Miftahudin 24018011

INTERGOVERNMENTAL RELATIONS Rian 24019003

Sasha 24019004
 STRUCTURAL AND FISCAL
FEATURES OF THE
INTERGOVERNMENTAL SYSTEM
AREAL AND FUNCTIONAL RELATIONS
Multiple Government

In the United States, governments operate within a federal system in which power is
constitutionally shared between a central or national government and 50 states, which have
sovereign status, meaning they are (at least technically) independent of the national government
within the division of powers in the Constitution.
In addition to the federal government, the 50 state governments, and more than 560 Native
American tribal entities, the United States includes more than 89,000 local governments and the
District of Columbia. The local "level" is not a single level in that most states have county
governments (more than 3,000 nationwide), and within their boundaries exist such general-
purpose governments as municipalities and sometimes townships (more than 19,000 municipalities
and 16,500 townships). Superimposed over these are numerous independent school districts and
special-purpose districts such as irrigation and sewer districts. Special districts, of which there are
more than 37,000, are the most numerous. There are more than 13,000 school districts.
THE FEDERALIST FRAMERS AND ADVOCATES FOR THE U.S. CONSTITUTION
DEFENDED A FEDERAL STRUCTURE USING THREE ARGUMENTS:

It would promote a sense of community and affinity between citizens and

the government.
It would promote efficiency by assigning functions that had mainly local
importance to local governments and functions of national importance to
the federal government.
It would promote liberty by avoiding concentration of power in the hands
of a few.
COORDINATION PROBLEM
The existence of thousands of governments results in coordination problems both geographically
and functionally. Municipalities in a metropolitan area need some coordinative mechanisms. Road
networks, for example, need to be planned in accordance with commuting patterns within a
metropolitan area, and such plans should not be restricted to the geographical boundaries of
each municipality. Before the federal government became involved in highway programs, many
highways did not connect sensibly across state lines.
At the local level, numerous types of cooperative arrangements exist. Some counties provide
services such as water and sewage treatment on a contract basis for municipalities within their
jurisdictions.
In some instances, state governments may require city-county cooperation for services, such as
police and fire departments having standby aid agreements during large civil disturbances or
fires.
Functional coordination among different levels is also necessary because the three main levels of
government share responsibilities for some of the same functions. Criminal justice, for instance, is a
shared function. Some type of police, court, and prison system exists at each government level.
Environmental protection similarly is a function in which federal, state, and local jurisdictions all
have a stake,
THE SEPTEMBER 11 DISASTERS

The terrorist attacks of September 11, 2001, dramatically underscore the need for
intergovernmental cooperation and coordination. One fact that immediately became painfully
obvious was the lack of sharing of information and coordination within federal agencies and
among them. Equally important were the weak linkages existing among federal intelligence
gathering and law enforcement agencies on the one hand and similar units internationally and
at the state and local levels within the United States.
HURRICANES AND OTHER DISASTERS
The devastation inflicted in 2005 by the Gulf Coast Hurricanes Katrina, Rita, and Wilma. The
Gulf hurricanes were the worst natural disasters in the history of the United States. All half-
million of New Orleans' residents had to flee the city, and tens of thousands more were
displaced along the coast. One stark item of evidence of the failure of the intergovernmental
system was that thousands of people arrived at the New Orleans Superdome having nowhere
else to go, and federal, state, and local officials were left clueless as to how to get these
people out of the city to safety as water broke through the levees and inundated the city.
The Deepwater Horizon oil spill of 2010 in the Gulf of Mexico was the worst oil spill in U.S.
history, overshadowing the infamous Exxon Valdez oil spill of 1989 off the Alaskan coast.
The largest hurricane of the 2011 season, Irene, caused massive flooding along the east coast
of the United States, and was particularly devastating to inland areas in New England.
FISCAL CONSIDERATIONS
Vertical Fiscal Inbalance

The intergovernmental fiscal problem is deciding on assignment of

expenditure responsibilities, and then designing an intergovernmental
fiscal system of revenue authority, shared revenue sources, and
transfers to match the expenditure assignments. Although one level of
government may have a comparative advantage in providing a
particular service efficiently, it may not have the same advantage in
obtaining revenue. Conversely, another level of government may
possess sufficient revenue capability but is not the most efficient unit to
provide certain services.
HORIZONTAL FISCAL DIFFERENCES

From state to state, there clearly are differences in income and wealth,
which are the basic sources of government revenue. Differences in income
and wealth lead to differences in revenue-generating abilities, tax burdens,
and levels of public services, although no simple correlation exists between
income on the one hand and taxing and spending on the other hand.
FISCAL RESPONSIBILITIES
Another issue is the extent to which one government with greater revenue-
generating capacity should be responsible for aiding other lower-level governments.
The issue is whether and to what extent governments should redistribute resources
among different segments of the population and geographic areas.
Since the 1980s, there seemingly has been less support for redistributive activities,
especially at the federal level, than in the decades beginning with the Johnson
administration's War on Poverty. The two decades from 1960 through 1980
witnessed the largest effort ever by the federal government to redress disparities
among the states and among regions within states.
ECONOMIC COMPETITION
Governments compete with each other in trying to attract businesses and industries.
Firms locate for a variety of reasons, such as access to markets, a good labor supply,
and availability of other resources.
Although intense competition among some states for industrial relocation does cause
problems, there are important benefits from this competition. First, it serves as a
market-like regulator, preventing state and local governments from over-taxation.
Second, it increases the efficiency of the allocation of public sector resources. States
and localities that offer uneconomical incentives to businesses ultimately cannot sustain
those incentives. There is a tendency toward equilibrium in the balance of incentives and
the taxesand other charges necessary to make services available to support industrial
development.
OVERLAPPING TAXES

The taxes of jurisdictions overlap with each other, and ultimately the same
people and firms must pay the various governments. Tax overlapping also
occurs when all levels of government tax the same specific source, such as
when federal, state, and local governments all tax income. Overlapping or
multiple taxation is unavoidable and not necessarily undesirable.
PATERN OF INTERACTION
AMONG LEVEL OF GOVERMENT

Key Word : Interaction, Level of government, multiple government,Inter

governmental revenue transfer, Federal, Shape budgetary decision.
DIRECT EXPENDITURE AND TAXES
Discussions of intergovernmental finance too often concentrate exclusively on financial
assistance and neglect the importance of direct expenditures.
How much the federal government spends in a state and, in turn, how much a state
spends in specific local areas have large impacts.
Direct federal expenditures have varying geographical impacts, and the same is true
for state expenditures.
NONGRANT SPANDING
1) Locating government-owned or government-built facilities in a jurisdiction can
substantially affect the jurisdiction's economy. Political considerations are crucial
at the state level in regard to the location of highways, state hospitals, prisons,
and parks. Local and state governments work actively to obtain federal projects
in their jurisdictions as one means of guaranteeing future prosperity.
2) Non Physical Program : programs include Social Security, Medicare, support to
farmers, and small business loans. Social Security, Medicare, and Medicaid alone
accounted for nearly 40% of all federal expenditures in 2011.States also
distribute large welfare and other human services payments among local
jurisdictions.
3) Federal spending other than grants to individuals, organizations, and
governments includes significant salaries and wages paid to federal employees
and members of the military, most of whom live in one state or another
Tax Collection
In addition to spending, tax collections have
varying effects on locales, and the resulting
balance between federal tax collections and
expenditures has significant effects on
jurisdictions.
 State Aid :
INTERGOVERMENTAL ASSISTENCE

intergovernmental revenues provided to the different

types of
local government entities, as a proportion of those
entities' total general revenues. For
example, in the middle column, county revenues for
2007 were 64% from their own
sources. The remaining 36% came from
intergovernmental transfers-3% from federal
government, 31 % from states, and 2% from other
local entities. Similarly, one can see
that school districts are the only local entities that
receive more than half of their revenue
from other governments-state governments provided
a majority of the funds that school
districts spent (53%)
Intergovernmental Sources of General Revenue for Types of Local Governments, 2007.
Data may not equal 100% due to rounding.
Source: Compiled from Bureau of the Census, U.S. Department of Commerce (2009). Table 2. Local government finances
l7y type of government and state: 2006-07. Retrieved November 26, 2011, from http://www.census.gov/govs/estimate/
historical_data_2007.html#state_local.
State Aid to Education

Aid to elementary and secondary education, as noted,

constitutes the largest portion of
state aid to local governments. Local school districts have not
always depended as heavily
on state and federal aid.

Federal, State, and Local Support for Elementary and Secondary Education, 1920-2009
(in Percent).
Sources: Compiled from Monk, D. H. ( 1991). Educational finance: an economic approach (p. 101). New York, NY: McGrawHill;
Bureau of the Census, U.S. Department of Commerce (1991). Government.finances: 1989-90 (p. 7). Washington,
DC: U.S. Government Printing Office; Bureau of the Census, U.S. Department of Commerce (2002). Public education
finances, 2000 (p. 1). Washington, DC: U.S. Government Printing Office; Bureau of the Census, U.S. Department of
Commerce (2011). Public e/,ementary-secondary school system finance data. Retrieved November 14, 2011, from http:/ /www.
census.gov I govs/www I school.html.
Other State Aid
Other state aid programs are comparatively small. Education is followed in size by expenditures for welfare and highways. Aid for these programs is usually handed out based on
some type of formula (welfare programs are often per-client reimbursement programs).

Federal Aid
Federal grants have been aimed at inducing state and local governments to increase the level of services in specified functions and are not intended to replace state or local spending with
federal revenues. The inducement effect is based on the theory that the more separation exists between taxing and spending, the more taxpayers will not perceive the full costs of local
services. This is known as the fiscal illusion hypothesis.
Federal Aid and functional Area
During the 1960s, about 80% of all federal aid went for transportation and income security. there have been substantial shifts since that time. The amount
of federal aid given to state and local governments varies among federal agencies.
STATE CONTROL LOCAL GOVERNMENT.
State governments have full constitutional authority over local governments, significant
limitations on local authority may stem from state actions.
A state also may assume direct control of a local government if it cannot exercise the
capacity to govern itself.
State governments watch local situations to see whether intervention is needed,although
they do not consistently use specific indices of financial condition in making their decisions.
TYPES OF FISCAL ASSISTANCE
Grant Characteristics

Categorical Aid
Revenue Sharing
Block Grants
GRANT CHARACTERISTICS
Aspects of grants-in-aid:
1. the purpose of the award: narrow to general
2. the recipient: entitlements
3. the amount
- open ended
- predetermine
4. the method of distribution:
- Project grants
- Formula grants
 CATEGORICAL AID (1)
 a grant of federal money by Congress to a state or local government to fund a specific program or a
specific category
 Funds were targeted for expenditure in specified areas
 Narrow focus and target aid to deal with perceived problems
 Reason for creating categorical programs:
1. state legislatures were unresponsive to urban needs.x
Many categorical grant programs were intended to channel funds directly to cities, bypassing the
state legislatures
2. to target and restrict assistance in various ways in an effort to control the recipients' behavior 
federal control over the spending of money
Examples: sholarship, research
CATEGORICAL AID (2)
Critics:
skew local priorities  apply for one type project available, though some other
project would provide greater benefits to the jurisdiction
much time and energy are consumed in drafting grant proposals
some jurisdictions do not obtain their "fair share" of federal dollars simply because
they lack adequate staff for proposal writing
proposals may be held pending for months
the application process be simplified  reducing the amount of paperwork,
standardizing some forms and procedures
https://beta.sam.gov/search?index=cfda
REVENUE SHARING
General Revenue Sharing (GRS)
 none of the application process and restricted purpose features of categorical grant
 the federal government shared some of its revenue with states, counties, cities, and townships
 States with a surplus in their budget were dropped from the list of beneficiaries
 expire in 1986, federal government faced annual budget deficits in excess of $200 billion 
no revenue to share
 states provide funds to local governments using formulas based on population and income 
fiscal pressure in the early 1990s  reduce  drastically reduce funding in 2001  fund-
sharing programs were not restored
Other countries
the most common means of central government financial assistance to lower-level governments 
decentralization, devolution
BLOCK GRANTS
special revenue sharing
 A form of compromise between GRS and categorical grants.
 Under this system, a higher-level government shares part of its revenue with lower-level
governments, but the use of funds is restricted to specified functions, such as law enforcement or
social services.
 Examples:
- State aid to education, funds from state general revenue
- State aid for local roads, funds from earmarked taxes on motor fuels

 Block grants at the federal level have been used as a method for consolidating categorical
grant programs  more flexible
 Block grants almost always result in some degree of reduced federal financing because they are
consolidating previous categorical programs, state and local governments have to achieve the
supposed efficiencies, make up for the losses, or reduce quality or quantity of services.
HOMELAND SECURITY: A CASE STUDY IN
INTERGOVERNMENTAL RELATIONS
9/11 attacks
 combating terrorism  Security was formed by pulling together a variety of
agencies
 Organization of Homeland Security and Intergovernmental Relations:
 diversity within the Department of Homeland Security/DHS (units)
 funds are distributed across a wide variety of activities
 components of DHS must interact with state and local governments
GRANTS
DHS administers a wide variety of grants programs, ex: Homeland Security Grant Program (HSGP),
subprogram:
(1) state homeland
(2) Operation Stonegarden (formerly law enforcement),
(3) urban areas
(4) metropolitan medical response; and
(5) Citizen Corps

- must apply for funding

- 0.355% requirement for each State to receive some funding
- The remaining money is awarded on a risk-based program.
Critics: methodology to assess risk and allocate funds
https://www.dhs.gov/homeland-security-grant-program-hsgp
RESTRUCTURING PATTERNS OF
INTERGOVERNMENTAL RELATIONS
1. Tax Laws
Tax Deductions and Exemptions
Tax Credits
Tax Exemptions on Bonds
Shared Taxes
RESTRUCTURING PATTERNS OF
INTERGOVERNMENTAL RELATIONS
2. Grant Requirements
Strings
Mandates
Unfunded Mandates
Mandates Since Passage of the Unfunded Mandates Reform Act
The Courts
Civil Rights
Streamlining and Paperwork Reduction
Grant Coordinatton
Awarding Grants and Grants Administranon
Management Capacity
INDONESIA
Otonomi daerah Desentralisasi Fiskal

Instrumen yang digunakan dalam penyelenggaraan pembangunan negara

LEGAL FORMAL
UU Nomor 23 Tahun 2014 tentang Pemerintahan Daerah
UU Nomor 33 Tahun 2004 tentang Perimbangan Keuangan antara Pemerintah Pusat
dan Pemerintahan Daerah.
UU Nomor 28 Tahun 2009 tentang Pajak Daerah dan Retribusi Daerah

Prinsip ‘money follows function’

 Transfer Ke Daerah dan Dana Desa (TKDD)
No Unsur Keterangan Sifat
1 Dana Perimbangan

a. Dana Alokasi Umum (DAU) Block Grant

jenis dana transfer yang dialokasikan untuk mendanai penyelenggaraan urusan

pemerintah yang menjadi kewenangan daerah, dengan memperhatikan aspek Block Grant, Kecuali DBH
b. Dana Bagi Hasil (DBH) otonomi, serta keseimbangan dan pemerataan kemampuan keuangan daerah Cukai Hasil Tembakau
(min. 50% untuk bidang
kesehatan)

dana yang dialokasikan ke daerah untuk mendanai kegiatan yang sudah

c. Dana Alokasi Khusus (DAK) Fisik dan
diarahkan atau ditentukan penggunaannya untuk meningkatkan layanan publik conditional/specific grant
Non Fisik
dan pencapaian prioritas nasional

dialokasikan untuk memberikan insentif dan sekaligus sebagai instrumen untuk

memacu peningkatan kinerja daerah dalam pengelolaan keuangan,
2 Dana Insentif Daerah (DID) Specific Grant
penyelenggaraan pemerintahan, pembangunan, pelayanan dasar publik, serta
kesejahteraan masyarakat

Dana Otonomi Khusus (Otsus) jenis dana transfer yang dialokasikan khusus untuk daerah-daerah yang 2019 penerapan metode
3 Dana Tambahan Infrastruktur (DTI), dan mendapatkan kebijakan otonomi asimetri sesuai undang-undang, yaitu Provinsi dari "block" ke "spesific
Dana Keistimewaan (Dais) Papua, Papua Barat dan Aceh, serta DI Yogyakarta. grant"

dialokasikan kepada desa sebagai salah satu sumber mendapatan desa dari
4 Dana Desa APBN untuk mendanai pembangunan desa dan pemberdayaan masyarakat Block Grant
sesuai dengan undang-undang mengenai desa.