The use of indicators and targets in a multilevel government setting with increasing budget responsi

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The use of indicators and targets in a multilevel
government setting with increasing budget
responsibilitiesLessons from the experience of
targeting essential services in the South of
Italy Paola Casavola, Aline Pennisi, Francesca
Utili The opinions expressed are of
responsibility of the authors only.
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MOTIVATION
Foreword

• Italy is facing implementation of recently
  approved fiscal federalist reform officially
  aiming at
• More efficiency and clearer responsibility for
  policy action
• Better quality and availability of services all
  over the country, at least for essential
  services (AN OPPORTUNITY FOR PROGRESS?)

EXPLICIT PERFORMANCE STANDARDS final objectives
of services to citizens obiettivi di servizio

• Policy experience of targeting essential services
  within 2007-2013 regional policy (obiettivi di
  servizio)
• quantified targets
• explicit financial incentives
• other actions

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Summary
Foreword
Discuss impact of dual context on feasibility
and possible consequences of reform Support
the adoption of quantified indicators for
objectives Suggest specific actions to sustain
achievement of objectives and enhance citizens
control Promote stronger role of outcome over
input costs
Choice of what is considered essential and
choice of equal standards... risk that weaker
regions end up with poorer services (and higher
taxes)

• Highlight complexity in multilevel gov.ment
• choosing indicators
• setting standards
• improving information

Adoption of targets and indicators only is
not enough
Reform and implicit incentives focused on cost
efficiency to close gaps in the outcome of
service delivery and provision specific resources
required
NOT ONLY TECHNICAL CHOICES ! !
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In Italy, the richest and the poorest regions of
the EU coexist
Measuring progress in a highly differentiated
country
Per capita GDP at purchasing power EU regions,
2005.
Differences between Italian regions are often
wider than differences between Italy as a whole
and other EU countries
Female employment rates Regional spread, 2007.
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The divide is even greater when measured
according to living conditions and availability
of basic public services
Measuring progress in a highly differentiated
country
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Can we really measure progress by just looking at
the national average?
Measuring progress in a highly differentiated
country
Early school leavers at province level, Italy
2007.
Intra-regional disparities can be much greater
than the inter-regional ones
Municipal distribution of the share of recycled
urban waste in the provinces of Campania, 2007.
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Is fiscal federalism an opportunity to tackle the
divide between North and South of Italy?
The fiscal federalist reform in Italy

• more fiscal autonomy and responsibility will
  shape incentives towards better government and
  better services
• For many it implies gradual reduction of the
  flow of transfers (perceived too high for
  inefficiencies) from North to South
• For others it implies a good chance to fix
  standards for the delivery of essential public
  services
• most decisions must still be taken .!!

to what extent and under which conditions this
favourable outcome can be realized? How far have
we got in defining standards to be respected in
service provision?
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The building blocks of the reform
The fiscal federalist reform in Italy

• Centrally-defined performance standards on
  essential services are to be guaranteed across
  the country
• spending responsibilities are devolved to Regions
  (and to Local authorities for fundamental
  functions)
• a hard budget constraint on central funds for
  essential services and fundamental functions is
  determined according to standard costs
  (additional revenues from local taxation)
• Other public services and functions are
  considered of local interest and can be
  differentiated according to local preferences and
  decisions an equalisation fund compensates for
  different per capita fiscal capacity (additional
  revenues from local taxation)
• Convergence Pact convergence of costs to the
  standard convergence on objectives for service
  delivery and performance levels (democratic
  control on achievements)
• Special interventions to reduce structural
  socio economic disparities, earmarked from State
  budget (and EU contributions)

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Issues and challenges
The fiscal federalist reform in Italy

• Setting standards issue
• essential services should represent levels to be
  guaranteed to all individuals across the
  territory, but focus is on standard costs instead
  of performance.
• Measurement issues
• information is sparse, not homogeneous,
  unsystematic. Are we measuring inputs, outputs or
  outcomes?
• Coordination and responsibility challenges
• the provision of services requires cooperation
  between different levels of government
• Capacity challenge
• filling the gaps may not only be a question of
  resources and incentives, but also of adequate
  planning and implementation capacities
• Pressure challenge
• Will voice and exit mechanisms work by themselves
  or will we fall in the typical underdevelopment
  trap?
• Loyalty and consistency challenge
• Decentralising works when the Centre is strong,
  stable, committed and impartial. Is it the case?

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Targeting essential services in the South of
Italy the mechanism obiettivi di servizio
Foreword
Individual opportunities/ Conditions for
development policy 1.Child and elderly
care 2.Education 3.Waste management 4.Water
management
Policy objectives
Measurable indicators

• Other support actions
• negotiating targets and rules
• focus and planning
• Citizen engagement
• technical group

Planning targets Setting the standard
technically achievable financially sustainable
Financial reward design of incentive scheme 3
billion


http//www.dps.mef.gov.it/obiettivi_servizio/
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What does the fiscal federalist law consider
essential ?
The fiscal federalist reform in Italy
Defining the policy objectives
In which sectors inequalities are not considered
acceptable?
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Is there a risk that the performance standard for
essential services will correspond to a minimum
level of service ?
The fiscal federalist reform in Italy
Setting standards issue
Setting a standard equal for all even in presence
of very different starting points
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Setting standards issue

• Choices of relevant aspects and of appropriate
  thresholds may vary considerably in time
  following technological and cultural progress
  (measure of America)
• How is a benchmark to be used if it is moving
  forward ?
• Setting different standards for different places
  ?
• Appropriate territorial level for the common
  standard may change (NCLB)
• A rights-based standard or an orientation device
  ? the EC Lisbon strategy targets and Millennium
  Development Goals (MDGs) orientation devices
• When standards become planning targets
• baselines condition what is achievable in a
  certain time span
• decision on the allocation of public resources
  have to be trustworthy, sensible and based on
  feasibility checks

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Measurable indicators and planning targets in the
obiettivi di servizio mechanismchild -elderly
care and education
Setting standards issue
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Measurable indicators and planning targets in the
obiettivi di servizio mechanism
Setting standards issue
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Measurement issues
Ratio of children in child care on population(0-3
years), baseline 2004 and target
Are those targets achievable considering the
starting point? Information from variability in
performance
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A planning target/1
Setting standards issue
Increase in the number of children in child care
required to achieve the target
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A planning target/2
Setting standards issue
Estimated number early school-leavers in 2007and
in the case the 10 target is met in 2013
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Selecting the indicators and targets
Measurement issues

• Focus on outcome/output to guide policy action
  towards the achievement of the final objectives
• Data availability is not always satisfactory
• Investment in statistical infrastructure
• Territorial detail and timely information
• Comparability in time and space
• Information on costs are not easily available
• Mix of indicators to avoid perverse incentives

Focus on outcome/output instead of costs to
guarantee equal provision of services. Currently
the incentive is more on costs reduction than on
performance, risk of increasing
inequality Investment in statistical
infrastructure is needed to support informational
requirements of the reform (also information on
costs are not available)
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Negotiating targets and rewarding rules
Coordination and responsibility challenges

• Targets for obiettivi di servizio were not
  imposed top down
• two years of discussion with regional authorities
• reinforcing ownership and clarifying
  responsibilities
• commitment of regional responsibilities for the
  whole implementation chain (involving local
  actors as well)
• during negotiations the original mechanism
  actually changed (adding a flexibility clause)
  
• Negotiation for having scheme challenging, but
  perceived as fair (and avoid retracting and
  cheating)

Early-school leavers different starting points
accepted also because of flexibility clause and
new national provisions on compulsory school age
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Focusing and planning / implementation capacity
Capacity challenges

• how to improve local government capacity to plan
  and manage services and invest in their
  improvements?
• Explicit request of Action plan including
  detailed programming
• Actions intended to achieve the target
• Organisation
• Localisation
• Resources (human and financial)
• Financial planning (investment and management
  resources)
• Time planning
• Monitoring and oversight procedures
• Public information
• The plan is drafted by administration, formally
  approved by local gov.ment, published on regional
  website. Central technical assistance is provided
  for.

Convergence pact to be effective should describe
in detail how performance standard can be
achieved and sustainable in time and create
ownership
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Citizen control and participation
Pressure challenges

• how to promote local gov.ment and administrators
  accountability? (transparency and engagement)
• Experience shows that in backward areas demand
  for better services is adjusted to low
  expectations
• Citizens dont necessary sanction for bad
  services nor do they reward for good management
• Public information on baseline and progress
• Action plans are public
• Investment in diffusion of detailed and timely
  statistical information
• Innovative information and monitoring devices
• Spur interest from citizens organizations and
  representative of interests

Democratic control can only be achieved with
investment in public information but it takes
time, should be explicitly addressed and is not
an automatic pressure to improve
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Managing complex incentive mechanisms in time
Loyalty and consistency issues

• Is the central government able to manage complex
  incentive mechanisms ?
• Stability of the conditions stated in the pact
  is key for credibility of the mechanism and
  functioning of the incentives on actors
  behaviour.
• Independent group in charge of oversight and
  support
• Existing formal commitments (NSF 2007-2013 and
  CIPE)
• Need for long term trust relationships
• However State level has already modified part of
  the commitment due to political and economic
  changes

Stability in the institutional contract among
levels of government is crucial. Political cycle
may differ from the timing of Convergence Pacts
and temptations may arise to renegotiate
conditions (or exit). Independent bodies will
then be needed to grant impartiality in progress
measurement and to ensure compliance with the
rules.
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Addressing disparities and long term
sustainability
Financial issues

• Are incentive mechanisms enough for backward
  areas?
• The obiettivi di servizio mechanism
• is partial and limited in time
• affects mainly management capacity
• Part of regional territorial policy
• Need for sufficient amount of resources, also
  from other sources
• Not a solution to disparities without significant
  transfer of resources to address inequalities

Even in presence of efficiency gains, given the
strong existing disparities, improvements in the
provision of services in terms of outcome are
unlikely to be obtained without an increase in
the amount of resources. Furthermore, in weaker
areas, essential services may concern a wider
range of sectors than those expected to be
covered by State transfers Dimension and scope of
the special interventions. .
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Lessons for fiscal federalism in Italy
Some lessons and recommendations
How to confront RISKS 1. performance standards
for essential services too low 2. other
important aspects not guaranteed at adequate
level Inequality may increase!
Allow time and negotiations to find consensus on
indicators and targets and create ownership
Invest in measurement and focus on output and
outcome indicators of performance standard
Detail in Convergence Pact, how performance
standard can be achieved and sustainable in time
Provide transfer of enough resources to ensure
acceptable level of provision of services
Introduce specific explicit financial incentive
schemes to improve service delivery