Tuesday, 12 April 2016

Fiscal Stress

Fiscal Stress

A Fiscal Stress is the pressure of the budget (fiscal) that occur as a result of limited reception area which can provide considerable influence against the 56th public service. Where financial pressures (Fiscal Stress) is becoming increasingly high demands for increased self-reliance due addressed with increasing acceptance of its own to finance the various expenses that exist.

The availability of resources potential and readiness region region became an important factor of success in the era of autonomy. The onset of the financial crisis was caused not cukupnya receipt or revenue in meeting the needs of expenditure. Areas that do not have the readiness in the era of autonomy can experience things the same, where the pressure of the financial (Fiscal Stress) are becoming increasingly high. Financial conditions and measurements fiscal tress emphasizing some issues that need to be considered in the measurement .

Introduction to Fiscal Stress

There is no definition of Fiscal Stress that is universally accepted. So the researchers create their own definition that is capable of answering the purpose of their research taking into account data availability. Many definitions and indicators of Fiscal Stress posed by various studies overseas.

Fiscal Stress in the spectrum of the financial conditions of the public. There are 5 major categories of measurements of Fiscal Stress at the level region (state) that is:

A deficit budget (budget deficits), end of year budget balance that are not backed up ( year-end unreserved budget balance), decreased over the performance of local government receipt (decline in revenues State's performance). The increase in taxes relative to the trend of expenditure (tax increases relative to spending trends) and financial ratios (financial ratios). 

Emphasized that the Fund Balance (the balance of the Fund = difference in acceptance and expenditure) is important in the determination of indicators (size) Fiscal Stress because it is considered to represent the ability of the Government to continuously operate despite economic conditions that are experiencing financial problems though. Local governments that have a Balance of funds (fund balance) still able to survive in operation to absorb the negative impact of the financial problems. In the spectrum of conditions of public finance, Fiscal Stress can be categorized as a condition of public finances are weak (weak financial condition).

The impact of the establishment of regional autonomy law and the promulgation of Act No. 34 of the year 2000 which limits the tax collection area can provide considerable influence against the acceptance region. The availability of potential resources and readiness of the area became an important factor of success in the era of regional autonomy. Financial area, especially on the side of acceptance can be unstable in entering the era of autonomy. The onset of the financial crisis was caused not enough receipt or revenue in meeting the needs of expenditure.

Classify the causes of the incidence of Fiscal Stress into three groups, namely:
  1. Stresses that the role of the economic cycle could cause Fiscal Stress. 
  2. The main cause of occurrence of Fiscal Stress is a condition of such economic growth is declining and the recession. Stresses that the absence of a stimulus to business and industry as the main cause of the decline of the incidence of Fiscal Stress. The decline of the industry make the reduced tax results but services increases, this can cause Fiscal Stress.
  3. Explain that Fiscal Stress as a function of the political and financial factors that are not controlled. The most of the role of inefficient bureaucracy, corruption, high salaries for employees, and high spending to welfare as the cause of Fiscal Stress.

The influence of the original Income Areas against Fiscal Stress

The growth of the PAD has an impact upon the Fiscal Stress an area. It indicated that the growth of acceptance region (in this case the PAD) affects the level of Fiscal Stress in an area. Any change (increase/decrease) of component acceptance area will cause changes to the level of Fiscal Stress experienced by the region.

The components of the sector's acceptance in the budget revenue and Expenditure area (BUDGETS) that influence significantly to Fiscal Stress condition is the proportion of the levy the region, while the proportion of tax areas relatively unaffected, even its proportions is a little climb in the composition of the original Regional Revenue (PAD).

Stress in a region encourage and motivate the area to improve the original income regions in order to reduce dependence on the Central Government. This indicates the existence of a link between the growth of acceptance region (PAD) and the phenomenon of Fiscal Stress.

The influence of capital expenditure against Fiscal Stress

In the face of regional autonomy, local governments should further improve the public service. This effort will continue to undergo repairs all backed by adequate levels of financing areas. Allocation of adequate spending for the improvement of public services is expected to provide reciprocal form of increased acceptance of the original areas, income from levies, taxes or other reception area.

An overview of the empirical level differences that occur after the era of financing autonomous region greater than before. This financing changes more due to the increased demands of public service demonstrated by increased allocation or shift going shopping for the interests of the public service directly, in this case development spending.

Development spending such as the construction of infrastructure in the short term will enlarge the budget area. This if not offset by the reception is quite significant (large) then it could cause Fiscal Stress serious enough, given the Fiscal Stress here reflected the presence of imbalances budget receipts with expenditures. In the long term with improved quality infrastructure is an area in turn have expectations to increase the revenue of the original area in the future. This proves that the growth of the shopping areas can affect the Fiscal Stress.

The influence of economic growth (GDP) of Fiscal Stress

The main objective of fiscal decentralization is the creation of self-rule regions. Local governments are expected to dig into local financial resources. The region has a positive growth rate of PAD have a possibility to have a level of per capita income. PAD correlates positively with economic growth (as measured by GDP) in the region. 

The PAD is one source of reception areas. If the PAD is increased then the funds that are owned by local governments to finance activities in the public service will also be higher. In turn, the level of self-sufficiency of the regions will increase as well. The local Government will take the initiative to further dig the potentialities of the area and boost the economic growth as measured by GDP. The Growth Of The PAD on an ongoing basis will lead to increased economic growth in the region.

Therefore, the region will not work when the area did not experience a meaningful economic growth despite an increase in acceptance of the PAD. When that happens, then it could be otherwise indicated the existence of exploitation of the PAD against the society is excessive without regard to the increased productivity of society itself. Asserts that the success of the improvement of PAD should be measured not only of the amount received.

But also measured by its role to regulate the economy of communities in order to better develop, which in turn can increase the welfare of the communities in the area. In turn hopes to increase revenue of the original region can be fulfilled. In this regard through enhancement of the PAD then economic growth as measured by GDP gives influence on Fiscal Stress.

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