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State finances
The constitution (73rd and 74th) Amendment Acts, 1992 and ARTICLE 280 (3) (c) have altered the erstwhile fiscal devolution system and framework between the states and local governments. Under the new fiscal devolution system every State Government is required to constitute, once in five years, a Finance Commission under articles 243 (I) and entrust it with the task of reviewing the financial position of Local Government and making recommendations as to the principles that should govern.
- The distribution between the state and the local governments of the net proceeds of the taxes, duties, tolls and fees leviable by the state.
- The determination of the taxes, duties, tolls and fees that may be assigned to or appropriated by the local government.
- The grant-in-aid to local government from the consolidate fund of the state.
A State Legislature has a provide by law, for the composition of the SFC, the qualification which shall be requisite for appointment as members thereof, and the manners in which they shall be selected. The existing constitutional provisions also provide that the Commission shall determine their procedure and shall have such powers in the performance of their functions as the legislature of the state. The Governor shall cause every recommendation made by the commission with the explanatory memorandum as to the action taken to be laid before the legislature of the state. In regard to the maintenance of the accounts by the panchayats and their Auditing, Article 243-J provides that "the legislature of a state may, be law, make provisions with respect to the maintenance of accounts by Panchyats and the auditing of such account.”
The 74th amendment of the constitution which is addressed to the municipal institutions had added one more mandatory provision. In the form of district planning committees to the domain of Pachayats. However, the crucial is a devolution of functional responsibilities, authority, power and financial Resources on the panchayats which have been made discretionary for the state. Therefore, each state usually practice its own scheme of devolution, and in the process, the pattern and degree of devolution on panchayats significantly vary across the states, depending upon the functional canvas of the panchayats. Central Finance Commissions and State Finance Commission in context of local finance issues. Under Article, 280 of the Constitution, Central Finance Commission is constituted to make recommendations on sharing of union tax revenues, Revenue Deficit grant, grant-in-aid to local bodies, calamity relief and for up-gradation of standards of administration and special problems. Whereas the State Fiancé Commission is to mediate between the state and the local governments under Article 243 1 and 243 Y.
Local finances
Revenues and Taxation
The dissimilar nature of rural and urban governments is apparent from their differing revenue structures: in the former about 89 per cent of revenues are derived from the states, while in the latter about 81 per cent of revenues are internally generated, with local taxation claiming about 55 per cent and nontax revenues about 27 per cent in 1976-77. By 1986-87 the dependence of urban local govern ments on external assistance had increased from 19 per cent to 23 per cent. This was related to the declining share of nontax revenues trend which is likely to continue. On the other hand, substantial reduction of external dependence in the revenue structure of rural governments must await radical restructuring of their tax compe tence, mainly through the assignment of land revenues. Until this happens, rural local government will not develop its own Personality, while urban local governments will continue to be marginalised in generally unified Soviet-type fiscal arrangement.
state-wise breakdown of local government revenues indicates that three states (Maharashtra, Gujarat, and West Bengal) account for about two-thirds of rural government revenue, while among urban authorities the situation is more variegated, with only one state (Maharashtra) claiming disproportionate share of 39 per cent . This is mainly due to the importance of octroi in internal revenue (Maharashtra and Uttar Pradesh) and larger external assistance (Maharashtra, Madhya Pradesh, and West Bengal). In Madhya Pradesh the urban authorities claim more external assistance (43 percent) due to their share of compensation for the state entry tax. Maharashtra's dominant reliance on internal revenue for both tax and nontax sources (86 per cent both rural and urban) also is striking. The internal revenue mobilization picture of local authorities is diverse: among rural governments the best performers are Kerala and Uttar Pradesh (61 percent each), followed by Himachal Pradesh (53 percent), while among urban governments the highest ratings belong to Haiyana (99 per cent), Karnataka (95 percent), and Punjab (92 %) The worst states in terms of rural government revenue mobilization are West Bengal and Orissa (3 per cent each), followed by Bihar (8 percent); in urban government the worst state is again Bihar (less than 40 per cent), while others are way above.
Per-capita revenues of the various tiers of rural government and types of urban government show their relative fiscal resilience: the village and area authorities are more effective in rural government, while the municipal corporations and councils are effective in urban government. The town and notified authorities are shade better than the village councils in terms of revenue performance. On an overall basis, there seems to be need to enhance minimum revenues of rural authorities substantially (at least five-fold), while the urban authorities need minimum of half of this level of reve nues. This would imply increased tax devolution to the rural authori ties and increased assistance for the urban authorities. detailed look at the revenue competence of rural authorities shows the need for strengthening their compulsory taxation capabilities through assignment of land revenue and devolution of land cess.
Expenditures
Local functions are usually divided into obligatory and discretionaiy categories, but such distinction is only notional in the absence of any quantitative specifications. Urban authorities are reported to be equally dividing their expenditures on these two categories. Available data on local government expenditures show similar functional coverage by urban and rural authorities, despite their differences in functional competence. Such similarities also appear in expenditures on civic and social Services, although their relative importance varies. Rural authorities spend relatively more on social services due to the greater availability of function-specific grants for Education, Health, and welfare. Urban authorities, being finan cially self-reliant, spend more on community semces like public health and sanitation. With increased financial strain resulting from rising staff salaries, urban authorities are cutting down their expendi ture on social services and concentrating more on community services and on their core or obligatory services to cope with financial strain. Among rural authorities, the village and area-level authorities are more effective in providing local services than those at the district level.
The search for economy and effectiveness in local government expenditures seems to lie in the direction of obtaining "value for Money" through (1) cheaper technology, (2) greater productivity, (3) increased competition, and (4) promotion of joint services. In such effoits, local government manpower issues have critical significance which sometimes takes on political overtones. Yet there are isolated success stories from various local e.-.J.horities in this regard, which need to be collected and widely disseminated for replication elsewhere.
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State and local government finances are a complex and ever-changing landscape. In recent years, state and local governments have faced a number of challenges, including the Great Recession, the COVID-19 pandemic, and rising pension costs. Despite these challenges, state and local governments continue to play a vital role in providing essential services to their citizens.
State and local governments raise revenue through a variety of sources, including taxes, fees, and intergovernmental transfers. The largest source of revenue for state governments is sales taxes, followed by income taxes. The largest source of revenue for local governments is property taxes.
State and local governments spend their revenue on a variety of services, including education, healthcare, transportation, and public safety. The largest expenditure for state governments is education, followed by healthcare. The largest expenditure for local governments is public safety, followed by education.
State and local governments are facing a number of challenges in the coming years. These challenges include rising pension costs, an aging Population, and the need to invest in Infrastructure-2/”>INFRASTRUCTURE. State and local governments will need to find ways to address these challenges in order to continue to provide essential services to their citizens.
One of the most pressing challenges facing state and local governments is rising pension costs. State and local governments have promised their employees generous pensions, but these promises are becoming increasingly difficult to keep. The value of pension funds has declined in recent years, and the number of retirees is expected to increase significantly in the coming years. This will put a strain on state and local budgets, and it is unclear how governments will be able to meet their pension obligations.
Another challenge facing state and local governments is an aging population. The number of people over the age of 65 is expected to double in the next 30 years. This will put a strain on state and local budgets, as governments will need to provide more services for the elderly, such as healthcare and transportation.
Finally, state and local governments need to invest in infrastructure. Roads, bridges, and other infrastructure are in need of repair and replacement. This will require a significant Investment of public funds.
State and local governments are facing a number of challenges, but they also have a number of opportunities. One opportunity is to use technology to improve efficiency and reduce costs. For example, governments can use online tools to collect taxes and fees, and they can use video conferencing to hold meetings.
Another opportunity is to collaborate with other governments. For example, governments can work together to purchase goods and services in bulk, and they can share information about best practices.
State and local governments play a vital role in our communities. They provide essential services, such as education, healthcare, and transportation. They also support Economic Development and create jobs. In order to continue to provide these services, state and local governments will need to address the challenges they are facing. However, they also have a number of opportunities to improve efficiency and reduce costs. By working together, state and local governments can ensure that they are able to provide essential services to their citizens for years to come.
What are the sources of state revenue?
State revenue comes from a variety of sources, including income taxes, sales taxes, property taxes, and fees.
What are the sources of local revenue?
Local revenue comes from a variety of sources, including property taxes, sales taxes, income taxes, and fees.
What are the major expenditures of state governments?
The major expenditures of state governments are education, healthcare, transportation, and public safety.
What are the major expenditures of local governments?
The major expenditures of local governments are education, public safety, and transportation.
What are the major challenges facing state and local governments?
The major challenges facing state and local governments are the rising cost of healthcare, the aging population, and the need to maintain infrastructure.
What are some of the ways that state and local governments are addressing these challenges?
Some of the ways that state and local governments are addressing these challenges include raising taxes, cutting spending, and privatizing services.
What are some of the impacts of these challenges on citizens?
The impacts of these challenges on citizens include higher taxes, reduced services, and a decline in the Quality Of Life.
What are some of the ways that citizens can get involved in addressing these challenges?
Some of the ways that citizens can get involved in addressing these challenges include voting, contacting their elected officials, and volunteering for local organizations.
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Which of the following is not a source of revenue for state governments?
(A) Income taxes
(B) Sales taxes
(C) Property taxes
(D) Federal grants -
Which of the following is not a function of state governments?
(A) Education
(B) Transportation
(C) Health care
(D) Foreign Policy -
Which of the following is not a function of local governments?
(A) Police
(B) Fire protection
(C) Libraries
(D) Social security -
Which of the following is the largest source of revenue for local governments?
(A) Property taxes
(B) Sales taxes
(C) Income taxes
(D) Federal grants -
Which of the following is the largest expenditure for local governments?
(A) Education
(B) Transportation
(C) Health care
(D) Social services -
Which of the following is the largest source of debt for state governments?
(A) General obligation Bonds
(B) Revenue bonds
(C) Tax anticipation notes
(D) Federal loans -
Which of the following is the largest source of debt for local governments?
(A) General obligation bonds
(B) Revenue bonds
(C) Tax anticipation notes
(D) Federal loans -
Which of the following is the most common type of state government employee?
(A) Teacher
(B) Police officer
(C) Firefighter
(D) Social worker -
Which of the following is the most common type of local government employee?
(A) Teacher
(B) Police officer
(C) Firefighter
(D) Sanitation worker -
Which of the following is the largest source of revenue for state and local governments combined?
(A) Income taxes
(B) Sales taxes
(C) Property taxes
(D) Federal grants