Analysis Of The Impact Fiscal Decentralization Act On Basic Public Service Expenditure

"The key to country's solidarity is to benefit people's livelihood," the ultimate goal of economic development is to benefit the public, and the construction of public financial system also launched around the people's livelihood. Fiscal decentralization is an important policy to stimulate the rapid development of the local economy, also leads to nearly 20 years of rapid growth in revenue. However, economic growth incentives inherent in fiscal decentralization led local governments pay to too much emphasis on economic development functions while ignoring their public service responsibility and this has largely led to the present shortage of basic public services supply situation. It has no mean that fiscal decentralization has become obsolete, as has been widely accepted around the world; fiscal decentralization has an irreplaceable property with respect to centralization. So our research is starting from the financial system, analyzing the actual effect of decentralization on the public service spending of local government, and whether this effect is restricted by other factors, or can be improved by policy.Preliminary analysis on the basis of the literature to determine the direction of this study, then comprehensively analysis the actual impact of decentralization from the income and expenditure decentralization dimensions. From the specific situation in Anhui Province, the decentralization of revenue and expenditure decentralization is not consistent, further analysis showed that:in incomes Decentralization, compete around tax revenues and economic growth would inhibit local government service expenditure, the effect of income decentralization is negative, which means the higher the income decentralization, expenditure structure of local government finances more twisted, the lower the basic public services; the same time as the expenditure is taken into account from the central Government transfer payments, expenditures may be related to the degree of decentralization of local government basic public services spending levels showed positive correlation. In the theoretical analysis, we use Besley model to make further standard analysis, while adding more practical considerations to make the conclusions more convincing. The results showed that:fiscal decentralization has an important impact on the supply of basic public services. In theory, the higher degree of decentralization, the more spend in public services. But the impact is constrained by many factors, the checking mechanism will distort the expenditure structure of local government, and the impact of transfer payments will depend on the specific form, special transfer payments would increase spending levels. Finally, the empirical studies of 57 counties (cities) in Anhui Province shows:income decentralization has a significant negative impact on local basic public services spending, while expenditure decentralization shows a positive relationship. Distorting effects on expenditure structure and the checking mechanism is an objective reality, this is an support and confirm of former judgement.The basic conclusion of this study, the analysis of Anhui shows that decentralization is an important factor in basic public services spending, and by using the assessment mechanism, competition and transfer payments and other means can be adjust this effect to reach ideal state. Meanwhile according to research findings, combined with the specific circumstances of Anhui Province, we make a few targeted policy recommendations:to foster local tourism tax resource, special transfer payments to support the local public service spending, confirm budget reform and improve security spending effectiveness. Finally, we also have several suggests for the central government:in order to equal the rights and responsibilities of local government, divide of responsibilities and enhanced financial resources; appraisal inclusion of public service, with the weakening of economic growth incentives; enrich transfer payment system, hardening livelihood expenditure to improve efficiency in the use of transfer payments.