Managing city finances

Managing city finances

Jakarta Governor Surjadi Soedirdja submitted to the City
Council on Wednesday his proposal for a 5.18 percent increase in
the administration's spending for the year starting April 1.
Later on, he said the overall budget is only a fifth of what is
ideally needed to manage a city as big and as complex Jakarta,
currently home to over nine million people. Of course, given the
city's limited financial resources, the governor cannot be
expected to have his way.

But his point makes it difficult for the City Council, which
has to approve the administration's spending plans, to deny him
the modest increase he is seeking. Considering that the Central
Government is gunning for an 11 percent increase in the current
fiscal year, Surjadi's request looks moderate and realistic.

In his proposal, the governor is proposing total spending of
Rp 3.37 trillion ($1.46 billion), including Rp 1.39 trillion in
public sector investment, in the 1997-98 fiscal year. This would
be financed by Rp 2.03 trillion to be raised locally, and the
rest would come from Central Government contribution.

In his budget speech, Surjadi laid out his priorities. Sectors
that will receive the highest budget allocations include the
administration's personnel (mainly for skill upgrading), housing
and settlement, regional development and transportation.

What is significant about the administration's finances is its
drive to become financially more self-reliant, in spite of
pressures to continue raising spending. In 1997-98, locally
generated revenues are envisaged to account for 60 percent of the
administration's total finances. This is not only easing the
burden on Central Government, but it also means greater autonomy
on how the City administration runs its affairs. We have often
heard how the governor has too many bosses in the central
government, whose interests need not necessarily be the same as
those of residents. By relying less on Central Government
funding, let's hope the governor can once in a while turn down
any special request or order from officials that go against the
common interest of his residents.

Greater financial self-reliance also means that more and more
of the city's spending plans will have to be funded by residents,
chiefly in the form of local taxes. The House of Representatives
is currently deliberating a government-sponsored bill that will
simplify local taxes and allow local administrations to impose
new taxes. These include a maximum of 5 percent gasoline tax and
a maximum 20 percent tax on land-water exploitation. Other taxes
permitted under the proposed law are 10 percent for street
lighting tax, hotel tax and restaurant tax; 25 percent for
billboard tax; and 35 percent for entertainment tax. All these
new taxes offer tremendous potentials for the city administration
to bolster its revenues in the future. As long as the
administration can convince that every rupiah collected is spent
effectively, residents have no reason to refuse.

With more and more of the city's spending now being
underwritten by residents, this calls for greater accountability
on how the administration spends every rupiah it collected from
the public. The administration must also work harder to meet and
to respond to the needs of residents and address their
complaints. In short, the administration must be prepared for a
more critical and demanding public.

While we see no reason for the City Council not to endorse
Surjadi's request for the 5.18 percent budgetary increase, we
hope council members will give the proposal a thorough reading,
making sure that the every rupiah collected is spent effectively
and efficiently, and that at the end of each year, every single
rupiah is accounted for.