GOLD Report I - UCLG

NORTH AMERICA238United Cities and Local GovernmentsUnited States, the role of local governmenthas generally been more pronounced, but inCanada that role still exceeds local governmentpowers in other countries with similarBritish colonial legacies, including Australiaand New Zealand. The relative discretionthat North American local governmentsexercise over their own finances, and themodest supervision by higher governmentofficials also set local government in bothcountries apart from most of their counterpartsworldwide, including in Europe andEast Asia.In both countries local governments have in recent yearsfound themselves less reliant on grants from higher levelgovernments for local revenuesExpenditures. Overall, the proportion ofGross Domestic Product (GDP) devoted togovernmental expenditure in Canada andthe U.S., remains somewhat lower than theaverage for the OECD (Table 2). The localgovernment portion of this expenditure,though it varies considerably, also remainsbelow levels reported for Northern Europe.In Canada and the United States, 18% and27%, respectively, of public expenditurewas distributed to local governments. Thebulk of these distributions is spent on education.Education consumes 57% of all localexpenditure in the United States, and 40%in Canada. Security services such as policeand fire represent about eight percent oflocal expenditures in the United States, ninepercent in Canada. In both countries, localpublic expenditures as a percentage of thetotal public expenditure have also creptupward slightly in recent years.Revenues. Locally raised revenue pays formost educational and security expenditures.As in other former British colonies,such as Australia and New Zealand, theproperty tax remains by far the mostimportant source of local governmentrevenue. In Canada, it has generated 80%to 90% of all local tax revenues. In theUnited States, partly in the wake of taxpayerresistance in some states, other localtaxes, such as sales taxes, income taxes anduser fees grew from 22% of local tax revenuesin 1975 to 28% in 1999. Even so, theproperty tax has continued to supply 72% oflocal tax revenues (OECD 2001).A distinguishing feature of the propertytaxes, as well as most other local taxesin these countries is the comparativelylarge degree of discretion local authoritiespossess in setting rates and inassessing property. Ratings of local taxautonomy consistently show this discretionto be high compared with that seen inother countries. In the United States, thelaws of some individual states restrict localinitiatives to raise taxes or change assessmentsby requiring prior approval by localvoters. In Canada, setting these rates isalmost always left to the discretion of localgovernment but subject to control by theprovinces.In both countries local governments havein recent years found themselves lessreliant on grants from higher level governmentsfor local revenues. In the UnitedStates and Canada, state or provincialgrants for education and other servicesremain considerable but modest by comparisonwith many other OECD countries.The current 39 percent of total revenues inthe U.S. represents a decline from levels ofup to 45 percent in the late 1970s, but hasfluctuated over the 1990s and early 2000s.The current 40 percent in Canada representsa decline from levels as high as 50percent in the late 1970s, down 2 or 3%from levels in the 1980s (OECD 2001).Revenues in relation to tasks. Despitedwindling access to funds from above, aswell as local opposition to tax increases,local governments in Canada and the UnitedStates have assumed more responsibilities.Additional areas of responsibility thatare increasingly being delegated to localgovernments include: environmental regulation,planning, transportation, publichealth, immigration, education, emergency