Silviase/jgov_v1.4_full_ann huggingface dataset:
## Trends in Expenditures by Character

Nationwide

Public debt payments ₹ 6.8 trillion (8.1%)

Maintenance and relief expenses ¥4.4 trillion (5.2%)

Ordinary construction expenses ¥ 24.5 trillion (29.3%)

Subsidized ordinary construction expenses ¥8.8 trillion | (10.5%)

Unsubsidized ordinary construction expenses ¥14.7 trillion (17.5%)

Personnel expenses ¥23.3 trillion (27.9%)

Other expenses ¥23.8 trillion (28.5%)

Net Total ₹ 83.8 trillion

Obligatory expenses ¥ 34.6 trillion (41.2%)

Investment expenses ¥25.4 trillion (30.3%)

￥5.8 trillion (5.8%)

FY

1996

₹ 26.4 trillion

(26.7%)

‡ 9.4 trillion

(9.5%)

‡ 29.9 trillion (30.2%)

¥ 41.6 trillion (42.1%)

¥ 11.9 trillion (12.0%)

¥ 16.7 trillion (16.9%)

¥ 30.7 trillion (31.0%)

¥ 99.0 trillion

¥ 26.7 trillion (26.9%)

￥6.2 trillion (6.3%)

¥ 26.9 trillion (27.6%)

¥ 10.3 trillion

(10.5%)

¥ 27.7 trillion (28.4%)

￥43.4 trillion (44.4%)

¥ 11.1 trillion (11.3%)

¥ 15.5 trillion (15.8%)

￥28.3 trillion (28.9%)

¥ 26.0 trillion (26.7%)

₹ 97.7 trillion

FY

1998

¥ 6.5 trillion (6.5%)

¥ 27.0 trillion (27.0%)

￥10.9 trillion (10.8%)

￥10.9 trillion ￥28.3 trillion (28.2%)

￥44.5 trillion (44.4%)

¥ 11.9 trillion ¥ 14.6 trillion (11.9%) (14.6%)

¥ 28.9 trillion (28.8%)

₹ 100.2 trillion

¥ 26.8 trillion (26.8%)

FY

1999

¥ 6.9 trillion (6.8%)

¥ 27.0 trillion (26.6%)

￥11.8 trillion (11.6%)

¥ 45.7 trillion (45.0%)

¥ 26.1 trillion (25.7%)

¥ 11.7 trillion (11.5%)

¥ 12.9 trillion (12.7%)

¥ 26.8 trillion (26.4%)

¥ 29.1 trillion (28.6%)

₹ 101.6 trillion

## Maintenance and relief expenses

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

## Ordinary construction expenses

FY

2000

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

￥6.1 trillion (6.2%)

¥ 26.9 trillion (27.5%)

¥ 45.3 trillion (46.4%)

¥ 26.8 trillion (27.5%)

￥6.5 trillion (6.6%)

¥ 12.3 trillion (12.6%)

¥ 46.1 trillion (47.3%)

¥ 23.9 trillion (24.5%)

10.5 trillion ¥ 11.9 trillion (10.8%) (12.1%)

¥ 27.9 trillion (28.6%)

￥24.4 trillion (25.0%)

￥97.6 trillion

￥12.8 trillion

(13.2%) ￥

￥22.5 trillion (23.1%)

10.0 trillion ¥11.1trillion (10.2%) (11.3%)

¥23.0 trillion (23.6%)

₹ 97.4 trillion

¥ 28.3 trillion (29.1%)
# 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 secure 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 sources can be secured is called the flexibility of the financial structure.

### 1. Ordinary Balance Ratio

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, and tax-reduction supplementary bonds and extraordinary financial countermeasures bonds [see note]) had been decreasing since fiscal 1999 because of such factors as the decline in personnel expenses share, but it increased in fiscal 2001 because of such factors as an increase in public debt payments.

Note:

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 debt service payment ratio used for restricting to issue local bonds, an index that takes into consideration the local allocation tax calculated for debt payments and indicates the actual degree of debt payment burden, has been increasing in recent years, and the flexibility of the financial structure has become weaker.

## 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 ¥131 trillion at the end of fiscal 2001. This figure has been increasing in recent years because of such factors as the need to supplement tax revenue as a result of the decrease in local tax revenue and tax cuts, the added public investment by economic-stimulus measures, and the issue of extraordinary financial countermeasures bonds. The figure is 1.3 times larger than total revenue and 2.3 times larger than general revenue resources, such as local taxes and local allocation tax.

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

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

In addition to the current outstanding local government bonds, there are the outstanding borrowing of local governments including the local burden of the borrowing of special account for local allocation tax, and public enterprise bonds borne by the ordinary account. These outstanding borrowings have been increasing sharply in recent years. The figure reached about ¥188 trillion at the end of fiscal 2001 and is expected to reach ¥199 trillion at the end of fiscal 2003.

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 those that 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.

### 1. Ratio of Local Public Enterprises

Local public enterprises play a major role in improving the standard of living of residents.
### 2. Number of Businesses Operated by Local Public Enterprises

The number of businesses is 12,611. By type of business, sewerage accounts for the largest ratio, followed in order by water supply, small-scale water supply, care services, and hospitals.

### 3. Scale of Financial Settlement

The total financial settlement scale is ¥21.2856 trillion. By type of business, sewerage accounts for the largest ratio, followed in order by hospitals, water supply, residential land development, and transport.
### 4. Management Conditions

Local public enterprises moved into the black for the first time in four years since fiscal 1997, with a surplus of ¥170.2 billion. By type of business, water supply, industrial water supply, electricity, and sewerage have registered a surplus, while transport and hospitals have continued to show a deficit.

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

## What efforts are being made toward sound local finance?

Although 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 administrative reform efforts 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 eight consecutive years since 1995. The number of employees has fallen for seven consecutive years in the general administrative sector and 11 consecutive years in the special administrative sector and also dropped in the public enterprise sector.

The reason for these trends is that although the number of employees has increased in some sectors because of such factors as the improvement of welfare and medical care and disaster-prevention measures, efforts have been made to restrain the increase of the total number of employees by numerical targeting measures and scrap-and-build measures.

Number of Local Public Employees
Trends in the Number of Staff in Local Governments by Sector (Unit: Ratio with April 1, 1992, as 100)

April 1, 1992	General administrative sector
Of which, general administration excluding welfare
Of which, welfare
Special administrative sector
Of which, education
Of which, police
Of which, fire
Accounting sector, including public enterprises
All local governments
April 1, 2000	General administrative sector
Of which, general administration excluding welfare
Of which, welfare
Special administrative sector
Of which, education
Of which, police
Of which, fire
Accounting sector, including public enterprises
All local governments
April 1, 2002	General administrative sector
Of which, general administration excluding welfare
Of which, welfare
Special administrative sector
Of which, education
Of which, police
Of which, fire
Accounting sector, including public enterprises
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 100.6.

Trends in the Laspeyres Index (Trends in the Average for All Local Governments)

## Laspeyres Index

The Laspeyres Index is used to compare price levels, wage levels and so on. Here it is used to show the salary level of local public employees when the salary level of national public employees is taken as 100.

The main cause of the increase in the Laspeyres Index in 2002 was that some of the local governments that carried out salary cuts in fiscal 2001 had completed these measures by the time of the survey on April 1, 2002.
Information relating to contract authorization

### 3. Administrative Transparency

Amid the increasing severity of local public finance, various efforts are being made to fulfill accountability. In recent years, there has also been an increase in the number of local governments formulating balance sheets in order to grasp the state of their assets and liabilities in a comprehensive manner as a means of publicizing and analyzing their financial conditions.

## Example of Balance Sheet (City A)

## FY 2001 Ordinary Account Balance Sheet

(As of March 31, 2002; unit: ¥1,000)

## Debit

## (Assets)

### 1. Tangible fixed assets

(1) General administration expenses

7,849,963

(2) Welfare expenses

2,635,732

(5) Agriculture, forestry and fishery expenses

5,295,694

(6) Commerce and industry expenses

2. Investment, etc.
(1) Investment and equity funds	4,055,425
(2) Loan	311,579
(3) Funds
[1] Special purpose funds	7,616,199
[2] Land development funds	2,044,674
[3] Fixed-in investment	44,000
Total 9,704,873
Total	14,071,877

3. Liquid assets
(1) Cash, deposits
[1] Adjustment fund for finance	2,040,545
[2] Sinking funds	1,726,458
[3] Cash in yearly account	1,151,958
Total	4,918,961
(2) Receivables
[1] Local taxes	1,844,860
[2] Others	728,614
Total	2,573,474
Total	7,492,435

Total assets 146,325,331

## Credit

## (Liabilities)

1. Fixed liabilities
(1) Local government bonds	53,400,519
(2) Contract authorization	0
[1] Purchase of property, etc.	0
[2] Guarantee of obligation or loss compensation	0
(3) Retirement allowance reserve	6,234,735
Total	59,635,254
2. Liquid liabilities
(1) Scheduled redemption in next fiscal year	4,074,464
(2) Appropriation mode in advance	0
Total	4,074,464
Total liabilities	63,709,718

## (Net assets)

1. National treasury disbursements

19,187,061

2. Prefectural disbursements

5,740,513

3. General revenue sources, etc.

57,688,039

Total net assets 82,615,613

Total of liabilities and net assets

146,325,331

(1) Matters relating to the purchase of property, etc. (excluding items included in the main table) 4,443,824

(2) Matters relating to guarantee of obligation and loss compensation (excluding items included in the main table) 5.931.001

(3) Matters relating to compensation for paid interest, etc.
# Issues of Local Finance

### 1. Strengthening the Administrative and Financial Base for Further Decentralization

## 1 Strengthening the Financial Base of Local Governments

At a time when local government finance is suffering from a severe shortage of resources, in order to promote further decentralization, it is necessary to make efforts toward the realization of structural reform to increase the degree of freedom of local governments in terms of both income and expenditure and to achieve local independence under the principle of “entrusting to local governments what local governments can do.”

Realization of an income structure based mainly on local taxes

Gap between expenditure scale and tax revenue of local governments

Expenditure state : local = 2 : 3

Tax revenue

state : local = 3 : 2

Reduce the gap as much as possible

Revision of involvement of the central government through national treasury subsidies, legislation, etc.

Further clarification of correspondence between benefit and burden of administrative services

Promotion of administrative reform and fiscal structure reform in the national and local governments

## Reference

Distribution of Financial Resources Between the National and Local Governments (FY 2001)
## • Local Taxes

In order for local governments to provide administrative services in response to local needs with responsibility and at their own discretion, it is necessary to expand and secure local taxes so as to build a local tax system in which the uneven distribution of tax sources is limited and the stability of tax revenue is ensured.

## Reference

## Uneven Distribution of Tax Revenue in Local Taxes

Index of per capita tax revenue from the local tax revenue total, individual resident's tax, two corporate taxes, local consumption tax, and fixed asset tax (with the national average as 100; FY 2001)

1. The tax revenue from the individual resident’s tax is the total of the individual prefectural resident’s tax and the individual municipal resident’s tax.

2. The tax revenue from the two corporate taxes is the total of the corporate prefectural resident's tax, the corporate municipal resident's tax, and the corporate business tax.

3. The tax revenue from the fixed asset tax includes the prefectural part.
## • Local Allocation Tax

The local allocation tax fulfills an extremely important role in view of the fact that there are differences in economic strength and financial strength among the regions and that in Japan, with regard to a large part of domestic administrative affairs, local governments are required through legislation, etc. to ensure a certain administrative level in the regions.

On the other hand, it is necessary to remedy the large financial shortage of local governments as soon as possible through such efforts as the reduction of expenditures and expansion of local taxes and, after that, to break away from dependence on financial resource guarantees through the local allocation tax and to realize the true financial independence of local governments.

Bearing these factors in mind, from now on also it is important to ensure the necessary total local allocation tax amount.

## Reference

· Regarding a large part of domestic political affairs, the state is required through legislation, etc. to ensure a certain administrative level in the regions.

There are large differences in economic strength and financial strength among the regions.

For example, the following diagram shows per capital tax amount in fiscal 2001:

## Reference

State of Financial Resource Guarantees (Micro) Through the Local Allocation Tax (FY 2001)
## • National Treasury Subsidies

In order to increase the degree of freedom of local governments and to achieve local independence, it is necessary to promote the reorganization and rationalization of national treasury subsidy projects.

## Reference

## Basic Thinking on the Reorganization and Rationalization of National Treasury Subsidies

(From the Plan for the Promotion of Decentralization, decided by the cabinet on May 29, 1998)

Clarification of the categories of national treasury burden and national treasury subsidy

National

treasury

burden

Local Finance Law

Articles

10, 10-2, 10-3, 34

## National treasury subsidy

Local Finance Law

Article

16

- The recurring national treasury burden is limited to items for which the state really does have an obligation to bear the burden and is definitely paid by the state.

- The national treasury burden relating to construction projects based on comprehensive plans is limited to key projects.

Abolition or reduction in principle, excluding the following:

- Subsidies with the character of state indemnity in accordance with national policy; subsidies with the character of substitute financial resources for local taxes

• Subsidies for temporary large financial burdens caused by natural disasters

• Subsidies with the character of local financial resources as income incidental to local government work

## Methods of Reorganization and Rationalization

(1) Coverage by ordinary financial resources of items that have become assimilated, established, or regular features of local government work and personnel expense subsidies

(2) Abolition and coverage by ordinary financial resources of small national treasury subsidies (raising of small-sum subsidy standards and approval standards)

(3) Setting of sunset dates and final periods (five years)

(4) Abolition and coverage by ordinary financial resources of subsidies with a low subsidy rate (less than one-third) and subsidies that have passed a certain period after their establishment

(5) Restraints on the establishment of new national treasury subsidies and thorough penetration of the scrap-and-build principle
National Treasury Subsidies, Burdens, Etc. for Local Governments

(General account and special account; FY 2003 budget base)
## 2 Promotion of Municipal Mergers

In order to promote autonomous municipal mergers by March 2005, which is the expiration date of the Special Municipal Merger Law (Law No. 6, 1965), it is necessary to strengthen further efforts toward merger.

## • Support by the municipal merger support plan through ministerial cooperation

Support for various projects, etc. implemented in priority merger support regions and municipalities that merge by March 2005 (Expansion of local financial measures, priority selection and priority investment in public work projects, elimination of various obstacles relating to merger, etc.)

## The following effects are expected through municipal mergers:

- Improvement of convenience of residents, including an increase in the number of accessible administrative counters, setting of elementary and junior high school zones more comfortable for residents, enhanced usability of the public facilities of the other municipalities, etc.

• Administrative services will be upgraded and diversified, and it will become possible for small-scale municipalities to implement special services, which they have not been able to do properly so far.

- Priority investment will become possible, and it will be possible to construct high-grade facilities to operate as the core of the community and to implement projects that require large-scale investment.

- It will become possible to implement city planning from a wide-area perspective in such fields as road and public facility construction, land use and zoning.

• Administrative and financial affairs will be made more efficient, because it will be possible to increase efficiency in the management sector and distribute human resources and budget more appropriately in the required sector.
### 2. Efforts Toward Financial Conditions

In order to improve the state of local finance, which is in an extremely severe situation, it is necessary to make efforts to increase revenue from local general revenue sources, such as local taxes, and at the same time to make the income-expenditure gap narrower and to reduce dependency on borrowing by making both national and local administration and finance more streamlined and more efficient.

## 1 Promotion of administrative reform

Efforts toward administrative reform in local governments are making progress, as we have seen, and it is necessary to continue to promote exhaustive administrative reform and to restrain and prioritize expenditures through comprehensive revisions.

• Streamlining of personnel management and salaries

Simplification and increased efficiency of organization and structure

- Revision of projects, promotion of private-sector consignment, public-built private-management method, utilization of private finance initiative (PFI), etc.

Private finance initiative (PFI) is a method by which the private sector takes over the construction of social infrastructure and supply of public services previously handled by the national or local governments, etc., from design to construction and operation, making use of the funds and know-how of the private sector.

## 2 Improvement of transparency

In order to respond to the increased decision-making powers and self-responsibility of local governments as a consequence of the advance of decentralization, local governments are required to ensure fairness in administrative procedures, improve transparency and fulfill accountability.

• Compilation and release of balance sheets and administrative cost statements

- Further disclosure of administrative information, sharing of information with residents

Introduction of public comment system

### 3. Response to Regional Policy Issues

It is necessary for local governments, which are general administrative entities in their communities, to respond positively to regional policy issues and to improve the welfare of residents.

Regional activation

Promotion of development and utilization of information technology

• Protection and creation of good environment

Promotion of general and efficient local welfare measures
White Paper on Local Public Finance 2003 (FY 2001 Settlement) Illustrated

Financial Management Division, Local Public Finance Bureau, Ministry of Public Management, Home Affairs, Posts and Telecommunications, The Japanese Government

Address: 2-1-2 Kasumigaseki, Chiyoda-ku, Tokyo 100-8926, Japan

Tel.: +81-(0)3-5253-5111

http://www.soumu.go.jp

Printed by Gyosei Co.

All Rights Reserved