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Success Stories Assistance Areas SEED Reports Contact Information Last updated: 39     DEMOCRATIC GOVERNANCE AND PUBLIC ADMINISTRATION IN POLAND OVERVIEW FINAL REPORT ON THE DGPA PROJECT, 1995 – 1999  The general objective of the Democratic Governance and Public Administration Project (DGPA) was more responsive, effective, and efficient local government in Poland. Initiated in March 1995, the $12.8-million, USAID-funded project concluded on 15 November 1999. The project was implemented by a consortium headed by Development Alternatives, Inc. (DAI), a consulting firm with headquarters in Bethesda, Maryland. To implement the program, DAI maintained an office in Warsaw that housed—at its peak level of operation in 1998—5 expatriate technical advisors and 12 Polish support staff. In addition, the project engaged a substantial number of short-term international and Polish consultants. DGPA’s principal clients were the Ministry of Finance, the Ministry of Education, four national associations representing various sizes of local governments, three university schools of public administration, entities offering training programs for local officials, and several associations of local government professionals. DGPA’s primary focus was reform of the policy framework within which local governments operate, with particular attention to decentralization of public finance. Complementing the policy focus, the project supported initiatives to enhance the capacities of associations of local governments, to develop university programs in public administration, and to improve the quality and availability of in-service training for local officials. It is impossible to understand DGPA without an appreciation for the numerous shifts in the project’s focus. The evolution of the objectives of the project is discussed in Section I of this report against the backdrop of the turbulent course of Poland’s transition from communism to democratic governance and a market economy. The efforts of USAID officials and DGPA advisors to maximize the effectiveness of the project in the face of the unsteady winds of the transition account for most of the apparent vagaries in DGPA’s route. Section II of this report provides an overview of the project’s activities in its three principal elements. I.  Poland’s Transition and the Evolution of Project Objectives Characterization of the focus of DGPA as reform of the policy framework to the end of political and fiscal decentralization is accurate for the final year of the project, but other objectives were more important or shared priority in earlier years. The project was originally conceived, designed, and competed by USAID in 1993 and 1994. The focus was to be on technical assistance to the national government with a view to:  (1) enhancing its capacity to deal with the local governments newly established in the first post-communist-era local elections in May 1990, and (2) promoting decentralization of Poland’s fiscal system. In the early years of the transition, Poland was governed by a Solidarity-backed coalition that, remarkably, found the time and energy to recreate local governments amid the economic turmoil of 1990. But the Solidarity coalition was defeated in the Parliamentary elections in September 1993, and was succeeded by the post-communist SLD party in coalition with the PSL (the Peasants’ Party). Many reformers feared that the new government would attempt to roll back the considerable decentralization achieved during the first three years of the new era. At the same time extensive talks to the newly appointed Government of Poland’s officials revealed that they have not clear concept how to use project for furthering decentralization. As a result, USAID decided that the DGPA contract, originally signed with DAI early in 1995, should be redesigned. Contract modofication was signed in May 1996. Work with agencies of the central government was stricken from the agenda. Its place was taken by a program designed to strengthen the municipal associations – strong supporters of decentralization process, and to work with Polish universities to upgrade graduate education in public administration. During the next year it became increasingly apparent that the SLD-PSL government was not—as reformers and many local officials feared—intent on recentralizing the public sector. In fact, it was clear that the government was listening to local officials and considering seriously (though without notable enthusiasm) a variety of reforms that would have built on those put in place before it came to power. An important indication of the government’s intentions was the establishment in late 1995 or early 1996 of the Department of Local Government Finance (DLGF) in the Ministry of Finance. In the spring of 1996, DGPA and USAID entered into discussions with the Ministry officials on a program of technical assistance to the new department. By the end of the summer, the discussions had produced yet another shift in the DGPA program. The change extended the project to revive technical assistance to the national government, specifically, to build the capacity of the DLGF and, more generally, to promote continued reform of the national legal framework in the interests of decentralization of Poland’s multi-level fiscal system.  The result was that, for the next two years, DGPA had three principal objectives:  strengthening the local-government associations, upgrading university programs in public administration, and reform of the legal structure to further decentralization. In 1997, the original completion date of the project was extended to the end of 1998, with continued, essentially balanced, attention to the three objectives. In September 1998, the project was extended to 30 September 1999, with a final shift of focus to primary emphasis on policy reform. Attention in the other two areas was to be limited to wrapping up activities scheduled to be completed by the end of 1998. A year later, in September 1999, the project was extended by six weeks to its final completion date of 15 November 1999. This extension was intended (1) to permit conclusion of an ambitious program to disseminate the results of DGPA-sponsored activities during the two final years of the project, and (2) to maximize the influence of the project on the design of the new system of financing local governments that is being developed by the government to succeed the interim system enacted in 1998.  II.  The Three Basic Elements of DGPA:  An Overview of the Project Over its lifetime, the core elements of the DGPA program were: a program to strengthen the institutional capacities and sustainability of local-government associations, with special emphasis on enhancing analytic capacities and lobbying skills; technical assistance in support of fiscal decentralization and public administration reform; and financial and technical assistance to training organizations and universities to enable them to offer high-quality programs to local officials and young persons contemplating careers in government, with a view to enhancing the professionalism of public employees. A brief discussion of each element follows. Selected references are provided in context to DGPA reports that provide additional information and details about the specific elements.  The Local Government Associations:  Institutional Capacity and National Policy Dialogue      DGPA worked extensively with the four national local-government associations beginning in the spring of 1996, when the original plan for technical assistance to agencies of the national government was abandoned. The reasoning at the time was that the government was unlikely to embrace continued reform and that, in fact, there was a real risk that it would attempt to reverse important elements of the reforms. Therefore, the highest priority was seen to be preservation of the considerable gains in democratic governance and fiscal decentralization achieved during the first few years of Poland’s transition. The best apparent strategy for pursuit of this objective was perceived to be strengthening the capacities of the newly formed associations of local governments (at least one traces its origins to the years of the Republic before World War II). This would enable them to play an active role in resisting any government effort to roll back the reforms and would, as well, position them to promote their own agendas for continued reform when the political climate at the national level would be more receptive. The organizations were: the Association of Polish Cities (APC), the Association of Rural Gminas (ARG), the Union of Metropolitan Cities (UMC), and the Union of Polish Towns (UPT). DGPA’s support for the organizations included office equipment (computers, local area networks, fax and copying machines), technical assistance, workshops and seminars, U.S. study tours, and financial support for innovative programs for their member governments. Following the creation of powiats by the 1998 reforms, a DGPA grant financed some of the start-up costs of the Association of Polish Powiats, which held its organizational meeting in Nowy Sacz in February 1999. In addition to its assistance to the major organizations, DGPA cooperated in specific projects with several regional associations of local governments, including the Malopolska Association of Gminas. With limited experience and analytic capacities, local governments were at a disadvantage in national policy debates on decentralization in the early years of the transition. In collaboration with the Joint Commission and the major municipal associations, DGPA began working in 1996 to develop a Local Self-Government Analysis System (SAS). The System includes a variety of data-collection and analysis mechanisms intended to improve local budgeting and management and to enhance the ability of local governments and their associations to participate constructively in policy dialogue with the national government. The most important SAS initiative was launched in the summer of 1997 and continued for two years. It was a series of major studies of five local service-sectors commissioned by the APC. The project was financed by DGPA and project advisors assisted in its design and implementation. Contracts for studies of the transportation, elementary-education, social-welfare, health, and culture sectors in selected large cities were awarded by the APC in a competitive procurement to Polish consulting firms. The studies developed and tested survey instruments for gathering and organizing information needed to assess conditions in each sector and to track changes over time. The studies also produced analyses of key issues in each sector and developed tools intended to enhance the abilities of local officials to manage efficiently and to improve the quality of local services. A parallel SAS initiative, "Monitoring Rural Gminas," was undertaken by the ARG in the fall of 1997 with the financial and technical support of DGPA. The ARG project included work in the same sectors as the APC project except for transportation. In addition to the capacity to analyze service delivery and sectoral problems, SAS comprehends systems for electronic mail and other uses of the Internet, including discussion lists for the exchange of information and ideas on governmental management and for coordination and facilitation of lobbying. Under a SAS project called Electronic Forum of Gminas (EFG), a web site was designed for each association and for the SAS secretariat (http://gmina.ids.pl). The EFG project endowed more than 385 gminas with web sites, modems, and training in use of the Internet. DGPA also financed the development costs of a regular Internet edition of Wspólnota, a weekly newspaper dedicated to matters of interest to local government officials.  Fiscal Decentralization and Public Administration Reform An impressive range of responsibilities for public services has been devolved by the national government of Poland since the end of the communist era in 1989. Inauspiciously, however, local governments have been granted authority to raise revenues from their own sources sufficient to finance only a fraction of the responsibilities. Hence fiscal dependency on the national government is high. Devolution of financing powers commensurate with the costs of responsibilities remains to be achieved. Fortunately, broad agreement across the political spectrum appears to exist on the desirability of doing so if local governments are to have the autonomy so essential to accountability and efficiency. The communist authorities abolished Poland’s historic intermediate governments (powiats) in 1975. For the next two decades, no level of government existed between national ministries (and their regional offices in the voivodships) and the nation’s 2,466 municipalities (gminas). As reforms were implemented in the 1990's, the resurrection of a countrywide system of powiats took on symbolic importance as the final step in reversing the structural contrivances of the communist era. As a practical matter, too, it became increasingly apparent that an intermediate level had to be created if the central government was to devolve responsibility for such functions as secondary education and specialized medical services to local governments outside of the nation’s large cities. (These functions, among others, were devolved under negotiated agreements with the 46 largest cities during the years 1994–96.) These considerations led USAID and DGPA in late 1995 to launch a program of support for an innovative experiment in Nowy Sacz, a rural area in the foothills of the Tatra mountains near Poland’s border with Slovakia. There, at the initiative of local governments, a Public Services City Zone (PSCZ) was created in early 1997 to test the practicability of an intermediate level of government. The results were promising and, by the end of the year, two others had been formally established (in Naklo and Polkowice), and others were in the process of being established. The popularity of these grass-roots initiatives was a significant factor in the enactment in 1998 of legislation creating a complete system of powiats throughout the country.  a.  Building the capacity of the Department of Local Government Finance From November 1996 until the conclusion of the project, DGPA advisors worked with the Ministry of Finance on the design and implementation of fiscal decentralization. Initially, this activity took the form of cooperation with the Ministry’s Department of Local Government Finance (DLGF). A key factor in this cooperation was the placement of one of the DGPA advisors in the offices of the DLGF. His daily presence within the Ministry provided the project with a continuous flow of information on developments in the Ministry and on matters involving various international organizations—including the World Bank, the International Monetary Fund, and the European Bank for Reconstruction and Development—that were also cooperating with the Ministry on fiscal reform. In addition to acquiring an indispensable understanding of developments in the Ministry and providing day-to-day liaison with key players in the reform process, the role of the advisor located in the Ministry included support for DGPA’s objective of developing the analytical and computational capacity of the DLGF. This role included providing department staff with one-on-one training in spreadsheet analysis and selected basic issues in public finance. One of DGPA’s most important contributions to the capacity of the department was the provision of extensive computer resources, including such ancillary equipment as printers and copying machines. Another important vehicle for upgrading the capacity of the DLGF was a series of study tours in which department staff participated. The typical tour involved a dozen participants, including—in addition to DLGF staff—officials from other offices in the Ministry, members of Parliament, and representatives (usually mayors) of the local government members of the Joint Commission. The tours exposed the participants to new ways of formulating intergovernmental transfers, to the variety of fiscal structures and intergovernmental fiscal relations among the states in the U.S., and to the local income taxes and equalization system of Sweden. Among other initiatives to improve the capacity of DLGF was DGPA’s support for development of an automated data-collection system in cooperation with the national government’s Regional Auditing Agencies (RIO’s). The system was designed and installed during the first half of 1999. In August and September, 1999, DGPA advisors helped design the specifications for the hardware to implement an even-broader upgrading of the system for collection of, and compilation of data from, the detailed quarterly financial reports all local governments are required to file (the advisors were never able to persuade the Ministry to reduce the frequency of these reports, which are quite burdensome to prepare). DGPA then managed a successful competitive procurement of the IT equipment needed by the RIO’s for implementation of the new system, which is expected to be put in place early in 2000. Overall, these efforts enabled DLGF to play an important role in the implementation of reforms of the structure of local government in 1999 and have positioned it to be a major player in the design and implementation of financial reforms in 2000 and succeeding years.  b.  Technical Assistance to Policy Reform:  Ministry of Finance In 1997, the advisors provided principal staff support for the Local Government Finance Working Group of the Joint Commission of National and Local Government. Among the most important reforms promoted by the advisors and incorporated by the Working Group in its report were a local individual income tax (administered as a supplement to the national tax) and replacement of the current, area-based property tax with an ad valorem tax. Both proposals were endorsed by the major local government associations. The Working Group also embraced the advisors’ proposal for including estimates of local needs as well as revenue-raising abilities in the allocation formula of the "general subvention," a program of equalizing general fiscal assistance. Following the Parliamentary election in October 1997, the new AWS-UW coalition government made structural reform of government one of its highest priorities. Beginning that December, DGPA advisors found themselves deeply engaged—principally with the Ministry of Finance but with other ministries as well—in an unusually chaotic process of design and implementation of a far-reaching program of reform. The proposals submitted to the Parliament in the spring of 1998 were designed to ensure that local governments would be financed principally by revenues from their own. When the smoke cleared, the reforms included the creation of two new levels of local government—consisting of 374 powiats and 16 self-governing voivodships (the total number of voivodships, or regions, was reduced from 49) and the devolution of substantial expenditure responsibilities to each. Regrettably, the government’s proposals for a local income tax and an ad valorem property tax were set aside by the Parliament in favor of a temporary, two-year scheme for financing the responsibilities by grants-in-aid. The reform confirmed the de facto powiat status of the nation’s 46 largest cities, to which powiat responsibilities had already been devolved in the mid-1990's. In a political compromise to cushion the slash in the number of voivodships, the Parliament conferred powiat status on another 19 cities (gminas) that lost their status as capital cities of the voivodships that were eliminated. This left 308 entirely new powiat jurisdictions and the 16 self-governing voivodships scheduled to come into being on 1 January 1999. An urgent priority in implementing the reforms, therefore, was calculation by the Ministry of Finance of an initial budget for each of the new jurisdictions. A set of algorithms for the estimation of these budget was prepared by a grantee in cooperation with DGPA advisors. The proposed formulas for the 10 major responsibilities assigned to the new levels of government were presented to the Vice Minister of Finance for Fiscal Reform in October 1998; several of the algorithms were used in the preparation and execution of the 1999 budget. In 1999, DGPA advisors worked with the Ministry of Finance and with several Polish grantees to monitor the implementation of the reforms and to lay the groundwork for design of the permanent financing system that will succeed the temporary arrangements when they expire in 2001. The advisors and the grantee with which they had worked on the algorithms in 1998 continued collaboration in 1999 evaluating the appropriateness of the algorithms actually used for the first year of the reforms and designing improved versions. Not long before DGPA closed its doors, the director of the grantee organization (a former voivode) was designated by the Minister of Finance as his senior advisor responsible for the formulation of the government’s proposals for the permanent financing system for local governments. DGPA’s support for reforms that would increase reliance of local governments on revenues from their own sources included short-term technical assistance missions by U.S. and Canadian experts on the individual-income and real-property taxes to conduct seminars and brief ministry officials and Parliamentarians. In 1999, DGPA contracted with Barents Group LLC to develop statistical models of the property markets in five cities and to simulate the impacts of conversion of the areal-based tax to a capital-value system. A grant to the Kraków Real Estate Institute enabled it to collect and process the data necessary to estimate the models. The study was completed in October and the results were presented at a two-day conference in Warsaw the first week of November. In October 1999, DGPA organized and conducted a week-long visit to Sweden for a group of local mayors, officials from the Ministry of Finance, and members of Parliament to study that country’s local individual income taxes and its programs for equalization of local fiscal capacities. c.  Technical assistance to policy reform:  the Ministry of Education DGPA advisors worked intensively in 1999 with the Ministry of National Education (MEN). This cooperation was carried out under a formal agreement signed on 20 April 1999. The agreement provided for the establishment of a joint Working Group on the Coordination of Research on Education Reform. DGPA advisors had principal technical responsibility for the preparation of a new, unified system for the distribution of the education subvention to local authorities. This involved redesign of the formulas by which the education subsidy is allocated to local governments—to gminas for elementary education and to powiats for secondary education. An indication of the policy significance of the subvention is that it accounts for 13 percent of the national budget. The new system, largely developed by DGPA advisors, has been approved by the Joint Commission and adopted by the government. It will take effect when the 2000 budget is enacted.  d.  Technical assistance to policy reform:  local governments’ access to capital The advisors also developed strategies for monitoring the growth of the emerging market for local government debt. Other important activities of DGPA advisors involved efforts to reduce legal barriers to development of the municipal capital market and assist the Polish Securities and Exchange Commission (SEC) in preparing new legislation relating to municipal bonds. The legislation, which is expected to be enacted by the Parliament by the end of 1999, will make it possible for local governments and public utilities to issue revenue bonds for the first time. It will also ease the requirements for the issuance of publicly traded municipal securities. Professionalism of Public Employees:  Training and Education in Public Administration Poland’s National School of Public Administration (NSPA) was established many years ago to train an élite corps for service in the national government. Until recently, no independent institutions provided training and education for local officials. DGPA began working in 1996 with the Malopolska School of Public Administration of the Kraków Academy of Economics and the Szczecin School of Public Administration, and in 1998 with the Faculty of Political Science of the Marie-Curie Sklodowska University in Lublin to design curricula, train faculties, and develop student services. The focus of the effort was pre- and in-service programs for local managers in such fields as public finance, service delivery, economic development, and personnel management. A crowning achievement of DGPA support for higher education in public administration was the establishment in June 1999 of the Association for Public Administration Education. The primary objectives of the association are to facilitate cooperation among universities and schools of public administration, disseminate the results of the cooperation with DGPA to universities throughout Poland, and to carry forward the innovative progress made during the cooperation with DGPA. In the fall of 1999, the Association was actively involved in Joint Commission deliberations on education reform. During the communist era, many positions in local government were filled on the basis of politics rather than professional competence. To strengthen professionalism and promote development of qualification and performance standards, DGPA worked with two associations of local officials—the Association of Economic Development Professionals and the Forum of Gmina Secretaries. Particular attention focused on improving the capacities of the associations to develop work plans, evaluate performance, and respond to member needs. With these improved skills, the associations are now providing effective assistance to their members. In anticipation of the inauguration on 1 January 1999 of the nationwide system of powiats (65 urban gminas invested with powiat responsibilities and 308 new powiats outside of the larger cities), DGPA financed the preparation of four training manuals for management-level powiat officials. When the manuals were ready, DGPA organized training workshops that were attended by 1,350 (out of a possible 1,550) directors of powiat offices in the four service sectors addressed by the manuals. The training, which was delivered and administered by associates of the Malopolska School of Public Administration, and the Foundation in Support of Local Democracy, was developed in cooperation with the Ministry of Internal Affairs and Administration and the Chancellery of the Prime Minister. It was the only such training organized nationwide, prior to starting date of the reform. DGPA also worked with the Association of Economic Development Professionals to prepare a manual of economic-development guidelines for gminas. The Association developed, implemented, and evaluated the results of an extensive survey whose results were used to enrich the realism and depth of the manual. Back to Top

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