International Encyclopedia of Public Policy and Administration Volume 2

Jay M. Shafritz

• Publisher: Routledge
• Year: 2019
• ISBN:
  9780429724015
• Edition: 1
• Topic: Politik & Internationale Beziehungen
• Subtopic: Politik

This encyclopedia includes entries on the concepts, issues and theories starting with alphabets D to K that define public policymaking, evaluation, management and implementation. It also includes entries on the individuals, commissions and organizations that have contributed to these fields.

E

Earmarked Revenue.

Revenues from a particular public revenue source, a tax or a user charge, which have been legally dedicated on a continuing basis in whole or in part to the finance of a specified public purpose. The dedication, known as hypothecation in the United Kingdom, may be constitutional or statutory, but the commitment extends beyond the life of a single annual appropriation process and normally is permanent.

Many governments specifically dedicate the proceeds of a particular revenue stream to a particular public purpose. For instance, 46 states earmark the proceeds from their motor fuel tax to the finance of their highways (Gold et al. 1987, p. 11). By that earmarking of a benefit-based tax, the states are trying to divide the cost of providing those highways in rough proportion to use of those facilities, inasmuch as to use those highways normally involves the purchase of taxed motor fuel. In some sense, applying the tax to a complementary private good amounts to a synthetic price that must be paid for use of the public facility, but without the need to erect the special barriers that would allow direct charging for those public facilities. Other earmarking may involve prices directly charged for use, for example, park admission revenue dedicated to operation and maintenance of the recreation facility. The earmarked link between payment and use, where such a connection is feasible, would appear to be a logical extension of market principles to government action.

Much of the U.S. social insurance system, including Social Security, Medicare, and unemployment compensation, is financed by dedicated taxes, mostly on payrolls. This longstanding dedication is entrenched in the fiscal system and emerges from decisions to employ insurancelike logic to defend the early development of the system. Dedications outside social insurance—in other words, earmarks in the general budget system—involve much less money but, in practical terms, are more consistent with ideas of using earmarks as a tool in applying user pay principles to government finance.

Across the nation, states earmark less than one-quarter of their revenue, with motor fuel tax dedication to highway finance constituting a major portion of the total, but at least one state earmarks each of the major state taxes (Gold et al. 1987). At the federal level, around 20 percent of revenue outside Social Security and Medicare is earmarked (U.S. General Accounting Office 1990). Some earmarks reflect an effort to accommodate the quasi-price logic, like that of the motor fuel tax linked to highway finance. Other earmarks reflect the exercise of political power in which an interest uses its clout to assure a revenue flow to a particular purpose for many fiscal cycles, as with a California referendum which guaranteed a particular portion of state spending for education. And other dedications may result from a desire to make a politically difficult activity more acceptable. For instance, there is no clear link between state lottery profits and the earmarked programs they often support-primary and secondary education or economic development; because the revenues are used in an attractive way, ethical dilemmas about state support for gambling are overcome.

The Argument for Earmarking

There is considerable dispute about the political and economic advisability of earmarking. Proponents make three major points in support of earmarking. First, earmarking can make part of government operate more like a business in regard to responding to public demands for service. A benefit-related tax or charge levied on users of a service with those revenues dedicated to provision of that service makes agencies react to market forces. When the agency provides what the public wants, it will have the resources for its operations. If the agency gets out of touch with its clients, its revenue base will decline. The agency thus has a real interest in serving the public, regardless of what the independent ideas of the bureaucracy might be. Rather than convince agency heads and legislatures of what the citizenry ought to want, a standard bureaucratic practice, the operation has to respond to what the citizenry actually wants and, more importantly, will pay for through the dedicated revenue base. Revenue flows show the nature of public preferences and the government need not speculate about or try to interpret what the public really wants; the quasi-market data from earmarked revenue provide the signals for supply of government services. In order for this system to provide meaningful signals, however, there must be close complementarity between what is being taxed and the public service being provided. Otherwise, dedicated revenue flows provide no information about demand for service. In other words, dedicating motor fuel taxes for highways may give demand information; dedicating a portion of individual income tax revenue to a similar use would not.

Second, earmarking may thaw political resistance to higher taxes by showing the citizenry exactly how the proposed new revenue will be used. If the voters are skeptical about government in general, possibly believing that services are provided inefficiently or that government is simply too big, they will not be sympathetic to additional taxes. If, however, the new revenue source is tied to a particular service to be delivered to the public and the service will be delivered only if the new revenue source is approved, the new revenue may be approved. This linkage is consistent with ideas about the contractual nature of democratic government (Wagner 1991).

Third, earmarking may assure continuity of funding for particular projects. This dedication accommodates long-range planning and provides some confidence that plans will receive some resources in the future. For instance, several states have dedicated a legally defined portion of a particular tax to the support of local education: thus, that program can be assured of the revenue generated by this source, so the earmark assures a minimum funding even if difficult fiscal conditions exist.

The Argument Against Earmarking

There are important arguments against earmarking, however. First, earmarking reduces flexibility and control in the budget process. The government (or a population, if the law comes from a referendum) in place when the earmark occurs effectively limits the ability of new governments or populations to move resources in response to new or changing public demands. This rigidity may cause the public sector to be artificially inflated; because available resources are tied by the existing earmark, any new compelling problem that might arise can be accommodated only by enacting new or higher taxes, rather than through the reallocation of existing funds to the now more pressing needs. Earmarking without an expiration date, whether originating by referendum or by statute, presumes that the problems at the time of the earmark will continue, forever, to be the most critical that the government will have to deal with. As Burkhead (1956) observed: "earmarking ... represent an attempt, not to introduce an improved pattern of fiscal management, but to protect and isolate the beneficiaries of specific governmental programs" (p. 228).

Second, earmarking breaks the comprehensiveness of the budget. It means that there will not be an even competition for fiscal resources, that there will be no level playing field in the process. This often creates a feast-famine situation in the budget because growth in revenue seldom matches growth in demand for the function. Earmarking sets the rate of the tax. As taxpayer preferences change, collections will be related to taxpayer demand only by coincidence.

Finally, earmarking can delude the public into false security about service provision. Earmarking provides no fundamental protection for a function against the basic fiscal problems of the government and no guarantee that earmarked receipts will not simply replace funds that would have been provided from other sources. Nothing about earmarking can change the fact that revenues are fungible and legislatures are independent. They are likely to regard government revenue as government revenue, to be distributed according to public needs as seen by the legislature at the time that funds are being appropriated.

Conclusion

Nothing protects a government service better than a political consensus on the need for that service. If a consensus exists, earmarking is not necessary to fund a service. And earmarking will not insulate a service from cuts during a fiscal crisis. If the public bureaucracy is wasteful, earmarking simply assures a revenue flow for one section of government to waste. During normal times, earmarking complicates bookkeeping, impedes fiscal flexibility, but makes little fiscal difference. Except for use in some circumstances involving true benefit taxation, in which a tax is on a private good, the consumption of which is complementary to use of a public good–rare conditions in the real world–earmarking is largely a gimmick that at worst represents a trick on the public and at best achieves what general fond budgeting and a responsible legislative leadership would achieve. Earmarking cannot establish credibility in an irresponsible government.

JOHN L. MIKESELL

Bibliography

Burkhead, Jesse, 1956. Government Budgeting. New York: John Wiley.

Gold, Steven D., Brenda Erickson and Michelle Kissell, 1987. Earmarking State Taxes. Denver: National Conference of State Legislatures.

U.S. General Accounting Office, 1990. Budget Issues: Earmarking in the Federal Government. Washington, D.C.: U.S. Government Printing Office.

U.S. Congressional Budget Office, 1993. The Growth of Federal User Charges. Washington, D.C.: U.S. Government Printing Office.

Wagner, Richard E., 1991. "Tax Norms, Fiscal Reality, and the Democratic State: User Charges and Earmarked Taxes in Principle and Practice." In R. E. Wagner, ed., Chargingfor Government: User Charges and Earmarked Taxes in Principle and Practice. London: Routledge.

Ecole National d'Administration (ENA).

The National School of Adminstration created by an ordinance of October 9, 1945, as one component of a broader reform of the French civil service. It is through the ENA that top-level government officials are recruited and trained. Thus, the school is intermediate between advanced university studies and entry into the public service.

It was created in response to both moral and technical objectives. The former relates to the need to democratize the system of recruitment for top-level administrators. Previous systems of specialized competitive examinations led to a form of cooptation and limited recruitment mainly to the Parisian upper classes. One goal was therefore to open up access to the higher ranks of the public service to the entire range of social classes. The second objective was to enhance the skills and competence of these officials. The creation of the ENA is just one in a series of measures put into effect in 1945 to improve the functioning of the French state's central administrations. Other reforms complemented the creation of the ENA, concerning both the preceding phase of university studies and the structures of the public service itself.

At the university level, the aim of the reforms was to develop "the teaching of political, economic, administrative, and social sciences," and the immediate result was the creation of the National Foundation of Political Science (Fondation nationale des sciences politiques, FNSP) and of a new type of school, the institutes for political studies. The presence of these sciences in the traditional university programs was extremely limited, although they were considered necessary to the training of the public service corps. In addition, students at the institutes who were preparing for the ENA entrance examinations could receive scholarships from the state to pay for their studies. Thus, the goals of diversifying the social and geographic origins of the future top public officials, and of improving their basic education, were already pursued in the phase preceding entry to the ENA.

The 1945 ordinances also reorganized the upper echelons of the administration itself. A Center for Advanced Administrative Studies (Centre des hautes etudes administratives, CHEA) ensures the training of top-level public servants, as well as providing individuals from the private sector with administrative training and, subsequently, the possibility to enter the public service (Kessler 1978). Before 1945, the differing standings of the grands corps, or major public service bodies, and central administrations were reflected in extreme variations of employment conditions and statuses. Unifying the recruitment and training of top public officials thus necessitated the unification of these conditions between the corps and the central administrations, as well as between the various central administrations themselves. This quest for unity was consecrated with the creation of a general authority for public service and a permanent council for public administration. An instrument of the government's personnel policy (through the coordination of statutory rules, the development of principles guiding personnel remuneration, documentation, and statistics), the general authority lays the groundwork for an overall public service policy, and particularly that of the upper-level administration. It was seconded by the permanent council for public administration, which was especially concerned with questions of status, recruitment, and discipline. This unification of public service administration was accompanied by the homogenization of statuses among upper-level adminstration officials. Homogenization was sought through the creation of a corps of civil administrators common to all the central administrations, assisted by a new corps of administrative secretaries. The civil administrators corps was to constitute a fourth grand corps, along with the Tax Inspectorate (Inspection des finances), the Council of State, and the State Audit Office (Cour des comptes).

An additional principle laid down in the 1945 texts was that all the corps recruited by the ENA be subject to the same statutory regulations, excepting particular provisions allowable due to the character of a given assignment. This principle was the precursor to the future general public service status (October 19,1946).

Organization and Methods

The defining characteristics of the ENA's organization and methods were set down from the outset. Three points are to be considered: entry to the school, the course of study, and...

Table of contents

• Cover
• Half Title
• Series Page
• Title
• Copyright
• Contents
• D
• E
• F
• G
• H
• I
• J
• K