Local government financing in oromia regional administrations: particular to city administrations

Abstract

The objective of this paper is to examine the revenue rights and expenditure obligations of local governments particularly city administrations. The paper has utilized the qualitative method in describing and analyzing the revenue rights and expenditure obligations of city administration local governments in Oromia Regional state and their impacts on the self-administration of city administrations. This is conducted by taking the sample study of self- governments of city administrations on the base of primary and secondary data obtained through interviews and questionnaires. In Oromia Regional state all districts and some city administrations are recognized as autonomous local governments by the region’s constitution and enactments. Even though the local governments are recognized as an autonomous governments in the region, their expenditure obligations and revenue rights particularly the city administrations are not separately stated by the region’s constitution. And the extent of their revenue rights and expenditure obligations are not clearly known. So, the researcher is motivated to identify these issues. The finding of this paper points out that the revenue rights of city administration local governments in Oromia Regional state are very less and limited to municipal revenues. Even the municipal revenues are not exhaustively collected. But more revenue sources are assigned to the region .The revenue collected by the city administrations only finances the municipality part of the city administration. The other government sectors of the city administrations are financed by the region’s financial subsidies. On the other hand, various expenditure obligations are assigned to the city administrations. Because of this, the local governments cannot cover even quarter of their expenditure obligations by their own revenue sources. Even though city administrations are recognized as autonomous city governments, they are practically dependent on the region’s subsidy to cover their expenditure obligations. Finally, the paper recommends that the revenue capacity of city administrations should be enhanced by expanding revenue sources and separately stated in the region’s constitution and conducted effective transfer system in the absence of sufficient revenue bases in some city administration local governments.