Study On The Fiscal Expenditure Of Gansu Province: The Scale, Structure And Performance Evaluation

Public finance has more than 200 years of history in developed market-oriented western countries. With the development of public finance application, arguments on fiscal expenditure theories are keeping piling up. Its theory was introduced prior to the application when public finance was firstly born in our country. And more efforts have been made to the building of public finance framework complying with the Chinese characteristics. Besides this, because our country differs greatly in natural conditions, the application effects of the same policy mechanism differ as well. Therefore, based on the collection of both domestic and foreign studies on local government expenditures, this paper is to take Gansu province as an example to analyze its fiscal expenditure scale, structure and effects with the adoption of theories and examples. The main results are as follows.1. Constraining by the aggregate economic volume, the scale of fiscal expenditure of Gansu is small in number making up less than 2% of total fiscal expenditure of local governments across the country. And the per capita fiscal expenditure remains around 80% of national average fiscal expenditure of local governments for years. Furthermore, because of factors of increasing expenditures in areas such as people's livelihood improvement, supports on "three rural issues" and accelerating the reform, the gap between fiscal revenue and expenditure is expanding. And because of low basis and self-sufficiency and high reliance of central fiscal subsidies, the fiscal expenditure of Gansu has increased faster. The growth is higher than the growth of GDP and national average growth of expenditure. But the growth is unstable. The proportion of fiscal expenditure in GDP is higher than national average and the average of western regions which shows that the proportion of government funded economic activities of Gansu is higher than national average. According to the principles of the scale of fiscal expenditure complying with economic development, this paper is to make an analysis on fiscal expenditure of Gansu by adopting regression analysis and trend extrapolation. And then, the paper proposes that the proportion of fiscal expenditure in GDP maintains at reanable range is appropriate on the basis of further improving budget management approaches and extending budget reform.2. This paper has identified issues relating to fiscal expenditure structure by applying structural optimizing standards and factors in fiscal expenditure theories including the theory of economic growth stage and public choice theory. The offside and absence of fiscal expenditure still exist. And issues such as high proportion of administrative cost, low input of basic public services, insufficient input in scientific and technological research and unclear direction of sector development are still serious. The occurrence of those issues is not only due to poor economic basis and unclear government functions, but also due to extensive expenditure management. Therefore, we should correctly handle the relationship between fiscal expenditure and the support for economic growth, promote balanced social development and the equalization of public services among different regions, and speed up the establishment of a harmonious society which enables elderly will be looked after, children be taught, patients be provided with medical treatment and people be given places for living through scientific arrangements of government functions, the building of a sound public fiscal system and the increasing inputs of public goods, to achieve the objectives of people's well-being oriented fiscal expenditure.3. This paper has made some analysis on establishing the performance evaluation system on fiscal expenditures. The evaluation of fiscal expenditure performances based on the requirement of economy, efficiency and effectiveness, is to evaluate fiscal expenditure process and effects through the establishment of evaluation indicators and the adoption of standard evaluation methods and procedures. The purpose is to keep the whole process including before, during and after the usage of public financial resources within the control and use the evaluation results as references for evaluating the duty compliance of each government authority and for future budget making. An appropriate and scientific indicator system is the core element of the performance evaluation. Theoretical analysis, frequency method and expert consultation are commonly used in designing the system of fiscal expenditure performance evaluation. The performance evaluation indicators discussed in this paper has two levels. The first level is the indicators on total fiscal expenditure, expenditure structure and contributions. While the second level covers more specific indicators which are recommended for further improvement after the empirical test on the scale, structure and contribution of fiscal expenditure of Gansu province.4. This paper has reviewed the reform of public fiscal management system and identified that the tax sharing system and related policy adjustments which are based on regulating the classification of financial rights and revenue distribution among governments and include the classification of government revenues, expenditures, responsibilities and transfer payments, have affected both horizontal and vertical equilibrium of government financial capacity, broken the traditional public finance management and mobilized the enthusiasm of both central and local governments. As a result, the fiscal revenues have increased rapidly with the proportion in GDP increased as well. And the proportion of central fiscal revenue in total fiscal revenue has increased generally with the strength on balancing regional financial gap being increased accordingly. However, there still exists a big difference between the designed objective and the reality such as insufficient horizontal income balancing and the shifting of expenditure responsibilities to lower level. Besides this, the tax sharing system and public finance management system are not well established below provincial level in Gansu. The tax sharing system is not standardized and unregulated in each city. And because of financial resources limitation, many cities centralized local financial resources as central and provincial governments did. As a result, the financial resources at county and township levels became even more limited. While, moreover, upper level governments have shifted their responsibilities on public services expenditures to lower level governments. As a result, the financial resources of primary governments are seriously divorcing from rights. Therefore, the improving of public finance system should come from not only the improvement of central government policies and mechanisms, but also from the reform and innovation of local governments. And a regulated and highly effective operation mechanism among governments should be built under joint efforts.5. Transfer payment is one of the basic mechanisms of the tax sharing system which is irreplaceable in balancing the provision of public services among regions, between rural and urban areas and among different social groups. And it can adjust the imbalanced regional economic development directly through the transfer and adjustment of regional incomes. Therefore, many counties in the world use it as a policy tool to reduce regional economic development gap. The analysis of related statistic indicators shows that the current transfer payment mechanism has played a positive role in equalizing local financial resources, suppressing the increasing regional development difference and promoting balanced regional development. And particularly, with the increasing of the proportion to regions of financial difficulty, the transfer payment mechanism has provided good conditions for governments to achieve balanced revenue and expenditure, reduce fiscal deficit, avoid financial risks and better perform government functions. However, because the current transfer payment mechanism was made at a specific period, the mechanism has a transition character with a series of issues such as insufficient mechanism arrangement, inappropriate structure, absence of vertical transfer payment and weak equalization, which need to be further improved. Measures can be adopted such as adjusting transfer payment structure, improving efficiency of the funds, establishing vertical transfer payment arrangement and promoting the reform of transfer payment by classification. 6. According to the study, the author makes policy recommendations from improving the financial management system, specificating the transfer payment system and promoting the fiscal expenditure reform.