Silviase/jgov_v1.4_full_ann huggingface dataset:
# The State of Local Public Finance (FY2004 Settlement)

## State of FY 2004 Account Settlement: Overview

Amid increasingly severe financial conditions, efforts were made to achieve large expenditure cuts. (Expenditure has declined for five consecutive years.)

#### 1. Expenditure: Acceleration and strengthening of expenditure cuts (down 1.4% from previous fiscal year)

Amid a situation in which many factors were leading to increased expenditures, such as revision of the child allowance system (raising the age of eligibility for benefits) and the frequent outbreak of disasters, efforts were made to achieve large expenditure cuts, such as in personnel expenses (down 1.2% from the previous fiscal year) and investment expenses (down 9.3%). As a result, expenditures declined by ¥1.3339 trillion compared with the previous fiscal year.

#### 2. Revenue: Decline of revenue (down 1.5% from previous fiscal year)

While increases were seen in local taxes (up 2.7% from the previous fiscal year), local transfer tax (up 67.7%), and so on, there were declines in local allocation tax (down 5.8%), local bonds (down 10.3%), and so on.

### 3. Reserves: Large increase of net withdrawal

The large-scale net withdrawal from reserves (difference between withdrawals and reserves) of about ¥1 trillion exceeded the figure for the previous fiscal year.

### 4. Other: Impact of municipal mergers and natural disasters

As well as town and village expenditures shifted to cities as a result of municipal mergers, there was a striking increase in disaster restoration work expenses (up 63.0% from the previous fiscal year) as a result of the impact of, among other disasters, the Chuetsu Earthquake in Niigata Prefecture and 10 typhoons that made landfall, the largest number ever recorded.
Single FY balance: Calculated by subtracting the real balance of the previous fiscal year from the real balance of the fiscal year concerned.

Real balance: Calculated by subtracting the revenue resources that should be carried over to the next fiscal year from the income-expenditure balance.

2. The number of organizations with real single FY balance deficits or single FY balance deficits does not include partial administrative associations and wide-area local public bodies; the figures in parentheses are the number of organizations including partial administrative associations and wide-area local public bodies.

## Scale of Account Settlement

As a result of such factors as a decline in ordinary construction project spending and personnel expenses on the expenditure side and a decrease of local taxes and local allocation tax on the revenue side, both revenue and expenditure have shrunk for five consecutive years.

# Revenue and Expenditure Settlement

Although the single fiscal year balance showed a surplus for the second consecutive year, the real single fiscal year balance registered a deficit for the first time in two years.

Category	Settlement figure	No. of deficit organizations
FY 2004	FY 2003	FY 2004	FY 2003
Real single FY balance	- ¥11.7 billion	¥91.8 billion	1,528 (2,498)	1,448 (2,435)
Single FY balance	¥127.6 billion	¥139.7 billion	1,330 (2,288)	1,347 (2,356)
Real balance	¥1220.8 billion	¥1204.6 billion	26	28

Notes:

1. Real single FY balance: Calculated by adding reserves to the fiscal adjustment fund and advanced redemption of local loans to the single FY balance and subtracting the used part of the fiscal adjustment fund.
# Revenue

Where does the funds for local government activities come from?

## 1 Revenue Breakdown

Local taxes account for about one-third of the revenue of local governments, followed by the local allocation tax, national treasury disbursements, and local bonds.

## Revenue Breakdown (FY 2004 settlement)

## General Revenue Resources

Revenue resources for which the use is not specified, like local taxes and the local allocation tax, are called general revenue resources. Here, the total of local taxes, local transfer tax, special local grants, the local allocation tax, and so on is treated as the general revenue resource. It is extremely important for local governments to ensure sufficient general revenue resources in order to handle various administrative needs properly.

Local transfer tax Collected as a national tax and transferred to local governments. Includes local road transfer tax, etc.

Special local grant A revenue source with the character of a substitute for local taxes, introduced to supplement a part of the decrease of local tax caused by a tax cut since FY 1999 and grants from the central government to local governments as a result of a revision of national treasury subsidies.

Local allocation tax An intrinsic revenue source shared by local governments in order to adjust imbalances in tax revenue among local governments and to guarantee revenue sources so that local governments in whatever region can provide a certain level of administrative services. Calculated as a certain ratio of five national taxes. (See page 10 for details.)

National treasury disbursements A general name for funds disbursed from the central government to local governments for specified uses. Local bonds The debts of local governments for which fulfillment continues for more than one fiscal year.

## Notes:

1. The figures here are mainly for the ordinary account. (For the accounts of public enterprises, such as water supply and sewerage businesses, transportation businesses, and hospitals, see page 22.)

2. The figures for each item are rounded off under the given unit. Therefore, they do not necessarily add up exactly to the total.
## Revenue Trends

While the shares of local taxes and local transfer tax to total revenue increased, the shares of local allocation tax and local bonds are on a downward trend.

## Nationwide
## 3 Local Taxes

Local taxes consist of prefectural taxes and municipal taxes. (In the case of the special wards of Tokyo, the Tokyo Metropolitan Government collects some municipal taxes.)

Composition of Revenue from Prefectural Taxes (FY 2004 settlement)

Composition of Revenue from Municipal Taxes (FY 2004 settlement)
Among prefectural taxes, the ratios of the two corporate taxes (corporate business tax and corporate prefectural residents tax) are high. Among municipal taxes, the ratios of the fixed asset tax and individual municipal residents tax are high.

Since the two corporate taxes are easily impacted by the business cycle, the tax revenue from prefectural taxes is unstable. In fiscal 2004 the figure showed an increase for the first time in four years.

Meanwhile, although municipal tax revenue has been on a downward trend in recent years, in fiscal 2004 it showed an increase for the first time in three years.

## Prefectural Tax Revenue Trend

Figures in parentheses are the component ratios of the business tax and prefectural residents tax.

## Municipal Tax Revenue Trend

Figures in parentheses are the component ratio of the municipal residents tax.

The municipal tax revenue figure includes municipal taxes collected by Metropolitan Tokyo.
## 4 Local Allocation Tax

From the perspective of local autonomy, it would essentially be the ideal for each local government to ensure the revenue sources necessary for administrative activities through local taxes collected from their residents. However, there are regional imbalances in tax revenue, and many local governments are unable to acquire necessary tax revenue. Therefore, the central government collects financial resources that should fundamentally be attributable to local tax revenue through national taxation and reallocates them as the local allocation tax to local governments where financial resources are insufficient.

## 1 Determination of total amount of local allocation tax

The total amount of the local allocation tax is determined on the basis of certain ratios for national taxes (32% for income tax and liquor tax, 35.8% for corporate tax, 29.5% for consumption tax, and 25% for tobacco tax) as well as estimates of standard revenue and expenditure of local public finance as a whole.

The total amount of local allocation tax in fiscal 2004 was ¥17.0201 trillion, down 5.8% from the initial figure for the previous fiscal year.

## 2 Method of calculation of regular local allocation tax for each local government

The regular local allocation tax for each local government is calculated by the following mechanism:

## Notes:
## 3 Function of the local allocation tax

The function of the local allocation tax is to adjust imbalances in revenue among local governments in order to guarantee revenue so that local governments can provide standard administrative services and basic social infrastructure to their residents in whatever region. Accordingly, as a result of the revenue adjustment mechanism through the local allocation tax, few differences in such factors as size of population have been found in the ratio of general revenue resources to total revenue.

Ratio of General Revenue Resources to Total Revenue for Municipalities

Notes:

1. A “midsize city” refers to a city with a population of more than 100,000 persons according to the national census of 2000; a “small city” refers to a city with a population of less than 100,000.

2. A “large town or village” refers to a town or village with a population of more than 10,000; a “small town or village” refers to a town or village with a population of less than 10,000.
# Expenditure

# What is revenue being expended for?

## 1 Expenses by Function

When expenses are classified by function, we see that a lot of revenue is expended for such items as education expenses, civil engineering work expenses, and public welfare expenses. In prefectures it is mainly expended for education expenses, civil engineering work expenses, and debt servicing, in that order. In municipalities it is primarily expended for public welfare expenses, civil engineering work expenses, and debt servicing, in that order.

Education expenses: Expenses for school education, social education, etc.

Civil engineering work expenses: Expenses for the construction and improvement of public facilities, such as roads, housing and parks.

Public welfare expenses: Expenses for the construction and operation of welfare facilities for children, the elderly, the mentally and physically disabled, etc. and for the implementation of livelihood protection, etc.

Public debt payment: Expenses for the payment of principal, interest, etc. on debts.

## Composition of Expenditure by Function (FY 2004)
## Breakdown of Educational Expenses by Purpose

Breakdown of Civil Engineering Work Expenses by Purpose

Breakdown of Public Welfare Expenses by Purpose
In recent years, while there has been a decline in such items as agriculture, forestry and fishery expenses and civil engineering work expenses, welfare expenses, public debt payments and so on have been increasing.

Trends in Expenditures by Function (ordinary account net total)

Unit: Ratio with FY 1992 as 100.

FY 1992	General administration expenses	101,087
Welfare expenses	99,353
Of which, social welfare expenses	27,922
Of which, elderly welfare expenses	26,728
Of which, child welfare expenses	29,561
Sanitation expenses	56,143
Of which, cleaning expenses	23,388
Agriculture, forestry and fishery expenses	56,762
Commerce and industry expenses	44,454
Civil engineering work expenses	216,332
Education expenses	184,060
Public debt payments	71,150
Total expenditure	896,597

FY 2000	General administration expenses	91
Welfare expenses	135
Of which, social welfare expenses	130
Of which, elderly welfare expenses	132
Of which, child welfare expenses	136
Sanitation expenses	116
Of which, cleaning expenses	122
Agriculture, forestry and fishery expenses	103
Commerce and industry expenses	122
Civil engineering work expenses	10
Education expenses	98
Public debt payments	174
Total expenditure	109
## 2 Expenses by Character

Classified by character, expenses can be divided into "obligatory expenses" (personnel expenses, social assistance expenses and public debt payments), which are mandatory and difficult to cut down at the discretion of individual local governments; "investment expenses," including ordinary construction expenses, etc.; and "other expenses."

Expenditure by Character (FY 2004 settlement)
Trends in Personnel Expenses
In recent years, while there has been a decline in such items as ordinary construction expenses, social assistance expenses, public debt payments and so on have been increasing.

Trends in Breakdown of Expenditures by Character (ordinary account net total) Unit: Ratio with FY 1992 as 100.

## Social assistance expenses

## Ordinary construction expenses

Expenses which include child welfare expenses, livelihood protection expenses, etc., aimed at assisting the needy, children, the elderly, mentally and physically disabled, etc., as a part of the social security system.

Expenses necessary for the construction of social capital, such as roads, bridges, parks, schools, etc.
# Flexibility of the Financial Structure

## How can local finance respond to the demand toward local governments?

In addition to revenue sources allocated to obligatory expenses required every year, it is necessary for local governments to ensure revenue sources for measures to respond properly to social and economic trends and changes in the demand of the residents. The extent to which these revenue resources can be ensured is called the flexibility of the financial structure.

## 1 Ordinary Balance Ratio

Because of such factors as an increase in social assistance expenses and declines in the ordinary allocation tax and extraordinary financial countermeasures bonds, the national average of the ordinary balance ratio (the ratio of ordinary revenue allotted to expenses recurring every fiscal year to the total of ordinary revenue recurring every fiscal year, centered on local taxes and the local allocation tax, as well as tax reduction supplementary bonds and extraordinary financial countermeasures bonds [see note]) registered the highest figure since the compilation of statistics began (in fiscal 1969).

Tax-reduction supplementary bonds and extraordinary financial countermeasures bonds have been added since fiscal 2001.
## 2 Debt Service Payment Ratio Used for Permission to Issue Local Bonds

It is necessary to keep a close watch on trends in public debt payments at all times, since public debt payments, payments of principal and interest on the debts of local governments, are expenses especially lacking flexibility.

The national average of the debt service payment ratio used to restrict the issue of local bonds, which is an index that takes into consideration the local allocation tax calculated for debt payments and indicates the actual degree of debt payment burden, rose by 0.1 point compared with the previous fiscal year and continues to maintain a high level.

Trends in the Debt Service Payment Ratio Used for Permission to Issue Local Bonds

The debt service payment ratio used for permission to issue local bonds is an index showing the ratio of local debt principal and interest repayment (excluding advanced redemption and the amount of general revenue resources calculated for this purpose that includes the local allocation tax) to the total of standard financial amount (excluding the amount of local allocation tax calculated for service payment) and possible issue of extraordinary financial countermeasures bonds. This index is one of the criteria to limit the issue of local bonds. In principle, the issue of local bonds relating to general unsubsidized projects, etc. is prohibited in the case of local governments with a ratio of 20% or over.
# Outstanding Local Government Borrowing (Ordinary Account)

What is the state of debts in local public finance?

## 1 Trends in Outstanding Local Government Borrowing

Outstanding local government borrowing, the debts of local governments, amounted to approximately ¥141 trillion at the end of fiscal 2004. This figure has been increasing in recent years because of such factors as the need to supplement tax revenue as a result of tax cuts, the added public investment by economic-stimulus measures, and the issue of extraordinary financial countermeasures bonds. The figure is 1.5 times larger than total revenue and about 2.7 times larger than the total sum of general revenue resources, such as local taxes and local allocation tax.

Trends in Outstanding Local Government Borrowing

Notes:

1. Outstanding local government borrowing excludes special fund public investment bonds.

2. Economic-stimulus figures are estimates.
## 2 Outstanding Borrowing of Local Finance

The outstanding borrowing of local finance, including the local burden of borrowing from the special account for local allocation tax and transfer tax grants and those public enterprise bonds borne by the ordinary account, as well as current outstanding local government bonds, has been increasing sharply in recent years. The figure reached about ¥201 trillion at the end of fiscal 2004 and is expected to reach ¥204 trillion at the end of fiscal 2006.

Trends in Outstanding Borrowing That Should Be Shouldered by the Ordinary Account and Ratio of Outstanding Borrowing to Gross Domestic Product

1. Outstanding local government borrowing excludes special fund public works bonds and special fund public investment bonds.

2. Outstanding public enterprise bonds (borne by the ordinary account) are estimates based on settlement statistics.
# Local Public Enterprises

## What is the state of local public enterprises?

Local public enterprises are managed directly by local governments for the purpose of social and public benefit. They provide social infrastructure and services indispensable for local residents and the development of the community, including water supply, sewerage, transport and hospitals.

## Ratio of Local Public Enterprises

Local public enterprises play a major role in improving the standard of living of residents.

$ ^{*} $ The graph shows the ratio of local public enterprises when the total number of business entities nationwide is taken as 100.

*Figures for the total number of enterprises nationwide are compiled from statistical materials of related organizations; figures for local public enterprises are compiled from figures for the total number of enterprises and settlements for the previous fiscal year.
## 2 Number of Businesses Operated by Local Public Enterprises

The number of businesses is 10,979. By type of business, sewerage accounts for the largest ratio, followed in order by water supply, care services, and hospitals.

## 3 Scale of Financial Settlement

The total financial settlement scale is ¥21.5925 trillion. By type of business, sewerage accounts for the largest ratio, followed in order by hospitals, water supply, and Residential development.
## 4 Management Conditions

Local public enterprises had a surplus of ¥259.0 billion. By type of business, while water supply, industrial water supply, electricity, and sewerage showed a surplus, transport and hospitals are continuing to register a deficit.

Trends in Management Conditions of Local Public Enterprises
# Efforts Toward Sound Financial Conditions

## What efforts have been made toward sound local finance?

While local public finance is certainly in an extremely severe situation, the role of the local government, which is clarified as the comprehensive administrative entity of the region, is becoming increasingly important. For this reason, various efforts for administrative reform are being made with the aim of making administrative organizations simpler, more efficient and more responsible to new administrative issues.

## 1 Number of Public Employees

The number of local public employees has declined for 11 consecutive years since 1995. The number of employees has fallen for 10 consecutive years in the general administrative sector and 4 consecutive years in the public enterprise sector.

The reason for these declines is that, although the number of staff in the police and fire service sectors is increasing due to such factors as the enhancement of public security and disaster-prevention measures, efforts are being made to reduce the number of staff as a whole by, for example, setting numerical targets for personnel management and implementing cuts in other sectors on the basis of scrap-and-build policies

## Number of Local Public Employees
## Trends in the Laspeyres Index (Trends in the Average for All Local Governments)

## Trends in the Number of Staff in Local Governments by Sector

April 1, 1996	General administrative sector
Excluding welfare
welfare
Education sector
Police and fire service sector
Public enterprises, etc.
All local governments
April 1, 2005	General administrative sector
Excluding welfare
welfare
Education sector
Police and fire service sector
Public enterprises, etc.
All local governments

## 2 Salary Level

When the salary level of local public employees is shown on the Laspeyres Index, the average for all local governments is 98.0.

In fiscal 2004 a total of 444 local governments adopted measures to correct wage levels, such as the revision of salary scales, and a total of 1,965 local governments implemented the revision of various allowances and retirement allowances.
## 4 Administrative Transparency

Amid the increasing severity of local public finance, various efforts are being made to fulfill accountability. In order for each local government to promote financial soundness while gaining the understanding and cooperation of residents, etc., the Ministry of Internal Affairs and Communications has compiled financial comparative analysis tables and posted them on its homepage with the aim of disclosing information to residents, etc. in an easy-to-understand manner based on indicators that are comparable with those of other local governments.

In the fiscal 2004 settlement, the ministry conducted a comparative analysis of the principal financial indicators, etc. among similar organizations and analyzed the efforts, etc. of each organization toward the improvement of the indicators, etc.

## Example of a Financial Comparative Analysis Table

Municipal Financial Comparative Analysis Table (FY 2004 Settlement)