A thorough public sector reform is required…
The core challenge faced by the government is to substantially enhance the quality and efficiency of public sector service delivery in a wide range of areas, while reducing its fiscal costs. The dilemma is not insurmountable in the Slovak context because of the very large inherited inefficiencies built into public spending. The new government is engaged in a fundamental overhaul of the public spending system on the basis of reforms in three areas:
the introduction of strategic and performance based budgeting,
decentralisation and subsidiarity in the provision of public services, and
a thorough transformation of the public employment regime.
These ambitious measures have been launched only recently and are in their teething phase. It is important to implement them effectively in order to maximise their benefits, increase their credibility and exploit their synergies.
…including strategic and performance‑based budgeting…
Fiscal consolidation should not be based uniquely on spending limits. The most needed adjustments and improvements in government services, public employment and social transfers do not automatically follow from budget cuts. OECD countries’ and Slovakia’s own recent experience shows that across‑the‑board cuts may bring about undesirable consequences such as infrastructure attrition, adverse selection in the quality of civil servants, and increased room for corruption in the conduct of public affairs. Targeted reductions in service capacities in lower priority areas are preferable, even if designating such targets is politically more difficult than across‑the‑board cuts. Strategic and performance‑based budgeting are essential tools for this purpose and the government plans to generalise them in the forthcoming budgets, on the basis of lessons from ongoing pilot experiences. Strategic and performance‑based budgeting should be utilised more actively to reallocate spending, from lower to higher priority areas.
…decentralisation and subsidiarity in the provision of public services…
Following a set of laws voted in 2001 and further executive decisions in 2003, Slovakia is making a leap forward in regionalisation. Responsibility for providing the main public services, including education, health, railway and social welfare services, have been transferred to sub‑central governments as of 2003. Sub‑central layers are still funded by the central government, but transfers will be less and less tied to specific uses, and funding will be secured mostly by bloc grants from 2005. This is expected to give regions and municipalities incentives for savings and service improvements so that the central government will be able to scale back overall funding in line with the efficiency gains generated by decentralisation. While this ambitious reform offers opportunities for expenditure rationalisation, it also presents risks. Sub‑central governments may become more effective than the central government in the provision of services but only if they remain fully accountable to local constituencies and are liberated from supplier interests. The central government should define and enforce core performance standards to ensure the quality of the public services across the territory, but needs to avoid micro‑management to prevent weakening the accountability of sub‑national governments. Sub‑central governments are subject to quite detailed fiscal disciplines specified in the decentralisation laws, and these disciplines must be strictly enforced, including with respect to possible off‑budget loopholes. Full fiscal transparency at sub‑central levels through regular procedural and functional audits must be ensured. Perhaps most importantly in a longer‑term perspective, user satisfaction and service performance should be closely monitored across regions and the comparative information made public. The development of a “culture of transparency” through this means would, over time, substantially ease the conflict between the goals of decentralised responsibilities and globally sound public finances.
…and an overhaul of the public employment regime
A new public employment regime has been put in place to provide for quantitative and qualitative changes in public sector employment. The new State Service Act prescribes the needed qualifications and the contractual provisions for 36 000 central administration jobs, and a Civil Service Act specifies corresponding provisions for more than 400 000 general government work positions, including in sub‑central governments. Detailed procedures for the verification and certification of the required skills and qualifications, with related adjustments in the contracts offered, are meant to facilitate the firing of unqualified persons and their replacement by new recruits. The early experience with the implementation of this framework has been disappointing. The examinations and tests could not be implemented, and no significant employment adjustment has been recorded on the basis of the new provisions. The regionalisation reform interferes somewhat with the enforcement of the new regime, as sub‑central authorities have discretion over their own personnel management. In the short‑run authorities need to evaluate the obstacles to the implementation of the new laws, which are fundamentally aimed at overcoming corruption and nepotism in public sector employment. At the same time, care must be taken to assure that these laws do not become barriers to flexibility and adaptation in the public sector to changing requirements.
Education services and employment
1. As per cent of the labour force in the category.
2. As per cent of unemployed in the category.
Source : Statistical Office of the Slovak Republic and OECD.
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