The continuing centralized nature of public administration in Albania could be attributed to a transition period, but since this phenomenon is not unique to Albania, it was necessary searching for underlying reasons for this system of regulation, organization, and financing of public affairs and administration.
It is generally accepted that the provision of public services to citizens cannot be left entirely to the market. In fact, direct government control over public administration with regard to public services is more or less inevitable. The issue is who should provide for these public services--state administration or self-governing bodies--and at what level--local, regional, or central.
The present situation in Albania is that the central government directly, or by means of district and regional offices, provides in the end of 2006 for approximately 70 percent of all public services to citizens. Funding decisions about these services are made solely at the central level; the district and regional offices have no significant decision making power or influence regarding funding amounts or destinations. Furthermore, regional self-governing bodies are not yet operational, and local self-governing bodies are very limited in their ability to make the necessary policy and budget decisions on major public services such as education, social care, health services, culture, and transportation.
An important precondition for the rationalization of public administration is speedy completion of the property transformation process and transfer of the state's responsibilities for the majority of economic activities to the private sector, and partly to the municipalities, as follows:
o forestry: the state + transfer to municipal ownership,
o agriculture: privatization + transfer to municipal ownership,
o transportation: the state + regional self-governing bodies,
o health care: the state + municipal and regional self-governing bodies,
o education: the state + municipal and regional self-governing bodies,
o culture: self-government + the state,
o recreation: the state + self-government,
o telecommunications: privatization + state participation,
o road network: local and regional self-governing bodies + the state
o management of water supplies: local self-governing bodies + the state.
The aim is:
o to decrease the degree of provision of private property by the public sector,
o to limit interference of public administration with private properties,
o to decrease the operating costs of state administrative bodies, and
o to determine the powers and competencies of state administration and self-governing bodies at their respective levels.
1. Reforming Relations between the State and Local Self-Governing Bodies
1.1 The Role of the State in Public Administration
Obviously, supporters of collectivist doctrines and liberal principles will have a different view of the role of the state in public administration. But the recommendations for reform of public administration in Albania takes decentralization into account and anticipates a significant decrease in the role of state institutions in the management of public affairs as compared with the present situation and a transfer of most public service responsibilities to regional self-governing bodies.
The state's role in the new structure of public administration should be limited to supporting, controlling, and organizing tasks with respect to the following:
o securing the country's external independence (in terms of foreign policy and national defense, including civil protection at all levels);
o maintaining law and order (e.g., selected areas of security, education, trade, water supply, medical and hygienic supervision);
o protecting civil rights and freedom;
o social legislation; and
o creating conditions for a healthy economy (currency policy, system of insurance, a tax policy that allows for improve of administration, financial administration, economic policy, participation in regional policy, energy policy, and national transportation policy).
These tasks shall be performed by central bodies of the state and their regional offices (i.e., local state administration institutions). All remaining tasks should be the responsibility of local and regional self-governing bodies.
1.2 The Role of Self-Governing Bodies in Public Administration
While the execution of state power is territorially defined by the frontiers of the state, self-governing bodies regulate public responsibilities within the framework of their territory and competence in compliance with the constitution and the law. As the legislator, the state continually tries, by means of law, to provide limitations for self-governing bodies; therefore, it is necessary to ensure the status of self-governing bodies through the following types of provisions:
o Institutional. Ensure that citizens are represented through free elections at the state, regional, and municipal levels. Regional and municipal representatives must have the right to regulate all appropriate issues within the framework of the law and consistent with their responsibility. City and municipal associations must take an active part in representing their constituents to the government, parliament, and other organizations and associations to ensure that the constitutional rule of the republic conforms to democratic rights and rules. Self-government, as an organizational form, is largely exempt from such control except where the court is entitled to arbitrate on a case of impingement upon the law. The sovereign rights of self-governing bodies are personal sovereignty, sovereignty of the organization, sovereignty in planning, financial sovereignty, regulatory sovereignty, and taxation sovereignty with regard to local and regional taxes.
o Financial. Ensure the participation of municipalities and regions in revenues from state taxes; address and adjust differences across municipal and regional tax potentials.
o Constitutional. Provide a means of constitutional complaint to safeguard self-governing bodies against state-initiated legal recourses.
Self-government functions at the local and regional levels consist of economic responsibilities, territorial planning and construction, local economy and environmental services, housing, transportation, water supply management, education, culture, health services, social care, administration, public order, and fire fighting.
1.3 Local Self-Government Authorities
A frequent topic of discussion is the ability of municipalities with a small number of inhabitants to ensure fulfillment of their designated responsibilities. The Albania's chose to establish self-governing bodies, it was offered to all municipalities and this became the model. If municipalities are to continue to be self-governing, the establishment of regional self-governing bodies in Albania is inevitable.
I do not, however, consider the establishment of new administrative units to be necessary to ensure that the principles of the original model can be implemented. If it is not efficient for a small municipality to provide public services, these can be provided by different forms of voluntary partnerships, common councils, companies, and agencies operating on a basis of contractual agreements with municipalities. In some cases, larger municipalities can provide services through contractual agreements to smaller municipalities in their region.
2. Proposal for a New System of Financing Self-Governing Bodies
Albania's 2006 tax reform led to the introduction of tax structures as a better tax administration oriented from the market segmentation and taxpayers needs. The tax system consequently became more transparent, the rate of taxes was decreased, and the taxation education improved.
The proposal for a new system of financing self-government is based on:
o principles, with significant reinforcement of the status of self-governing institutions;
o resolving the income aspect of the budget and the redistribution mechanisms of taxes, as we consider spending to be a responsibility of the respective self-governing bodies and the result of an agreement between the citizen-voters and their representatives--the deputies at the individual levels of public administration;
o the possibility of a differentiated approach for municipal subjects in addressing the scope and content of public properties; and
o independence of public property with regard to social and taxation policy.
One of the aims of public administration reform in Albania is compatibility with the regulations and principles applied in European countries. These principles include:
o increased financial responsibility of local and regional self-governments in order to prevent an excessive debt load which would endanger their autonomy;
o increased transparency of public expenditures to encourage a reduction in administrative steps and improve the possibility of control which should be directed, in compliance with the regulations of the European Charter of Local Self-Government, at conforming with the law and constitutional principles;
o standardized budget submissions and their evaluation;
o provision of fiscal authority to self-governing bodies, since this is the only way to achieve financial autonomy;
o total freedom of self-governing bodies, in accordance with the law, in setting fees and tariffs for local public services;
o elimination of excessive differences in rates set because these differences can lead to a distortion of competition; and
o in case of a temporary need for centralized cash flow management, that this be accomplished so as not to threaten the solvency of local self-governing bodies and cause problems in cash flow.
Recommended adjustments involve the tax systems, the tax authority, changes in the budget structure of self-governing bodies, changes in the relations between state and local self-government budgets, the determination of the extent of debt, and changes in the distribution criterion for the so-called shared tax.
3. New System for Financial Adjustment
Redistribution of tax revenues has, over the last decades, become part of the budgetary regulations in Albania following the EU model.
The new system of financial adjustment fulfills four main functions:
o Fiscal--by increasing the financial means of municipalities, since municipal tax incomes (revenues) do not cover municipal needs;
o redistributional--by correcting differences in tax-raising capabilities;
o spatial/political--by covering the increased costs connected with different municipal tasks in the structure of the settlement; and
o economic--by using local budgets to ensure the stability of the country.
The extent of financial adjustment derives from changes in a country's economic conditions, which change over time and with changes in politics. Therefore, it is necessary at certain points in time to analyze and adjust the system to new situations. It is very important to define the optimal extent of adjustment.
The volume of financial adjustment is controlled by the institution for public administration that provides for it; for that reason, from the point of view of territorial self-government, the greater the degree of adjustment, the lower the degree of financial independence (autonomy).
The financial adjustment is based on the tax power of territorial self-government, which shall be evaluated on the basis of an approved final invoice (bill) for the preceding fiscal year.
The financial adjustment consists of the following items:
o Vertical financial adjustment, by which the state budget will contribute to weaker tax regions and regional self-government will contribute toward weaker tax self-governing bodies. This means that vertical financial adjustment shall have an impact on the state budget as well as on the budget of regional self-government.
o Horizontal financial adjustment, by which the stronger tax regions will contribute to the weaker, and cities and municipalities with a greater tax capacity will contribute to those with a lower. This means that horizontal adjustment at the state level will not have an impact on the state budget, and adjustment at the regional level will not have an impact on the budget of regional self-government.
Financial adjustment ought to provide municipalities and cities, communes and towns with the necessary resources to enable them to perform their functions, but it must not interfere with the various municipal financial powers that result from municipal independence. If a financial adjustment were to cover differences 100 percent, territorial self-governments would lose interest in using their own taxation authority and would instead rely totally on adjustment mechanisms.
It is generally accepted that the provision of public services to citizens cannot be left entirely to the market. In fact, direct government control over public administration with regard to public services is more or less inevitable. The issue is who should provide for these public services--state administration or self-governing bodies--and at what level--local, regional, or central.
The present situation in Albania is that the central government directly, or by means of district and regional offices, provides in the end of 2006 for approximately 70 percent of all public services to citizens. Funding decisions about these services are made solely at the central level; the district and regional offices have no significant decision making power or influence regarding funding amounts or destinations. Furthermore, regional self-governing bodies are not yet operational, and local self-governing bodies are very limited in their ability to make the necessary policy and budget decisions on major public services such as education, social care, health services, culture, and transportation.
An important precondition for the rationalization of public administration is speedy completion of the property transformation process and transfer of the state's responsibilities for the majority of economic activities to the private sector, and partly to the municipalities, as follows:
o forestry: the state + transfer to municipal ownership,
o agriculture: privatization + transfer to municipal ownership,
o transportation: the state + regional self-governing bodies,
o health care: the state + municipal and regional self-governing bodies,
o education: the state + municipal and regional self-governing bodies,
o culture: self-government + the state,
o recreation: the state + self-government,
o telecommunications: privatization + state participation,
o road network: local and regional self-governing bodies + the state
o management of water supplies: local self-governing bodies + the state.
The aim is:
o to decrease the degree of provision of private property by the public sector,
o to limit interference of public administration with private properties,
o to decrease the operating costs of state administrative bodies, and
o to determine the powers and competencies of state administration and self-governing bodies at their respective levels.
1. Reforming Relations between the State and Local Self-Governing Bodies
1.1 The Role of the State in Public Administration
Obviously, supporters of collectivist doctrines and liberal principles will have a different view of the role of the state in public administration. But the recommendations for reform of public administration in Albania takes decentralization into account and anticipates a significant decrease in the role of state institutions in the management of public affairs as compared with the present situation and a transfer of most public service responsibilities to regional self-governing bodies.
The state's role in the new structure of public administration should be limited to supporting, controlling, and organizing tasks with respect to the following:
o securing the country's external independence (in terms of foreign policy and national defense, including civil protection at all levels);
o maintaining law and order (e.g., selected areas of security, education, trade, water supply, medical and hygienic supervision);
o protecting civil rights and freedom;
o social legislation; and
o creating conditions for a healthy economy (currency policy, system of insurance, a tax policy that allows for improve of administration, financial administration, economic policy, participation in regional policy, energy policy, and national transportation policy).
These tasks shall be performed by central bodies of the state and their regional offices (i.e., local state administration institutions). All remaining tasks should be the responsibility of local and regional self-governing bodies.
1.2 The Role of Self-Governing Bodies in Public Administration
While the execution of state power is territorially defined by the frontiers of the state, self-governing bodies regulate public responsibilities within the framework of their territory and competence in compliance with the constitution and the law. As the legislator, the state continually tries, by means of law, to provide limitations for self-governing bodies; therefore, it is necessary to ensure the status of self-governing bodies through the following types of provisions:
o Institutional. Ensure that citizens are represented through free elections at the state, regional, and municipal levels. Regional and municipal representatives must have the right to regulate all appropriate issues within the framework of the law and consistent with their responsibility. City and municipal associations must take an active part in representing their constituents to the government, parliament, and other organizations and associations to ensure that the constitutional rule of the republic conforms to democratic rights and rules. Self-government, as an organizational form, is largely exempt from such control except where the court is entitled to arbitrate on a case of impingement upon the law. The sovereign rights of self-governing bodies are personal sovereignty, sovereignty of the organization, sovereignty in planning, financial sovereignty, regulatory sovereignty, and taxation sovereignty with regard to local and regional taxes.
o Financial. Ensure the participation of municipalities and regions in revenues from state taxes; address and adjust differences across municipal and regional tax potentials.
o Constitutional. Provide a means of constitutional complaint to safeguard self-governing bodies against state-initiated legal recourses.
Self-government functions at the local and regional levels consist of economic responsibilities, territorial planning and construction, local economy and environmental services, housing, transportation, water supply management, education, culture, health services, social care, administration, public order, and fire fighting.
1.3 Local Self-Government Authorities
A frequent topic of discussion is the ability of municipalities with a small number of inhabitants to ensure fulfillment of their designated responsibilities. The Albania's chose to establish self-governing bodies, it was offered to all municipalities and this became the model. If municipalities are to continue to be self-governing, the establishment of regional self-governing bodies in Albania is inevitable.
I do not, however, consider the establishment of new administrative units to be necessary to ensure that the principles of the original model can be implemented. If it is not efficient for a small municipality to provide public services, these can be provided by different forms of voluntary partnerships, common councils, companies, and agencies operating on a basis of contractual agreements with municipalities. In some cases, larger municipalities can provide services through contractual agreements to smaller municipalities in their region.
2. Proposal for a New System of Financing Self-Governing Bodies
Albania's 2006 tax reform led to the introduction of tax structures as a better tax administration oriented from the market segmentation and taxpayers needs. The tax system consequently became more transparent, the rate of taxes was decreased, and the taxation education improved.
The proposal for a new system of financing self-government is based on:
o principles, with significant reinforcement of the status of self-governing institutions;
o resolving the income aspect of the budget and the redistribution mechanisms of taxes, as we consider spending to be a responsibility of the respective self-governing bodies and the result of an agreement between the citizen-voters and their representatives--the deputies at the individual levels of public administration;
o the possibility of a differentiated approach for municipal subjects in addressing the scope and content of public properties; and
o independence of public property with regard to social and taxation policy.
One of the aims of public administration reform in Albania is compatibility with the regulations and principles applied in European countries. These principles include:
o increased financial responsibility of local and regional self-governments in order to prevent an excessive debt load which would endanger their autonomy;
o increased transparency of public expenditures to encourage a reduction in administrative steps and improve the possibility of control which should be directed, in compliance with the regulations of the European Charter of Local Self-Government, at conforming with the law and constitutional principles;
o standardized budget submissions and their evaluation;
o provision of fiscal authority to self-governing bodies, since this is the only way to achieve financial autonomy;
o total freedom of self-governing bodies, in accordance with the law, in setting fees and tariffs for local public services;
o elimination of excessive differences in rates set because these differences can lead to a distortion of competition; and
o in case of a temporary need for centralized cash flow management, that this be accomplished so as not to threaten the solvency of local self-governing bodies and cause problems in cash flow.
Recommended adjustments involve the tax systems, the tax authority, changes in the budget structure of self-governing bodies, changes in the relations between state and local self-government budgets, the determination of the extent of debt, and changes in the distribution criterion for the so-called shared tax.
3. New System for Financial Adjustment
Redistribution of tax revenues has, over the last decades, become part of the budgetary regulations in Albania following the EU model.
The new system of financial adjustment fulfills four main functions:
o Fiscal--by increasing the financial means of municipalities, since municipal tax incomes (revenues) do not cover municipal needs;
o redistributional--by correcting differences in tax-raising capabilities;
o spatial/political--by covering the increased costs connected with different municipal tasks in the structure of the settlement; and
o economic--by using local budgets to ensure the stability of the country.
The extent of financial adjustment derives from changes in a country's economic conditions, which change over time and with changes in politics. Therefore, it is necessary at certain points in time to analyze and adjust the system to new situations. It is very important to define the optimal extent of adjustment.
The volume of financial adjustment is controlled by the institution for public administration that provides for it; for that reason, from the point of view of territorial self-government, the greater the degree of adjustment, the lower the degree of financial independence (autonomy).
The financial adjustment is based on the tax power of territorial self-government, which shall be evaluated on the basis of an approved final invoice (bill) for the preceding fiscal year.
The financial adjustment consists of the following items:
o Vertical financial adjustment, by which the state budget will contribute to weaker tax regions and regional self-government will contribute toward weaker tax self-governing bodies. This means that vertical financial adjustment shall have an impact on the state budget as well as on the budget of regional self-government.
o Horizontal financial adjustment, by which the stronger tax regions will contribute to the weaker, and cities and municipalities with a greater tax capacity will contribute to those with a lower. This means that horizontal adjustment at the state level will not have an impact on the state budget, and adjustment at the regional level will not have an impact on the budget of regional self-government.
Financial adjustment ought to provide municipalities and cities, communes and towns with the necessary resources to enable them to perform their functions, but it must not interfere with the various municipal financial powers that result from municipal independence. If a financial adjustment were to cover differences 100 percent, territorial self-governments would lose interest in using their own taxation authority and would instead rely totally on adjustment mechanisms.
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