White Paper on Local Public Finance, 2007 FY 2005 Settlement

Ministry of Internal Affairs
and Communications
FY 2005 Settlement
White Paper on Local
Public Finance, 2007
Illustrated
The Role of Local Public Finance
................................................ 1
The State of Local Public Finance
(FY 2005 Settlement)
Outline of FY 2005 Account
Settlement.................................... 4
Scale of Account Settlement ......... 5
Revenue and Expenditure
Settlement.................................... 5
Revenue ....................................... 6
1 Revenue Breakdown .................. 6
2 Revenue Trends........................... 7
3 Local Taxes .............................. 8
4 Local Allocation Tax ..................... 11
Expenditure 13
1 Expenses by Function .................. 13
2 Expenses by Character ............... 16
Flexibility of the Financial
Structure .................................... 19
1 Ordinary Balance Ratio ............... 19
2 Real Debt Service Ratio and Debt Service
Payment Ratio Used for Permission to Issue
Local Bonds ................................. 20
Outstanding Local Government
Borrowing (Ordinary Account) 21
1 Trends in Outstanding Local
Government Borrowing ............... 21
2 Outstanding Borrowing of Local
Finance .................................... 22
Local Public Enterprises 23
1 Ratio of Local Public Enterprises ...... 23
2 Number of Businesses Operated
by Local Public Enterprises 24
3 Scale of Financial Settlement 24
4 Management Conditions 25
Trends and Issues in Local Public
Finance
1 Promotion of Decentralization
Reform 26
(1) Enactment of the Law for the
Promotion of Decentralization
Reform ................................. 26
(2) Promotion of Municipal Mergers
................................................ 27
2 Promotion of Administrative Reform
................................................ 29
(1) State of Efforts Through Intensive
Reform Plans ........................ 29
(2) Further Promotion of
Administrative Reform ............ 30
3 Promotion of Information Disclosure
................................................ 33
4 Revision of Reconstruction
Legislation ................................. 38
5 Reform of Local Allocation Tax
Computation .............................. 40
(1) Introduction of New Type of
Local Allocation Tax ............... 40
(2) Support Program for Local
Governments Making Efforts...... 431The Role of Local Public Finance
Prefectures and municipalities (cities, towns, and villages) are principal actors in
various administrative areas, including school education, welfare and public
health, police and fire services, and the construction of such public works as
roads and sewerage systems. They play a major role in national life.
This brochure will introduce the state of local public finance, which is an
assemblage of the finances of individual local governments, with particular focus
on the state of settlements for fiscal 2005 and efforts toward financial soundness
of the local public entities centered on the ordinary account.
Classification of the Accounting of Local Governments
Applied in the Settlement Account Statistics
Although the accounts of local governments are divided into general accounts and special
accounts, the account classification of each local government is not uniform. Therefore, we have
adopted a uniform method in the settlement account statistics by classifying accounts as an
ordinary account, which covers the general administrative sector, and other accounts (public
business accounts). This enables us to clarify the financial condition of local governments as a
whole and to make a statistical comparison among local governments.
Accounts of Local Governments
Ordinary
account
Account of general administrative sector
Other
accounts
(Public business
accounts)
National health
insurance
account
Elderly medical
care account
Nursing care
insurance
account
Public enterprise account
Water supply business, Transport business,
Electricity business, Gas business, Hospital,
Sewerage business,
Residential land development projectEtc.Etc.
Ordinary account
51円.7663 trillion
(10.3%)
Local government
Net export of financial
goods and services
6円.5020 trillion
(1.3%)
60円.7979 trillion
(12.1%)
Government sector
114円.9252 trillion
(22.8%)
Central
government
21円.2415 trillion
(4.2%)
Private sector
381円.9396 trillion
(75.9%)
Household sector
303円.9192 trillion
(60.4%)
Enterprise sector
78円.0203 trillion
(15.5%)
Social security fund
32円.8859 trillion
(6.5%)
Gross domestic
expenditure
(nominal)
503円.3668 trillion
Gross Domestic Expenditure and Local Public Finance2Looking at the scale of local public finance to gross domestic expenditure, we see that the ratio
of the local government sector is 12.1%, which is about three times larger than the ratio of the
central government.
How large is local public finance compared with central
government finance?TheRoleofLocal
Public
Finance
Judicial, police and fire
service expenses
Land development
expenses
Commercial and
industrial expenses
Land preservation
expenses
Public welfare
expenses
(except pension expenses)
Housing expenses,etc.Disaster reconstruction
expenses, etc.
Agriculture, forestry
and fishery industry
expenses
Defense expenses
Pension expenses
(of public welfare expenses)
General administration
expenses, assembly
expenses, etc.
Public health centers, garbage and
human waste disposal, etc.
Elementary and junior high schools,
kindergartens, etc.
Community centers, libraries,
museums, etc.
Urban planning, roads and
bridges, public housing, etc.
Rivers and coast
Child welfare, elderly care
and welfare, livelihood
protection, etc.
Family register,
basic residents’
register, etc.94%85%77%79%70%60%63%63%55%46%62%77%4.0%10.3%2.8%4.3%
12.0%5.1%2.0%
16.9%1.5%0.7%1.9%3.2%4.2%8.2%6%15%23%21%30%40%37%38%45%54%37%100%100%23%
Sanitation expenses
National ratio
Local ratio
Ratio of
expenditures
by function
Shares of National and Local Governments in Main Expenditures by
Function (final expenditure base)
School education
expenses
Social education
expenses, etc.3In which fields are local expenditure ratios high?
Local expenditure ratios are higher in the areas that have a close relationship with our daily
lives, such as public health and sanitation, school education, social education, and police and
fire services.4Outline of FY 2005 Account Settlement
1. Decline in expenditure due to decreases in personnel
expenses, ordinary construction expenses, etc.
Total expenditure declined for the sixth consecutive year to 90.6973 trillion.
Real expenditure, excluding special causes involving the Large Earthquake
Rehabilitation Fund, amounted to 89.8004 trillion, a decline of approximately
1.1421 trillion.
The reasons for this decline were, among other things, decreases in personnel
expenses (down 349 billion, or 1.4%, compared with the previous fiscal year)
and ordinary construction expenses (down 1.2324 trillion, or 7.5%).
The State of Local Public Finance
(FY2005 Settlement)TheStateofLocal
Public
Finance(FY2005
Settlement)2. Decline in revenue
Total revenue declined for the sixth consecutive year to 92.9365 trillion.
While local tax revenue increased by 1.2656 trillion (up 3.8% over the
previous fiscal year), national treasury disbursements (down 4.6%), local bonds
(down 16.2%),* and so on declined.
*Due to declines in emergency financial countermeasures bonds, ordinary construction
expenses, etc.
3. Increase in number of deficit organizations
The number of organizations with a deficit in their real balances increased by
1 from fiscal 2004 to reach a total of 26 (2 prefectures [Hokkaido and Osaka] and
24 municipalities).
4. Financial structure remains highly rigid
The ordinary balance ratio remained at a high level of 91.4%, almost the same
as the previous fiscal year.
The debt service payment ratio (used for permission to issue local bonds) was
11.7%, the same as the previous fiscal year.
The amount of outstanding borrowing that should be shouldered by the
ordinary account remained at a high level of approximately 201 trillion.51009590850
(\ trillion)
(Scale of account settlement)
FY1992 FY2001 FY2002 FY2003 FY2004
91.4238
89.5597
99.8878
97.6738
100.0041
97.4313
97.4313
97.1702
94.8394 94.8870
92.5818
93.4422
91.2479
Total revenue
Total expenditure
FY2005
92.9365
90.6973
FY1997
92.0376
92.0376
89.8004
89.8004
97.4317
94.8390
94.8390
94.8390
92.5814
92.5814
93.1372
93.1372
90.9425
90.9425
90.9425
As a result of the fact that, on the revenue side, local bonds and national treasury disbursements
declined and, on the expenditure side, personnel expenses, ordinary construction expenses, and so
on declined, both revenue and expenditure decreased for the sixth consecutive year. Excluding
special causes involving the Large Earthquake Rehabilitation Fund, revenue and expenditure
declined from the previous fiscal year by 1.0996 trillion and 1.1421 trillion, respectively.
Note: The lower column shows amounts excluding special causes involving the Large Earthquake Rehabilitation Fund.
Scale of Account Settlement
Although the real single fiscal year balance showed a surplus, the number of real balance deficit
organizations increased.
Revenue and Expenditure
Settlement
Category
Real single FY
balance
Single FY
balance
Real balance
FY 2004
11.7 billion
127.6 billion
1220.8 billion
FY 2004
1,528 (2,498)
1,330 (2,288)
25 (26)
923 (1,693)
876 (1,644)
26 (28)
Settlement figure No. of deficit organizations
FY 2005
429.2 billion
237.0 billion
1316.4 billion
FY 2005
Notes:
1. Real single FY balance: Calculated by adding reserves to the fiscal adjustment fund and advanced redemption of local loans to the single
FY balance and subtracting the used part of the fiscal adjustment fund.
Single FY balance: Calculated by subtracting the real balance of the previous fiscal year from the real balance of the fiscal year concerned.
Real balance: Calculated by subtracting the revenue resources that should be carried over to the next fiscal year from the income-
expenditure balance.
2. The number of deficit organizations does not include partial administrative associations or wide-area local public bodies; the figures in
parentheses are the number of organizations including partial administrative associations and wide-area local public bodies.
3. The number of organizations with a real balance deficit excludes entities with a deficit resulting from discontinued settlement (entities
with no income or expenditure in the account settlement period because of a merger, etc.).6General revenue
resources
28,981円.9 billion
(57.4%)
Local taxes
17,667円.0 billion
(35.0%)
Municipalities
Total
50,478円.6
billion
Local transfer tax
995円.4 billion
(2.0%)
Special local grants
645円.4 billion (1.3%)
Local allocation tax
7,737円.1 billion
(15.3%)
Other general revenue
resources
1,937円.0 billion (3.8%)
National treasury
disbursements
5,226円.0 billion
(10.4%)
Local bonds
4,719円.0 billion
(9.3%)
Other revenue
resources
11,551円.7 billion
(22.9%)
(0.0%)
General revenue
resources
28,087円.0 billion
(57.7%)
Local taxes
17,137円.4 billion
(35.2%)
Prefectures
Total
48,694円.5
billion
Local transfer tax
853円.6 billion
(1.8%)
Special local grants
872円.6 billion
(1.8%)
Local allocation tax
9,221円.6 billion
(18.9%)
National treasury
disbursements
6,583円.6 billion
(13.5%)
Local bonds
5,709円.5 billion
(11.7%)
Other revenue
resources
8,314円.4 billion
(17.1%)
Other general
revenue resou rces
1.9 billion
(0.0%)
Other revenue
resources
15,620円.5 billion
(16.8%)
Local taxes
34,804円.4 billion
(37.4%)
Local bonds
10,376円.3 billion
(11.2%)
National treasury
disbursements
11,809円.6 billion
(12.7%) Local allocation tax
16,958円.7 billion
(18.2%) Special local grants
1,518円.0 billion
(1.6%)
Local transfer tax
1,849円.0 billion
(2.0%)
General revenue
resources
55,130円.1 billion
(59.3%)
Net total
92,936円.5
billion
Revenue Breakdown (FY 2005 settlement)
Revenue
Where does the funds for local government activities come
from?
Revenue Breakdown1The revenue of local governments comes mainly from local taxes (about one-third), local
allocation tax, national treasury disbursements, and local bonds, in that order.
Local transfer tax Collected as a national tax and transferred to local governments. Includes local road transfer tax, etc.
Special local grant A revenue source with the character of a substitute for local taxes, introduced to supplement a part of the decrease of local
tax caused by a tax cut since FY 1999 and grants from the central government to local governments as a result of a revision of national treasury
subsidies.
Local allocation tax An intrinsic revenue source shared by local governments in order to adjust imbalances in tax revenue among local
governments and to guarantee revenue sources so that local governments in whatever region can provide a certain level of administrative
services. Calculated as a certain ratio of five national taxes. (See page 11 for details.)
National treasury disbursements A general name for funds disbursed from the central government to local governments for specified uses.
Local bonds The debts of local governments for which fulfillment continues for more than one fiscal year.
General Revenue Resources
Revenue resources for which the use is not specified, like local taxes and the local allocation tax, are called general revenue
resources. Here, the total of local taxes, local transfer tax, special local grants, the local allocation tax, and so on is treated as the
general revenue resource. It is extremely important for local governments to ensure sufficient general revenue resources in order
to handle various administrative needs properly.
Notes:
1. The figures here are mainly for the ordinary account. (For the accounts of public enterprises, such as water supply and sewerage businesses,
transportation businesses, and hospitals, see page 23.)
2. The figures for each item are rounded off under the given unit. Therefore, they do not necessarily add up exactly to the total.TheStateofLocal
Public
Finance(FY2005
Settlement)FY1992Net Total 91円.4 trillion
99円.9 trillionFY1997FY2004
Local transfer tax 2.1%
Local taxes 37.8%
Local allocation tax 17.2%
National treasury
disbursements
14.1%
Local bonds 11.2%
Other revenue
resources 17.7%
(16円.2 trillion)1.1%36.2% 17.1%
14.3% 14.1% 17.2%
General revenue resources 57.0% (52円.1 trillion)
54.4%(54円.4 trillion)
20.1%
97円.2 trillion0.7%13.5% 13.7% 16.8%
56.0% (54円.5 trillion)0.9%18.2%
(17円.0 trillion)
93円.4 trillion
1.2% (1円.2 trillion)
35.9%
13.2%
(12円.4trillion)
13.2%
(12円.4trillion)
17.1%
(15円.8 trillion)
56.5%(52円.8 trillion)
1.2% (1円.1 trillion)
19.0%
94円.9 trillion0.7%34.4%
13.8%
(13円.1 trillion)
14.5%
(13円.8 trillion)
16.4%
(15円.6 trillion)
55.3% (52円.4 trillion)1.1%FY2005FY2003FY2002FY200120.3%
100円.0 trillion0.6%35.5%
14.5% 11.8% 16.3%
57.4% (57円.4 trillion)
Special local grants 0.9%
18.2%
(17円.0 trillion)
92円.9 trillion
2.0% (1円.8 trillion)
37.4%
12.7%
(11円.8trillion)
11.2%
(10円.4trillion)
16.8%
(15円.6 trillion)
59.3% (55円.1 trillion)
1.6% (1円.5 trillion)
(1円.1 trillion)
(15円.7 trillion)
(12円.9 trillion)
(10円.2 trillion)
(34円.6 trillion)
(36円.2 trillion) (17円.1 trillion)
(14円.3 trillion) (14円.1 trillion) (17円.1 trillion)
(0円.6 trillion) (0円.9 trillion)
(35円.5 trillion) (20円.3 trillion)
(14円.5 trillion) (11円.8 trillion) (16円.3 trillion)
(0円.6 trillion) (0円.9 trillion)
(33円.4 trillion) (19円.5 trillion)
(13円.1 trillion) (13円.3 trillion) (16円.3 trillion)
34.4%
(0円.7 trillion) (1円.0 trillion)
(32円.7 trillion) (18円.1 trillion)
(33円.5 trillion)
(34円.8 trillion)
(1円.9 trillion)7While the shares of local taxes, local transfer tax and special local grants to total revenue
increased, the shares of local allocation tax, national treasury disbursements and local bonds are
on a downward trend.
Revenue Trends28
Composition of Revenue from Prefectural Taxes (FY 2005 settlement)
Total
15,226円.9
billion
Prefectural
residents tax
3,585円.4 billion
(23.5%)
Corporate
966円.1 billion
(6.3%)
Enterprise tax
4,914円.2 billion
(32.3%)
Individual
215円.8 billion (1.4%)
Corporate
4,698円.4 billion
(30.9%)
Individual
2,442円.0 billion
(16.0%)
On Interests
177円.4 billion (1.2%)
Other taxes
132円.7 billion (0.9%)
Prefectural tobacco tax
275円.2 billion (1.8%)
Automobile acquisition tax
452円.8 billion (3.0%)
Real property
acquisition tax
476円.7 billion (3.1%)
Light oil delivery tax
1,085円.9 billion (7.1%)
Automobile tax
1,752円.8 billion
(11.5%)
Local consumption tax
2,551円.2 billion
(16.8%)
Composition of Revenue from Municipal Taxes (FY 2005 settlement)
Other taxes 481円.6 billion (2.4%)
Municipal tobacco tax
845円.3 billion (4.3%)
City planning tax
1,233円.0 billion (6.3%)
Fixed asset tax
8,862円.1 billion
(45.3%)
Corporate
2,457円.0 billion
(12.6%)
Individual
5,698円.5 billion
(29.1%)
Municipal
residents tax
8,155円.5 billion
(41.7%)
Total
19,577円.5
billion
The municipal tax revenue figure includes municipal taxes collected by Metropolitan Tokyo.
Local taxes consist of prefectural taxes and municipal taxes. (In the case of the special wards of
Tokyo, the Tokyo Metropolitan Government collects some municipal taxes.)
Local Taxes3The
StateofLocal
Public
Finance(FY2005
Settlement)(38.4) (34.1) (27.9) (26.6) (28.1) (30.0) (32.3%)
Prefectural Tax Revenue Trend
Figures in parentheses are the component ratios of the business tax and prefectural residents tax.
\ trillion
trillion
Other taxes
Light oil delivery tax
Automobile acquisition tax
Automobile tax
Prefectural tobacco tax
Real property acquisition tax
Local consumption tax
Individual
Corporate
Corporate
Interest
Individual
EnterprisetaxPrefectural
residentstax1614121086420
FY 1992
14.83302.06.13.99.52.54.51.936.55.57.719.9FY1997
14.94781.68.93.811.41.74.95.41.832.36.43.018.8
FY 2002
13.803516.80.98.33.012.82.03.817.61.625.05.32.9
FY 2003
13.693116.30.88.13.312.82.03.517.51.626.55.71.9
FY 2004
14.487015.60.87.63.111.82.03.218.01.528.56.01.9
FY 2005
15.22690.9%7.1%3.0%11.5%1.8%3.1%
16.8%1.4%30.9%6.3%1.2%
16.0%
FY 2001
15.53030.77.711.41.83.515.91.526.45.47.615.32.9
(33.1) (28.2) (28.2) (25.0) (23.9) (25.3) (23.5%)
Municipal Tax Revenue Trend
\ trillion
trillion
Other taxes
City planning tax
Municipal tobacco tax
Fixed asset tax
Individual
Corporate
Municipal
residentstaxFigures in parentheses are the component ratio of the municipal residents tax.
The municipal tax revenue figure includes municipal taxes collected by Metropolitan Tokyo.1614121086420222018
FY 1992
19.735337.73.15.63.336.413.9
FY1997
21.207733.82.56.33.841.611.9
FY 2001
20.018530.02.56.64.345.710.9
FY 2002
19.575030.12.66.74.246.89.6
FY 2003
18.972629.72.56.54.546.210.5
FY 2004
19.051828.72.46.54.646.211.6
FY 2005
19.5775
29.1%2.4%6.3%4.3%45.3%
12.6%
(51.6) (45.8) (40.9) (39.7) (40.3) (40.3) (41.7%)9Revenue from prefectural taxes, in which the share of the two corporate taxes (corporate
business tax and corporate prefectural resident's tax) is high, increased for the second
consecutive year due to such factors as buoyant corporate earnings.
Furthermore, municipal tax revenue also rose for the second consecutive year due to such
factors as an increase in municipal resident's tax.10Hokkaido
Aomori
Iwate
Miyagi
Akita
Yamagata
Fukushima
Ibaraki
Tochigi
Gunma
Saitama
Chiba
Tokyo
Kanagawa
Niigata
Toyama
Ishikawa
Fukui
Yamanashi
NaganoGifuShizuoka
AichiMieShiga
Kyoto
Osaka
HyogoNaraWakayama
Tottori
Shimane
Okayama
Hiroshima
Yamaguchi
Tokushima
Kagawa
Ehime
Kochi
FukuokaSagaNagasaki
KumamotoOitaMiyazaki
Kagoshima
Okinawa
NationalAverage
Index
Local taxes
revenue total
Individual
resident’s tax
Index of Per Capita Revenue in Local Tax Revenue
(with national average as 100; FY 2005)
Two corporate
taxes
Local consumption
tax (after settlement)
Notes:
1. The local tax revenue total amounts do not include excess taxation, non-statutory ordinary taxes, or non-statutory special
purpose taxes.
2. The revenue of the individual resident's tax is the total of the prefectural individual resident's tax (taxation on per capita
basis and taxation on income basis) and the municipal individual resident's tax (taxation on per capita basis and taxation
on income basis) and excludes excess taxation.
3. The revenue of the two corporate taxes is the total of the corporate prefectural resident's tax, the corporate municipal
resident's tax and the corporate business tax and excludes excess taxation.
4. Calculations are made from the basic residents' register population as of March 31, 2006.
settlement amount
34円.2
trillion
FY 2005
settlement amount
8円.0
trillion
FY 2005
settlement amount
7円.6
trillion
FY 2005
settlement amount
2円.6
trillion
FY 2005
In order for local governments to provide administrative services in response to local
needs with responsibility and at their own discretion, it is necessary to expand and secure
local taxes so as to build a local tax system in which the uneven distribution of tax
sources is limited and the stability of tax revenue is ensured.TheStateofLocal
Public
Finance(FY2005
Settlement)11
Standard financial
requirements
−
Standard financial
revenues
Regular allocation
tax amount
Standard financial
revenues
Standard local tax revenue

Calculation rate
(75%)
Local transfer tax, etc.
Standard financial
requirements
Unit cost

Measured unit
number /amount
(population national census, etc.) Adjustment coefficient
(scale modification, etc.)×ばつ ×ばつ ×ばつ + From the perspective of local autonomy, it would essentially be the ideal for each local
government to ensure the revenue sources necessary for administrative activities through local
taxes collected from their residents. However, there are regional imbalances in tax revenue, and
many local governments are unable to acquire necessary tax revenue. Therefore, the central
government collects financial resources that should fundamentally be attributable to local tax
revenue through national taxation and reallocates them as the local allocation tax to local
governments where financial resources are insufficient.
Determination of total amount of local allocation tax
The total amount of the local allocation tax is determined on the basis of certain ratios for
national taxes (32% for income tax and liquor tax, 35.8% [34.0% from fiscal 2007] for corporate
tax, 29.5% for consumption tax, and 25% for tobacco tax) as well as estimates of standard
revenue and expenditure of local public finance as a whole.
The total amount of local allocation tax in fiscal 2005 was 16円.9587 trillion, down 0.4% from
the previous fiscal year.
Method of calculation of regular local allocation tax for each local
government
The regular local allocation tax for each local government is calculated by the following
mechanism:
Local Allocation Tax4Notes:
1. Standard financial requirements are calculated as the financial requirements of each local government based on rational and appropriate
standards. It is required to include the local share of the national treasury projects, such as compulsory education, livelihood protection,
and public works, work project in calculating the standard financial requirements. From FY 2001 to FY 2009, part of the standard
financial requirements is being transferred to special deficit-financing local bonds (extraordinary financial countermeasures bonds) as an
exception to Article 5 of the Local Finance Law.
2. Normal local tax revenue neither includes "non-statutory ordinary taxes"and "non-statutory special purpose taxes" imposed independently
by the local government nor "excess tax" that exceeds the standard tax rate stipulated in the Local Tax Law.12Ratio of General Revenue Resources to Total
Revenue for Municipalities
Special
local
grant
Local
allocationtaxLocal
taxes
General
revenue
resources
Ratio of general
revenue resources
to total revenue
Local
transfer
tax, etc.
SmallcityLarge
town or village
MidsizecitySmall
town or village
Function of the local allocation tax
The function of the local allocation tax is to adjust imbalances in revenue among local
governments in order to guarantee revenue so that local governments can provide standard
administrative services and basic social infrastructure to their residents in whatever region.
Accordingly, as a result of the revenue adjustment mechanism through the local allocation tax,
few differences in such factors as size of population have been found in the ratio of general
revenue resources to total revenue.
Notes:
1. A "midsize city" refers to a city with a population of more than 100,000 persons according to the national census of 2005; a "small city"
refers to a city with a population of less than 100,000.
2. A "large town or village" refers to a town or village with a population of more than 10,000; a "small town or village" refers to a town or
village with a population of less than 10,000.TheStateofLocal
Public
Finance(FY2005
Settlement)13
Composition of Expenditure by Function (FY 2005)
Unit:100円 million
Other expenses
Public debt
payments
Education
expenses
Civil engineering
work expenses
Commerce and
industry expenses
Agriculture, forestry
and fishery expenses
Sanitation
expenses
Public welfare
expenses
General
administration
expenses
Net total
Prefectures
Municipalities
Share(%) Share(%) Share(%)
Expenditure
When expenses are classified by function, we see that a lot of revenue is expended for such items
as education expenses, public welfare expenses, and civil engineering work expenses. In
prefectures it is mainly expended for education expenses, debt servicing, and civil engineering
work expenses, in that order. In municipalities it is primarily expended for public welfare
expenses, civil engineering work expenses, and debt servicing, in that order.
Education expenses: Expenses for school education, social education, etc.
Civil engineering work expenses: Expenses for the construction and improvement of public facilities,
such as roads, housing and parks.
Public welfare expenses: Expenses for the construction and operation of welfare facilities for children,
the elderly, the mentally and physically disabled, etc. and for the implementation of livelihood protection,etc.Public debt payment: Expenses for the payment of principal, interest, etc. on debts.
What is revenue being expended for?
Expenses by Function114
Breakdown of Public Welfare Expenses by Purpose
Disaster relief
Livelihood protection
Child welfare
Elderly welfare
Social welfare
Net total
Prefectures
Municipalities Share(%)Share(%)Share(%)44,100
128,13521141,928
39,560
46,964
28,264
156,9270.118.029.925.226.70.36.719.841.731.50.120.132.620.926.3
Breakdown of Civil Engineering Work Expenses by Purpose
Share(%
) Prefectures Share(%)Share(%)74,919
71,723
144,174
9,285
12,176
54,731
16,504
46,760
4,718
Other
Housing
Urban planning
Harbors
Rivers and coast
Roads and bridges
Municipalities
Net total8.214.91.11.920.419.334.26.612.220.93.520.713.023.16.58.438.03.311.432.46.17.920.64.420.540.56.69.154.72.52.824.3
Unit:100円 million
Unit:100円 million
Breakdown of Educational Expenses by Purpose
Share(%)Share(%)Share(%)Prefectures
Municipalities
Net total
Unit:100円 million
Other
Educational
general affairs
Health and physical education
Social education
Senior high school
Junior high school
Elementary school
165,778
53,067
113,378
12,800
23,101
12,129
12,986
24,988
28,782
50,9927.713.97.37.815.117.430.8The
StateofLocal
Public
Finance(FY2005
Settlement)15
Trends in Expenditures by Function (ordinary account net total)
Unit: Ratio with FY 1992 as 100.FY1992FY2001FY2005
General administration expenses
Welfare expenses
Of which, social welfare expenses
Of which, elderly welfare expenses
Of which, child welfare expenses
Sanitation expenses
Of which, cleaning expenses
Agriculture, forestry and fishery expenses
Commerce and industry expenses
Civil engineering work expenses
Education expenses
Public debt payments
Total expenditureFY1997
General administration expenses 86
Welfare expenses 128
Of which, social welfare expenses 125
Of which, elderly welfare expenses 145
Of which, child welfare expenses 119
Sanitation expenses 120
Of which, cleaning expenses 120
Agriculture, forestry and fishery expenses 114
Commerce and industry expenses 121
Civil engineering work expenses 99
Education expenses 102
Public debt payments 145
Total expenditure 109
General administration expenses 88
Welfare expenses 142
Of which, social welfare expenses 136
Of which, elderly welfare expenses 138
Of which, child welfare expenses 144
Sanitation expenses 119
Of which, cleaning expenses 129
Agriculture, forestry and fishery expenses 98
Commerce and industry expenses 121
Civil engineering work expenses 86
Education expenses 98
Public debt payments 181
Total expenditure 109100101,087
99,353
27,922
26,728
29,561
56,143
23,398
56,762
44,454
216,332
184,060
71,150
895,597
General administration expenses 86 87,372
Welfare expenses 158 156,927
Of which, social welfare expenses 150 41,928
Of which, elderly welfare expenses 148 39,560
Of which, child welfare expenses 159 46,964
Sanitation expenses 102 57,067
Of which, cleaning expenses 98 22,845
Agriculture, forestry and fishery expenses 70 39,783
Commerce and industry expenses 104 46,260
Civil engineering work expenses 67 144,174
Education expenses 90 165,778
Public debt payments 196 139,635
Total expenditure 101 906,973
Unit:100円 million
In recent years, while there has been a decline in such items as agriculture, forestry and fishery
expenses and civil engineering work expenses, welfare expenses, public debt payments and so
on have been increasing.16Subsidized ordinary
construction expenses
4,040円.7 billion (8.4%)
Social assistance
expenses
952円.9 billion (2.0%)
Public debt
payments
7,222円.2 billion
(15.1%)
Unsubsidized ordinary
construction expenses
3,379円.4 billion (7.1%)
Other expenses
15,627円.9 billion
(32.6%)
Personnel
expenses
15,008円.6 billion
(31.4%)
Obligatory expenses
23,183円.7 billion
(48.4%)
Investment expenses
9,061円.7 billion
(18.9%)
Ordinary
construction expenses
8,559円.3 billion
(17.9%)
Prefectures
Total
47,873円.3
billion
Subsidized ordinary
construction expenses
2,380円.7 billion (4.9%)
Other expenses
17,704円.0 billion
(36.1%)
Investment expenses
7,594円.1 billion
(15.5%)
Obligatory expenses
23,762円.6 billion
(48.4%)
Personnel
expenses
10,255円.7 billion
(20.9%)
Social assistance
expenses
6,714円.9 billion
(13.7%)
Public debt
payments
6,792円.1 billion
(13.8%)
Ordinary
construction expenses
7,270円.1 billion
(14.8%)
Municipalities
Total
49,060円.7
billion
Unsubsidized ordinary
construction expenses
4,542円.2 billion (9.3%)
Other expenses
28,013円.1 billion
(30.8%)
Ordinary
construction expenses
15,104円.3 billion
(16.7%)
Unsubsidized ordinary
construction expenses
7,663円.9 billion (8.4%)
Subsidized ordinary
construction expenses
6,176円.2 billion (6.8%)
Personnel
expenses
25,264円.3 billion
(27.9%)
Obligatory expenses
46,855円.3 billion
(51.7%)
Social assistance
expenses
7,667円.8 billion (8.5%)
Public debt
payments
13,923円.3 billion
(15.4%)
Investment expenses
15,828円.9 billion
(17.5%)
Net total
90,697円.3
billion
Expenditure by Character (FY 2005 settlement)
What are expenses for?
Classified by character, expenses can be divided into "obligatory expenses" (personnel expenses,
social assistance expenses and public debt payments), which are mandatory and difficult to cut
down at the discretion of individual local governments; "investment expenses," including
ordinary construction expenses, etc.; and "other expenses."
Expenses by Character2The
StateofLocal
Public
Finance(FY2005
Settlement)17
Municipalities
Prefectures
FY1997
FY1996 FY2000
FY1999
FY1998 FY2003
FY2002
FY2001
Net total
FY2004 FY2005
Unit:100円 million
Breakdown of Personnel Expenses by Item
Unit:\trillion
Other
Subsides for local
government
employee mutual-aid
associations, etc.
1.2556 (5.0%)
3.3831 (13.4%)
Retirement
allowances 2.0324 (8.0%)
Temporary
worker wages
0.0130 (0.1%)
Other
allowances
6.4650
(25.6%)
Employee
salaries
18.5932
(73.6%)
Basic
salaries
12.1153
(48.0%)
Net total
25円.2643
trillion
Prefectures
15円.0086
trillion
Municipalities
10円.2557
trillion
14.3%2.6%26.5%7.3%0.0%
75.8%
49.3%0.1%8.4%
12.1%9.1%24.3%
70.4%
45.9%100(%)806040200s18Trends in Breakdown of Expenditures by Character
(ordinary account net total)FY1992FY2005
Obligatory expenses 359,087
Personnel expenses 241,194
Social assistance expenses 47,065
Public debt payments 70,828
Ordinary construction expenses 285,684
Subsidized ordinary construction expenses 102,436
Unsubsidized ordinary construction expenses 170,645
Reserves 36,109
Total expenditure 895,597
Obligatory expenses 121
Personnel expenses 112
Social assistance expenses 131
Public debt payments 145
Ordinary construction expenses 97
Subsidized ordinary construction expenses 108
Unsubsidized ordinary construction expenses 91
Reserves 43
Total expenditure 109
Unit: Ratio with FY 1992 as 100.
Unit:100円 millionFY2001FY1997100Obligatory expenses 128
Personnel expenses 111
Social assistance expenses 138
Public debt payments 181
Ordinary construction expenses 79
Subsidized ordinary construction expenses 97
Unsubsidized ordinary construction expenses 65
Reserves 56
Total expenditure 109
Obligatory expenses 130 468,553
Personnel expenses 105 252,643
Social assistance expenses 163 76,678
Public debt payments 197 139,233
Ordinary construction expenses 53 151,043
Subsidized ordinary
construction expenses
Unsubsidized ordinary
construction expenses
Reserves 51 18,566
Total expenditure 101 906,973
60 61,762
45 76,639
In recent years, while there has been a decline in such items as ordinary construction expenses,
social assistance expenses, public debt payments and so on have been increasing.
Social assistance expenses
Expenses which include child welfare expenses, livelihood protection expenses, etc., aimed at assisting the needy, children, the elderly,
mentally and physically disabled, etc., as a part of the social security system.
Ordinary construction expenses
Expenses necessary for the construction of social capital, such as roads, bridges, parks, schools, etc.TheStateofLocal
Public
Finance(FY2005
Settlement)19
Nationwide
Municipalities
Prefectures
Other expenses
Personnel expenses (%)
Public debt payments (%)
FY2002
FY2001
FY2000
FY1999
FY1998
FY1997
FY1996 FY2003 FY2004 FY2005
Flexibility of the Financial
Structure
How can local finance respond to the demand toward local
governments?
In addition to revenue sources allocated to obligatory expenses required every year, it is
necessary for local governments to ensure revenue sources for measures to respond properly to
social and economic trends and changes in the demand of the residents. The extent to which
these revenue resources can be ensured is called the flexibility of the financial structure.
The national average of the ordinary balance ratio (the ratio of ordinary revenue allotted to
expenses recurring every fiscal year to the total of ordinary revenue recurring every fiscal year,
centered on local taxes and the local allocation tax, as well as tax reduction supplementary bonds
and extraordinary financial countermeasures bonds [see note]) remained at a high level of 91.4%,
almost the same as the previous fiscal year.
Ordinary Balance Ratio1Note:
Tax-reduction supplementary bonds and extraordinary financial countermeasures bonds have been added since fiscal 2001.
Real Debt Service Ratio and Debt Service Payment
Ratio Used for Permission to Issue Local Bonds
It is necessary to keep a close watch on trends in public debt payments at all times, since public
debt payments, payments of principal and interest on the debts of local governments, are
expenses especially lacking flexibility.
The real debt service ratio, which is an index indicating the extent of the real debt payment
burden, was calculated for the first time on the basis of fiscal 2005 account settlements. Past
trends can be seen in the debt service payment ratio used for permission to issue local bonds.
The national average is the same ratio for the previous fiscal year and remains at a high level.202
Trends in the Debt Service Payment Ratio Used for Permission
to Issue Local Bonds
Prefectures
Nationwide
Municipalities
FY 1996
FY 1997
FY 1998
FY 1999
FY 2000
FY 2004
FY 2003
FY 2002
FY 2001
FY 2005
State of the Real Debt Service Ratio
under18%over 18%,
under 25%
over 25%,
under 35%over35%
National
(1,891 organizations)
Prefectural
(47 organizations)
Municipal
(1,844 organizations)
78.0%
(1,475 organizations)
91.5%
(43 organizations)
77.7%
(1,432 organizations)
20.4%
(386 organizations)0.1%(2 organizations)1.5%(28 organizations)8.5%(4 organizations)0.1%(2 organizations)1.5%(28 organizations)
20.7%
(382 organizations)
*Debt service payment ratio used for permission to issue local bonds
The debt service payment ratio used for permission to issue local bonds indicates the ratio of the total of local debt principal and interest and
expenditure relating to debt-burden acts corresponding to debt service expenses, excluding the amount of advanced redemption, and also
excluding the amount of general revenue resources calculated for this purpose that includes the local allocation tax, to the total of the
standard financial amount and possible issue of extraordinary financial countermeasures bonds (excluding the amount of local allocation tax
calculated for service payment).TheStateofLocal
Public
Finance(FY2005
Settlement)*Real debt service ratio
The real debt service ratio indicates the ratio of the principal and interest repayments on local bonds (excluding advanced redemption,etc.)
and the real debt service amount, including items corresponding to debt service expenses, such as disbursements to public enterprise bonds,
minus that portion of the local allocation tax allotted for this purpose to the total of the standard financial amount and the issuable
extraordinary financial countermeasures bond amount. It is used to determine organizations that require consultations or permission to issue
bonds. If the ratio is over 18%, the organization needs permission to issue bonds; if it is over 25%, the issue of certain kinds of local bonds
is restricted; and if it is over 35%, the restrictions are tightened even more.2114013012011010090807060500
FY 1992 FY 2001 FY 2002 FY 2003 FY 2004
FY 1997 FY 20052.92.13.252.961.19.95.46.080.3111.59.915.41.26.383.6130.97.516.915.23.86.583.0
134.17.618.014.29.15.982.3
138.17.918.713.212.95.781.4
140.68.219.212.115.75.379.2
139.98.219.4
Trends in Outstanding Local Government Borrowing
Economic-stimulus
measures
Extraordinary
financial
countermeasures
bonds
Tax revenue
supplementary
bonds
Tax-reduction
supplementary
bonds, etc.
Financial aid
bonds, etc.
Other local
bonds
\ trillion
Outstanding Local Government
Borrowing (Ordinary Account)
What is the state of debts in local public finance?
Trends in Outstanding Local Government Borrowing1Outstanding local government borrowing, the debts of local governments, amounted to
approximately 140円 trillion at the end of fiscal 2005. This figure has been increasing in recent
years because of such factors as the need to supplement tax revenue as a result of tax cuts and
the issue of extraordinary financial countermeasures bonds. The figure is 1.5 times larger than
total revenue and about 2.5 times larger than the total sum of general revenue resources, such as
local taxes and local allocation tax.
Notes:
1. Outstanding local government borrowing excludes special fund public investment bonds.
2. Economic-stimulus figures are estimates.22Trends in Outstanding Borrowing That Should Be Shouldered by the
Ordinary Account and Ratio of Outstanding Borrowing to Gross
Domestic Product
\trillion
FY 1992 FY 1997 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 (End of FY)
79.1451
2.1859
15.8279
61.1313
149.8931
15.2137
23.1823
111.4971
187.7146
130.8615
28.3228
28.5303
193.0685
30.7243
28.2435
134.1007
201.2943
33.6142
27.7509
139.9292
Ratio of outstanding
borrowing that
should be shouldered
by the ordinary
account to GDP
Outstanding borrowing from special
account for local allocation tax and
transfer tax grants (local burden)
Outstanding public enterprise bonds
(borne by the ordinary account)
Outstanding local government
bonds
140.6158
28.0539
32.8177
201.4874
198.2831
138.1009
28.3465
31.835750(%)40302010040.0%
40.0%40.640.639.639.638.838.837.437.428.828.816.816.8210200180160140120100806040200
Also, the outstanding borrowing of local public finance, which includes the local burden of
borrowing from the special account for local allocation tax and transfer tax grants and those
public enterprise bonds borne by the ordinary account, as well as current outstanding local
government bonds, remains at a high level, amounting to approximately 201円 trillion at the end
of fiscal 2005.
Outstanding Borrowing of Local Finance2Notes:
1. Outstanding local government borrowing excludes special fund public works bonds and special fund public investment bonds.
2. Outstanding public enterprise bonds (borne by the ordinary account) are estimates based on settlement statistics.TheStateofLocal
Public
Finance(FY2005
Settlement)23
Water-supply
business
(including small-scale
water supply business)
Sewerage
business
Transport
business
(railways)
Transport
business
(buses)
Hospitals
Water-supply
population
of 124.71
million persons
Sewage disposal
facility population
of 102.82
million persons
No.of passengers
a year
of 21.954
billion persons
No.of passengers
a year
of 4.626
billion persons
No.of hospitalbedsof 1,632,000 beds
123.83
million persons
93.25
million persons
2.870
billion persons
1.063
billion persons
235,000bedsLocal Public Enterprises
Local public enterprises are managed directly by local governments for the purpose of social
and public benefit. They provide social infrastructure and services indispensable for local
residents and the development of the community, including water supply, sewerage, transport
and hospitals.
Local public enterprises play a major role in improving the standard of living of residents.
Ratio of Local Public Enterprises1Notes:
1.The graph shows the ratio of local public enterprises when the total number of business entities nationwide is taken as 100.
2.Figures for the total number of enterprises nationwide are compiled from statistical materials of related organizations; figures for local
public enterprises are compiled from figures for the total number of enterprises and settlements for the previous fiscal year.
What is the state of local public enterprises?24FY2005
Sewerage
business
65,635
(32.3%)
Hospitals
47,599
(23.4%)
Water-supply
business
including small-scale
water supply
44,560
(21.9%)
Residential
development
18,470
(9.1%)
Others
26,918
(13.3%)
203,182
100円 million
End of FY2005
Sewerage
business
3,699
(39.4%)
Water-supply
business
including small-scale
water supply
2,334
(24.9%)
Care services651(6.9%)
Hospitals672(7.2%)
Residential
development531(5.7%)
Others
1,492
(15.9%)
No. of businesses
9,379
The number of businesses is 9,379. By type of business, sewerage accounts for the largest ratio,
followed in order by water supply, hospitals, and care services.
Number of Businesses Operated by Local Public Enterprises2The total financial settlement scale is 20円.3182 trillion. By type of business, sewerage accounts
for the largest ratio, followed in order by hospitals, water supply, and Residential development.
Scale of Financial Settlement3The
StateofLocal
Public
Finance(FY2005
Settlement)250Others
Sewerage business
HospitalsGasElectricity
Transport
Industrial
water supply
Water supply
(including small-scale
water supply)
5,000
4,000
3,000
2,000
1,000
1,000
2,000
3,000
100円 million
Surplus
Deficit
Total
balance
Trends in Management Conditions of Local Public Enterprises
Total surplus
2,702
Others 1,175
Sewerage 225
Gas 48
Electricity 170
Industrial
water supply 122
Water supply962Transport
1,472
Hospitals887Total deficit
2,359343Total surplus
4,690
Others 1,155
Sewerage 931
Electricity 99
Industrial
water supply 194
Water supply
2,311
Transport638Hospitals
1,261
Others 148
Gas 53
Total deficit
2,100
2,590
Total surplus
3,013
Others 365
Sewerage 755
Electricity 114
Industrial
water supply 180
Water supply
1,599
Transport
1,452
Hospitals
1,264
Others 203
Gas 15
Total deficit
2,93479Total surplus
3,927
Others 1,561
Sewerage 799
Electricity 123
Industrial
water supply 153
Water supply
1,286
Transport
1,598
Hospitals627Total deficit
2,225
1,702
Total surplus
2,392
Others 242
Sewerage 324
Electricity 177
Industrial
water supply 82
Water supply
1,567
Transport
1,712
Hospitals578Total deficit
2,31478Gas 24
Total surplus
3,349
Others 441
Sewerage 765
Electricity 106
Industrial
water supply 164
Water supply
1,871
Transport754Hospitals
1,013
Others 100
Total deficit
1,867
1,482
Gas 2
Gas 5
Electricity 93
FY1992 FY2001 FY2004
FY2002
FY1997 FY2003 FY2005
Total surplus
5,102
Others 1,512
Sewerage 805
Industrial
water supply 239
Water supply
2,453
Transport640Hospitals
1,476
Others 197
Gas 22
Total deficit
2,335
2,767
Local public enterprises had a surplus of 276円.7 billion. By type of business, while water
supply, industrial water supply, electricity, and sewerage showed a surplus, transport and
hospitals are continuing to register a deficit.
Management Conditions426
Trends and Issues in Local Public
Finance
The Law for the Promotion of Decentralization Reform, which aimed to clarify the basic
philosophy for the promotion of decentralization and the responsibilities of the central and local
governments, to stipulate fundamental matters, and to promote decentralization in a
comprehensive and planned manner by establishing the necessary system, was enacted on
December 8, 2006, and enforced on April 1, 2007. On the basis of this law, efforts are being
made to promote new decentralization reforms, thoroughly review the role sharing between the
central and local governments, advance the transfer of authority and financial resources to local
governments, and establish the independence and responsibility of the regions.
Promotion of Decentralization Reform1Enactment of the Law for the Promotion of Decentralization Reform
"Through the comprehensive revision of related laws and
ordinances and so on toward decentralization, efforts will be
made to review the role sharing between the central and local
governments, abolish or reduce state involvement and national
treasury subsidies, etc."
Establishment of a setup within the government to promote
decentralization reform (Decentralization Reform Promotion
Committee)
To study the form of role sharing between the central and
local governments, etc.
The government shall compile a Decentralization Reform
Promotion Plan.
The law shall be valid for a limited period of three years from
its enforcement.
O u t l i n e o f L a w
Law for the Promotion of Decentralization Reform
(enacted on December 8, 2006)
Comprehensive
revision of individuallawsBasic Policy 2006
(approved by the cabinet on July 7, 2006; extract)
Compilation of Decentralization Reform Promotion Plan
Comprehensive Law on Decentralization
Reform (tentative name)
TrendsandIssuesinLocal
Public
Finance0500
1,000
1,500
2,000
2,500
3,000
3,500
No. of municipalities
3,229
1,990671568 562 552 533339197
675 677 695 7397791,981 1,961
1,872
1,3178443,218 3,190 3,100
2,395
1,820 1,804827782195Total
State of Progress of Municipal Mergers
Towns
Cities
Villages
Apr. 2006
Apr. 2005
Apr. 2004
Apr. 2003
Apr. 2002
Apr. 1999 Apr. 200727As decentralization advances and the role of the municipality becomes increasingly important,
in the present situation of severe fiscal conditions both centrally and locally, the promotion of
municipal mergers is important in order to strengthen the administrative and financial bases of
municipalities and to maintain and improve their administrative services.
Promotion of Municipal Mergers28Community Development Efforts of Merged Municipalities
In many merged municipalities, positive efforts have begun toward building an energetic and
individualistic community in response to local issues.
Improvement in the convenience of residents!
Upgrading and diversification of administrative services!
Wide-area community development!
Greater administrative and financial efficiency!
A clinic was opened for the first time in about 30 years in the
mountainous district of Besshiyama, which previously did not
have a doctor. (Niihama City, Ehime Prefecture; formerly the
mountainous area of Besshiyama)
A new fire station has been established in the town, which
previously did not have any emergency fire-prevention service
or a fire station, and the ambulance and fire-prevention
services have been expanded and strengthened. (Kibichuo
Town, Okayama Prefecture)
A Children's Comprehensive Support Office has been established as a key station for
assisting and coordinating enhancement of the child-raising, health, and educational
environment in a comprehensive manner, and more specialist services are now provided.
(Kameyama City, Mie Prefecture)
In addition to the former Takayama City area, which boasts the
popular Takayama Festival and a historical townscape, such
attractions as the former Kamitakara area of the Northern Alps
and the Oku-Hida Hot Springs Village have been added to the
municipality, making it possible to aim for the establishment of
a new Hida-Takayama brand by, among other things,
launching an accommodation- and tour-style tourist strategy
linking urban and rural areas. (Takayama City, Gifu Prefecture)
As a result of a survey of 557 local governments that merged between April 1999 and March
2006, it is estimated that after fiscal 2016 (that is, about 10 years after the mergers) efficiency
will amount to about 1.8 trillion a year.
Examples
Through mergers, it has become possible to go beyond municipal
boundaries and use child day-care centers that have vacancies.
(Niigata City, Niigata Prefecture)
n order to facilitate the efficient use of libraries, library systems
have been integrated so that it is now possible at any library to
search the books stocked at other libraries and to request,
borrow, and return them. (Tahara City, Aichi Prefecture)
TrendsandIssuesinLocal
Public
Finance29Reduction of number of employees
Reduction of number of employees by about 1,700 persons (about 11.4%) through efforts in the five years from FY 2005
to FY 2009 (Reduction of 687 persons by April 2007 due to efforts in FY 2005 and 2006)
Formation of new salary system
Revision of pay scale in response to work stages and shift to salaries that reflect job and work responsibility (Salary structure
reform implemented in April 2007 and special work allowances, employee health and welfare systems, etc. under continuous
review.)
Formation of new personnel system
Promotion of personnel system reform to make maximum use of the abilities of employees through the operation of a new
personnel evaluation system, compilation of a human resource development plan, etc. (New personnel evaluation system
introduced in April 2006, and second human resources development basic plan formulated in June 2007.)
Promotion of private-sector consignment, etc.
Promotion of shift to method of providing public services through utilization of the private sector through utilization of the
designated manager system, etc. (system introduced at about 179 facilities as of April 2007)
Promotion of equity corporation reform
Clarification of new reform targets for equity corporations, including their integration and abolition, and steady promotion of
reform (one corporation abolished in FY 2005)
Promotion of soundness of public enterprises
Regarding the four projects for the full operation of the Local Public Enterprise Law, compilation of individual new medium-term
management plans and promotion of efforts toward establishment of financial structure to enable management through
independent settlement
Efforts toward financial soundness
Efforts to build a sustainable financial structure to achieve an account balance without borrowing from the sinking-fund in FY2009Reduction of number of employees
Reduction of 7.8% (about 2,800 persons) in the six years from FY 1999 to FY 2004
Reduction of 6.9% (about 2,300 persons) in the five years from FY 2005 to FY 2009
Restraint of salary expenses
Pay-rise period extension measure (12-month extension)
Period: FY 1999-2003
Salary-cut measure
Period: FY 2004-2006 (7% for department heads and bureau heads, 5% for office heads, 3% for other staff)
: FY 2007 (7% for department heads and bureau heads, 5% for office heads)
Promotion of private-sector consignment, etc.
Fundamental revision of all nonclerical work (17 businesses, 361 persons)
Private-sector consignment, etc. of security work, road inspection work, kitchen work, telephone operator work, etc.
Introduction of designated manager system
149 facilities as of April 1 2007 (of which, prefectural housing: 113 facilities)
Reduction of internal management expenses
Reduction based on the results of the comprehensive inspection of administrative work, which was implemented in fiscal 2006
and individually inspected all administrative work of prefectures, etc.
Revision of facility management standards, curbing of expenses, etc.
Revision of travel expenses, commodity procurement methods, etc.
Reduction of ordinary construction project expenses, etc.
Planned reduction of public works
35% reduction of subsidized public works compared with the fiscal 2006 initial budget by fiscal 2009
35% reduction of unsubsidized public works (construction) compared with the fiscal 2006 initial budget by fiscal 2009
17.5% reduction of unsubsidized public works (maintenance) compared with the fiscal 2006 initial budget by fiscal 2009
17.5% reduction of direct obligations compared with the fiscal 2006 initial budget by fiscal 2009
Reduction of investment expenses other than public works in a planned manner by 35% compared with the initial budget for
FY 2006 by FY 2009
Revision of administrative work
Reduction based on the results of the comprehensive inspection of administrative work, which was implemented in fiscal 2006
and individually inspected all administrative work of prefectures
Thorough revision of work from the perspectives of necessity, effectiveness, and efficiency, optimization of information
systems, review of contracts, etc.
Revision of subsidies, etc. corresponding to obligatory subsidies
In order to solidly promote local administrative reform, the Ministry of Internal Affairs and
Communications compiled the New Guidelines for the Promotion of Administrative Reform in Local
Governments (the New Local Administrative Reform Guidelines) and notified local governments of them
on March 29, 2005.
As a result, local governments have compiled and disclosed intensive reform plans indicating specific
efforts, such as the reorganization and arrangement of administrative work and projects and the promotion
of private-sector consignment, to be undertaken in general until fiscal 2009.
Specific Examples of Intensive Reform Plans
Promotion of Administrative Reform2State of Efforts Through Intensive Reform Plans
PrefectureACityB30
On August 31, 2006, the Ministry of Internal Affairs and Communications formulated
"Guidelines for the Further Promotion of Administrative Reform in Local Governments" and
requested local governments to make positive efforts toward three reforms: reform of total
personnel expenses, reform of public services, and reform of local public accounting.
Further Promotion of Administrative Reform
Reform of total personnel expenses
Further net reduction in number of employees bearing in mind
the net reduction (down 5.7%) in the number of national public
employees
Promotion of salary reform (reflection of regional private-sector
salaries, further streamlining of salaries)
Efforts to curb personnel expenses in third-sector enterprises,etc.Reform of public services
Implementation of studies in light of project classification and
overall inspection of need for public services and implementing
entities
Setting of performance indexes relating to the maintenance
and improvement of public services and numerical targets
relating to expenditure reduction, etc. in the implementation of
marketization tests
Reform of local public accounting
(local asset and debt management reform)
Promotion of the compilation of four documents: balance
sheet, administrative cost statement, financial balance
statement, and net asset fluctuation statement
Formulation of the direction and specific measures for asset
and debt reform including promotion of the sale of unused
assets, effective utilization of assets, etc.
Enhancement of disclosure systems, including salary
information
Further promotion of financial information disclosure to
enable comparisons between organizations
Disclosure of implementation process and implementation
results of marketization tests
Active appointment of outside personnel as auditors and
utilization of external auditing
Formulation of Rules for Information Disclosure to
Facilitate Comparisons and Appraisal Between Local
Governments and Strengthening of Resident Monitoring
TrendsandIssuesinLocal
Public
Finance31The number of local public employees has declined for 12 consecutive years since 1995. The
number of employees has fallen for 11 consecutive years in the general administrative sector and
5 consecutive years in the public enterprise sector.
The reason for these declines is that, although the number of staff in the police and fire service
sectors is increasing due to such factors as the enhancement of public security and disaster-
prevention measures, efforts are being made to reduce the number of staff as a whole by, for
example, setting numerical targets for personnel management and implementing cuts in other
sectors on the basis of scrap-and-build policies
Number of Public Employees
3,267
3,249
3,232
3,204
3,172
3,144
3,117
3,084
1,069
1,172 1,166 1,161
1,152
1,114
1,100
1,086
3,042
1,049
2,998
1,027
3,200
3,220
3,240
3,160
3,180
3,140
3,120
3,100
3,080
3,260
3,280
1,000 persons
1,100
1,120
1,080
1,060
1,140
1,160
1,180
Total number of local
public employees
General administrative
sector
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
3,040
3,060
3,020
3,000
2,980
1,040
1,020
April 1,1997April 1,2006General administrative sector
Excluding welfare
welfare
Education sector
Police and fire service sector
Public enterprises, etc.
All local governments
General administrative sector
Excluding welfare
welfare
Education sector
Police and fire service sector
Public enterprises, etc.
All local governments
Number of Local Public Employees
Trends in the Number of Staff in Local
Governments by Sector
Unit: Ratio against 100 as the number of staff as of April 1, 1997.
R eference321998
1974 1988 2005 2006
110.6
103.4
101.398.098.096979899100101102103104105106107108109110111
Trends in the Laspeyres Index
(Trends in the Average for All Local Governments)
Laspeyres Index
The Laspeyres Index is used to compare price
levels, wage levels and so on. Here it is used to
show the salary level of local public employees
when the salary level of national public employees is
taken as 100.
TrendsandIssuesinLocal
Public
Finance
When the salary level of local public employees is shown on the Laspeyres Index, the average
for all local governments is 98.0.
In fiscal 2005 a total of 1,015 local governments adopted measures to correct wage levels, such
as the revision of salary scales, and a total of 1,573 local governments implemented the revision
of various allowances and retirement allowances.
Salary Level
R eference
200,000
150,000
100,000
50,0000108,343
65,489
170,490
112,503 Settlement
amountofpersonnel
expenses,
property
expenses,etc.per
capita
population [108,343円] Current
balance
ratio:Thisratioislowerthanthe
averageforsimilar
organizationsandis
deterioratingyearbyyearasaresultofan
increaseinwelfare-related
expenses.Theratiowillmaintainthepresent
leveldueto
effortstoreduce
obligatory
expenses
through
efforts
toward
administrativeandfinancial
reform,suchascutsin
personnel
expenses.Debtservice
payment
ratio:Thisratioisincreasingduetodebtrepayments
relatingtowaste
processing
facilityandrecycling
center
construction
expenses,etc.andisslightly
abovetheaverageforsimilar
organizations.Overthenextfive
yearstheratiowilldrop
belowtheaverageforsimilar
organizationsasa
resultofrestraintsonlarge-scale
projectsandproperdebtservice
management.
Laspeyres
Index:Thisindexisatthelowest
level
among
similar
organizationsduetotheimplementationofemployee
salarycuts(5%formanagers,3%for
general
staff).Fromnowoneffortswillbe made
towardthefurther
rationalizationofsalaries
throughanoverall
inspectionofallowances,etc. No.of
employeesper1,000
population:Thisnumber
exceedstheaverageforsimilar
organizationsdueto
large-scale
recruitmentinthe
periodofrapid
growthofthe
population.Onthe
basisofan
employee
rationalization
plan,overthenextfive
yearsthenumberofemployeeswillbecutby5%(50
persons)
throughthenonreplacementofmandatory
retireesandthe
promotionofprivate-sector
consignment.
Municipal
Financial
Comparative
Analysis
Table(FY2005
Settlement)xxCity,xxxPrefecture
Population:
129,236(asof
March31,2006)
Area:
63.19sq.km
Total
revenue: \
31,223.867
million
Total
expenditure:\31,217.996
millionRealbalance:\5.036
million
under408060100120over140Fiscal
power
Soundnessoffuture
burden
Soundnessofdebt
service
burden
Appropriatenessofno.ofemployees
Appropriatenessofsalary
levels
(comparisonwithcentral
government)
Flexibilityoffiscal
structure
Appropriatenessofpersonnel
expenses,
property
expenses,etc.xxCityComparisonwhenaverageofsimilar
organizationsistakenas100
Averageofsimilar
organizations
*Similar
organizations
refertothose
local
governmentsinthesamegroupasthe
organization
concernedasa
resultofthe
classificationofmunicipalities
nationwideinto88
groups
accordingtopopulation,
industrial
structure,etc.Fiscal
power
Fiscal
power
index
[0.73] Maximum
figureinsimilar
organizations
Average
figureinsimilar
organizations
Minimum
figureinsimilar
organizations
National
municipal
average
...... 0.43Municipal
averageinxxx
Prefecture
............... 0.63RatioofxxCityRankinginsimilar
organizations
[14/28] 0.200.400.600.801.001.200.730.970.480.72Current
balance [84.8%] National
municipal
average
...... 87.4Municipal
averageinxxx
Prefecture
............... 88.4National
municipal
average...121,478
Municipal
averageinxxx
Prefecture
............
115,210
Rankinginsimilar
organizations
[10/28] Rankinginsimilar
organizations
[17/28] 1101009080706084.8(%)
102.276.988.4
Flexibilityoffiscal
structure
Appropriatenessofpersonnel
expenses,
property
expenses,etc.(\) *The
totalofpersonnel
expenses,
property
expenses,andmaintenanceandrepair
expenses.
However,
personnel
expenses
include
project-based
personnel
expensespaidbutdonot
include
retirement
allowances.
Appropriatenessofsalary
levels
(comparisonwithcentral
government)
Laspeyres
Index [92.8] Rankinginsimilar
organizations
[1/28] 105.0
100.095.090.085.092.892.8102.098.5Nationalcityaverage
...... 97.6Nationaltownand
village
average
............... 93.7No.ofemployeesper1,000
population [7.86
persons]
Appropriatenessofno.ofemployees
Rankinginsimilar
organizations
[22/28] 1510507.86
(persons)3.849.306.93National
municipal
average
...... 8.25Municipal
averageinxxx
Prefecture
............... 7.82Debt
service
payment
ratio [10.5%] Rankinginsimilar
organizations
[20/28] 20151055010.5(%) 2.113.29.4Soundnessofdebt
service
burden
National
municipal
average
...... 11.0Municipal
averageinxxx
Prefecture
............... 10.4
Outstanding
localdebtper
capita
population Soundnessoffuture
burden
Rankinginsimilar
organizations
[5/28] 500,000
600,000
700,000
400,000
300,000
200,000
100,0000262,133(\)
181,422
511,304
316,284
National
municipal
average
............ 463,353
Municipal
averageinxxx
Prefecture
............
325,609
[262,133円] Analysis
Column33Amid the increasing severity of local public finance, various efforts are being made to fulfill
accountability. In order for each local government to promote financial soundness while gaining
the understanding and cooperation of residents, etc., the Ministry of Internal Affairs and
Communications has compiled financial comparative analysis tables and posted them on its
homepage with the aim of disclosing information to residents, etc. in an easy-to-understand
manner based on indicators that are comparable with those of other local governments.
In the fiscal 2005 settlement, the ministry conducted a comparative analysis of the principal
financial indicators, etc. among similar organizations and analyzed the efforts, etc. of each
organization toward the improvement of the indicators, etc.
Promotion of Information Disclosure3Example of a Financial Comparative Analysis Table
Mayor
Deputy
mayor
Treasurer
Chairpersonofboardofeducation
Speakerofassembly
Deputy
speakerofassembly
Membersofassembly
131,205
127,733
2.7%
1,135 1.8 14,000
22.2
46,400 73.71,349 2.2 15,628
25.0
45,025 72.043.19
3,038Nameof
prefecture
○しろまる
○しろまる Prefecture
△しろさんかく
△しろさんかく CityNameof
local
government
Settlemen×ばつ ×ばつ
○しろまる ×ばつ ×ばつ ×ばつ ×ばつ ×ばつ ×ばつ ×ばつ ×ばつ ×ばつ ×ばつ
○しろまる 1 1 1 1 1 1 2818.04.01
18.04.01
18.04.01 18.04.01
12.04.01 12.04.01
12.04.01
8,630
7,370
6,730 6,730
5,400 4,800
4,500
3,815
3,530
4,175
3,513 − 3,768746 87 6 145 − 897
32,168,871
30,215,506
1,953,365 830,659
1,122,706
−147,821
241,000 − 30,000
63,179
32,671,555
30,939,738
1,731,817 461,290
1,270,527
496,323
1,000 − 1,218,000
−720,677
2,845,860
307,090
25,050
509,340 − 3,380,250
3,262,774
873,800
112,478 − −
804,751
1,471,745
116,247
43,057
24,240
45,882 88 51 142131,838
131,592
0.2%
16,819,763
818,154
97,356
60,055
99,970
959,696
39,901 − 258,472 − 764,357
1,267,276
1,117,237
150,039
21,185,000
21,033
273,757
552,589
220,687
2,490,341 −
1,083,349
46,148
256,468
548,554
1,731,817
321,328
3,437,800
277,800
1,329,800
32,168,871
52.3 2.5 0.3 0.2 0.3 3.0 0.1 − 0.8 − 2.4 3.9 3.5 0.5 65.9 0.1 0.9 1.7 0.7 7.7 − 3.4 0.1 0.8 1.7 5.4 1.0 10.7 0.9 4.1
100.0
15,292,253
818,154
97,356
60,055
99,970
959,696
39,901 − 258,472 − 764,357
1,117,237
1,117,237 − 19,507,451
21,033 − 57,084 − − − − 1,356 − − − 5,101 − − − 19,592,025
15,356,319
15,356,319
8,427,818
170,364
7,640,860
193,819
422,775
6,330,559
6,315,545
71,704
526,238 − − − 1,463,444
1,463,444 − −
1,463,444 − − − 16,819,763
9,219,587
6,669,434
3,554,976
2,608,146
2,608,146 − 15,382,709
5,494,208
265,890
1,486,990
238,108
3,150,296
272,175
198,278 − 3,964,960
93,929
3,964,960
808,037
2,691,141 − −
30,215,506
352,657
5,286,947
8,850,768
2,851,893
20,812
291,832
267,581
4,150,571
1,427,305
4,106,992 − 2,608,148 − − 30,215,506− 641,439
256,071
212,248 12 46,150 − 1,956,000
61,300
791,740 − − − − 3,964,960
352,477
4,415,498
5,619,549
2,354,315
20,792
277,849
155,912
2,945,295
1,378,481
3,616,652 − 2,542,608 − − 23,679,4281.2 17.5
29.3 9.4 0.1 1.0 0.9
13.7 4.7 13.6 − 8.6 − − 100.0
30.5
22.1
11.8 8.6 8.6 − 50.9
18.2 0.9 4.9 0.8 10.4 0.9 0.7 − 13.1 0.3 13.1 2.7 8.9 − −
100.0
40.2 − 5.8
12.0
12.0 − 58.0
21.5 1.2 5.7 1.1 9.3 − 0.0
8,571,339
6,084,052
1,219,422
2,542,606
2,542,606 − 12,333,367
4,704,713
246,855
1,290,035
238,108
2,989,966
256,791
77,078 − 1,780,623
78,372
1,780,623
91,156
1,464,535 − −
23,679,428
8,528,465 − 1,219,042
2,542,606
2,542,606 − 12,290,113
4,566,619
244,829
1,206,335
238,108
1,979,216 − 297
91.3
91.3
50.1 1.0 45.4 1.2 2.5
37.6
37.5 0.4 3.1 − − − 8.7 8.7 − − 8.7 − − − 100.0
64,066
64,066
64,066 − − − 64,066 − − − − − − − − − − − − − − − 64,066
78.1 4.2 0.5 0.3 0.5 4.9 0.2 − 1.3 − 3.9 5.7 5.7 − 99.6 0.1 − 0.3 − − − − 0.0 − − − 0.0 − − −
100.0
14,170,686
15,224,453
18,614,282
19,731,519
0.92 5.7 99.3
10.2 9.0 10.2 8.4 1,534,000
541,000
1,288,000
27,026,165
19,060,040 1,884,989 − 173,660 − − −
97.9 93.1
98.4 94.5
97.3 ×ばつ ×ばつ ×ばつ ×ばつ ×ばつ ×ばつ ×ばつ ×ばつ
○しろまる ×ばつ ×ばつ ×ばつ ×ばつ ×ばつ
○しろまる ×ばつ
III‐3 2‐8Population2005national
census2000national
census
105,975
102,8152000national
census
(persons)1995national
census
(persons)Rateof
change
Basic residents' register population
March31,2006
March31,2005Rateof
change
State of revenues
(units:\thousand;%)Category
Settlement
figure
Share
Current
general
revenue
resources,etc.Share
Local
taxes
Local
transfertaxInterest
apportionment
grant
Dividend
apportionment
grant
Capital
gainsfromshares,etc.apportionment
grant
Local
consumptiontaxgrantGolfcourse
utilizationtaxgrant
Special
local
consumptiontaxgrant
Automobile
acquisitiontaxgrant
Lightoildeliverytaxgrant
Local
special
grant
Local
allocationtax Ordinary
Special
(General
revenue
resources
total)
Special
grantfortraffic
safety
measures
Charges,
burdens
UsagefeesHandling
charges
National
treasury
disbursements
National
provision
grant
(specialwardfiscal
adjustment
grant)
Prefectural
disbursements
Property
revenue
Donations
Money
transferred
Money
carriedoverVarious
revenues
Local
bondsOfwhich,
tax-reduction
supplementary
bondsOfwhich,
extraordinary
financial
countermeasures
bonds
Total
revenuesTypeof
municipality
Local
allocationtaxareaArea(km2) Population
density
(persons)
Industrial structure
Category2000national
census1995national
census
Primary
Secondary
Tertiary
State of municipal taxes
(unit:\thousand;%)Category
Revenue
settled
Share
Excesstaxportion
Ordinary
taxes
Statutory
ordinarytaxMunicipal
resident'staxIndividual
equal
apportionment
Income
apportionment
Corporate
equal
apportionment
Corporatetaxapportionment
Fixed
assettaxOf
which,netfixed
assettaxLight
motor
vehicletaxMunicipal
tobaccotaxMiningtaxSpecial
land-holdingtaxNonstatutory
ordinary
taxes
Earmarked
taxes
Statutory
earmarked
taxesSpatax
Business
officetaxCity
planningtaxWater
utilityandland
profittaxNonstatutory
earmarked
taxes
TaxesfromdefunctlawsTotal
State of
designated
organizations,
etc.
FormernewindustrialcityFormer
industrial
development
specialareaUnderdevelopedareaFormer
miningareaRural
developmentareaRemote
island
UnderpopulatedareaPeninsula
Metropolitan
TokyoareaKinkiareaChubuareaWide-area
municipality
Special
rural
village
Fiscal
reconstruction
organization
Fiscal
index
reference
organization
Revenue-surplus
organization
State of membership of
partial administrative associations
Special staff, etc.No.of
seats
Applicable
beginningdatePer
capita
average
monthly
salary
(compensation\hundred)
CategoryNo.of
employees
(persons)
monthly
salary(\
hundred)Percapita
average
monthly
salary(\
hundred)
Category
FY2004(\
thousand)
FY2005(\
thousand)
Total
revenues
Total
expenditure
Revenues
minus
expenditures
Revenue
resourcesthatshouldbecarriedovertothenext
fiscalyearReal
balance
SingleFYbalance
Reserve
Advanced
redemptionoflocal
loans
Reserve
breakup
amountRealsingleFYbalance
State of income‐expenditure balance
General
staffOfwhich,
skilled
workers
Education-related
government
employees
Fire-fighting
staff
Temporary
staff
Total
General staff,etc.Rawsewage
disposal
Garbage
disposal
Crematories
Reservefireservice
Elementary
schools
Juniorhighschools
Other
Accidentstoassembly
membersincourseofduty
Accidentstopart-time
staffincourseofduty
Retirement
allowance
Joint
office
equipmentTaxadministration
Elderly
welfare
Infectious
diseases
State of expenditures by character
(unit:\thousand;%)Category
Settlement
amount
Share
Appropriated
general
revenue
resources,etc.Current
expenses
appropriated
general
revenue
resources,etc.Ordinary
balance
ratio
Personnel
expensesOfwhich,
employee
salaries
Social
assistance
expenses
Publicdebtpayments Principalandinterest
repayments Temporaryloaninterest
(Totalofobligatory
expenses)
Nonpersonnel
expenses
Maintenanceandrepair
expenses
Supplementary
expenses,etc.Of
which,
burdenofpartial
administrative
associations
Transfers
Reserve
Investment,
capital,
loans
Appropriations
carriedoverfrom
previousFYInvestment
expensesOfwhich,
personnel
expenses
Ordinary
construction
expenses Ofwhich,
subsidized
expenses Ofwhich,
unsubsidized
expenses
Disaster
reconstruction
expenses
Unemployment
countermeasures
expenses
Total
expenditure
Breakdown
Breakdown
Totalofcurrent
expenses
appropriated
general
revenue
resources,etc.\
20,287,409,000 Ordinary
balance
ratio
95.7% 103.5%
(Excluding
tax-reduction
supplementary
bondsandemergency
financial
countermeasures
bonds)
Income
general
revenue
resources,etc.\
25,014,468,000
State of expenditures by purpose
(unit:\thousand;%)Category
Settlement
amount(A)ShareOfA,
ordinary
construction
project
expensesOfA,
appropriated
general
revenue
resources,etc.Category
Assembly
expenses
General
administration
expenses
Public
welfare
expenses
Sanitation
expenses
Labor
expenses
Agriculture,
forestryandfishery
expenses
Commerceandindustry
expenses
Civil
engineeringworkexpenses
Fire-service
expenses
Education
expenses
Disaster
reconstruction
expenses
Publicdebtpayments
Various
expenses
Appropriations
carriedoverfromthepreviousFYTotal
expenditure
Total
Sewerage
business
Water
supply
Industrial
water
supply
Transport
National
health
insurance
Other
Transferstopublic
business,etc.Stateofthe
national
health
insurance
program
accountRealbalance
Resubtracted
balanceNo.of
subscriber
households
(households)No.of
insured
persons
(persons) Amountedofcollected
insurancefees
National
treasury
expenditure Insurance
benefit
expensesPercapita
insured
persons(\
thousand)
Standard
financial
revenue
Standard
financial
requirement
Standardtaxrevenue
amount,etc.Standard
fiscal
scale
Fiscal
power
indexRealrevenue-expenditure
ratio(%)Current
general
revenue
resources,etc.ratio(%)Debt
service
expenses
burden
ratio(%)Debt
service
expenses
ratio(%)Realdebtservice
ratio(%)Debt
service
payment
ratiousedfor
permissiontoissue
local
bonds(%)Current
reserve
outstanding Fiscal
adjustment Debt
payments Special
purposes
Outstanding
local
government
bondsOfwhich,
government
funds
Contract
authorization
amount
(scheduled
expenditure) Purchaseofsupplies,etc.
Guarantee,
compensation Other Other
items
accruingfromrealdebtburdenactsProfit-generation
business
income
Currentlanddevelopmentfundoutstanding
Collectionrate(%)[Current
year,
total]
Total Municipal
resident'stax Net
fixed
assettaxNote1:Supplementary
business
expensesofordinary
construction
project
expenses
includethesupplementary
business
expensesofcommissioned
project
expenses;
single
project
expenses
include
same-level
group
travel
project
expensesandthe
single
project
expensesofcommissioned
project
expenses.2:The
standard
financial
revenue
figureandthe
standard
financial
requirement
figureforthe
special
wardsofTokyoarenecessaryforthe
calculationofthe
specialwardfinancial
adjustment
grant,andthe
fiscal
power
indexiscalculatedfromthe
above
standard
financial
requirement
figureandstandard
financial
revenue
figure.
Concentrated population zoneNo.of
householdsin2005
national
census
49,598No.of
householdsin2000
national
census
46,63134In addition, the settlement data of all prefectures and municipalities (since fiscal 2001) are
shown in balance sheets for each individual organization posted on the homepage.
Example of Settlement Card
TrendsandIssuesinLocal
Public
Finance35In response to the growing demand for comprehensive transparency in local public finance
information, as a means of disclosing the overall financial condition of each local government,
including the condition of special accounts, such as enterprise accounts, as well as the ordinary
account, the management condition of third-sector enterprises and so on, and the state of
financial assistance to them, the Ministry of Internal Affairs and Communications compiles
financial condition tables and so on and posts them on its homepage.
Example of Table of Financial Condition, Etc.
1. Financial condition of general account and special accounts (mainly items relating to ordinary account)
General account
Prefectural debt management special account
Disaster relief project special account
Mother-child widow welfare financial loan project special account
Small and medium-sized enterprise support financial loan project special account
Agricultural improvement financial loan project special account
Forestry promotion financial loan project special account
Offshore fishing improvement financial loan project special account
Prefectural forest project special account
Urban development finance project special account
Ordinary account
Borrowingfromother accounts
Current outstanding
local government
bondsRealbalance
Formal
balance
Expenditure
Revenue Remarks
( million)
2. Financial condition of other special accounts (items relating to public enterprise accounts)
Electricity business special account
Industrial water supply business special account
Industrial land development business special account
Toukou coastal land development business special account
Hospital business special account
Borrowing
from other
accounts
Current outstanding
local government
bonds
Bad debts
(real balance)
Net profit/loss
(formal balance)
Total expenses
(expenditure)
Total earnings
(revenue) Remarks
( million)
3. Financial condition of related partial administrative associations, etc.
Regional Federation of Water Supply Enterprises
Federation of Coastal Water Supply Enterprises
Burden share of
organization
concerned
Current outstanding
local government
bonds
Real balance
(bad debts)
Formal balance
(net profit/loss)
Expenditure
(total expenses)
Revenue
(total earnings) Remarks
( million, %)
4. Management condition of third-sector enterprises, etc. and state of local government financial assistance
Cultural Promotion Foundation
Industrial Creation Organization
Construction Technology Center
Cultural Deposits Research Corporation
Forest Development Human Resources Foundation
Marine Products Promotion Foundation
Agriculture and Forestry Public Corporation
Women's Foundation
Sports Association
Outstanding debt
involvingdebtguarantee
from the organization
concerned
Loans from
organization
concerned
( thousand)
Subsidies from
organization
concerned
( thousand)
Investment from
organization
concerned
( thousand)
Capital or
net assets
( thousand)
Ordinary
profit/loss
( thousand)
Remarks
( thousand)
Notes:
1. "Enterprises governed by law" means public enterprises to which the Local Public Enterprise Law applies.
2. When bad debts amount to so many million yen, they are shown with a mark.
Outstanding debt
involving loss
compensation from the
organization concerned
Note: Enterprises that do not compile profit/loss statements enter their increase or decrease of net assets in the current term in the "Ordinary
profit/loss" column.
Note: The real debt service ratio is the three-year average from FY 2003 to FY 2005 used in such procedures as consultations on the issue of
bonds in FY 2006.
5. Financial indexes
Financial strength index Real balance ratio Real debt service ratio Ordinary balance ratio
Name of organization
Prefecture
Enterprises
governed
by law
Example of Balance Sheet (City A)36Ordinary Account Balance Sheet
(As of March 31, 2006; unit: thousand)
Meanwhile, in recent years an increasing number of local governments have been compiling
balance sheets and other financial documents as a means of disclosing and analyzing financial
conditions in order to grasp the state of their assets and liabilities in a comprehensive manner.
*From the standard model form in Chapter 2 of the report of the Study Group on a New Local Public Accounting System (May 2006).
(Assets)
1. Financial assets
Funds
Financial assets (excluding funds)
Credit
Tax and other accounts due
Accounts due
Loans
Other credit
(Deduction) Reserve for doubtful accounts
Securities
Investments, etc.
Capital investments
Other investments
2. Nonfinancial assets
Assets for business
Tangible fixed assetsLandTimber and bamboo
Buildings
Structures
Machinery and equipment
Goods
Ships
Aircraft
Other tangible fixed assets
Construction suspense account
Intangible fixed assets
Superficies
Patent rights
Software
Telephone subscription rights
Other intangible fixed assets
Inventory assets
Infrastructure assets
Public property land
Public property facilities
Other public property
Public property construction suspense account
Deferred assets
Assets total
(Liabilities)
1. Liquid liabilities
Accounts payable and unpaid expenses
Advance received and income in advance
Reserves
Bonus reserve
Deposits (money in custody, etc.)
Local government bonds (short-term)
Short-term loans
2. Nonliquid liabilities
Local government bonds (long-term)
Long-term loans
Reserves
Retirement allowance reserve
Other reserves
Liabilities total
(Net assets)
Revenue sources
Revenue sources allotted to asset formation
Fixed assets
Long-term financial assets
Appraisal and conversion differential, etc.
Other net assets
Opening unanalyzed balance
Net assets total
Liabilities and net assets total
TrendsandIssuesinLocal
Public
Finance
Compiled
(including being compiled and scheduled to be compiled)
Prefectures
Municipalities
0 20 40 60 80 100(%) 0 20 40 60 80 100(%) 474744 3471,113 714
1,102
1,636
1,710725191117Compiled
(including being compiled and scheduled to be compiled)
Not compiled
Not compiled
No. of organizations compiling
ordinary account balance sheet
No. of organizations compiling
administrative cost account
statement
No. of local public organizations
compiling ordinary account and public
business accounts balance sheet
No. of organizations compiling balance
sheet including public enterprises,
third-sector enterprises, etc.
No. of organizations compiling
ordinary account balance sheet
No. of organizations compiling balance
sheet including public enterprises,
third-sector enterprises, etc.
No. of local public organizations
compiling ordinary account and public
business accounts balance sheet
No. of organizations compiling
administrative cost account
statement37Example of Administrative Cost Statement (City B)
Administrative Cost Total
State of Compilation of Balance Sheets (no. of organizations)
*Number of municipalities at time of survey: as of March 31,2007, 1,827.
From April 1, 2005,
to March 31, 2006
(unit: thousand)
*From the Ministry of Internal Affairs and Communications format revised model form in Chapter 3 of the report of the Study Group on a New
Local Public Accounting System (May 2006).
Administrative costs
Personnel expenses
Payment into retirement allowance reserve
Property expenses
Maintenance and repair expenses
Depreciation expenses
Assistance allowances
Subsidy expenses, etc.
Disbursements
Subsidies, etc. to other organizations, etc. relating to asset formation
Interest payable
Estimated losses due to nonpayment recorded
Other administrative costs
Administrative cost total
Administrative service revenue
Usage fees
Handling fees
Other administrative service revenue
Administrative service revenue total
Ordinary national treasury (prefecture) expenditure
(Balance) Net administrative cost
The administrative cost statement shows the amount of administrative resources spent on
administrative services during the year.38Amid severe financial conditions caused by such factors as the redemption of local bonds and
the advance of aging, local governments are required to conduct autonomous financial
management that takes into account the needs of local residents. Furthermore, it is extremely
important to establish the financial discipline of local governments in order to promote
decentralization from now on.
In response to this situation, the present system of local government financial reconstruction
only uses flow indexes for the real deficit, such as the general account, and various problems
have been pointed out, such as the fact that it is a mechanism for reconstruction through
application.
Therefore, the present system of local government financial reconstruction was drastically
revised for the first time in about 50 years, and the Law Relating to the Financial Soundness of
Local Governments (2007, Law No. 94) has been enacted as a new system to thoroughly
establish and disclose financial indexes and to strive for the early soundness and rebuilding of
financial affairs. Financial indexes will be enforced from a date stipulated by government
ordinance within one year after the promulgation of the law, and other obligatory regulations
will be enforced from April 2009.
Revision of Reconstruction Legislation4Background of Revision
Comparison of New Law and Present System
Sound stage
Early financial
soundness Financial rebuilding
Establishment of indexes
and thorough information
disclosure
Financial soundness
through independent
improvement efforts
Definite rebuilding through
involvement of the
central government, etc.
Flow indexes: Real deficit
ratio, consolidated real
deficit ratio, real debt
service ratio Stock indexes: Future
burden ratio = indexes
by real liabilities,
including public
enterprises, third-
sector enterprises, etc. →Reported to assembly
and publicly
announced with auditor
inspection attached
Formulation of financial
soundness plan (approval by
assembly), obligatory request
for external auditing Report of progress of
implementation to assembly
and public announcement
every fiscal year If the early achievement of
financial soundness is
deemed to be strikingly
difficult, the minister of
internal affairs and
communications or the
prefectural governor makes
necessary recommendations. Formulation of financial rebuilding
plan (approval by assembly),
obligatory request for external
auditing The financial rebuilding plan can
seek consultations and agreement
from the minister of internal affairs
and communications. (No agreement) Restrictions on the issue
of local bonds, excluding disaster
rehabilitation projects, etc.
(Agreement) Possible to issue local bonds
(rebuilding transfer special bonds) whose
redemption deadline comes within the plan
period in order to transfer the balance
shortfall.
If financial management is deemed
not to conform with the plan, etc.,
budget changes, etc. are
recommended. Soundness of public enterprise management
New law
Present system
Sound finance Financial deterioration
Problems of present system
Disclosure of easy-to-understand financial
information, etc. is inadequate. There are only standards for reconstruction
organizations and no early corrective functions.
There are only balance indexes centered on the
ordinary account, and even if problems relating
to the financial condition of stock (liabilities,
etc.) are cited, they are not taken up. There are no early corrective functions for public
enterprises. Etc.
Law on Special Measures for the
Promotion of Local Financial Reconstruction
Formulation of financial reconstruction plan through
application by the deficit organization (Agreement of the
minister of internal affairs and communications is necessary.)
Corresponding reconstruction system for public
enterprises as well (Local Public Enterprise Law)
*Prefectures with a deficit ratio of 5% or more and
municipalities with a deficit ratio of 20% or more cannot
issue local construction bonds unless they undertake
financial reconstruction in accordance with the law.
TrendsandIssuesinLocal
Public
Finance39Scope of Financial Indexes in the New Law
*Calculated for each
public enterprise
account.
General
account
Special
accounts
Of which,
public
enterprise
accounts
Local government
Ordinary
account
Public
enterprise
accounts
Real deficit
ratio
Consolidated
real deficit
ratio
Real debt
service ratio
Future
burden
ratio
*Financial
shortfall
ratio
Partial administrative
associations,
wide-area local
public bodies
Local public
corporations,
third-sector
enterprises, etc.40From the perspective of drastically simplifying the method of calculation of the local allocation
tax and enabling forecasting of the local allocation tax, a new type of local allocation tax
involving a simplified calculation based on population and area will be introduced from fiscal
2007.
The system has been designed to minimize the amount of fluctuation so that no difficulties arise
in the financial management of local governments.
Reform of Local Allocation Tax Computation5Introduction of New Type of Local Allocation Tax
1 Introduction of a new type of local allocation tax for computation of
administrative fields for which there are no national standards or which are
weak (about 10% of the standard financial demand amount)
2 Reflection of administrative cost differences by population scale and form
of land use, such as residential land and fields or paddies
3 30% reduction of number of items in "individual estimated expenses"
(previous type) through integration of expense items
4 Ensuring of mechanism to respond to local governments that really do
require consideration, such as remote islands and depopulated areas
(establishment of local promotion expenses)
Method of calculation
Cost difference by scale of population
ax + by
a: 12,390円 (prefecture), 23,220円 (municipality)
b: 1,114,000円 (prefecture), 2,357,000円 (municipality)
x: Population reflecting cost difference by scale of population
y: Area reflecting cost difference by form of land use
(Prefecture) Z = 1.7 million persons
(Municipality) Z = 100,000 persons
Cost difference by form of land use
Prefecture
Residential land: 1.00 (summary protocol of fixed asset price, etc.)
Agricultural land: 2.87 (agriculture and forestry industry census)
Forest: 0.60 (agriculture and forestry industry census)
Other: 0.59 (other area announced by the Geographical Survey
Institute)
Coefficient
1.000
Z Population
Residential land: 1.00 (summary protocol of fixed asset price, etc.)
Fields and paddies: 0.90 (summary protocol of fixed asset price,
etc.)
Woodland: 0.25 (agriculture and forestry industry census)
Other: 0.18 (other area announced by the Geographical Survey
Institute)
Municipality
TrendsandIssuesinLocal
Public
Finance
2006 2007
95 (42 for prefectures,
53 for municipalities)
68 (32 for prefectures,
36 for municipalities)
Integration and Revision of Estimated Expense Items41FY 2006
Expense item Unit of measurement
Police expenses
Road and bridge expenses
River expenses
Harbor expenses
Other civil engineering expenses
Elementary school expenses
Junior high school expenses
Senior high school
expenses
Special education school
expenses
Other educational
expenses
Livelihood protection expenses
Social welfare expenses
Hygiene expenses
Elderly health and welfare
expenses
Labor expenses
Agriculture administration expenses
Forestry administration
expenses
Fisheries administration expenses
Commerceandindustryadministrationexpenses
Tax collection expenses
Pension expenses
Planning promotion expenses
Other expenses
Road and bridge expenses
Harbor expenses
River expenses
Senior high school expenses
Special education school expenses
Social welfare expenses
Elderly health and welfare expenses
Agriculture administration expenses
Forestry administration expenses
Other expenses
No. of police officers
Road area
River length
Length of mooring facilities (harbor)
Length of mooring facilities (fishing port)
Population
No. of teachers
No. of teachers
No. of teachers
No. of students
No. of teachers
No. of classes
Population
No. of students in local public universities, etc.
No. of students in private schools, etc.
Town and village area population
Population
Population
Population aged 65 and over
Population aged 74 and over
Population
No. of farming households
Nonpublic forest area
Public forest area
No. of fisheries businesses
Population
No. of households
No. of people eligible to receive pensions
Population
Population
Road length
Length of auxiliary facilities (harbor)
Length of auxiliary facilities (fishing port)
River length
No. of students
No. of classes
Population
Population aged 65 and over
Agricultural land area
Forest area
PopulationAreaExpense item Unit of measurement
Police expenses
Road and bridge
expenses
River expenses
Harbor expenses
Other civil engineering expenses
Elementary school expenses
Junior high school expenses
Senior high school
expenses
Special support school
expenses
Other educational
expenses
Livelihood protection expenses
Social welfare expenses
Hygiene expenses
Elderly health and
welfare expenses
Labor expenses
Agriculture administration expenses
Forestry administration
expenses
Fisheries administration expenses
Commerceandindustryadministrationexpenses
Tax collection expenses
Pension expenses
Community promotion expenses
No. of police officers
Road area
Road length
River length
Length of mooring facilities (harbor)
Length of auxiliary facilities (harbor)
Length of mooring facilities (fishing port)
Length of auxiliary facilities (fishing port)
Population
No. of teachers
No. of teachers
No. of teachers
No. of students
No. of teachers
No. of classes
Population
No. of students in local public universities, etc.
No. of students in private schools, etc.
Town and village area population
Population
Population
Population aged 65 and over
Population aged 75 and over
Population
No. of farming households
Nonpublic forest area
Public forest area
No. of fisheries businesses
Population
No. of households
No. of people eligible to receive pensions
Population
FY 2007
1. Individual estimated expenses
(conventional type)
PopulationArea(1) Prefecture
2. Comprehensive estimated expenses
(new type)
Ordinary
expenses
Investment
expenses42FY 2006
Expense item Unit of measurement
Fire-fighting expenses
Road and bridge expenses
Harbor expenses
Urban planning expenses
Park expenses
Sewer expenses
Other civil engineering expenses
Elementary school
expenses
Junior high school
expenses
Senior high school
expenses
Other educational
expenses
Livelihood protection expenses
Social welfare expenses
Public health and hygiene expenses
Elderly health and welfare
expenses
Waste disposal expenses
Agriculture administration expenses
Commerceandindustryadministrationexpenses
Other industrial and economic expenses
Tax collection expenses
Family register and basic
residents' register expenses
Planning promotion expenses
Other expenses
Road and bridge expenses
Harbor expenses
Urban planning expenses
Park expenses
Sewer expenses
Other civil engineering expenses
Elementary school expenses
Junior high school expenses
Senior high school expenses
Other educational expenses
Social welfare expenses
Elderly health and welfare expenses
Waste-disposal expenses
Agriculture administration expenses
Other industrial and economic expenses
Planning promotion expenses
Other expenses
Population
Road area
Length of mooring facilities (harbor)
Length of mooring facilities (fishing port)
Population in urban planning zone
Population
Urban park area
Population
Population
No. of pupils
No. of classes
No. of schools
No. of students
No. of classes
No. of schools
No. of teachers
No. of students
Population
No. of children in kindergartens
City area population
Population
Population
Population aged 65 and over
Population aged 74 and over
Population
No. of farming households
Population
No. of workers in forestry, fisheries, and mining
No. of households
No. of family registers
No. of households
Population
PopulationAreaRoad length
Length of auxiliary facilities (harbor)
Length of auxiliary facilities (fishing port)
Population in urban planning zone
Population
Population
Population
No. of classes
No. of classes
No. of students
Population
Population
Population aged 65 and over
Population
No. of farming households
No. of workers in forestry, fisheries, and mining
Population
PopulationAreaExpense item Unit of measurement
Fire-fighting expenses
Road and bridge expenses
Harbor expenses
Urban planning expenses
Park expenses
Sewer expenses
Other civil engineering expenses
Elementary school
expenses
Junior high school
expenses
Senior high school
expenses
Other educational
expenses
Livelihood protection expenses
Social welfare expenses
Public health and hygiene expenses
Elderly health and welfare
expenses
Waste-disposal expenses
Agriculture administration expenses
Forestry and fisheries administration expenses
Commerceandindustryadministrationexpenses
Tax collection expenses
Family register and basic
residents' register expenses
Community promotion
expenses
Population
Road area
Road length
Length of mooring facilities (harbor)
Length of auxiliary facilities (harbor)
Length of mooring facilities (fishing port)
Length of auxiliary facilities (fishing port)
Population in urban planning zone
Population
Urban park area
Population
Population
No. of pupils
No. of classes
No. of schools
No. of students
No. of classes
No. of schools
No. of teachers
No. of students
Population
No. of children in kindergartens
City area population
Population
Population
Population aged 65 and over
Population aged 75 and over
Population
No. of farming households
No. of workers in forestry and fisheries
Population
No. of households
No. of family registers
No. of households
PopulationAreaFY 2007
1. Individual estimated expenses
(conventional type)
PopulationArea2. Comprehensive estimated expenses
(new type)
(2) Municipality
TrendsandIssuesinLocal
Public
Finance
Ordinary
expenses
Investment
expenses
Local governments will formulate their own original projects
(setting specific performance targets) and announce them to
residents.
The Ministry of Internal Affairs and Communications will
announce the projects of local governments on its website.
Project applications will be accepted for three years from FY 2007
to FY 2009.
Special allocation tax measures will be adopted to help
municipalities cover the expenses incurred in tackling the project.
The results of the efforts (the performances indexes cited below)
will be reflected in the calculation of the regular local allocationtax.Local allocation tax measures for the promotion of company
location
Through cooperation with the Ministry of Agriculture, Forestry and
Fisheries, the Ministry of Economy, Trade and Industry, and the
Ministry of Land, Infrastructure and Transport, consideration will
be given to the priority selection of subsidy schemes, etc. relating
to information and communications, symbiosis and circulation
between urban and rural areas, export promotion of agricultural,
forestry, and marine products and production-area brand
formation, programs for the utilization of local resources by small
and medium-sized companies, the promotion of company
location, the promotion of tourism and exchange, the rejuvenation
of local bus services and so on, etc.43Support measures, such as the local allocation tax, will be adopted for local governments that
think up original projects by themselves and tackle them in a forward-looking manner so that
enthusiastic local governments can freely develop their own policies and thereby transform their
districts into attractive regions.
Support Program for Local Governments Making Efforts
Administrative reform index
Agricultural production value
Manufactured goods shipment
value
No. of businesses
Birthrate
In-coming population
Annual merchandise sales
value of the retail industry
Employment rate for young
people
Waste-disposal volume
Formulation and announcement of projects
by local governments
Support measures through the local allocation tax
(about 300 billion)
Support measures through cooperation
with related ministries44Support is given to local governments
that strive to realize simple and efficient
administration through administrative
and financial reforms, such as
administrative organization and
management reform, and create new
vitality in the community.
1 Local Management
Reform Project
Support is given to local governments
that tackle local vitalization and
exchange by, for example, promoting
symbiosis and circulation between
urban areas and rural and fishing
villages, local consumption of local
products, and dietary education and
attracting foreign tourists.
6 Tourism Promotion and
Exchange Project
Support is given to local governments
that endeavor to strengthen the base of
local industries through the discovery,
utilization, branding, and so on of
indigenous local resources, such as
local products, nature, history, culture,
and scenery, and build local attractions.2Support is given to local governments
that tackle the revitalization of central
urban areas as a part of community
development and the realization of lively
communities that are pleasant to live in
for all people, including the elderly and
children.
7 Community
Regeneration Project
Support is given to local governments
that tackle low birthrate countermeasures
in a comprehensive and multilateral
manner, such as the expansion of local
child-raising support, the establishment
of an environment in which women can
give birth without anxiety, and the reform
of ways of working to enable people to
balance work and child raising.
3 Low Birthrate
Countermeasures Project
Support is given to local governments
that promote the occupational
independence of young people, including
NEETs (not in employment, education, or
training) and freeters (job-hopping part-
timers), and offer, for example, assistance
for employment in the agriculture,
forestry, and fisheries industries.8Young People's
Independence Support
Project
Support is given to local governments
that endeavor to attract domestic
companies, foreign companies, and
companies making a U-turn from
overseas to locate in the locality and
thereby to strengthen local vitality and
competitiveness.
4 Company Location
Promotion Project
Support is given to local governments
that, among other things, promote
measures to protect children from
crime, crime-prevention activities by the
local community, the healthy upbringing
of young children, and local disaster-
prevention measures, such as large-
scale earthquake countermeasures.9Support is given to local governments
that strive to promote settlement by
providing people who wish to make a U-
or I-turn, such as members of the baby-
boom generation and young people,
with places where they can enjoy a
healthy life in the countryside, achieve
self-realization, or make a return
contribution to society.
5 Settlement Promotion
Project
Support is given to local governments
that make efforts toward energy saving,
the development of new energy sources,
the adoption of global-warming
countermeasures, and the building of a
recycle society, such as by promoting
the 3Rs (reduce waste, recycle, reuse),
as well as toward symbiosis with nature.10Environmental
Preservation Project
Local Product Discovery and
Brand Formation Project
Safe and Secure
Community Development
Project
Examples of Support for Projects Formulated by Local Governments
TrendsandIssuesinLocal
Public
Finance
White PaperonLocal Public
Finance2007Illustrated
FY 2005 Settlement
Financial Management Division, Local Public Finance
Bureau, Ministry of Internal Affairs and
Communications
Address: 2-1-2 Kasumigaseki, Chiyoda-ku, Tokyo 100-8926,
Japan
Tel.: +81-(0)3-5253-5111(ext. 5649)
http://www.soumu.go.jp
All Rights Reserved