Behind the Glitz of the 2010 Budget
-60- Table 3
Comparison of “Adjustment Funding” Transferred to Rich and Poor Areas
Rp billions
No Region
Fiscal Index
Poverty Index
DPIPD DPF PPD
1 Kab. Berau 2.999
0.886 17 335 000 000
4 931 137 019 2
Kab. Penajam Paser Utara
2.935 0.698
24 175 000 000 3
Kab. Timor Tengah Selatan TTS
0.243 1.857
12 000 000 000 4 931 137 019
4 Kab. Kupang 0.271
1.46 4 835 000 000
Remarks: Data from various sources, processed by Seknas FITRA
c. Critical Lack of Fiscal Discretion and Creativity
Regional governments’ flexibility in managing their budgets shrank further in 2010, because of central government policies of increasing civil service costs by 15 and recruiting more civil
servants. These developments imposed unavoidable demands on regional government budgets. They also led to declines in levels of fiscal discretion in all but seven of Indonesia’s 33 provinces
Graphics 2 as well as in fiscal space Graphic 3.
Graphic 2 Trends in Kabupaten and City Fiscal Discretion by Province
Remarks: 2010 data from D-G of Fiscal Balance MoF, processed by Seknas FITRA
Declining levels of reg ional governments’ fiscal discretion hampered the provision of public
services. At the same time, declines in fiscal space meant that less money could be used freely by regions to meet local needs. The result was that only ―residual‖ funding was available for
implementation of development programs on health, education, the betterment of people’s welfare and poverty reduction. All these programs were dependent on funds left over from big budget
items expenditure on civil servants and bureaucracies.
10 20
30 40
50 60
70
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S u
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2009 2010
Behind the Glitz of the 2010 Budget
-61-
Even though they were confronted with such threats to their budget authority and declining amounts of money to spend as they wished, regional governments continued to give priority to
indirect routine expenditure. And most of that disappeared in meeting the needs of local bureaucracies. In the process direct development-related expenditure on the provision of public
services was sacrificed.
Regional governments’ critical shortage of fiscal discretion should not have been used, as it was by most, to explain away their failure to accelerate the pace of programs to meet fundamental
rights of poor people and on reducing poverty. On the contrary, they should have regarded such a situation as an opportunity to redouble their efforts to increase, over time, levels of own source
local revenue PAD. They could do that by increasing local taxes, fees and charges and by better managing local assets, without imposing undue new burdens on their communities. But, as of
2010, PAD accounted for only 8 on average across regions of local government revenue. That number shows that local governments are not reacting seriously or creatively to the fiscal
constraints they face.
d. Budget Mismanagement Costing the State Dearly
