Welcome to the United Nations
In most countries around the world, subnational governments (SNGs) are on the front lines in implementing programs to support the Sustainable Development Goals (SDGs). The subnational governments are the primary level of government responsible for delivering education, clean water, sanitation, basic health care, sustainable cities, basic infrastructure and many other aspects of the SDGs. Across the world, SNGs are responsible for ensuring their population’s public health, safety, and social protection. On average, SNGs are responsible for 55% of a country’s expenditure on public order and safety, 38% of expenditure on health, and 15% of expenditure on social protection (OECD).
These subnational governments derive their revenues from a combination of intergovernmental transfers and own-source income, such as local user charges. As the world grapples with the fallout from COVID-19, the SNGs are facing severe budgetary challenges. In most cases, national governments are reducing budgetary transfers. Many typical sources of own-source revenues (for example, hotel surcharges, tolls, parking fines, industry contributions) have been drastically curtailed. Subnationals who borrow directly will also find it more difficult and costly to access capital and will likely have to defer or curtail capital spending.
At the same time, the SNGs require greater resources to mitigate the virus, address the health crisis and support vulnerable populations – while still providing vital basic services like trash collection and electricity. In many countries, SNGs are also responsible for countercyclical income replacement programs, such as unemployment insurance, that are further increasing their spending. Such costly mitigation efforts threaten to undermine the financial balance of SNGs as their expenditures rise sharply and revenues collapse leading to possible liquidity crises and long-term revenue shortfalls.
Many SNGs have embraced the SDGs and have incorporated key elements of these goals into their local finances, or were on a path to do so prior to the outbreak of COVID19. Efforts in a diverse set of countries including Argentina, Japan, Brazil, Belgium and ranged from participatory budgeting to digitized initiatives to using SDG targets as a budget framework, and such efforts were set to expand over the next decade. The current fiscal shortfalls mean that regional and local governments will have far fewer resources at a time of huge and immediate need, thus threatening the capacity of subnational governments to ensure public health in the short-term and provide essential services in the long term.
During the immediate crisis, the subnational governments need to take on a leading role, in several respects that are vital to social welfare and the functioning of communities. These will likely include (but are not limited to):
• Communications: Communicating accurate health information to the population
• Implementing new containment measures (testing, tracing, isolating, population monitoring, coordinating, ensuring compliance, forecasting, eventually administering vaccines).
• Supporting local businesses
• Supporting local institutions (schools, hospitals, clinics, parks, museums, etc.).
• Ensuring food supplies and distribution, especially to the elderly and vulnerable
• Ensuring basic income support is disbursed properly
• Organizing the efforts of community and local civil society organizations
In the current circumstances, the SNGs will be forced to make painful spending cuts and layoff public sector workers which may further exacerbate the economic downturn. Often SNGs are large employers who make up a significant percentage of their country's workforce (OECD). If SNGs are able to retain their personnel, they may be able to reduce the severity of an economic recession while providing stable employment and services for their populations.
In short, in most countries, it is essential for local governments to function well and it is impossible to achieve progress on the SDGs if these governments are destabilized. Not only are the subnational governments facing the worst budgetary environment in decades, but in this case, they are at the mercy of what happens in neighboring communities and regions, where outbreaks and mismanagement may undermine their own efforts.
Thus, an addendum to the paper on SDG budgeting is that there needs to be a concerted global effort to support the subnational levels of government. This effort could include IMF and World Bank lending facilities to ensure liquidity in the subnational borrowing sector, as well as direct assistance for subnational spending on essential services, subsidies for public sector salaries, and targeted grants to enable the SNGs to carry out the communication, testing, and program implementation to mitigate the impact of the virus on public health.
Linda Bilmes, member of the Committee of Experts on Public Administration