Case Study: Ireland ............................................................................................................... 47 Box I.5. Case Study: Slovakia ............................................................................................................. 48 Figure A. GG expenditure and GDP growth (% of GDP and %, respectively) ................................ 49 Figure B. GG Revenue, Expenditure and Balance (% of GDP) ........................................................ 49 Figure C. Composition of GG Revenues (% of GDP) ...................................................................... 49 Figure D. Composition of GG Expenditures (% of GDP) ................................................................ 49 Box I.6. EBA Methodology ................................................................................................................. 53 Box II.1. A Snapshot of the Economics of Expenditure Assignment ................................................... 59 Box II.2. Hungary’s Municipal Bankruptcy Procedure ........................................................................ 75 Box II.3. Calculating the Formula Grant in England and Wales .......................................................... 76 Box IV.1. Expenditure on Drugs (OECD countries; 1998-2003) .......................................................... 110 Box IV.2. Health Reforms in Slovakia ................................................................................................. 118 Box IV.3. Managing Expenditure on Drugs – the Experience of Slovakia .......................................... 121 Box V.1. How Does the Use of PPPs Differ by Sector? ........................................................................ 137 Box V.2. PPPs in the EU8 ................................................................................................................... 139 Box V.3. Building Risk Management Capacity in Turkey .................................................................... 146 Tables Table I.1. Effect of Pension Reforms in the EU8 (% of GDP) .............................................................. 29 Table I.2. EU8 Tax Burden 1995-2004 (% of GDP) ............................................................................. 32 Table I.3. EU8 Economic Classification of Public Expenditure 2003 (% of GDP) ................................. 39 Table I.4. EU8 Functional Classification of Public Expenditure 2003 (% of GDP) ................................ 39 Table I.5. Snow Ball Effect on Debt (% GDP) ..................................................................................... 41 Table I.6. EU8 Expenditure and Revenue at Central and Local Government Level 2003 ..................... 42 Table I.7. EU8 Debt Stabilizing Primary Fiscal Balance 2004 (% of GDP) ............................................ 44 Table I.8. EU8 Medium-Long Term Spending Projections (% of GDP) ...............................................