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In many countries occur problems from unfunded mandates related to a shift of a function by an upper tier of government to lower rank governments without providing the lower one with financial means to perform these functions. The authors define the unfunded mandates and clarify how they relate to functions, uncovered costs and financial means of municipalities. Then they discuss the connexity principle in order to avoid unfunded mandates and respective functions variations in crises to avoid unfunded mandates. They point to conflicts which stem from allocation, stabilization and distribution activities. In Estonia the development of revenues and expenditures of central and local governments reflect tendencies to cause unfunded mandates especially in the period of crisis from 2009 to 2011. To fight unfunded mandates the connexity principle should be applied for municipal performance of central state functions and compulsory municipal functions. The central and local government finances should vary according to the principle of parallelism. If the total tax revenues vary the changes of block grants have to be parallel to the disposable incomes of the tiers of government., Estonian Discussions on Economic Policy, Vol 23, No 1 (2015): Developments in global economy wrought with tensions. Entwicklungen in der angespannten Weltwirtschaftslage

Estonian municipalities have to perform a broad range, while their fiscal resources are often limited in comparison to functions and large disparities in fiscal capacity prevail among them. Moreover, the power to regulate fiscal affairs is mostly in the hands of the central government. Municipalities do not possess satisfactory development planning perspectives. In particular municipalities in the North-East region and South Estonia have experienced considerable fiscal stress. We discuss how a strict application of the connexity principle can protect municipalities from the fiscal bottleneck. We also recommend the introduction of the principle of parallelism and investigate its effects on the down-flow grant system in Estonia. The procedure of determining the total sum of block grants needs to be changed. In most cases a high degree of parallelism applied when providing the unconditional grant via the equalization fund improves the fiscal stability and predictability of Estonian municipalities., Estonian Discussions on Economic Policy, Vol 18 (2010)

Estonian municipalities should perform a broad range of functions, while their fiscal resources are often limited and large disparities in fiscal capacity prevail among them. Moreover, the power to regulate fiscal affairs is mostly in the hands of the central government. We discuss how a strict application of the connexity principle can protect municipalities from the fiscal bottleneck. We also recommend the introduction of the principle of parallelism and investigate its effects on the unconditional, down-flow grant system in Estonia. In particular the procedure of determining the total sum of block grants appears to be changed.

Uuringuprobleem. Kui riigiasutus jaotab oma ressursse, on nõudlus nende teenuste järele tihti kindlalt teadmata. Omamata täielikku teavet nõudlusest, kindlustab otsustaja ennast nõudlusšokkide vastu täiendavate ressurssidega (suurendab valmisolekut). Kulu- ja tõhususanalüüsid eeldavad üldjuhul, et nõudlust iseloomustavad parameetrid on teada (või ei pöörata sellele tähelepanu), mis on aga ebarealistlik ega arvesta teenuse osutamise keerukusega riigiasutuses. Enamasti toob see kaasa soorituse tõhususe liiga madala hinnangu. Üleliigset ressursivarustatust (valmisolekut) teenuste osutamiseks võib osaliselt selgitada otsustajate riskikartliku käitumisega, mistõttu peaks riskihinnang olema osa soorituse hinnangust, vältimaks sellise ressursivarustatuse käsitlemist ebatõhususena. Ex ante, võttes arvesse oodatud nõudlust, võib ressursside jaotus olla optimaalne, kuid mitte ex post, kui on teada reaalne nõudluse tase. Doktoritöö eesmärgiks oli välja töötada teoreetiline kontseptsioon ja rakendus, kuidas hinnata sooritust riigiasutuses, mis toimib ebakindla nõudluse tingimustes. Et hinnata mitme üksusega ja mitmel tasandil toimivat teenuseid osutavat riigiasutust ebakindla nõudluse tingimustes, loodi süsteem, milles hinnati (a) keskse riigiasutuse kulutõhusust, (b) allüksuste alavarustatust ja (c) allüksuste väljundtõhusust. Soorituse hindamiseks kasutati piirianalüüsi meetodeid (DEA, FDH, DFA) ning kontseptsiooni rakendati Eesti, Soome ja Rootsi päästevaldkonna näitel. Tulemused ja tähtsus. Päästeteenuseid pakutakse mitmete allüksuste poolt erinevates piirkondades. Teenuste osutaja otsustab esialgselt, kuidas ressursid (päästjad, masinad) erinevates piirkondades jaotada, teadmata seejuures, kui palju päästesündmusi seal tegelikult aset leiab. Allüksused hoiavad teatud valmisoleku taset, et vajaduse korral päästesündmusele reageerida. Valmisoleku tagamine on aga kõige kulukam komponent eelarves, mistõttu on oluline, et ressursid oleks jaotatud nii, et ei tekiks liigseid kulusid, st minimeeritakse valmisoleku taset optimaalse mahu ja kvaliteediga päästeteenuse pakkumiseks. Saadud tulemused näitavad veenvalt, et mudelid, mis arvestavad nõudluse ebakindlusega, hindavad kulutõhususe kõrgemaks kui standardsed mudelid, olenemata hindamismeetodist või hinnatud riigist., Description of the Problem. When planning the allocation of resources in public agencies, the demand for services is often unknown and prone to uncertainty. Without having the full information of the possible demand, the decision maker will insure oneself with additional standby capacity against upsurges in demand. Cost and efficiency studies predominantly assume known demand, which is unrealistic and hinders understanding the essence of service provision in public agencies. In many cases, it has probably resulted in underestimation of efficiency. The observed excess capacity can partly be explained by risk averse behaviour and should be incorporated to the analysis to avoid unjustly labelling such input usage as inefficiency. Ex ante, given expected demand, the resource allocation is optimal, but not ex post, given realised levels of demand. The challenge is to distinguish the necessary standby capacity from excessive mismanagement. This thesis develops the theoretical concept and application to measure the performance of public agencies in the case of demand uncertainty. To evaluate the efficiency of a multi-unit and multilevel service providing public agency in the presence of demand uncertainty, one is interested in: (a) the cost-efficiency of the central agency, (b) any under-resourcing of subunits, and (c) the output-oriented technical efficiency of each subunit in jurisdictions. The suggested models would be the basis for planning resource allocation improvement in public agencies. The models are implemented using the example of the Estonian, Finnish and Swedish fire and rescue services. For estimation, different frontier analysis methods (DEA, FDH, DFA) are proposed. Result and Benefit. Typically, the rescue authority decides beforehand to allocate resources (rescuers, vehicles, etc.) between different subunits in jurisdictions without knowing how many emergencies will occur. The subunits must maintain a certain level of standby capacity to be able to respond to emergencies. Sustaining the readiness, however, is the most expensive component in the running costs. The results show convincingly that the models taking the demand uncertainty in the form of minimum service level into account, estimate a higher cost-efficiency irrespective of the estimation method or country (with different level of centralisation for management) analysed.